Plain Talk – 4.20.10
Posted: Tuesday, April 20, 2010 9:05 pm
By: Nicolle Crist, Guest Columnist
If you listen to National Public Radio, you’re probably familiar with the “driveway moment.”
It’s when an interview is so interesting that listeners find themselves sitting in their driveways with the car idling so they can hear the end. During one of my driveway moments, an author theorized that many Americans should be capable of purchasing everything they would ever need in life by the age of 30, with the exception of food.
Being a renter, who was at least two years away from paying off my first car, and looking back at 30 that really caught my ear. How on earth could that be possible?
He said too many Americans confuse the difference between wants and needs and that prevented them from living up to their full potential.
He theorized that every lunch out, magazine, book, iPod, television, car, khatchky, etc., that most Americans have spent money on since the time they cashed their first paychecks, if saved and invested, would have been enough to pay off a home, own a car and have enough in savings to meet all of the basic human needs for shelter, clothing and food for the rest of their lives.
And the standard of living achieved by such savings would still be better than most of the population of the rest of the world.
As a government, we haven’t done a great job of separating wants from needs either. We are in debt and we have a budget deficit. We have to earn more money and cut spending – it sounds so simple.
Instead of a driveway moment, I had a “trapped in traffic isn’t so bad” moment last week that proves how incredibly complex the idea of “earn more and spend less” really is.
The Florida Tea Party organized a tax day protest at Kennedy Space Center for more government spending. Yes, they protested the recently announced budget cuts to NASA because they are afraid the cuts will decrease the number of jobs in their area.
For more than a year, the core message of the Tea Party has been about the debt, deficit and government spending, but clearly, deciding where to cut spending, is not as easy as it sounds.
When the spending cuts are in someone else’s backyard, they are much easier to make. Isn’t that true about so many things in life?
So what do we do?
In the past, politicians have decided that the easiest place to cut spending is where the beneficiary won’t complain too loudly – meaning the poor.
It doesn’t matter if it’s a sales tax on food or cuts to welfare, food stamps and school lunch programs. When belts need to be tightened, the poor usually get asked to pull the tightest.
Of course, the squeakiest wheels contribute the least to the national revenue. In 2009 all corporations paid $138 billion in federal taxes. Individuals paid six times more.
Just about ever other developed country in the world has instituted a form of the Value Added Tax (VAT). It’s a sales tax that is not just paid by the consumer, but by everyone along the way. From the cotton grower to the manufacturer to the retailer and on to me, the buyer of those jeans.
It’s still a sales tax, but the cost of the tax is baked into the sale price, not tacked on at the end. One of the known side effects is that the price of consumer goods goes up but the individual savings and investment rate go up, too. When the price of goods go up, people have a tendency not to buy as much and save their money instead. They “save up” for what they really want and rediscover frugality.
It’s a tax, there are no two ways about it – let the countdown to screaming and hollering begin in T minus 5 seconds …
Here’s the skinny folks, we got ourselves into this mess. We knew that the baby boomers would start retiring in 2010, this should not be a surprise. Social Security and Medicare are not savings accounts that are “paid into” over time.
The younger generations who are working pay for their parents and grandparents who retire. That’s the way it’s always been and there are more baby boomers than anyone else, so we should not be surprised by the deficit.
We can’t act shocked or outraged when we don’t include the cost of the Iraq War in the federal budget for eight years and then stagger when we do and end up with a $10 trillion hole in our budget.
Paul Volcker, the former Federal Reserve chairman under Ronald Reagan, and a current economic advisor to President Obama, sent the media into a tailspin with a recent comment about the VAT.
He said, “It is not a toxic idea.” The media went into a frenzy and dug up old quotes from Nancy Pelosi, who said, “It shouldn’t be off the table.”
These are not revolutionary statements, it’s common sense. We have have a problem, a very serious problem and unless we are willing to eliminate Social Security and Medicare and a whole lot more, we have to deal with it.
There is no single tax or spending cut that will solve our problem. The solutions will be felt by everyone, whether it’s the Florida Tea Partiers, college students, seniors, the wealthy or corporations.
When I think about that driveway moment and lament that fact that “if only I hadn’t bought those jeans” I have to remind myself that another reason why so many Americans don’t have their basic human needs met by the age of 30 is optimism.
We were optimistic that we’d be able to earn a living and collect a paycheck for years and forgot that frugality helps take the sting out of the hard times that eventually do come.
But we have to be willing to at least talk about the proposed solutions – all of them. If one side wants to dig their heels in the sand and hold us back from solving these problems, I say cut them loose and move forward without them.
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