Are We Able To Grow The American Economy While Also Balancing The Budget?

Are We Able To Grow The American Economy While Also Balancing The Budget?

I have been in a quandary the past few weeks while I developed and then wrote my Hub, "My Budget Alternative To Rep. Paul Ryan's Path To Survival Of The Fittest". That article was written because of my urgent feeling that our federal budget deficit needs to be closed now to save us from economic ruin. A new round of dismal economic statistics seemed to come out daily as I wrote that Hub.

That got me to thinking about the books that I have read regarding the Great Depression and the New Deal. United States policymakers decided in 1937 that the American economy was firmly on the road to recovery. Economic indicators had indeed been improving for a couple of years but the economy was still in a weak state. The government decided to tighten its fiscal policy and the Federal Reserve tightened monetary policy. These moves reflected prevailing economic wisdom that you expanded spending and the money supply during downturns and then tightened these policies as the economy improved. This was to prevent inflation and huge debt loads. The Stock Market subsequently plunged and banks tightened lending again which led to a sharp dip in the economy. The U.S. finally recovered in 1942 when they entered World War II. The huge ramping up of military spending for the war facilitated the recovery.

This raises the question of whether balancing a budget with such a large deficit will precipitate a similar double dip recession or worse. A large amount of funds will be withdrawn from the American economy whether the budget is balanced by spending cuts, tax increases, or some combination of the two. This is especially critical because our current economy is at a very fragile stage just as it was in 1937. United States political and economic realities have now merged together ensuring that some form of severe budget austerity is sure to be put in place soon. Several plans have been placed into public discourse and legislators are debating them now.

I presented a budget balancing plan with my earlier article and now I have come up with a few ideas to encourage growth in our economy while also ensuring that they remain budget neutral. One area will concentrate on the tax code by way of tax cuts and credits to stimulate economic investment and job growth. Three other areas will target increasing investments in our future namely within education, energy, and innovation. Keep in mind that I want all of these to be accompanied by offsetting spending cuts or revenue increases to ensure that they remain budget neutral. These investments in our future should offset to some degree the lost stimulus from the expected budget tightening while also increasing long term revenue prospects. These moves are meant to establish and preserve future American economic strength.

Corporations and financial institutions have been sitting on a hoard of cash for at least a couple of years. The reasons for this are not clearly known. What is known by most economists and governmental leaders is that we must coax a large amount of these funds into circulation in our economy to allow for its continued and hopefully accelerated growth. I have conceived of four possible tax related ideas to allow this to happen.

The first is a new Investment Tax Credit. This credit would be in addition to those currently in our tax code. It will cover the purchase of new equipment, plants, and offices. I would give it an expiration date of two to three years which will encourage companies to avail themselves of this credit sooner rather than later.

Secondly, I would allow the equipment purchases to be depreciated on an accelerated basis which allows these companies to save further on their federal taxes as an added incentive to invest.

My third idea is a temporary lowering of the Capital Gains Tax. The budget plan I offered in my prior Hub proposed allowing the Bush tax cuts to expire after 2012 as they are scheduled to do. This would cause the long term capital gains rate to rise to 20% from 15%. I propose lowering it to 10% for two years and then permanently raising it back to 20%. This would give businesses a very strong impetus to invest these surplus funds that have been sidelined for so long.

Finally I would institute a new Jobs Creation Credit. This credit would be valued at 50% of the first year salary of the newly hired worker up to $50,000. Credits would be allowed for an unlimited number of hired workers but must also guarantee that these workers be retained on the company's payroll for at least three years. No one year and out. This credit would also be allowed for jobs that are repatriated back to the U.S. from overseas.

I would offset these four tax breaks with either spending cuts in programs that Congress would choose or possibly a temporary Value Added Tax or (VAT). This is a form of a sales or consumption tax that extracts revenues at small amounts from each stage of a product's development. The initiation of these tax credits for two to three years is sure to bring a rush of funds into our economy and jump start it into a much more robust state.

The future of a country naturally lies with its children. The academic results for United States students have been declining for several years. This trend must be reversed quickly if we wish to return the U.S. to economic strength and remain on the cutting edge of science and new technology. State governments all over the country are drastically slashing their education budgets just when the money is most urgently needed. Money saved on educational waste or duplicate services will be money well saved.

