Now that the payroll tax holiday has passed and will remain in effect through the end of 2012, the question remains as to what happens next year.

President Obama and the Democrats have promoted the tax holiday as a middle class tax cut benefiting the average worker to the tune of $1,000 per year or roughly a $20 a week boost to workers  paychecks.   Since that tax holiday went in to effect in 2010 the real effect is that workers won’t see that $20 a week benefit disappear this year.  Next year however could be a different question.

When the talk of an extension came up late last year, Republicans demanded that there should be spending cuts to offset the drain on the Treasury and more specifically the Social Security Trust Fund so that the tax holiday wouldn’t cost the government any more money than it already had in terms of increasing the deficit.

The president along with the Democrats in the House and some help from the mainstream media portrayed the GOP as cold-hearted and not wanting to give middle income Americans a much needed tax cut. Plus it was only temporary.

This was a very effective strategy, as Congress passed a two-month extension so they could go home for Christmas and in essence punted the ball into 2012.  When the time came to deal with the “tax cut”,  Republicans seemed to have lost their resolve and passed an extension without demanding that it be paid for somewhere else in the budget.

Score this as a victory for Obama, but a loss for taxpayers and their future generations who will eventually have to foot the bill for this folly.

For the Democrats it was all part of a strategy of pulling together a populist message that was also a pocketbook issue in an election year.  Who cares about paying the Piper when you have an election to win? Certainly not House Minority Leader Nancy Pelosi, who told PBS Newshour’s Judy Woodruff that she wasn’t worried about how the reduced payroll contributions will be repaid by saying “I think that this should be the last year for it. One or two years, no, the trust fund can handle that.”

What’s $70 billion in lost revenue when you have a national debt of over $15 trillion?

The bigger problem with the “tax cut” as Obama prefers to refer to it is how do they revert to the old rate once the extension expires without calling it a tax increase as the president accused Republicans who were against the extension of favoring.  Oh yeah I forgot.  It will be after the election which Obama hopes will result in a second term and by that point he will find another way to rephrase it so that he doesn’t look like the bad guy.

In the end this supposed “tax cut” will do little to stimulate the economy as most workers have either been saving the extra money in their paycheck or spending it on gas which is soaring towards record highs instead of making purchases of items that help create new jobs.

Even Treasury Secretary Tim Geithner admits that one result will be that we will have to increase our debt ceiling limit ahead of schedule which should give voters a clue of the bum hand that they have been dealt by Obama and the Democrats.

Tick, Tick, Tick goes the debt bomb.

 

 

 

 

The Republican Party has talked  a lot about controlling spending when they take over Congress next month but their recent choice for the Chairmanship of the Appropriations Committee sends a message that nothing has really changed.

For some reason the GOP thinks that just because they passed a two year earmark moratorium that members won’t try to find a way to bring home the bacon to their districts.

What’s worse is that by naming Rogers as the chairman it not only gives the liberals fodder about the  seriousness of the Republican agenda but is an insult to voters who want the government to cut spending.

If John Boehner and Eric Cantor were really serious about this issue they should have looked to someone like Jeff Flake from Arizona who has been a champion of earmark reform rather than pick an old dog who will resist learning new tricks.

 

The unexpected victory by Scott Brown in last week’s Massachusetts special election to fill the vacancy created by the death of Sen. Ted Kennedy last year has cast a pall for the Democrats over tonight’s State of the Union address.

Just a few weeks ago the White House was preparing for what they thought was the guaranteed passage of the president’s health care reform package and the retention of a Senate seat that has been in Democrat hands since 1952.

Well what a difference a few weeks make.

The Democrats not only lost the Kennedy seat but in doing so they may have lost the health care battle.  Scott Brown campaigned on the fact he would be the 41st vote against health care and there is no doubt that he will keep his promise.  In the meantime the Democrats who have been trying to work some back room deals in order to get a bill to the president have been bickering over what to do leaving the president little choice but to go ahead with his first State of the Union speech without the benefit of his key prop.

Now the president is left with trying t convince the American public that we are on the right track despite an unemployment rate that has risen to a twenty-six year high throwing another four million people out of work that has contributed to a rising tide of home foreclosures despite the administration having thrown billions of dollars at the industry in an effort to stem the flow.

