Senator Jeff Sessions, ranking
member of the Senate Budget Committee has pointed out that our per capita
government debt is already larger than Greece's. Per person, our government
owes over $49,000 compared to $38,937 per Greek citizen. Our debt has just
reached 101% of our Gross Domestic Product. Our creditors see this and have
quietly slowed down or stopped their lending to us. As a result, the Federal
Reserve has been outright monetizing debt as a way to patch things together
and keep the economy on life support a little longer. There is rapidly
shrinking demand for our debt, and confidence in the dollar is falling. This
phenomenon is hidden only by the fact that confidence in all other fiat
currencies is falling faster.
None of this seems to really
alarm the administration, obviously, as they have just released a budget that
accelerates spending and borrowing. The reason the debt and deficits plague
the economy, according to this administration, is that the American economy
is not taxed enough. Therefore, hidden in the fine print of the budget is a
provision that ramps up the corporate dividends tax rate from its current 15%
to 39.6%. In addition, certain deductions and exemptions will be phased out;
an additional 3.8% Obamacare investment tax surcharge will be tacked on,
bringing the effective dividend tax rate to 44.8% in 2013. Keep in mind, this
is not just a tax on big business, this is a tax on anyone who depends on
dividend income to live - retirees will be hit hard by these changes and
dividend yielding stock prices will adjust downward rapidly to reflect their
decreased value.
Not only this, but the Obama
administration is worsening the uniquely American policy of taxing income of
US based companies earned overseas. No other country presumes to tax globally
in this manner, so it amounts to a huge penalty for basing a company in the
US. Companies have been able to manage this penalty by deferring taxation
until it is repatriated or by paying dividends. What will happen to US based
businesses with strong international ties if these allowances are abolished
as the Obama administration proposes? A massive wave of permanent capital
flight will undoubtedly cause the already high levels of unemployment to
rise.
Businesses are struggling and
failing in this economy. The government ultimately depends on a healthy
business climate to provide jobs and a tax base. It is penny wise and pound
foolish to add to business tax burden in a misguided attempt to close the
colossal gap between our government's revenue and spending. Rather than
crippling and absorbing more of our shrinking economy, government needs to be
drastically cut - not in 10 years, but immediately.
Those who understand the
underpinnings of the dollar and how the Federal Reserve works have known for
some time that we are on an unsustainable course, that major chaos is in
store if nothing is done quickly to reform things. Politicians pay
lip-service to reforms that never materialize or turn out to be at best small
and meaningless, or at worst actively harmful. It seems more and more
inevitable that because the necessary changes would be too inconvenient for
the elites to enact now, we will get them later Greek-style, through collapse
and chaos.
