Pay as you go

The Democrats, upon taking majority control of the Congress in 2006, made “pay as you go” a staple of what they promised to bring to the management of the US government. In a nutshell, it was simply this: if we cannot afford it, we will not take it. The problem with such a premise, however, is not whether we can genuinely afford something but whether we can withstand the actuality that if it is a program that promises the sun and the moon and the stars to voters, there will be a tax increase to pay for it. With the Democrat’s top two contenders for the presidency and with the very real prospect of an overwhelming and virtually veto-proof Democratic majority in the Congress in 2008, it promises to be a very expensive next term for Americans regardless of who occupies the White House in 2009.

“Pay as you go” is a good idea for American households as the current national credit crisis will testify. Americans, as evidenced by the crumbling mortgage market, have been buying more than they can actually afford and not only with homes. Consumer credit levels also indicate that many American households lack the discipline required to save for those big-ticket items that only a few short years ago would have required lay-away programs or savings accounts. Over the years in efforts to sell more stuff, companies that once specialized in making this stuff became their own financiers and made buying their stuff much easier, offering credit to less-than-creditworthy consumers which did nothing more than to create more havoc in the credit markets. And the cycle goes endlessly on.

The difference between the American consumer and the American Congress in a “pay as you go” scheme can be boiled down to this: consumers cannot go to their employers and “take” a pay raise in order to finance their enhanced lifestyles while Congress can put a dress on a pig and convince Americans that the latest tax increase is for our own good, sort of like President Clinton’s record-breaking tax increase. Like in other “revenue enhancements” or “investments” (government dressing the pig), regardless of what any may choose to call it, the government will take it whether we can afford it or not and Americans will do with less. Why? Because some government “leader” has a New Idea that will somehow make our lives better in the long run. And in the coming potential Democrat-controlled Congress and possibly a Democratic president, the American consumer’s life is about to be “enhanced” to an unbelievable level because the Congress is determined to “pay as you go”.

For the poor and the so-called Middle Class, it all sounds good when the Congress promises to make the rich “pay their fair share”, and it especially sounds good when a skilled political strategist can convince a politician that this is what the rank-and-file citizen wants to hear because that politician is seeking to “help” us by hammering someone else. What they fail to tell us, however, is that the rich folks in this country pay their lawful taxes according to the laws established by the very Congress that promises to “get ‘em” (the rich) for us. This is to say, there are enormous loopholes in the US tax code which enables those with means to pay less in taxes by substantial write-offs. These write-offs were brought to light during the 2004 presidential campaign as John Kerry and John Edwards were promising to soak the rich in order to pay off the growing deficit. Vice President Cheney reminded John Edwards during their debate that Mr. Edwards wrote off some $600,000.00 worth of income by certain investments that were protected by the tax code (Senator Kerry was also enjoying some of the same tax shelter benefits because both he and Senator Edwards were both men of substantial means).

The only thing wrong with this scenario is that it pointed out that the only reason rich people are not paying their “fair share” is that Congress has granted them the means by which to avoid such payments. Rich people have resources that enable them to make substantial write-offs, and there is nothing illegal about it. Many are highly questionable as to whether the tax code is fair, but the Congress created the laws which enable the rich to write off. Rather than repeal these laws and make the tax code more equitable, there is talk of “penalty” taxes reminiscent of the Clinton administration on incomes exceeding presumably the ambiguous line between Middle Class and rich.

In a “pay as you go” environment it is much easier to take more money to finance questionable expenses than to roll up one’s sleeves and figure out that something is actually not affordable. It is much easier to “soak the rich” in order to appease the masses than to simply say to these masses, “We simply cannot afford this”, especially in an election year.

The Congress lacks the ability or the will to simply say “no” to more government programs and bail-outs which makes the “pay as you go” promise to America perhaps one of the most dangerous, ill-advised, and expensive governments we will ultimately be forced to endure and in the end the poor will still be poor but will be receiving more government aid, the middle class will still struggle to make ends meet, and the rich will still have their write-offs because too many members of Congress also take advantage of these same write-offs. Honestly, would any of us deliberately choose to cut our own throats?

“Pay as you go” has to go far beyond simply making the ends meet. The premise must be founded upon the reality that there is only so much money to go around, and the government can only take so much out of the US economy without substantial harm. Let us hope that these Democrats who have promised us all that is under the sun can actually deliver responsibly and recognize that material wealth, in and of itself, is not the enemy of a sound economy or responsible government.