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Thomas Sowell
Thomas Sowell
2 Feb 2016
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2 Feb 2016
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Fiscal Cliff Notes


Amid all the political and media hoopla about the "fiscal cliff" crisis, there are a few facts that are worth noting.

First of all, despite all the melodrama about raising taxes on "the rich," even if that is done it will scarcely make a dent in the government's financial problems. Raising the tax rates on everybody in the top two percent will not get enough additional tax revenue to run the government for ten days.

And what will the government do to pay for the other 355 days in the year?

All the political angst and moral melodrama about getting "the rich" to pay "their fair share" is part of a big charade. This is not about economics, it is about politics. Taxing "the rich" will produce a drop in the bucket when compared to the staggering and unprecedented deficits of the Obama administration.

No previous administration in the entire history of the nation ever finished the year with a trillion dollar deficit. The Obama administration has done so every single year. Yet political and media discussions of the financial crisis have been focussed overwhelmingly on how to get more tax revenue to pay for past and future spending.

The very catchwords and phrases used by the Obama administration betray how phony this all is. For example, "We are just asking the rich to pay a little more."

This is an insult to our intelligence. The government doesn't "ask" anybody to pay anything. It orders you to pay the taxes they impose and you can go to prison if you don't.

Then there are all the fancy substitute words for plain old spending— words like "stimulus" or "investing in the industries of the future."

The theory about "stimulus" is that government spending will stimulate private businesses and financial institutions to put more of their money into the economy, speeding up the recovery. But the fact that you call something a "stimulus" does not make it a stimulus.

Stimulus spending began during the Bush administration and has continued full blast during the Obama administration.

But the end result is that both businesses and financial institutions have had record amounts of their own money sitting idle. The rate of circulation of money slowed down. All this is the opposite of stimulus.

What about "investing in the industries of the future"? Does the White House come equipped with a crystal ball? Calling government spending "investment" does not make it investment any more than calling spending "stimulus" makes it stimulate anything.

What in the world would lead anyone to think that politicians have some magic way of knowing what the industries of the future are? Thus far the Obama administration has repeatedly "invested" in the bankruptcies of the present, such as Solyndra.

Using lofty words to obscure tawdry realities extends beyond the White House. Referring to the Federal Reserve System's creation of hundreds of billions of new dollars out of thin air as "quantitative easing" makes it seem as if this is some soothing and esoteric process, rather than amounting essentially to nothing more than printing more money.

Debasing the value of money by creating more of it is nothing new or esoteric. Irresponsible governments have done this, not just for centuries, but for thousands of years.

It is a way to take people's wealth from them without having to openly raise taxes. Inflation is the most universal tax of all.

All the pretty talk about how tax rates will be raised only on "the rich" hides the ugly fact that the poorest people in the country will see the value of their money decline, just like everybody else, and at the same rate as everybody else, when the government creates more money and spends it.

If you have $100 and, after inflation follows from "quantitative easing," that $100 dollars will only buy what $80 bought before, then that is the same economically as if the government had taxed away one-fifth of your money and spent it.

But it is not the same politically, so long as gullible people don't look beyond words to the reality that inflation taxes everybody, the poorest as well as the richest.

To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate web page at Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His Web site is



4 Comments | Post Comment
Here's some other info "worth knowing". Republicans are not fiscal hawks; they are spending fanatics, as evidenced by their $900 billion give-away to the pharmaceutical industry, wasteful squandering of the Clinton surplus, and the two unfunded wars they started, which paved the way for Halliburton and Koch Industries to receive billions in “secret, no-bid” contracts. Fortune 500 companies earned trillions in 2011 but paid less than $5 billion in taxes because of revenue draining tax cuts and loopholes legislated by the GOP, a wholly owned subsidiary of Koch Industries. And now John Boehner and Mitch McConnell want to throw seniors under the bus, force states to repay emergency relief aid, privatize Medicare with a “buy-ten-get-one-free” coupon system, stop Pell Grants, abolish reduced fee school lunch programs, stop unemployment insurance, end WIC, eliminate Head Start, eviscerate the EPA, end SNAP, and evict seniors from Section 8 housing just so they can keep on borrowing money from China to give $5 trillion in revenue-draining, infrastructure depleting, job killing tax cuts to millionaires. Republicans want to help the rich by giving them huge tax cuts, yet they seek to hurt the poor and most vulnerable by cutting $6.3 trillion in essential safety-net programs. America cannot be ruled by the top 2%. When Republicans controlled both Houses and the Presidency, they tripled the deficit, erased 15 million manufacturing jobs, deregulated the subprime derivative mortgage market (leading to 8 million home foreclosures and 144,000 small business failures), deregulated oil (which led to increased gas prices through increased oil speculation), and tricked us into two wars. Under Bush 43, we added $7.5 trillion to the deficit to pay for tax cuts for the wealthy, and now Republicans want to do it all again. Insanity!
Comment: #1
Posted by: morgan
Tue Dec 4, 2012 9:18 AM
Re: morgan- "The trouble with our Liberal friends is not that they're ignorant; it's just that they know so much that isn't so."
Did Reagan know you when he wrote that? Because you got it bad, dude.
Comment: #2
Posted by: DoubleIPA
Tue Dec 4, 2012 5:57 PM
And we all know what the puppet suffered from during his time in office and what ultimately killed him...dementia.
Nobody ever went broke underestimating the intellect of Republicans.
Comment: #3
Posted by: morgan
Wed Dec 5, 2012 5:13 AM
When they said they were going to "stimulate the economy," you misunderstood. Specifically, they meant they were going to stimulate their personal economy and that of their political cronies. When they said they want "the rich to pay their fair share," you misunderstood. Specifically, they meant they want the rich who aren't in bed with them to pay their fair share. Seriously - people need to read some history books and see that none of this is new. The game has been played this way since the dawn of time. I can just picture the same stuff playing out on a smaller scale back in some prehistoric village. I'm willing to bet it will be the same a thousand years from now, just with different players.
Comment: #4
Posted by:
Wed Dec 5, 2012 5:23 AM
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