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We've been Taxed Enough Already!
Limited, Fiscally Responsible, Transparent Government
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Volume 3 Number 9 3 November 2011
LC Republican Women
Lancaster County Republican Women will meet on 8 November 2011 at 6:30 PM in the Assembly Room on the second floor of Springs Memorial Hospital, 800 West Meeting Street, Lancaster, SC 29720. The event brochure is available here.
What Can We Learn From Greece?The national debt of Greece is about 120% of GDP. Greece has been spending more than it takes in for many years, financing the difference with debt. National government taxes in Greece run about 30% of GDP. Greece's partners in the Eurozone believe that Greece can successfully repay only about 50% of the debt that it currently has. The fact that the banks that loaned Greece the money that it now owes will have to write off 50% of their Greek loans would cause a worldwide financial crisis, to be mitigated by the support of Eurozone governments and international government supported resources such as the International Monetary Fund (IMF).
Greece must raise taxes and cut spending substantially in order to be able to pay off even these much reduced debts. Greek citizens are responding to the idea of reduced government spending and increased taxes by replacing their government and rioting. The point that the money has already been spent and must now be paid back is unacceptable to them.
The reality of the situation is that austerity is coming to Greece whether the citizens approve or not. The Eurozone nations cannot afford to support Greece, and Greece will be forced to leave the Eurozone and return to its own currency, the drachma. Greece will no longer able to borrow money because there will be no possibility that the money will ever be repaid. Without borrowed money the Greek government will have to choose between cutting spending and devaluation of the drachma, with the resulting rampant inflation. The present path leads to rampant inflation, which will lead to widespread suffering as the price of bread rises without limit when bought with drachmas.
To apply this information to the US, realize that US national debt is currently a little more than 1.0 times GDP. US Government spending exceeds revenue by about 40%. There is no organization comparable to the Eurozone capable of bailing out the US or offering to discount the national debt of the US by 50%. The US is not in the crisis situation that Greece is in, but the reality of the situation must be faced immediately to prevent the situation from becoming a crisis. The US Government must either cut its spending by 40% from present levels, increase its tax burden from 18% of GDP to 26% of GDP or inflate the value of the dollar by 40%. Any of these courses will be difficult, and inflating the dollar would cause a worldwide financial disaster, but it is essential that the process begin now while there are still choices to be made. Postponing the decisions is a decision itself, and will lead eventually worldwide recession and chaos.
Budget in 2012 Set To Break the 2011 Record
The South Cartolina Policy Council has set up a tracking system to follow the development of the 2012-13 State Budget. The first pass at agency requests has produced some massive increases proposed by state agencies and some regrettable attempts to circumvent the system.
In a uniquely South Carolina approach to government, the procedure specified in state law Section 11-11-15, passed in 1993, has apparently never before actually been used to prepare a state budget.
I95 Corridor AuthorityThe SC House needs to vote to sustain the Governor's veto of S 211 and thus kill this monstrosity. The 19 board members of the I95 Corridor Authority would have the power to do whatever it takes to further the purposes of the Authority. This is effectively a new subdivision of state government interposed between the affected Counties and Municipalities and the state legislature. It is not clear that the Legislature has the authority to create such an entity without a constitutional amendment.
In any case, we don't need an additional layer of state bureaurcracy requiring additional tax dollars to do what the local governments along the I95 Corridor are already motivated to do.
School ChoiceEver since public schools were introduced into the US in 1850 they have been training students as though they were stamping coins. Unlike coin blanks, students are not uniform, and putting them all through the same educational process does not produce optimal results. School choice would go a long way toward allowing students to obtain the individualized education that they need.
School choice failed by a single vote last session and will be reconsidered tn January. It's time to pass this important improvement to the educational system. Governor Haley is committed to sign the legislation if it comes to her.
Sales Tax Reform
State Gets Sued
Many feel that the SC sales tax system is broken because so many items are exempted. The South Carolina Policy Council reports that a group of legislators is suing the state in the State Supreme Court, alleging that the existing system of exemptions makes the sales tax fundamentally unfair.
9 - 9 - 9 and Flat TaxHerman Cain has been catapulted to the top of the Republican Presidential pack based on a very bad idea he calls 9 - 9 - 9. Rick Perry proposes a flat tax simply to distinguish himself from Mitt Romney. Either proposal gives the Federal Government a new way to tax the American people via a national sales tax. It calls for simultaneously having the Federal Government give up the payroll tax. History has clearly shown that every time any government is given another route to tax dollars, that government will exploit that new route to the maximum extent possible. Opening a new tax channel to the Federal Government in the form of a sales, consumption or value added tax will put us on the European path to government taking 40+% of GDP rather than 30+%. If there is one thing that must not happen in the 2012 election, this is it. If the Federal Government is given a new taxing channel such as a consumption or value added tax, expenses will never be cut.
Two Very Bad Ideas
Spending Reduction Now Tax Change LaterIt is critical that the current focus remain on spending reduction until spending is under control. For fifty years the US Government has been deliberately spending more money than it takes in and borrowing the difference. It has been clear from the beginning that this process would eventually self-destruct. Each time this has come up in the past the can has been kicked down the road, most notably in the 1980s when the Social Security tax surpluses were converted to fund the Federal deficit.
We finally have the focus where it needs to be, on the excessive Federal Government spending financed by misuse of Social Security trust funds and international borrowing. The choice we face is to either reduce spending to the rate that can be supported by current revenue dollars (about 35% reduction in the Federal budget) or increase Federal tax revenue by about 50%.
FreedomConnectorFreedomWorks has announced the creation of the FreedomConnector, a social networking site for conservatives. The FreedomConnector offers the ability to create local groups and organize local activities in addition to Facebook type interactions. It's free and easy to use. Connect to J.R. Wilt.
From the Editor
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J.R. Wilt, Editor and Publisher