Here’s the carrot:
Republicans nationwide have been celebrating – and with good reason. Despite hysterical opposition by Democrats, the Tax Cuts and Jobs Act passed the House and Senate.
This is a huge (read: yuge) legislative accomplishment for the President. It’s a good bill for many reasons. The Brookings Institute calculated that 80.4 percent of taxpayers would see a cut, with the average cut calculated at $2,140. Some companies, spurred on by the slashing of the U.S. corporate tax rate from 35% to 20%, have made some exciting announcements.
Fifth Third Bancorp announced it will raise their minimum hourly wage to $15 for all employees and will be sending a one-time bonus of $1,000 to more than 13,500 workers.
Wells Fargo has announced an identical minimum wage hike, as well as plans to aim for $400 million in philanthropic donations next year.
The Boeing Company announced a $300 million investment in employees and charitable activities.
AT&A announced it will pay a special $1,000 bonus to more than 200,000 U.S. employees and will increase U.S. capital spending by one billion dollars.
All of these companies cited tax reform as the precipitating factor in these announcements.
With two straight quarters of 3% GDP growth (and 4% on the horizon), consumer confidence soaring, and a little more cash in their pockets, Americans have good reason to be feeling some long overdue excitement about the future of the U.S. economy.
Here’s the stick:
Without spending cutbacks, the deficit is going to explode.
The three most absurdly large spending items on the budget are broken down as followed:
1) Social Security, Unemployment & Labor: 33.26% or $1.28 trillion.
2) Medicare & Health: 27.42% or $1.05 trillion.
3) Military: 15.88% or $609.3 billion.
None of this spending can be maintained, and it’s not as if each of these doesn’t have clear issues – we have decades of research and Blue Ribbon Committees that have told us what the problems are and how to fix them.
Here’s some fast facts:
In 1945 there were 45 workers for every Social Security recipient. By 2013, that ratio dropped to less than three to one – less than three workers supporting each recipient. Similarly, the life expectancy in the U.S. in 1945 was approximately 67 years. Today it is approximately 80 years.
According to Michael Tanner at the National Review:
“The average two-earner couple pays about $150,000 over their lifetime in Medicare taxes and premiums, while collecting almost $450,000 in benefits.”
That is absurdly unsustainable and Medicare is expected to go bankrupt by 2030.
The Military budget eats up the lion’s share of discretionary spending – the portion of the budget decided by Congress. This is even less forgivable because congress isn’t required by law to blow the discretionary budget on military spending.
The tax cuts are wonderful, they are going to directly help the vast majority of American taxpayers, but unless they are coupled with action to reign in government spending Republicans are just kicking the enormous debt ball down the road.