Wednesday, November 21, 2012

What Does Government Need To Spend Versus How Much It Can Afford

Budget deficits and increasing debt has put the focus on how and where to cut government spending.  This article suggests that the question should be the other way around.  We should be asking how much we need to be spending.  If we need to spend more there is an easy answer.  We need to raise taxes.  The US is the richest nation in the world, and it has one of the lowest tax burdens among rich nations.  Globalization has changed the nature of the US economy in dramatic ways.  Incomes are falling in the middle class, while wealth and income has become more concentrated in the top 1%.  This is a trend that will be with us as long as we continue to move toward a global economy.  It is not good for small businesses, which depend upon domestic demand, and it is not good for democracy.  Government investments in infrastructure, education, healthcare and the social safety net may come at the expense of personal consumption, but that may be better that building an economy around personal consumption funded by debt.

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