Lots of talk and worry has been expended over an unfortunate aspect of the ancient Mayan calendar: it was calculated to run through 2012 but no further.
Some folks, placing inordinate weight on pre-Aztec American time-keeping, think that spells the end of the world.
As preposterous as the movie about this was, there are a few things to be expected at the end of this year that have a touch of the hand of Doom.
Bush-era tax rates expire, for instance.
Isn’t it strange how a lowered tax rate must expire, but higher rates don’t get a similar sunset treatment?
Anyway, on December 31, 2012, tax rates go up. The Washington Post relates that some folks are calling this “Taxmageddon,” and it could be a disaster for our faltering recovery:
Overnight, the marriage penalty for joint filers will spring back to life, the value of the child credit will drop from $1,000 to $500, and the rate everyone pays on the first $8,700 of wages will jump from 10 percent to 15 percent.
The just-agreed-to payroll tax reprieve also has a built-in expiration date, so FICA withholding will go up 2 percent as well.
Though folks are running scared about this, politicians are girding their loins for a big fight. Or “negotiation.” Or something.
Meanwhile, no real cuts in spending can be expected, especially if President Obama wins in November, as seems increasingly likely.
And the U.S. government continues to borrow an additional six billion dollars every business day. I fear more than one thing is set to expire.
This is Common Sense. I’m Paul Jacob.
7 replies on “Expiration Date”
Holding the rate of increasing the spending to a 2% increase a year would balnce the budget, ie get us to where money spent equals money taken in by 10 years. It would also avoid the economic catastrophe likely to occur when our creditors that have been subsidizing this spending debacle suddenly realize that they are loaning out money that with the continually increasing rate of spending that we have no prayer of ever paying back and they cut off the supply.
Paul,
One of your comments today started me thinking. You bemoaned the fact that only tax reductions merit sunset provisions. What do you think of a constitutional ammendment requiring that all laws, not part of the constitution, be required to include sunset provisions?
Vic Justes — On first blush, I love the idea. Certainly any law that isn’t sun-setted, should have to justify why not.
RE: Taxes having a sunset.
When I was in college, (admittedly, many years ago)-there was an item about this in an economics class I was taking.
In (I beleive Scotland, of not, Wales)in the 1700’s, when windows were rare ( and only the ‘wealthy” had them) the government instituted a “temporary tax” on windows, to finance something (I beleive a rebellion against England).
In the late 1960’s– when I was in college — the tax was still in place.
Paul, There is a reason the tax reductions “expire” or are “temporary”, with an automatic reversion to the prior rates, which are neither rescinded or have a sunset provision.
It is all part of self-serving window dressing, and supported by the vast majority of both sides of the aisle in Washington.
The purpose of having expiration dates for tax “reductions” is to artificially lower the projections of the growth of government and the national debt. Truthful projections would expose clearly the unsustainability of the government’s spending patterns.
The non-partisan congressional budget office (CBO) projections are, and must be by the rules governing them, based upon laws in effect. The Congress and Senate are fully aware of the rules which they made.
Therefore, if tax reductions are set to expire, then prior tax rates must be used following the scheduled expiration in the CBO’s revenue projections.
Thus the expiration of the Bush Tax Cuts, and other “temporary” adjustments (the estate tax and alternate minimum tax come to mind) are factored into CBO revenue forecasts.
This mandated methodology compels the CBO to publish deficit projections which are lower than can reasonably be expected.
As with all economic projections, it is best to read the “assumptions” page first. After that it becomes easy to decide if it is worth going any further.
Dirk, I find it doubtful (actually incredulous) that the US could remedy its deficit by “decreasing the increase” of governmental spending to 2% for 10 years.
The CBO makes additional assumptions. It takes the projected costs of new programs already passed and coming on line as seriously as it does the expiration of tax cuts.
Therefore projected spending is biased low, while revenue is biased high, a compound error.
Regardless of the absurdity of a rational acceptance of either of those two assumptions based upon the government’s record, the “we can grow ourselves out of this with little or no pain” fallacy is among the preferred delusions of voters. That thought pattern is epidemic in the political class, especially in sub-category actively running for election.
Disaster will strike the US when it must, like Greece, face the inevitable rise of interest rates.
Perhaps the most unrealistic of all CBO assumptions, is that the cost of US debt, most of which is in short term notes, will remain the same (currently at historical lows) over the projection period. That simply cannot be rationally assumed. An inflation and risk premium are inevitable and coming shortly. Replacing the current central bank manipulated average interest rate with just the average historical average interest rate results in fiscal disaster.
Therefore, perhaps the the expiration date of the Mayan long calendar is prophetic, at least for the end of the brilliant phase of the history of the United States. The US was the greatest sociological experiment of human kind, in personal liberty, freedom and general economic progress.
I consider myself extremely blessed, regardless if its periodic imperfections and errors, to have lived in the United States during its brilliant phase for what will certainly be the majority of my life. Therefore, as a figure of some historical significance once advised near the end of his life, “Weep not for me, but for your children.”
Reducing the increase in government spending to 2% would work, but it would take quite some time to balance the budget (let alone pay down the debt).
I much prefer Ron Paul’s plan to eliminate entire sections of the government, and cut government spending dramatically ($1 trillion in the first year). The other candidates want the same level of spending (as do our House RINOs who could have stopped the deficit this year if they wanted) in spite of their rhetoric, as they’ve not told us where the cuts would come from.
Santorum at least says he wants to cut $5 trillion in 5 years, but he hasn’t said from where, and he wants to increase military spending. I don’t believe him. Romney hasn’t provided any specific cuts of any significance (he wants to cut spending on Amtrak and Title X, but that’s < 0.1% of spending).
To see where the candidates stand on spending, see http://www.cato-at-liberty.org/a-guide-to-the-presidential-candidates-proposals-to-cut-spending/
Where they stand on spending is, in my opinion, the most important position given our financial situation. And it's because government spending is the burden of government, and its a drag on the economy. Romney even said that government spending stimulates the economy. To me he's not much different than Obama if he doesn't cut spending back to 18% of GDP or less.
Historically from 1800 thru 1910, ALL levels of government in the US consumed only 10% of GDP, now it's closer to half. Working for the government 50% of the year isn't freedom, it's closer to slavery.
If real Americans EVER get back in power maybe all laws and regulations should have a sunset. The “logic” of the ‘hired help’ in Washington should be reviewed every few years to give the people a right to roll back the crap they lay on their bosses.