Unfortunately most of these cuts will come out of vital programs and teacher layoffs. Class sizes will grow which will further decrease the quality of our children's instruction. Teachers will find it much harder to focus on individual students. Entire subject areas are being eliminated. These conditions cannot be allowed to persist. Our children need complete curriculums to develop them into well rounded adult citizens. Eliminating so called elective programs such as music, art, and physical education is shortsighted. Furthermore we need to continue and expand the Charter School movement around the country. These experimental public schools have been at the forefront of developing innovative educational ideas, systems, and programs that are then conveyed to other schools around the nation.

My belief is that our federal government needs to fill this fiscal shortfall with a serious investment of funds. This should be done in concert with Corporate America and our many universities and colleges. These two sectors also have a lot at stake in developing the academic acumen of our children. Therefore it makes enormous sense that we should partner with them to address this problem. They have ample resources and expertise to assist our communities in teaching students the subject matter necessary to turn them into the high achieving employees and college students that these institutions require.

Providing funds and instructional help to our strapped and failing school districts will help mitigate costs to our governments as well as holding them more responsible for academic results. The balance of the additional costs to the federal government can be offset by cuts to other less vital programs or through additional taxes and fees.

One problem currently facing the United States that threatens both our national security and our economic system is sustainable energy. The supply of fossil fuels such as oil, gas, and coal are finite commodities. We are quickly approaching the point of diminishing returns in the supplies of these energy sources. This is occurring precisely at a time when several heavily populated countries are growing at phenomenal rates.

Furthermore the vast majority of the scientific community recognizes that the overuse of fossil fuels is causing a global warming of the planet that left unchecked threatens the existence of all human beings. Ironically the Chinese are now at the forefront of alternative renewable energy production and development. The United States was the leader during the formation of these industries. Why have we fallen behind? I believe the U.S. has lost its focus on the future. The Chinese government knows that eventually the world will be turning en masse to alternative renewable energy sources out of necessity. They already have started doing so. Why does the U.S. government not fight harder to help redirect resources into these alternative renewable energy industries?

The entrenched industries and their political supporters fight tooth and nail to retain their markets. Instead they should be turning to investing in new renewable energy sources while they are still generating enormous revenues from fossil fuels. I am not going to list all of the alternative renewable energy sources which I feel we should invest in as part of this Hub. You can read my Hub, "Drill Baby Drill Where Hath Thou Gone?", to get my full take on the alternatives I favor. The bottom line is that I feel our government must get fully behind these industries and strongly invest in them.

This can be implemented both through direct grants and through tax credits. We need a comprehensive energy policy. Until now energy policy has been an ad hoc set of actions that only served certain targeted problems or political exigencies. Our economic and environmental futures are at stake. There are many ways to fund this effort to make it budget neutral. I would prefer a Gasoline Tax. I know this will be hugely unpopular but it will not only fund our energy future but it will also encourage energy conservation. I would use a a steadily escalating tax increase to minimize the economic impact on our citizens. It would start at two cents per gallon and increase a cent per year until it reaches ten cents. The legislation allowing this should be written specifically to ensure that this tax is only for a dedicated fund that is used for investing in alternative renewable energy research and development exclusively.

The final areas that I would like the United States government to invest more in to enhance our future are the technological and medical fields. We already do this in major ways through two agencies. One is the Defense Advanced Research Projects Agency (DARPA). The other is the National Aeronautics and Space Administration (NASA). Both of these agencies were created in 1958 as a response to the Soviet Union's launching of the first satellite into space called Sputnik. Our government felt that our national security was gravely endangered so they created and aggressively funded these agencies. Their purpose was to return us to the forefront of space and defense exploration and development. These efforts worked perfectly and quickly. We were the world leader again by the early 1960's and we were soon far surpassing any other country.

I believe that our federal government needs to do this again and promptly. They need to partner with our universities and corporations to identify key potential industries and innovations. Funding them aggressively and turning them into realities must become a top priority. We are starting to fall behind the rest of the world in this research and the situation must not be allowed to stand.

One example area to invest in is high speed fiber optic connections. The U.S. is far behind the rest of the industrialized world in regards to the speed and quality of its communications highway. Most other countries recognized early that fiber optic connections were the key to maximizing online commerce and communications. It is analogous to runners racing in a sprint. We are racing in an armor suit while the others are racing in track gear. The United States must catch up rapidly lest we fall behind the rest of the world in all technological areas.

