Haim -
...The proposed tax cut will only make US economic even more anemic paying down the national debt would have a more effective and broad based implication on household free cash than the tax cut from an illusionary long term budget surplus.
Contrary to popular belief, the so-called paying down of the national debt is simply a multi-level political con game, and the 'risky' tax cut is so small and dispersed over time as to be effectively lost in the rounding errors of futile economic projections.
First, since the majority of the current 'surplus' is due to the current payroll tax receipts exceeding current social security outlays, there is little or no actual reduction of the national debt involved, but rather simply a shift of publicly held debt into the non-public pseudo debt of the criminally-misnamed 'Trust Funds'. The 'Trust Funds' are simply a bookkeeping device that records an IOU when 'surplus' payroll taxes are spent along with general revenue, and contains NO economic assets of any kind. When the 'IOU' becomes due, it will simply be turned back into publicly held debt to fund future social security payments.
Secondly, even if the 'paying down of the national debt' were to achieve its stated goal of interest rate reduction, this would be a dubious achievement indeed. To the extent that it replaces tax reductions, its overall effect is to transfer wealth from the hands of taxpaying savers and investors into the hands of non-taxpaying borrowers.
Finally, the ideas of a 'national debt' and a 'surplus or deficit' are over-hyped and misdirected. If the debt level is merely growing slower than the economy over time, that should be sufficient to prevent any outsized problems for the economy from that particular source. However, all the concentration on debt, surpluses, and deficits serves to misdirect attention from the real issues. At the end of the day, the real economic damage is the result of ALL government intervention in the economy. Every dime that the government EITHER taxes or spends is a dime that distorts economic activity and reduces the standard of living of every productive member of the population. The balancing of the difference between taxing and spending is a secondary issue, as both are real problems in and of themselves. This is not to say that there is not a necessary and proper level for government defined by the Constitution, minuscule by current standards, but that even the taxes and spending for that level would be necessary evils, but evils none the less.
Regards, Don |
