Sunday, December 05, 2010

First Questions on the Deficit Commission and other issues

In the last few weeks we have watched democrats scramble to adjust their position on reauthorizing the Bush tax cuts.  Finally in the last couple of days at least two prominent democrats indicated an interest in raising their ante on tax cuts to exclude people who make less than a million bucks.  This is classic positional bargaining and I hope the GOP leadership says no.  There is a first question that any discussion about the deficit should begin with and it is not what percentage of the taxpayers should pay at the highest rate.  The most important question to answer on this fight is "What percentage of the GDP should be be dedicating to federal activities?"

In the last two years, tax revenues, as a percentage of GDP have dropped from their traditional levels of about 18-20% to below 15%.   At the same time because of all the bailouts our expenditures have risen to close to 25%.  The Deficit Commission has a start which needs to be followed up with vigor - regardless of tax rates.  But the political class, or at least large portions of it, do not seem to understand that truth.

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