The Free Lunch May Be Coming To An End

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Nirvana for a politician is to increase benefits to the electorate and to cut taxes. In other words, they like to give the public a free lunch. It worked for Reagan and it worked for the junior Bush. The public was less concerned about deficits and the national debt when they held office. Certainly, few in the GOP complained about providing a free lunch to voters or to contributors.

The reality is that the days of the free lunch are over. That means that taxes are likely to rise in one way or another and something will have to be done to contain healthcare prices that are inflating at 7% per year. The US military budget will also come under pressure. The US will not be able to fund a military budget that is about equal to the total military spending of the rest of the world, with a tax system that is one of the lowest in the world.

This article describes some of the current debate on the ways in which this is playing out in Washington. Most of this is familiar. One of the problems is that we have an electorate that has been poorly informed by the media and has a hard time understanding its own interest. For example, 23% of Americans benefit from the tax deduction on mortgage interest payments but over 90% support the deduction. The main reason why many with mortgages do not benefit from the deduction is that they take the standard deduction instead of itemizing their deductions. This is done primarily by taxpayers in the lower income brackets.