Another area we should invest in is high speed rail. Rail transportation is much cleaner than traveling by air or automobile. Comfortable high speed rail lines could replace a significant percentage of our transportation system if done correctly. They will not replace a majority of this transportation but even a 10% replacement would be quite significant.

Medical research is another area that our federal government should invest in much more heavily. Examples for this would be cancer and biogenetics research. Cancer is probably the greatest health scourge we have in the world today. Increased dedicated funding with universities and drug companies would do wonderful work in speeding the eradication of many cancers.

Biogenetics and stem cell research are also extremely promising areas of research. The most dramatic future cures to diseases and catastrophic injuries will be achieved within these areas. Tissue and organ regeneration is a strong possibility for the future. It is essential that we remain in the forefront of this innovative research both for public health reasons and for economic growth. Much of the cost of investing in all of these innovative programs will come in partnership with universities and corporations so the expenses will be shared.

The additional cost of the federal government's expenditures in these areas can be recouped from either additional fees and taxes or cutting other less important programs. The bottom line is we need to redirect our national spending to sectors that represent our economic future and these represent that very well.

There is no question that the United States needs to start balancing its budget and soon. The question arising from this is whether we should sacrifice our future in carrying out this endeavour. Our federal government has many functions it is required to perform. These include national defense, administering social programs to protect its citizenry, and to promote an atmosphere for growth of its economy. There are many other functions but these are the most important.

My belief is that the structure of our federal budget is extremely inefficient and is not up to meeting all of these needs. This is especially true of promoting growth. My previous Hub proposed balancing the budget with extensive spending cuts and even larger revenue increases. Unfortunately it also takes a lot of money out of circulation in the economy. This will occur while it is still weak and malfunctioning.

The ideas I propose here will coax money out of corporate coffers to be invested in our economy. These investments and tax incentives are long overdue. I am also rearranging governmental priorities to stress investing in areas that will allow us to grow and push us into the technologies of the future. My educational investments are essential to transforming our workforce into one that will be able to capitalize on our move into these new high technology industries. Finally, investing in cutting edge industries such as fiber optics, alternative renewable energy, biogenetics, and many more will allow the U.S. to reclaim its economic leadership in the world.

The American economy is at a critical crossroads. Enormous debt and a dearth of investments threaten to impoverish us both in the short term and the long term. Therefore a fundamental restructuring of our national budget is urgently needed. Balancing the budget while investing in the future is the sensible way to carry out this restructuring. Some people feel that the era of American exceptionalism is over. I believe this is nonsense. We need courageous and imaginative leaders to turn our economy around and allow our can do spirit to shine through. Some sacrifice and hard work will be required but that was never a problem for the American people in the past. A new budget such as the one I have proposed within this Hub and my previous one will give the United States economy the foundation and direction it needs to reclaim its preeminence in the world.

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Comments 42 comments

Sylvia's Thoughts profile image

Sylvia's Thoughts 5 years ago from Southern California

What we need is for Wall Street and the big corporations to stop manipulating our economy, and to stop believing everything we hear and read, and start connecting the dots.


HSchneider 5 years ago from Parsippany, New Jersey Author

This is true Sylvia's Thoughts. Hopefully the new Wall Street Reform law will rein in Wall Street. We also need our federal government to invest in education, energy, and technologies of the future. Without this we will fall behind the rest of the world. Thanks for commenting.


PETER LUMETTA profile image

PETER LUMETTA 5 years ago from KENAI, ALAKSA

HSchneider, What an elegant well thought out proposal. Very fair and straightforward. The only fly in the ointment, and there are around 700 of them, are the politicians. They would see nothing in it for them. They would have to take a cut in "pay". And the Corporations would also look down on your plan because they already pay little or no taxes so where is their incentive? I believe all of your plan is good but there needs to be more stick and less carrot. We all know that they will fight tooth and nail not to pay/invest any money unless forced to. And the Politicians just all need to go and get some that actually care more about the country than getting reelected. But bravo on a well thought out plan, Thanks, Peter


HSchneider 5 years ago from Parsippany, New Jersey Author

Thank you very much Peter. The Republicans will love my tax credits and incentives. They will gag on my spending. I do believe these tax credits would get at least some money off the corporate sidelines. These corporate titans know they must soon invest this money and quickly sunsetting credits might actually be the carrot and stick we need. I may be a bit of a "Pollyanna" on that point but I like to look at the glass as half full. The Democrats should like the proposals. Of course all politicians will look to get my investment spending in their districts and damn the rest. I put this proposal and my previous Hub out as what I feel is best for the country. Hopefully others will do the same and we will come to a sensible compromise as a country.


