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Are Most Americans Missing the Point?
Commentary on the News
Monday, January 10, 2011
Ed DeShields

While our politicians seem to compete for whose point is the most useless, we’re facing a deficit we aren’t soon going to be able to fix.

In 1999 Georgetown University did a study that showed that up to 79% of the American public missed the point on many general issues.  For example, one poll showed that while Americans wanted more and more government services, they didn’t want to give up their right to complain about the public spending and they didn’t personally want to pay for them.  

Most Americans, when polled, want cleaner, more wholesome movies produced from Hollywood yet ticket sales go to the exactly the opposite films.  Hardly an art form, Jackass 3D has earned over $117 million and been in the top 20 pictures for over 87 weeks. 

Today, both Democrats and Republicans mirror this weird sense of “missing the point” entirely.   And, perhaps it is us who are perpetuating the problem by electing them. 

It is absolutely clear we have a major problem and that both political parties are contributing to it.  You see, the deficit isn't a tax problem; it's a spending problem. Yet, the Republicans insist we keep the Bush-era tax rates because it will create jobs and turn the economy around.  You and I know that in reality this is hogwash.  It could create more jobs but it won't cover the deficit.

Conversely, the Democrats are suggesting that in order to solve the deficit problem we must levy higher taxes on rich people.   As well off as the rich may be, they don't have enough income to come close to covering that level of deficit spending.

The federal deficit for the current fiscal year is about $1.4 trillion. The IRS’s figure for federal income tax collections is about $1 trillion which represents an average 12% tax rate on personal income. To shrink the deficit, the average tax rate would have to be doubled – and then some.   Neither party would dare suggest we double your taxes.

The Democrat’s solution revolves around increasing the taxes on the top 10 percent of households.  The top 10 percent have incomes of over $120,000.   This group paid 19% of their income in taxes; a total of just over $700 billion. The government would have to triple the taxes on this group to least 60% to cover the deficit.

The message here is simple. Discussions about shifts in tax rates miss the point entirely.   It won’t solve the problem we face.

What if we increased employment taxes by taxing the corporation more heavily? It won’t work either. 

The second-largest source of federal revenue is the employment tax but this tax covers Social Security and Medicare.  Unfortunately, this tax revenue is no longer adequate to support the promised benefits.  And while the employment tax has provided a cash surplus since the Social Security reform of 1984, that surplus had only one use – it allowed Democrats to spend more and Republicans to cut income taxes.  In reality, both parties have missed the point about the financial condition of our government.

If you’re thinking about raising our corporate tax rates it will only bring in a modest $300 billion.  Corporate tax rates in America are already the second-highest in the industrial world.  It’s any wonder why it is a major reason so much domestic employment is being outsourced to other countries.

There simply isn't enough wealth to keep up with federal spending. 

So while our leaders in Washington, and many of our citizens, miss the point entirely we are left to an inevitability that we’re going to be in for a big dose of reality just around the corner.

About Ed DeShields

Last week: Energy Independence: Blessing or Curse for Israel?

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