In a recent oped piece entitled, No compassion for you if you’re in R.I.’s private sector, Projo columnist Edward Achorn bemoans the fact that Governor Chafee has asked the General Assembly to enact new taxes on a range of products, and some services, previously exempt. As has been the case in the past Mr. Achorn argues a popular point based on a flawed analysis of the problem.
We have had a party. We have borrowed big time from the future. We have borrowed to pay for the present without regard for the future. As a result, until we repay the future, there will be no future for Rhode Island.
Government's job is to serve the public interest by providing the goods and services that the voters and public determine they need. It does this by generating income from taxes and related fees.
Cutting expenses diminishes the goods and services you can consume. Some of that is waste; some luxuries that we can do without; and some is real belt tightening by forgoing things that are needed such as roads and bridges
and public health and safety.
How are Government finances any different from your finances?
Can you get rid of your debt by lowering your personal income? What happens if you lose your job?
Look at your own credit card behavior, for example. Waste would be buying your Big Mac with your credit card rather with the cash in your pocket or balance in checking/debit card account. A luxury would be to buy that sales item using your credit card rather than cash or debit card just because it was on sale, even through you did not need it. Belt tightening is like paying your mortgage with your credit card, borrowing more at a higher interest rate, to make a payment on a debt at a lower interest rate. In each case, your are increasing your borrowing simple to buy time and hoping to put off your eventual default.
Do tax cuts and budget cutting reduce debt?
Spending cuts do not effect the interest cost on the public debt. What cuts the interest cost is paying down the principle. And this can only be done by shifting the savings from cost cutting to principle payments. That means either no tax cuts, or raising additional income through tax increases (i.e. taking a second job). In either case, the proceeds from savings and/or the new job should be dedicated to pay down the debt.
Those, like Mr. Achorn, who complain about their taxes being too high, or the waste in government, should look to their own credit card debt. How good a job are you doing to manage your debt?
Who pays for drinks?
Rhode Islanders have been having a party. They have become drunk on quick fixes. It seems that those who would have us ignore the debt and focus only on taxes, really want us to look the other way. They want us to pay for the drinks while they can skip out of the state. They would leave the tab for the rest of us and our children to pay, or default on the debt.
Sharing the wealth also means sharing the risk and burden.
Everyone in the state has benefited in some way from the debt. Each of us shares responsibility for letting it happen. This includes the tax payers, the unions, and politicians who have created the debt arising from the unofficial borrowing caused by underfunding or postponing payments into the pension funds.
Everyone in the state should share in the cost of retiring this debt. Tax cuts for the wealthiest without demanding they pay their fair share on the principle first, is like letting them take you to lunch and then allowing them to leave you with the tab. In my experience they often will do this, if you let them.
The Hidden Cost of Debt
The same is true for politicians. Letting politicians postpone paying for current earned pension obligations and deferring them for the future, is like being treated to lunch and then be told that they left their wallet at home. They will promise,
What about all those businesses and union members who cash in their chips before paying their share of the debt, and then move to Florida? Aren't they doing the same thing?
The problem is not the budget or the taxes -- it is the State's debt.
Government's job is to serve the public interest by providing the goods and services that the voters and public determine they need. It does this by generating income from taxes and related fees.
Cutting expenses diminishes the goods and services you can consume. Some of that is waste; some luxuries that we can do without; and some is real belt tightening by forgoing things that are needed such as roads and bridges
and public health and safety.
How are Government finances any different from your finances?
Can you get rid of your debt by lowering your personal income? What happens if you lose your job?
Look at your own credit card behavior, for example. Waste would be buying your Big Mac with your credit card rather with the cash in your pocket or balance in checking/debit card account. A luxury would be to buy that sales item using your credit card rather than cash or debit card just because it was on sale, even through you did not need it. Belt tightening is like paying your mortgage with your credit card, borrowing more at a higher interest rate, to make a payment on a debt at a lower interest rate. In each case, your are increasing your borrowing simple to buy time and hoping to put off your eventual default.
Do tax cuts and budget cutting reduce debt?
Spending cuts do not effect the interest cost on the public debt. What cuts the interest cost is paying down the principle. And this can only be done by shifting the savings from cost cutting to principle payments. That means either no tax cuts, or raising additional income through tax increases (i.e. taking a second job). In either case, the proceeds from savings and/or the new job should be dedicated to pay down the debt.
Those, like Mr. Achorn, who complain about their taxes being too high, or the waste in government, should look to their own credit card debt. How good a job are you doing to manage your debt?
Who pays for drinks?
Rhode Islanders have been having a party. They have become drunk on quick fixes. It seems that those who would have us ignore the debt and focus only on taxes, really want us to look the other way. They want us to pay for the drinks while they can skip out of the state. They would leave the tab for the rest of us and our children to pay, or default on the debt.
Maybe it is time to stopping drinking single malt scotch and switch to beer
Sharing the wealth also means sharing the risk and burden.
Everyone in the state has benefited in some way from the debt. Each of us shares responsibility for letting it happen. This includes the tax payers, the unions, and politicians who have created the debt arising from the unofficial borrowing caused by underfunding or postponing payments into the pension funds.
Everyone in the state should share in the cost of retiring this debt. Tax cuts for the wealthiest without demanding they pay their fair share on the principle first, is like letting them take you to lunch and then allowing them to leave you with the tab. In my experience they often will do this, if you let them.
The Hidden Cost of Debt
The same is true for politicians. Letting politicians postpone paying for current earned pension obligations and deferring them for the future, is like being treated to lunch and then be told that they left their wallet at home. They will promise,
"We can use your credit card to pay the bill. I promise to repay you when we get back to the office." Of course, when you get back to the office, they have disappeared.
What about all those businesses and union members who cash in their chips before paying their share of the debt, and then move to Florida? Aren't they doing the same thing?
After all, aren't they feeding off of us, just to leave the rest of us with their share of the tab!
No comments:
Post a Comment