'Fiscal Responsibilty'

As I write this the price of crude oil is somewhere near $145 a barrel - a sum that would be unimaginable a couple of years ago.  As I wrote earlier, it is a classic supply and demand situation - the demand continues to rise, driven by sustained and robust economic growth in China, India and the former soviet union.  Supply, on the other hand, has remained relatively stagnant for the past several years. 

But the price of oil hasn't risen by the same percentage everywhere.  In Europe, the price has still risen substantially over the past several years, but not nearly as much as it has here.  Why is that?  Well, the Europeans (many of them anyway) pay for their oil in Euros, and the value of Euro has been much stronger than the dollar.  In 2004, you could buy a Euro for about $1.10, in 2006 it cost about $1.25, today it costs about $1.57 to buy a Euro.

Oil traders, financial analysts and producers all agree that one of the factors driving up the price of oil for us has been the weakness of the dollar.  If we could strengthen the dollar, it would do much to restrain the price of oil (and other commodities).  And one good way to strengthen the dollar would be to balance the federal budget. 

Now Andy Harris, like most Republican politicians since Reagan runs on a simple mantra of 'lower taxes'.  He also talks about something called fiscal discipline.  Every Republican says they want lower taxes.  They know we all want to pay less and it's an easy thing to say.  And if Harris is elected, you can bet he will vote to lower taxes.  But whose taxes will he lower?  It's safe to say it won't be mine and probably not yours.  He'll push to lower taxes for himself and his rich cronies from the Club for Growth or as conservative Mike Huckabee called it - the 'Club for Greed'.

Let's go back and look at the tax cuts that George W. Bush pushed through a compliant Republican Congress when he became President.  Over the ten-year period of his tax cuts, from 2001 to 2010, an astonishing 52 percent of the total cuts will go to the richest 1 percent of taxpayers! 

Now let's look at the flip side - the 'fiscal discipline' side.  Since George W. Bush became President, with a compliant Republican-controlled Congress, Federal spending has grown at an average of 5 percent per year - faster than the growth of the economy and much faster than the 2 percent growth during the Clinton years.  During this period we've added about $3 Trillion to the national debt, which will be a burden to our children and our country for years and years to come.  So much for Republican fiscal conservatism.

So we know what to expect if Harris is elected - more tax cuts for the rich, more bloated Federal spending and a further decline in the value of the dollar leading to higher and higher commodity prices.  Hold on to your wallet.

[The photo shows the supertanker 'Abqaiq', owned by Saudi Arabia, taking on oil at Iraq's Basrah off-shore oil terminal]

Comments

[Bull Horns]

Poor Andy Harris, doesn't know his history very well. He likes to talk about Reagan's tax cuts of 1981 and how good they were for the economy. What he doesn't bother to tell people is that, in 1982, Reagan signed into law, two tax bills that took back 75% of those cuts. Good old smoke and mirrors.

[Michael Swartz]

I have two points to add to your discussion.

First of all, you note that the wealthiest 1% of income earmers accrued 52% of the Bush tax cuts, but you fail to point out that this is roughly proportional to the amount of total taxes the richest 1% pay. Meanwhile, the bottom 50% of taxpayers (who only pay about 5% of the total bill) also received a benefit from the Bush tax cuts.

I will agree with you that the GOP-controlled Congress went a little bit overboard with spending under President Bush; in particular adopting the Medicare Part D prescription drug program. Nor are the Democrats working on reducing the budget given they've also increased spending over the last two years - but we expected that to occur.

The best way to bring spending under control would be to completely reform and begin to devolve the large entitlement programs that take up a huge chunk of the budget - unfortunately it's a process which would take many terms to accomplish and we can't count on keeping fiscal conservatives there that long.

[Tom Wilson]

Thanks for your comments. First, I'm not convinced that the Reagan tax cuts were that good for the economy. His own Director of Management and Budget, David Stockman, apparently thought they were just a way to trim top rates for the wealthy rather than a device to stimulate the economy. That said, David Stockman did make a mighty effort, with some success, to trim government spending in almost every area.

Michael's point that the Bush tax cuts were allocated approximatly in line with actual tax payments is a fair one. I guess my concern is that the working man and woman - middle class or lower middle class - seems to be falling further and further behind and allocating more of the tax benefits to that segment of the population would be beneficial.

It's clear that entitlement programs are consuming a larger and larger share of the Federal budget. It's just not clear to me that the American electorate will ever support significant cuts to major entitlement programs. Absent that, I think Congress needs to ensure that there is sufficient revenue to cover spending. Otherwise we just continue stealing from our children by borrowing money they will have to repay, by neglecting our infrastucture and by continued degradation of the environment.