Obama on taxes

Here is a quote from President Obama’s speech given on Thrusday. I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes Does this mean that he plans to pay down the debt with taxes? The CBO estimates that allowing the Bush tax cuts to lapse on those earning more than $250,000 per year would bring in about $90 billion. No small amount but let’s be real. The debt is currently $16,000 billion. This may take a while. If you allow the Bush tax cuts to expire completely this will bring in about $250 billion which is better but still not enough. The point is that to get rid of the deficit we need growth. Assuming that revenue will be 20% of GDP a 1% increase in GDP will bring in $140 billion. Since WW 11 the average GDP has been 3.3% so this would bring in $462 billion. Other things being equal this would eliminate the 16 trillion debt in 34 years. This does not take into account that with this growth rate the unemployment rate would decrease and that would add more revenue. Now add to that the expected inflation coming due to the vast spending by government and if we have 6% inflation that adds about $300 billion. Now let’s do it all, eliminate all of the Bush tax cuts (250 billion), GDP at 3.3% (462 billion), inflation ($300 billion) for a total of $1,012 billion which is almost enough to cover this years deficit of 1,100 billion. The bottom line of all this mumbo jumbo is that we must reduce spending on entitlement, things like social security, Medicare and Medicaid. It is time to tackle these important issues. Is the leadership up to the challenge? Stay tuned!