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Cutting Our Way to Prosperity

 

Recently, our president said this:

"We can't simply cut our way to prosperity," Obama said. "We need to do what's necessary to grow our economy; create good, middle-class jobs; and make it possible for all Americans to pursue their dreams."
He's more wrong than he knows.

While he advocates that cutting alone is no way to prosperity, we also can't simply spend our way to prosperity, and unfortunately for Tim Geithner, the super genius who was the only guy who could help our economy, as treasury secretary he saw the greatest increase in national debt ever.

Way to go, Tim. And way to go, Mr. President, for your, um, exceptional hiring prowess.

But back to the topic...

If we want more money, there are only two ways to achieve that:

  • Increase income.
  • Decrease expenses.
You can't become prosperous by spending more than ever you've ever spent. You'd think that was a no-brainer, but I guess they don't teach that math at Harvard.

It's much harder to increase your income than to cut your spending. Why? Because you have more control over what you spend than what you earn. Spending is your decision alone. Income requires at least the cooperation of one other person who is willing and able to pay you.

Therefore, the fastest way to become prosperous is to reduce your expenses. It's certainly better for you if you can increase your income at the same time, but not always in your control.

The government only makes money one way - by taking it from people. But you can't raise taxes to grow tax revenue. Why? Ours is an income tax. When you reduce a person's net income (via increased taxation), you reduce their ability to spend - and it's their spending that provides income to others. Less income means less income taxes collected. Whenever the government acts in a way that reduces individual or corporate net income, the economy suffers, and so do tax revenues.

Cutting taxes increases tax revenue, because people have more to spend and thereby provide more income to others, which increases tax revenue. The Congressional Budget Office showed that the Bush tax cuts improved tax revenue.

But Obama wants to do the worst of everything: he wants to raise taxes and he wants to continue spending at record levels.

Can you cut your way to prosperity? Yes. Cut taxes and cut spending and you can absolutely cut your way to prosperity.

ETC: I know some great places to cut...

Golf, flights, fundraisers, vacations... all of those could be greatly reduced, and maybe some actual work on the budget would be good.

But I guess that requires math, and math doesn't come easy at Harvard.

 


by Brett Rogers, 7/1/2011 8:45:54 AM
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