PETER LUMETTA profile image

PETER LUMETTA 5 years ago from KENAI, ALAKSA

I hope so for all our sakes, Peter


HSchneider 5 years ago from Parsippany, New Jersey Author

You and me both Peter. Hope springs eternal. They also better stop playing "Chicken" with raising the Debt Ceiling. If the GOP block this, the U.S. credit rating will be junk and our economy will sink like a stone.


TeaPartyCrasher profile image

TeaPartyCrasher 5 years ago from Camp Hill, PA

H: that may be the idea. . .


HSchneider 5 years ago from Parsippany, New Jersey Author

I think and fear that you may be right TPC.


Dennis AuBuchon profile image

Dennis AuBuchon 5 years ago

This is a great hub. You have provided much information that should be a part of the solutions to the problems we face today or at least considered. I agree we need a comprehensive energy policy that focuses on becoming energy independent.

We have so much energy resources in this country that is not being utilized today that would go a long way to helping revitalize our economy. This would involve not only having a supply of our own energy resources but it would create jobs which would provide more income to help reduce our debt.


HSchneider 5 years ago from Parsippany, New Jersey Author

Thank you very much Dennis. I am glad we are both enthusiastically in agreement about a new U.S. energy policy. We desperately need it. National security and environmental security is at stake. China and India are growing explosively and their demand for oil is growing enormously every year. You are right that there will be a huge amount of jobs created with these new industries. We need this now.


writer20 profile image

writer20 5 years ago from Southern Nevada

It's strange I haven't been receiving any messages from Hubpages since last Friday. Do you have any idea why?


HSchneider 5 years ago from Parsippany, New Jersey Author

Sorry I don't know why Writer20. I have received many messages every day. I think it would be best to inquire with HubPages to see if there is a problem.


Fay Paxton 5 years ago

Hi Schneider:

You have to wonder why people who hate government so much choose to work in it. Sadly, I believe tanking the economy and keeping a high unemployment rate are part of the Republican agenda.

This is the same party that railed against Obama endlessly asking, "where are the jobs". They rose into office on that mantra and have done nothing since but undermine every possibility to recover.


HSchneider 5 years ago from Parsippany, New Jersey Author

I totally agree Fay. It seems that the entire GOP's sole purpose is to defeat President Obama. Sen. McConnell said as much during the Healthcare reform debate. They rail against government to get back into it. I want to balance the budget at the same time that we restructure it to focus on future growth. Thank you for commenting.


kimh039 profile image

kimh039 5 years ago

You've really given this a lot of thought HSchneider. I remember learning in some economics classes back in the day, that the spending on the war improved the economy and have wondered why the opposite seemed to happen in our current situation. I also am surprised at myself for thinking this, but I am beginning to believe that there are corporations, individuals and political action groups who are hoarding money and harming the economy. I was somehow offended when royalty came to the US and raised billions of $ for charity from a couple celebrity events. Maybe the federal government should have a few fundraisers with celebrities and apply the proceeds to the deficit. Then, no one is having to pay taxes, but money is raised and the deficit and economy can benefit! I haven't really given this a lot of thought, but it did strike as offensive. Thanks for sharing your thoughts on these current issues, and teaching some lessons as well.


HSchneider 5 years ago from Parsippany, New Jersey Author

Thank you very much KimH. Unfortunately, politicians hold a numerous amount of fundraisers but they are for their own re-elections. You are correct that a war can sometimes be good for an economy. This was true for World War II. The American economy was so down that no demand for goods and services existed in the economy. The war provided plenty of demand. Poof. No more depression. We went into war when the economy was good and it just put us into a larger deficit. I believe that instead of war, a large investment in renewable energy, infrastructure, education, and new medical research would provide tremendous positive stimulus to our economy. Thanks for commenting.


Rock_nj profile image

Rock_nj 5 years ago from New Jersey

Nice thorough suggestions regarding how to get our economy moving again. I like the idea of getting corporations to bring their revenue earned overseas home. The tax credits would help hiring, but ultimately a business is going to hire people if they need them, especially in these lean times. I would like to also see stimulus in the form of real infrastructure spending. It has the benefit of helping the economy in other ways and for many decades, as better infrastructre makes it easier for businesses to do business.

