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Tax Relief And The American Dream Economy
Terrell E. Arnold
At this moment the Congress and the White House are shutting down for Christmas, having spread Christmas gifts in all directions except toward America's economic future. The feel good part of it is that in the coming year many Americans will have a bit more spending money. Specifically, the Bush tax cuts will remain in force, while contributors to Social Security will see a little larger paycheck month to month because their share of social security tax withholding has been cut. President Obama started this process as an effort to terminate tax advantages for the rich while preserving them for the middle class. He ended it by agreeing to tax cuts for everybody! Such are the ebbs and flows of power in Washington with each change of political leadership. This year tax cutting conservatives are winning the round, while tax increasing liberals are having their faces rubbed in the dirt.  Our system is the worse for it.
This situation might well be viewed by many Americans as just the sort of thing Washington does, and it can be ignored like most things that happen in the nation's capital. However, the pleasing looking tax cuts were only part of the story. If things go as presently envisaged, Congress will go home and the White House will go to ground on Pennsylvania Avenue without having done anything about the rapidly growing national debt except authorize an increase in the debt ceiling.  In effect, those last minute actions by the Congress and the President preset the United States to go deeper into debt, further crippling the Government's ability to pay its bills.
There are two dreams here that are about to crash. First is the notion that America can work its way out of this hole without real changes in lifestyle.  Second is the notion that global free trade practices work ultimately to America's advantage. While clinging to the first, our debt continues to balloon. While hanging on to the second, competition from abroad steals our trade advantage. Under the notion that free trade is always good for us, we have shipped many thousands of jobs abroad; we are unlikely to get those jobs back because our competitors are newer and better at this work. Meanwhile, the unemployment picture hangs in a disturbing 10% neighborhood as our leadership ignores the truth that we truly need those jobs we so willingly exported. Putting a little extra cash into the pockets of an under-employed labor force is not going to turn this large, heavy American economic ship onto a new course.
Unconventional wisdom has it that we should accept this new reality, redesign our economy to fit into a new and less central position in the global system, and simplify our lifestyle to fit this more realistic vision of the future. In fairness, that is a pretty tall order. In reality, there probably is no viable alternative to making those adjustments.
The American dream economy does not need to be abandoned. It does need to be redesigned. For decades we have lived by the notion that our knowhow and our global presence were key posts in the natural order of things. So long as our balance of international accounts remained positive, that was a reasonable expectation. It became increasingly unrealistic when, about three decades ago, the balance shifted against us. As that negative balance has persisted and grown, the unreality of America's position in the global system has also grown.  Real power has moved abroad. This has accelerated in the presence of rising stars abroad, and our attempt to maintain position by going into debt in the face of radically changing circumstances has only added to the need for recognition and change. We had two problems: Americas declining competitiveness abroad; and the declining relative capability of the American labor force at home. The two were and are tightly related, and we have been far too slow in recognizing and fixing the latter.
What lifestyle changes do we critically need? Start with while others save, Americans spend. The central thrust of Washington policy has been to get Americans back to spending. Many have increased savings during the economic downturn of the past two years, but that is not enough to correct the bad habits of the past, and putting that money back into circulation will only repeat past failures of living well by growing debt.
The conservatives about to invade Washington are ostensibly bent on cutting government and, with that, cutting costs. If several decades of political behavior offer any prophecy, this enterprise will fail miserably. In any case, the size of government, per se, is not the problem. The focus of its activities and our ignoring of the need to pay for them on a current basis are the main problems. The sooner we pull in our horns, get out of Iraq and Afghanistan and shrink our sprawling military presence abroad, the sooner we will be positioned financially to restore the basic infrastructures of the American economy, while living within our means. If we stop trying to run the world through piecemeal military establishments in more than half of the world's countries, we can free up the resources to build and refocus our system to America's future responsibilities in the global system. There are no real alternatives to these actions. Let's get on with them.
The writer is the author of the recently published work, A World Less Safe, now available on Amazon, and he is a regular columnist on rense.com. He is a retired Senior Foreign Service Officer of the US Department of State whose overseas service included tours in Egypt, India, Sri Lanka, the Philippines, and Brazil. His immediate pre-retirement positions were as Chairman of the Department of International Studies of the National War College and as Deputy Director of the State Office of Counter Terrorism and Emergency Planning. He will welcome comment at wecanstopit@charter.net
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