New Year’s resolutions worth considering
With just a few days remaining before we ring out the old year and welcome in the new one, people will soon be making New Year’s resolutions. All too often the promises we make to ourselves seem to last about as long as the last few drops of the bubbly consumed on New Year’s Eve, but that doesn’t keep us from engaging in this annual ritual.
With this tradition in mind, I would like to offer a few suggestions that our nation’s politicians and policymakers might consider as economic resolutions for 2012. Policies that could, in the long run, produce a more vibrant economy. Actions that put people’s best interests first, rather than enacting another series of politically expedient policies.
First, resolve to make 2012 the last year Social Security will be used as a tool for providing temporary tax relief for working Americans. By its design — which certainly needs to be overhauled to insure continued solvency —- Social Security is supposed to provide supplemental income for retired Americans. And, by its design, Social Security is a pay-as-you-go system where payroll tax collections from current workers support the payments made to current retirees. Sadly, given the weakened state of the economy and the demographics of the population, the U.S. is now at the point where more is paid out than what is taken in from current workers. To cut payroll taxes to give “working class families” a tax break is flim-flam, pure and simple, since those reduced tax collections require more government borrowing to meet Social Security obligations. If continued year-after-year for self-promoting political purposes, the payroll tax rate cut amounts to an assault on the financial integrity of an already stressed social insurance program and simply pushes the true costs onto future American workers and their families.
Second, bring government spending under control. The country, its present-day citizens, and generations of future Americans cannot continue to avoid painful decisions. Over the past few years, people and businesses have engaged in a de-leveraging effort, that is, putting away the credit cards (and other forms of borrowing) to bring long-term spending more in line with income. To be sure, this is not a pleasant process; it is one that necessarily involves painful cutbacks, but for the sake of a more prosperous future the process must be undertaken.
Isn’t this same lifestyle change of embracing thrift also needed by the federal government? The “stimulus’ spending utilized by government over the past few years can be judged as either a failure (by its critics) or having provided less-than-hoped-for growth (by its supporters). Either way, if the fiscal integrity of the nation is valued, the de-leveraging effort undertaken by others must now extend to the federal government. Failure to do so — along with accepting the pain which necessarily ensues — will produce a Greece-like nightmare which will haunt the lives of Americans for generations to come.
On a related note, policymakers should resolve to not punish success or the successful by trying to shake down high-income Americans through higher “fair share” tax rates. If spending is brought under control, huge tax collection increases become less necessary. And if there is a real desire to address problems with our various means of raising tax revenues, then do so honestly and in a long-term, comprehensive fashion; not through quickie, politically expedient decisions such as raising tax rates on “millionaires and billionaires” or cutting payroll tax rates.
Fourth, in an effort to cure our economic ills, do not over-regulate the economy. While it may be a leap of faith, assume that people and businesses know more about what is in their best interests rather than relying upon politicians and their self-selected “experts” to impose their will, thereby producing a stagnant or receding economic environment. In the same way that physicians do not over-medicate a sick patient, policymakers should not over-regulate a sick economy. To do so would be a serious mistake when trying to encourage long-term health.
Finally, on a more localized level, policymakers should resolve to avoid buying economic development through various business tax giveaways. While such policies may provide much-desired newspaper headlines, somebody else eventually will be forced to pick up the tab for that business welfare.
In short, politicians and policymakers should resolve to conduct the public’s affairs in an open and honest fashion; in a way that assumes the best role models for government are the individuals whom they are supposed to represent.
Dr. James Newton serves as Chief Economic Advisor to Commerce National Bank and is an auxiliary faculty member in economics and statistics at OSU-Marion and OSU-Newark. Dr. Newton’s views do not necessarily reflect those of Commerce National Bank or OSU-Marion/Newark.