Liberally Conservative

"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children's children what it was once like in the United States where men were free....... ~Ronald Reagan~

Monday, November 20, 2006

Social Security Reform - In Reverse

President Bush had grandiose plans for reforming the bankrupt social (underline social) security system offering privatization of accounts so individuals would have some control over their money.
The antiquated welfare system that now taxes payroll checks and serves as a "piggy bank" for the pork laden congress and its irresponsible politicians will only be bailed out if responsible reform takes place or employment taxes are raised.
Unfortunately Bush may be desperate enough to "fix" FDR's folly he may reverse his tax cuts (read his lips) and allow the cap on social security, i.e. employment tax, to be lifted. This is called a tax increase.
It's an economic fact Bush's tax cuts had a positive effect on unemployment, consumer spending and business investment. The tax cuts helped entrepreneurs expand their businesses, create jobs and allow economic expansion over the long-term.
Like his father George H.W. Bush, President Bush may be lulled into "compromise" with Liberals who feel they have a mandate to tax everything not nailed down. Social Security is pork and Liberals like many Republicans enjoy pork year round as long as their constituents pay for it. Sending money from Ohio to fund bridges to nowhere in Alaska is what the fat cat politicians do best. It's how they stay in office and that is their primary function.
The parties switched control in congress but the stripes remain the same. Tax and spend, cut and run, and have the taxpayers pony up more money to fix and broken system.
Lawrence Lindsey, President Bush's chief economic adviser from 2001 to 2002, suggests a turnabout for taxes may be on the Bush horizon. Mr. Lindsey rightfully argues an increase in revenues, now at record pace do to the tax cuts, would not increase revenue but would fund FDR's welfare scheme.
Doing so would raise the marginal tax rate on the entrepreneurs that Mr. Bush credits for having led the economic recovery by more than 10 percentage points. The new effective rate would be five percentage points above the level when he took office. Moreover, in 2011, the rate would go up a further 4.3 percentage points to an effective 53% marginal rate on entrepreneurial income. The president would thus be not just raising taxes on entrepreneurs to well above the levels that prevailed in the Clinton administration, but to a rate higher than that which prevailed in the Carter administration. Most of the improved incentives for entrepreneurship and work brought about under Reagan would be repealed.
Let's remember, 10% of the taxpayers now pay 68% of the taxes. Raising Social Security serves no purpose as these individuals, especially the entrepreneur will have their business taxes further, they will receive no personal benefit and some jobs may be lost due to increased costs to small business. Couple this with an increase in minimum wage and the small businessperson is being taxes again.
Liberals have no real economic sense, let's hope the President realizes compromising with them is the same thing that cost his father a second term and ushered in the Clinton's. That alone is incentive enough not to tinker with Social Security unless it's fully privatized. After all, whose money is it?

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