TAXES VS CUTS July 1, 2011Posted by wmmbb in US Politics.
How to fix a budget problem? Governments have the options of raising taxes or decreasing services.
Al Jazeera reports:
Barack Obama, the US president, has told Republicans they must accept tax increases for wealthy Americans in a deal to head off the risk of a debt default that would deal a “significant” blow to the economy.
Obama on Wednesday dismissed criticism that his own leadership was lacking, in a showdown over raising the government’s $14.29tn borrowing authority ahead of an August 2 deadline.
Republicans have been demanding heavy spending cuts to narrow a $1tn budget deficit.
The president said his Democrats had accepted tough and painful spending cuts but lashed out at Republicans who he said were blocking his spending on education and health care to save tax breaks for oil firms and corporate jet owners.
“I don’t think that’s real radical. I think the majority of Americans agree with that,” Obama said, speaking at a White House press conference.
Republicans last week walked out of talks with the administration, claiming Obama was bent on raising taxes.
But Obama warned that should a deal not get done soon, the US faced the real prospect of defaulting on its debts at a time when it is already struggling to fire up a sluggish recovery and create jobs.
“If the United States government for the first time cannot pay its bills, if it defaults, then the consequences for the US economy will be significant and unpredictable and that is not a good thing,” Obama said.
Obama said he did not want to “spook” people, but he warned that no one knew how capital markets and investors in the US economy would react if no deal was reached; he said the economic headwinds facing America would only get worse.
Cutting taxes on the wealthy was supposed to be the silver bullet that would not simply fix the budget but stimulate the economy. Why is it that removing government regulation over the activities of corporations and financial agents has acted to wreck the economy?