Economics of Taxes

One aspect of universal healthcare that few people want to talk about is the cost. How will the government pay for this coverage? That is something that should be central to any public discourse in universal healthcare(UHC). The government is already spending more then tax revenues provide for. On top of that people want to pile on what would be the costliest entitlement program in the history of the United States. Obama is one of the biggest proponents of UHC. He says that he will pay for it by rolling back the tax cuts that President Bush put in place for the wealthiest classes. He also says that he will increase taxes on capital gains, dividends and estate taxes famously called death taxes. Since these ideas seem to be very popular as a means of providing UHC I thought that it would be a good idea to get out there some reasoning as to why this is economically bad advise.



One of the most basic tools for measuring economic growth is called GDP. This is the Gross Domestic Product. It is the sum of all income earned in the US. It is also the sum of all output in the US. Either way it gives us a hard number for how much business is going on. Anyone who has taken a basic macroeconomics class should remember that there is a formula used to figure the GDP. It is GDP=C+I+G+(X-M) where C=consumption, I=investment, G=government spending and X-M=exports - imports. There are 2 key factors that need to be looked at when discussing taxes. Consumption is the money that we as a populace and also firms spend on stuff. Food, materials, cars and all that jazz. When taxes are added to the equation then C=Income(1-tax rate). This is important. If taxes are 0 then C=Income(1-0) which equals Income. If taxes are 50% then C=Income (1-.5) which means that consumption is half of income. So the more taxes increase the less consumers have to spend. It is important to note that consumption is around 70% if GDP. When consumption goes down then less money is spent by consumers. This lowers profits for firms trying to sell to these consumers. As profits go down firms lower production and often start reducing employment. This leads to lower or even negative growth in GDP. This is not just the crackpot ideas of some neocons. This economics 101. If you look at many of the European economies with these higher taxes you will also see that they have higher unemployment and lower GDP growth. Interestingly, if you look back in history you will usually see that tax cuts eventually lead to higher GDP which will usually lead to higher tax revenue for the government. So if the government wants more money then they should boost domestic growth as much as possible by returning as much money as they can to consumers and then allowing the following economic growth to increase their revenues. There is a tipping point in this idea of tax cuts equals increased revenues. However, we have not reached that point yet. That should be our goal.

A conservative idea on health care.

I know that it has been a long time since my last posting. I have been very busy and I have had trouble finding the time or energy to do this. The other day I was having a discussion with a friend about healthcare and I felt it was time to dust off my keyboard. He was very liberal on the idea and of course I am very conservative. We had some interesting discussions on the topic but there was one thing that kept coming up from his arguements. Since I am very much a pro market person and since profits drive the markets then I am only thinking about the money and ignoring the moral problem. It then occured to me that the conservative point of view on healthcare is often protrayed as being selfish, greedy and a kind of survival of the richest. I think that there is a gross misunderstanding on conservatives on this issue. So felt that I should speak out about this.

I think that the first thing that I should say about that I am very religious. As such I very much beleive in mercy, sacrifice and charity. That being said I also think that charity is something that should only be given to those that need it. Most conservatives are monotheistic. Meaning that they beleive in God. As such they also beleive in charity. With that being said I think that I can safely say that it is a strong conservative belief that there should be a safety net as far as healthcare goes, for those that find themselves in a position where they cannot afford to pay for it. I think that there is nothing wrong with the government providing this safety net. It is a worthy use of our tax dollars. Unfortunately, the idea that some cannot afford any coverage has given rise to the idea that the government should provide healthcare for everyone. This is where I disagree with liberal views. The idea that some need help is a poor excuse for the government to step in and take control of the entire market. There are a lot of people that are happy with there coverage even if it has gotten more expensive and they would be deprived of that coverage in favor of a one size fits all attempt by the government to cover everyone.



Why would it be wrong for the government to provide for free something that everyone wants or needs you ask. There are many reasons. The first one that I want to go over today is the one that is most compelling for me. I do not want to be taken care of. I am not an invalid. I have a good job. I do not need or want the governments help in taking care of myself or my family. The American Spirit is one of freedom and independence. Not just independence from foreign governments but independence from our own government. The more power we give to the government to take care of us the more dependent we become and I beleive the weaker we become as a people. That is my primary gut reaction to universal healthcare. I will concede some things to the governments control; military and national defense, public works for local governments, things like that. My health and the health of my family is something that I want to have full control over though.



At a later time I will go over other more economical reasons why I think that unversal healthcare is wrong for us. At this time I just wanted to get across the idea that conservatives do beleive in helping those that need it. We have no problem with government help at that point. However, if you can take care of it yourself you should.