Dec 25, 2021 3 min read

Election year politics is the only explanation one can offer when confronted simultaneously by a soaring federal deficit and a tax cut, no matter how welcome the latter may be.

Government economists say the tax cut was designed to get more cash into the hands of consumers and thus to stimulate the economy. But aren’t these the same men who fought inflation with a freeze and now are working in the framework of Phase II? If one didn’t realize that ’72 is a presidential election year it would be impossible to see the logic in reasoning that says more consumer spending is good if it is financed by a tax cut but bad if it is paid for through higher wages and salaries.

The logic, of course, is based on the politicians’ old premise that people are (1) greedy and (2) penny wise and pound foolish. They expect the general public to accept any tax cut at face value general – even when the arithmetic has as many faces as the old-fashioned ward heeler.

For instance, much is being said officially about the income-tex break most of us are going to be getting. But the official silence is deafening when it comes to an increase in the Social Security tax rate which will cost everybody making as much as $9,000 an extra $62.40 per year.

Today’s taxpayers are more sophisticated than earlier generations of Americans. They understand all too well the dangers of deficit financing on a personal basis and can see the perils on the national level, too.

The devaluation of the dollar shows what can happen when a nation lives above its means in the field of international trade. The official line highlights the benefits that will come from devaluation – and there are some. But all the rosy words cannot hide the fact that the American dollar is worth less in other countries than it was.

It is worth less at home, too. Inflation is pointed out as the villain. But what causes inflation? Perhaps the biggest factor is a federal government which spends more than it collects in taxes. The national debt continues to rise – this year it may climb by a record $26 billion.

The debt is often defended as “something which we owe to ourselves.” True, most of the securities issued by the government are held by American citizens or corporations. But these obligations are no less real than those held by outsiders. Nobody expects a day of reckoning in which settlement will be demanded, but everybody expects the government to pay the interest on its debts. With the national debt expected to be in the neighborhood of $400 billion by next June 30, the interest alone boggles the mind. Sooner or later a lax increase will be necessary if the nation is to continue paying an ever-higher interest bill each year.

Getting away from the billions, let’s consider the situation on a personal basis. In 1910 the national debt amounted to only $12.41 for every person then living in the United States. At the end of the last fiscal year the per capita debt had climbed to $1,806.24. The only way for the trend to be reversed is for the government to spend less than it takes in. This can be done by higher taxes or less spending – not by higher spending and lower taxes being offered as an election year gimmick.