Wake up and smell the coffee! Tough times in America: Who’s to blame? Part 2

Posted on April 9, 2010 by


By Orphe P. Divounguy

Earlier this week, senior White House economic advisor Paul Volcker uttered words that no one wanted to hear:  “If, at the end of the day, we need to raise taxes, we should raise taxes!”  Mr. Volcker was referring to the leviathan US government debt caused by the administration’s out of control discretionary spending that results in yearly deficits.  Someone in the Obama administration has to wake up and smell the coffee beans.  The democrats have been telling the American people all along that they would not raise taxes and that they’d be no new tax on the middle class.  Recently, Senator Levin (D-Mich) of the tax-writing House Ways and Means Committee assured the American people that his focus would be job creation by giving tax credits to businesses and extending the Bush tax cuts.

How do we plan to pay for all the entitlements (Social security, Medicare and Medicaid, etc…) and our entire discretionary spending among which our overstretched defense, homeland security, health and human services, education, transportation, housing and urban development, agriculture?  The 2010 deficit is estimated at $1.5 trillion added to a national debt of approximately $12. 7 trillion which is more than the combined GDP of the top performing European economies, Germany, France, Russia, The United Kingdom and Italy.

Paul Volcker suggested a “Value-Added Tax”!  A “VAT” is a national sales tax, a tax on the consumption of all goods and services.  As if Americans were not going through tough economic times right now.  With the unemployment rate reported at 9.7%, and so many Americans struggling to find or keep a job, a VAT will hurt the middle class and the poor even more.  The rich don’t hurt from a consumption tax as much as the poor would.  The rich can afford the VAT; the middle class can barely afford to pay for basic utilities and in most cases, “Main Street” Americans are living paycheck to paycheck.  The VAT would be a disproportionate tax burden.  As far back as 2009, the head of the Senate Budget Committee, Democrat Kent Conrad considered the idea.  Any attempt by democrats to implement this idea of a VAT would be a direct attack on the means of subsistence of the middle class and the poor in America.

“I think America has prospered because the general level of taxation has been lower than Europe,” said prominent research economist Chris Edwards of the Cato Institute (the leading think tank in Washington DC) who prefers spending cuts to new taxes. “I don’t think we should go in this direction.”