I do think any deficit package needs tax increases, as well as spending cuts. The deal last winter that left the Bush tax cuts in place balloned this year's budget deficit from $1.1 Trillion to $1.5 Trillion, so the loss of revenue does have a significant impact on the budget deficit. On the spending cuts size, I think it's time to rethink how much we spend on our military. That is really draining our budget, and the return on investment is dubious. This ties into your energy investment idea, as too much of our military spending is spent protecting the oil supplies. We need to kick our oil habit and bring the boys and girls home.


HSchneider 5 years ago from Parsippany, New Jersey Author

I agree with you Rock_NJ. President Obama should have allowed the Bush tax cuts to expire. My prior Hub which is My Budget Alternative to Rep. Ryan says that. I proposed my best idea to balance the budget. This Hub here contains ideas to get the economy moving. All ideas in this Hub would be accompanied by cuts in my earlier Hub. Thus restructuring our budget for growth. You are quite right we need dedicated infrastructure spending and alternative energy research spending. The budget had a surplus under President Clinton. The tax cuts and the wars blew that out of the water. We can get back to that and grow if the political will can be found for it. Thank you for your comments.


junko profile image

junko 5 years ago

It take a lot of time and effort to create this bird's eyes view,HSchneider. The time and space between the Great Depression and the Great Recession is the life lesson we need to succeed and solve our debt problems. vote up&useful


HSchneider 5 years ago from Parsippany, New Jersey Author

Thank you for your kind comments Junko. You are right that we need to look back on history and learn lessons. We do have a severe deficit and debt problem but we also have a very weak economy. Those who want to just blindly balance the budget without regard to its consequences are very shortsighted. The budget deficit must be brought down steadily but intelligently. Spending for growth and our future must be maintained and even increased. Otherwise our books will be balanced but our economy will be much smaller and our citizens much poorer.


youyour 5 years ago

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HSchneider 5 years ago from Parsippany, New Jersey Author

Youyour, This has nothing to do with my Hub.


moneymake profile image

moneymake 5 years ago

It's great that you've been putting a lot of attention to all the subjects. I think like most people who pursue the field, the challenge comes in trying to understand how all the pieces tie together and affect one another - and it can become so infinitely complex. But it's great that you didn't shrink the issue to something so small "spend to stimulate growth", instead you went all out and covered a bit of the many important issues.


HSchneider 5 years ago from Parsippany, New Jersey Author

Thank you MoneyMake. I feel it is important to know what all the different issues are and how they interconnect. My prior Hub was my budget balancing alternative to Paul Ryan's plan. This one is meant to stimulate future growth while staying budget neutral. The Republicans just want to cut and ignore the consequences for both our present and future.


PoliticsNOW profile image

PoliticsNOW 5 years ago from New York

Great read, glad I found it. I really believe their are corporations out there with plenty of cash like you said. The reason they won't hire is to keep unemployment high. This makes Obama look bad and in the end this is what they want. I am wondering when the Media will talk about the JOBS crisis instead of all the distractions we watch today?


HSchneider 5 years ago from Parsippany, New Jersey Author

You are right PoliticsNOW. The corporations are sitting on a huge pile of cash. I hope they are not so cynical, evil, and organized to be doing this to defeat the President next year. It is against their short term economic interests. The media should now turn to jobs and should expose the GOP for emphasizing everything except for jobs. Thank you for commenting.


My Esoteric profile image

My Esoteric 5 years ago from Keystone Heights, FL

Hi, HS. Wonderful hub, as always!

I suspect the reason the corporations are sitting on tons of cash, and that is not a suspicion, the data show that they are, is relatively simple, to me at least ... they can't plan; they have no clue what the government is going to do. Look at the history:

- Bush signs TARP and Obama signs the Stimulus and viola, firings start decreasing dramatically,the stock market turns around withing three months, the recession is officially over in five.

- Meanwhile, the Conservatives begin their Obama for "one-term only" campaign and the super-majority Democratic Congress can't get its act together

- Jan 2010, economomy is starting to grow, hiring exceeds firing for the first time, and the stock market is doing great ... I am happy.

- AND THEN - Feb - Nov 2010, the Conservative negativism continues and their message of failure is catching on, the economy stalls slightly as does hiring, still growing but very slowly.

