Taxes are Only Half of the Equation

Sometime this week, Republicans are expected to announce their plan for major changes to the tax code.  Rumors surrounding corporate tax cuts and changes in deductions have swirled for a while.  President Tweet and Republicans assures us the tax cuts will spur economic growth.  Meanwhile, the Democrats revert back to their “it’s a tax cut for the rich” argument.  (When the top 20% of earners pay 84% of federal income taxes, who else can benefit from tax cuts, Mr. Schumer?)

The entire national dialogue is focused on the tax (revenue) side of the equation.  Sadly, very few of our political leaders want to talk about the other side of the ledger, our government spending problem.

Several years ago, Greg Mankiw, a right-leaning economics professor at Harvard, wrote an article in the New York Times that described how our government spending problem ends.  Please read it.  If you are not concerned after reading Mankiw’s piece, please check your pulse.  http://scholar.harvard.edu/files/mankiw/files/its_2026.pdf.  Our current government, like every government in our modern history, has shown no desire to deal with the spending side of the ledger.

Growth can mask or solve a lot of problems.  To grow our economy, we need more productivity and/or consumers (people).  The premise behind a tax cut is productivity will increase via investment.  Its supporters cite economic growth in the 1980s and 1990s as a direct result of tax cuts.  They fail to admit our population was growing at a faster rate in the 1980s and 1990s than it is today.  (http://www.u-s-history.com/pages/h980.html and https://tradingeconomics.com/united-states/population)  We need immigrants that contribute to our economy!

Don’t get me wrong; like every other American, I’d love to pay less in taxes.  At some point, however, our spending issues must be addressed.  If you think the tax conversation is unpleasant, wait until we get to the spending side.

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