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Tax And Spend: Can’t We Just Be Like Switzerland?

Blog From
August 4th, 2010

Less than two weeks before his inauguration, Barack Obama stated that only the Government could rescue the American economy. He intended to spend our way out of the Great Recession. Mounting national debt did not give pause for thought, let alone deter. True to his word, Obama’s been on a spending binge unlike anything in our nation’s history.

But, most of it has gone to increase social benefits rather than effectively fight the Recession. The result is a looming economic disaster. Our debt will equal 62% of GDP by the end of this year, a ratio increase of more than 50% since Obama’s inauguration. Increasing debt won’t end with the stroke of midnight on December 31, either. Under his forecasted budgets, the debt-to-GDP ratio will rise to 90% by 2020. That does not include the spiraling cost of Obamacare or the money the Government borrowed from the Social Security fund, which stands virtually depleted.

Shortly after that the economy will be toast and our quality of life mere cinders. We’ll be buried, not just by debt, but by the interest owed on it. So, by continually digging deeper, we’re just Greecing the skids for the jump into economic oblivion without so much as a threadbare parachute.

But, surely, Stimulus spending will fix things. Unfortunately, its sustaining affect on the economy is nil. The proof? GDP is falling quarter by quarter while our persistently high unemployment sets new records. Consumer confidence, and spending, is plummeting. In the face of an economic stall out, Government economists can’t substantiate a long-term benefit commensurate with the Stimulus cost. Or any, actually. The most they can say is, “things would have been worse without it”.  But, temporary up blips in the economic graph are worthless. Even worse is the prospect of double-dip ripping through the economic landscape.

How about the private sector to the rescue? Right now, Obama is sitting on the sector’s back, slowly breaking it with crushing piles of new regulations and higher taxes and fees. And business itself is catching the blame, which is being used as an excuse for still more Government control.

Won’t increasing taxes on the “rich” bail us out? Other than creating income distinctions, all it’s ever done for Federal tax revenue is decrease it. Why? Those highly paid tax attorneys and accountants simply kick into an even higher gear and shift their clients’ money to more obscure shelters. Which also means it’s not being spent so the economy loses out on those dollars as well. Meanwhile, the debt continues to grow.

Can’t anything be done? European countries in the deepest debt also have higher tax rates than the U.S. Greece is not a point off the data curve. Its smack dap in the middle of it. These high tax/deep debt countries made the conscious decision to trade economic growth for social benefits doled out by their governments. And their economies are slowly slipping off the precipice. Taxes just can’t keep pace with spending and most of the countries have maxed out their borrowing from the neighbors. This year, Europe’s leading nations vowed to cut their deficits in half by 2013 through spending reductions. They’re trying to rein in the public dole before it gallops over the edge dragging them with it.

Meanwhile, back in the U.S., our Government has chosen social benefits over economic growth, too, putting us on Europe’s well-worn path to economic annihilation. And they’re doing it during an economic downturn and without our permission. Yet, we’re the ones who will pay the heavy price unless we hastily reverse course. So, it comes down to whether there’s a chance for a competent, honest Government in our immediate future.

We could try being like Switzerland. That Country holds the enviable position of having the lowest tax rate on average workers in the world and the 7th highest per capita GDP. The Swiss have a high standard of living, an educated work force, an unemployment rate of 3.9% and a low national debt. Of course, the Country also has a relatively small population and the Government runs very efficiently. It is actively luring businesses with low tax rates and pro-growth regulations.

Rather than sending our businesses there, let’s send our politicians in trade for theirs. A big win for us and a hearty “good luck” to the Swiss.

See you on the left-side.


 





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