- Jan 2011, the electorate changed everything and brought government to a halt by electing uncompromising Conservatives

- Jan - until now, Business watches as government disintigrates before its eyes. It sits on its cash now, because it sees stagnation. It has no clue if the government can pull-off a recovery because everything Obama tries is stopped by the Conservatives and they know that it won't be until 2012 until there is any indication if things are going to get better. I don't know what is going to happen if the electorate sends mixed signals again and doesn't either kick the Conservatives out entirely in the Senate and into a minority in the House or give them a super-majority in both Houses. Otherwise, it is going to be another four years of what we have now.

For now, there is no basis for business to make big, multi-million dollar decisions to take the risk and commit the hoards of dollars to increase production ahead of demand and the Conservatives won't let Obama increase demand via governmental action. I certainly wouldn't.

Fortunately, I am a small businessman and not impacted too much by the Conservative's ill-conceived reliance on political and economic faith in place of reason. I can continue to employ new people as my business grows; for some reason, people keep on using drugs and businesses are becoming more and more aware they need us to detect their employee's usage of them.


HSchneider 5 years ago from Parsippany, New Jersey Author

You are exactly right, My Esoteric. The GOP blocking all programs and taking money out of circulation in the economy hurts badly. We need strong short term, smart future industry stimulus. Along with it we need a strong 10 year budget balancing plan. Both can be done at the same time. It is crucial. I am very glad your business is doing well and you can still hire and thrive. Thank you for your comments.


My Esoteric profile image

My Esoteric 5 years ago from Keystone Heights, FL

Somehow I must learn how to write shorter comments, but it seems one thought keeps leading to another ...


HSchneider 5 years ago from Parsippany, New Jersey Author

Not a problem, My Esoteric. Your comments are always welcomed and appreciated no matter the length.


AKA Winston 5 years ago

We can certainly grow the GDP enough to make inroads into the debt but we must stop fueling unwarranted saving by the wealthy.

72% of GDP is consumption, and 50% of American famililes earn less that $85K a year, which means than 50% of American families consume almost 100% of income.

To increase GDP, the simple solution is to cut taxes to the bottom quintiles while raising the top quintiles to compensate. Eliminate regressive tax policies in favor of progressive policies.

After all, without demand there can be no supply side.


HSchneider 5 years ago from Parsippany, New Jersey Author

I totally agree with you AKA Winston. The trend in tax policy for the last 35 years has been regressive. We can see this in the wealth disparity trends and the lack of consumer spending today. The wealthy sit on their hoards of cash while the middle and lower classes have to spend. The 90% top tax rate of the 1950's was unfair but the 35% rate of today is even more unfair to the lower classes. We need to return to a more progressive tax system to close our budget deficit and get money into the hands of those who will spend. That is a move to greater fairness. Thank you very much for your comments.


My Esoteric profile image

My Esoteric 5 years ago from Keystone Heights, FL

The high tax rates in the past had a purpose, first to fund WW II after which they began lowering them, and then wham, the Korean war. Once that conflict was settled, what 1954-55, then top tax rates started coming down. It was Kennedy who made the first substantial cut in 1961 and the ONLY one that actually resulted in sustained economic growth. NO tax cut since has accomplished the same feat; only the two tax increases, in tandem, 1991, 1993, helped improve the economy on a sustained basis. Go figure.

After some recent study (that resulted in the above), I have come to the conclusion that the 35% top rate is fine, heck, you might even lower it a point or two. In addition, however, there needs to be something like a 1% tax on ALL income (not just above) for those whose GROSS earnings exceed 2 million dollars annually to pay for the additional benefits America affords them for access to new income opportunities for simply earning that much money and an additional 2% tax on ALL GROSS income to pay for the benefit of the influence that kind of earnings buys them in the financial and government sectors. These taxes, btw, would be on the gross earnings, before deductions of any sort.

How do like them apples?


Dennis AuBuchon profile image

Dennis AuBuchon 5 years ago

I believe we can grow the economy while balancing the budget. A fiscally responsible government can increase confidence in the economy and thereby increase the incentive to invest. Increasing confidence in the economy will occur with government living within its means.

Our tax system as discussed needs to be revamped to a more fair and balanced one. Putting more money in the pockets of consumers will provide extra income to purchase things people want vs purchasing what they need.

Any spending activity will increase tax revenue at all levels. Projected decreases in income resulting from lower tax rates will be offset by new spending levels by consumers.

True some individuals may save part of their increase in funds but other will spend. Consumers spend more when they have confidence in the economy and their future.


