First of all, before I write anything, congratulations to President Obama for getting re-elected. It was really a hard fought campaign by both him and the republican opponent Mr. Romney. The campaigns by both men were a lesson in itself for anyone who closely followed this election. Now, throughout the campaign, I had many friends telling me how they disliked both the candidates. But I for one liked both of them and listened to many of their passionate debates and arguments about each other’s policy proposals. True that there were at times false, empty or just pure political arguments that clouded over the real issues. But bottom line: I always said to all my friends that I will be happy for anyone who wins and sad for anyone who loses. And that’s how I felt.
So now let’s gets back to the “fiscal cliff” and other tax breaks/increases that are supposed to be worked out before this year end. The statements from both sides so far is just like a deja vu to me! Increase taxes on the rich! Decrease taxes for everyone! Oh, by the way, who is rich here? – joint filers who earn above $250,000 annually? I am not sure how many living in big cities across the US would agree to that. But anyways, let me get back on track. Now, I have been hesitatingly on the side of increasing taxes on the rich (forget the 1% for now. I am talking about upper middle class – as $250,000 dollar family income, to me, in many big cities across US, is just that). As much as the other side of the argument was tempting and even made me rethink many of the policies that I thought was right, at the end of the day, I just had to give myself a gentle knock on the head and remind myself the word – “Demand!” And the aggregate demand has been low due to poor job growth and the overall gloom that hangs in the US and the world economy as a whole. And that gloom has prevented private corporations from stepping up investments as much as we would like. The few private capital spending we see from corporates is, to my knowledge, largely because of inventory replenishment. And so, though I am hesitant to say this, I still believe, government investments are needed now to push up growth in the US to a higher trajectory (the reason why I am hesitant is just due to the basic fact that government many times wastes money). And so this requires more revenue to the government in the form of tax reforms and some increases.
But recently, I have also started to fear and listen more carefully to the other side of the argument: that government does not create jobs! The reason: in the last four years, I have seen more printing of money than investing it. So, there goes my question - Policy makers from both sides of the aisle have been calling for reducing debt! The form varies. But ultimately, one thing would happen: government would end up with relatively more revenue for now. But let’s be careful – this might not last! Why? - because the government might just waste that money that would only add up to problems in the future. And maybe loss in revenue and higher debt again! So my question is – if we are going to follow the path of higher taxes, then where would that money end up going? What investments will be made? I would be willing to shout at my highest pitch to stress the word “Investments” here!
I know certain things have been promised – like higher spending on education, infrastructure, green economy, tax breaks to companies that invest locally, energy efficiency etc. But all this to me is as vague as it can get. All this sounds nice, but can we be more specific please? And I must say that I am little hesitant to just push forward the “tax increase” strategy without knowing what will be done with that money. I fear we are working in the reverse way of collecting money first by not telling the one who gives money on what we are willing to do with that. Maybe I haven’t followed the specifics much, but as far as I know, I am not satisfied that I have enough information on where the money would end up going by the government in the next four years. Can we please, please be more specific?