TIME magazine’s Eric Heinrich offers his readers a Hobson’s Choice concerning the mounting federal debt. You accept hyperinflation, or, you pay a lot more taxes. Your choice, but either way you pay. And that’s just one more piece of evidence that proves that today’s legacy media is replete with economic illiterates.
Heinrich’s article entitled “How High Could the U.S. Tax Rate Go?” appears in the magazine’s March 3, 2010, issue. Here’s a summary of its 633 words offered in 25: The Obama Administration’s “monster deficit” will either result in hyperinflation – by printing money – or higher taxes. The amount and means of levying higher taxes is the question.
Hiking taxes is the less traumatic course, though it will only be accepted as the cost of inaction rises. “Congress only responds to financial crisis or some other external shock,” says Bill Gale, co-director of the Tax Policy Center in Washington. “Nothing will be done in Obama’s first term to substantially increase tax revenue.”
He doesn’t mention the inevitable event of both happening, since they would. When money is worth less the government has to tax more to just keep even. Duh.
In closing, Eric glances toward Britain:
Pacific Investment Management Co., based in Newport Beach, Calif., and manager of the world’s biggest bond mutual fund, is warning investors that Britain’s stratospheric debt load is resting on a bed of uncertainty comparable to “nitroglycerin.” If Britain is receiving such harsh criticism from money managers, can the U.S. be far behind?
Perhaps one of the problems of being a big-time journalist for a legacy periodical like TIME magazine is a shortage of time to read much beyond your own periodical. Mr. Heinrich may have missed the “harsh criticism” from Chinese money managers over their concern for the hundreds of billions of $US they hold in the form our treasuries. Japan and Britain have to be concerned for our solvency, since they, too, hold vast amounts of our paper. Unfortunately, the U.S. is not far behind Britain, and the world knows it, Eric.
Earlier this month, Treasury Secretary Timmy Geithner said, according to Bloomberg, that,
… the U.S. is in no danger of losing its AAA debt rating even though the Obama administration has predicted a $1.6 trillion budget deficit in 2010. “Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”
This is the same Timmy Geithner who, last June, provoked an uncharacteristic response from an inscrutable Chinese audience. The U.K.’s Telegraph reported that,
In his first official visit to China since becoming Treasury Secretary, Mr. Geithner told politicians and academics in Beijing that he still supports a strong US dollar, and insisted that the trillions of dollars of Chinese investments would not be unduly damaged by the economic crisis. Speaking at Peking University, Mr. Geithner said: “Chinese assets are very safe.” The comment provoked loud laughter from the audience of students.
It’s never good when your banker laughs at you, unless you’re telling a joke. The Chinese must have assumed Timmy was telling a joke, since “Helicopter” Ben Bernanke has been running the money presses in hyper-drive monetizing the debt.
Heinrich closes his pseudo-economic analysis piece with a thoroughly predictable suggestion,
As Washington ponders its taxation options, it might also wish to cast its gaze toward the NYSE and Nasdaq, whose companies add very little to the public till.
Sure, that’s the solution to a sluggish economy – raise the corporate tax level. Grab the Golden Goose firmly by the neck and squeeze more eggs out of her.
The Obama Administration’s fiscal and monetary policies are driving us back toward our Colonial era of indentured servanthood. Back to the time when at least half of the immigrants who came to America entered under terms of indenture, except this time it will apply to the entire nation. Back to when Section 2 of the U.S. Constitution originally contained language that was modified by the Fourteenth Amendment, Section 2, in 1868. The original language read:
Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.
Indentured servants were bound by chains of debt, not by the chains of the slave master. But nonetheless bound they were. And so are we.
The choice that TIME writer Eric Heinrich never mentions reflects the myopic perspective of many of the economically illiterate journalists who delve into the subject matter of economics with thinking narrowed by their favorable bias toward big government.
The unmentioned option, the only one historically guaranteed to work, is to cut government spending. But Eric never considers that possibility. And neither is the Obama Administration.
So we’re hell-bent to national indentured servanthood and – dare we say the forbidden word – bankruptcy.
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