HSchneider 5 years ago from Parsippany, New Jersey Author

That is a very interesting proposal, My Esoteric. I agree with you and I am all for that 1%. I am also for allowing their tax rate to go to 39% which existed during the prosperous Clinton terms. I believe that to be fair and just along with your proposal. Thank you for your additional comment and proposal.


HSchneider 5 years ago from Parsippany, New Jersey Author

Thank you for your comments Dennis. We can lower the rates on the poor and middle class while raising it on the wealthy. They are not spending more. They are just sitting on their cash. The poor and middle class must spend any additional funds out of neccessity.


American Romance profile image

American Romance 5 years ago from America

I would argue the economy did not recover from the huge military spending during WWar, Impossibe for government to spend when the rest of the nation suffers and the economy grow. I would argue the economy grew because of tax revenue provided by the private sector! Anyone studieing this time period will be shocked to learn that every hand on deck was used to provide for our military! I have seen old adds from Zebco fishing reels that state after the war they will go back to building Americas finest fishing equipment! Woman for the first time in history were a huge labor force! Taxes and the need for raw material along with energy and innovation overcame the monies given by the government and turned this country around! Obama has tried to learn from your above lesson but failed as you have to see how it actually works! Meaning there is no demand for anything, During the War there was a huge demand, Now ...........nothing or in the least very little.

Oh and talking about fairness regarding taxes, I keep hearing the word fair but when those making less than 50K don't pay taxes anyway then what is truly fair? I say lets start making the poor pay taxes and you will see the changes you really want in this country! PS If you don't pay taxes (meaning you get it back at the end of the year) then stop worrying what others are paying!


HSchneider 5 years ago from Parsippany, New Jersey Author

Thanks for commenting, American Romance. The economy recovered after our entry into WWII because demand for military equipment and food and clothing for the soldiers skyrocketed. All remaining citizens were enlisted into the workforce so everyone had jobs and spending money. The people who make 50,000 or less in income most certainly pay taxes. Your argument is a very popular right wing myth. They pay all payroll taxes including income tax withholding, social security, and medicare. Many do not owe on their taxes come the April 15th filing day, but that is a different matter. The wealthy escape much of their taxation through loopholes. Your argument is cruel and inhumane. You want to tax those struggling to make ends meet now and often not meeting them. How do you sleep at night?


My Esoteric profile image

My Esoteric 5 years ago from Keystone Heights, FL

No question you are right HS. When we went on warfooting, several things happened, 1) most of the young men in the country were mobilized, creating instant employment, 2) consumer demand was curtailed because they were taken out of the economy and because of rationing, 3) government demand, and therefore production, increased dramatically was manufacturers switched over to producing war material, 4) the rest of America, women included, were employed to meet labor demands of the war production, i.e. full employment, and 5) taxes were raised on everybody, but especially the wealthy, to pay for it all,

The economy HAD to boom because 1) EVERYBODY was making money, the soldiers, the people left at home, the manufacturers, and the merchants, 2) it was fueled by the tax revenue, and 3) it was fueled by debt.

I don't quite understand why anybody would be "shocked" to learn we were a full employment during a world war, what other choice is there when our normal labor force is off fighting the war, get real.


HSchneider 5 years ago from Parsippany, New Jersey Author

Thank you for more fully backing my points on the 'full war employmnent" point, My Esoteric. I too thought it was an obvious assessment.


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Freeway Flyer 4 years ago

I don't know if I agree with every proposal here, but what I like is that your ideas do not fit into the generic categories of liberal or conservative. Instead, they are pragmatic proposals that incorporate aspects of both ideologies. This is the kind of approach that our nation needs in order to get over the gridlock that plagues our political systems at the moment.

You also recognize that public investment has played a major role in our nation's past success. Cuts inevitably have to happen, particularly with Medicare, Social Security, and Defense, but cutting all government spending as a matter of principle is analogous to "throwing the baby out with the bath water." Here are some more thoughts:

http://hubpages.com/politics/A-Defense-of-Some-Big...


HSchneider 4 years ago from Parsippany, New Jersey Author

Thank you for your comments, Freeway Flyer. I read your linked Hub and I agree with you and commented there. I included many areas to invest in for our future in this Hub. Not all would be used in the real world. Investment in many of them is needed. The key point is that government needs to rationally study these areas, make choices, and definitely invest in our future.

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