Pre-Boomer Musings

The former chairman of the Federal Reserve, and advisor to the White House, recently indicated there may be a need to consider a Value Added Tax (VAT).  So expect all kinds of revenue-raising proposals to be floating around Washington in the days ahead. 

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Few, if any, of these government schemes to bring money into the government’s coffers will reduce taxes, fees, up-charges, penalties, etc.  The current head of the Federal Reserve Bank followed a few days later with a warning that the system cannot sustain our current debt our spending levels.  Does this mean America is bankrupt?

The national debt is approaching 13 trillion dollars and continues to grow at the daily rate of nearly 4 billion dollars.  The problem is we don’t even know how much a trillion dollars represents, because the numbers are beyond our comprehension.  To put this in perspective: it takes a thousand millions to make a billion (1,000,000,000) and a thousand billions to equal a trillion (1,000,000,000,000). 

If dollar bills were laid end to end, a trillion of them would represent the distance in miles of more than 200 round trips to the moon.  Or consider that there are over 31 million seconds in a year; it would take more than 32 thousand years to reach a trillion.  Needless to say, a trillion is a gigantic number, and America’s shortfall is many trillions of dollars.

Yes, the country is in bad shape, but there are ways to get out from under the financial burdens affecting us all.  First of all: stop spending money we don’t have!  No, more new spending won’t get us out of the hole, but it will keep the hole from getting deeper even though the interest on the debt must be paid.  Next, the federal government must get back to the job of governing and out of the lives of businesses and individuals; this means cutting entitlements and making the states and local governments responsible for providing services for their citizens.  These are hard but necessary choices.

Plenty has been said about cutting waste, fraud and abuse; however, the bigger the programs get the greater the chances for these kinds of problems.  Entitlements must be reduced for able bodied people who are capable of working and contributing to society.  Instead of trying to redistribute income, the government needs to create an atmosphere were business can flourish and people can have jobs.  Encourage all citizens to do as well as they can by working to achieve the American dream, but don’t hand it to them.  It will not be easy to roll back existing government programs, but depending who we elect to office could have a huge impact on future entitlements. 

So, what about the VAT possibility?  In Europe such taxes add 15 to 20 percent to the cost of products.  It’s a consumption tax, so everyone pays the same amount.  Those on limited or fixed incomes will feel the pinch, but the higher-consuming middle class will be hardest hit.  Anyone who thinks VAT will solve the nation’s financial problems needs to look at Europe’s problems.  Better yet, answer this question, “Have high state, county and city sales taxes saved places like New York and California from financial disaster?”    

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