Obama will also have to defend his $787 billion stimulus program which has failed to create the jobs or stimulate the economy as promised while running up a deficit that topped $1 trillion last year and will do so again in the current fiscal year.

So what is Obama’s answer to the deficit?  It is to freeze spending except for certain areas that are deemed essential.  This is from a man who previously said that spending freeze’s don’t work.  That’s one thing he has right.  With all the exceptions to the freeze and working from inflated baseline figures the budget will grow while tax revenues continue to lag.

We don’t need a spending freeze, we need spending cuts combined with tax cuts to stimulate the economy.

The Democrats who just a year ago were brimming with confidence and optimism that the 2008 election results would cement their power for decades to come thanks to Obama’s promises of bipartisanship and transparency are now fighting amongst themselves as they watch their health care bill die an ignominious death and face the prospect that they will lose control of the House in November.

For Barack Obama a night that was supposed to be a celebration of his first year in office has turned into a fight to regain the public’s confidence in him and his party.

The Obama administration’s attempt to revive the economy by increased government spending has resulted in the federal deficit topping the $1 trillion level for the first time.

According to the Treasury Department the June deficit was $94.3 billion pushing the current year total to $1.09 trillion with 3 months remaining in the budget year.  The administration is expecting the total deficit to come in at $1.84 trillion but that may be optimistic based on how the economy is performing.

And so far the economy isn’t cooperating.  The White House pushed for and received a $787 billion stimulus program and the money has been trickling into the economy at such a slow pace that not only has the unemployment rate risen to 26-year high but there is now talk of a second stimulus package.

Obama and the Democrats seem to be wedded to the idea that increased government spending is the only way out of this recession.  But the only thing we have to show for all the taxpayer money being spent is a record deficit that is expected to grow larger, possibly to $2 trillion before it heads lower.

Add to that the fact that overseas investors especially from China who have been large buyers of U.S. government debt are now getting nervous that their once safe investments may not be so safe after all as the deficit soars.

Apparently the administration isn’t too concerned about the long term damage that their policies are inflicting on our economy.  Maybe, just maybe some of the government spending will actually spur some parts of the economy back to life, but at what cost?  Our national debt is already at $11.5 trillion and growing fast.   As interest rates will likely rise when the economy does eventually recover the cost of servicing that debt will soar further crippling the U.S.   A vicious cycle to be sure.

Instead of the real hope and change that the Obama promised he would deliver if elected we are getting more of the same tax and spend policies that Democrats love.

Buddy can you spare a trillion?

Even before the votes were cast in last month’s election, conservatives around the country were already hoisting the banner for Louisiana governor Bobby Jindal as a potential Republican presidential candidate in 2012.

All was going well for Jindal as he came into office on the heels of the disasterous Kathleen Blanco administration who mismanged the state’s reaction to Hurricane Katrina.

With Katrina reconstruction tax revenues on the rise and the record price of oil giving the state a windfall, legislators overwhelmingly passed a $360 million income tax cut and Jindal eagerly signed it.

Now with oil prices below $40 a barrel versus the $127 price in the spring when the tax cut passed so easily and with Katrina related revenues on the wane the state is now facing a budget deficit of $340 million this year and expects it to rise to $2 billion next year.

Liberal opponents of Jindal are now pointing to the tax cut as inappropriate and singling it out as an example of how unprepared Jindal is to oversee a state budget.  But I am not worried about the tax cut.  Sure it looks expensive considering what has happened in the state in just the last few months, but in tough economic times the taxpayers appreciate any effort to allow them t make spending decisions instead of the state.

On the other hand Jindal should have known that nothing lasts forever and he convinced himself that Louisiana was an economic recovery story that had no end.  It seems like that he forgot the old adage of “What goes up must come down” by thinking that oil prices would stay at the lofty levels of the spring.

Jindal doesn’t deserve all the blame as the state legislature which is in charge of craftting the state’s budget were drunk at the well of high oil prices and ignored any advice for fiscal restraint, but as the chief executive he should have insisted on a more conservative approach to spending.

Now he will have to face the same difficult decisions other governor’s are facing as he addresses the grwoing deficit.

If he wants to put some shine back on that rising star, he would be wise to take a tough stance and trim the fat from the budget without any tax or phony fee increases and streamline the government’s operations.

Jindal still has a chnace for higher office in 2012 or beyond, but it will his handling of the budget gap that will largely determine his fate.