Senator Jeff Sessions, ranking member of the Senate Budget Committee has pointed out that our per capita government debt is already larger than Greece's. Per person, our government owes over $49,000 compared to $38,937 per Greek citizen. Our debt has just reached 101% of our Gross Domestic Product. Our creditors see this and have quietly slowed down or stopped their lending to us. As a result, the Federal Reserve has been outright monetizing debt as a way to patch things together and keep the economy on life support a little longer. There is rapidly shrinking demand for our debt, and confidence in the dollar is falling. This phenomenon is hidden only by the fact that confidence in all other fiat currencies is falling faster.

None of this seems to really alarm the administration, obviously, as they have just released a budget that accelerates spending and borrowing. The reason the debt and deficits plague the economy, according to this administration, is that the American economy is not taxed enough. Therefore, hidden in the fine print of the budget is a provision that ramps up the corporate dividends tax rate from its current 15% to 39.6%. In addition, certain deductions and exemptions will be phased out; an additional 3.8% Obamacare investment tax surcharge will be tacked on, bringing the effective dividend tax rate to 44.8% in 2013. Keep in mind, this is not just a tax on big business, this is a tax on anyone who depends on dividend income to live - retirees will be hit hard by these changes and dividend yielding stock prices will adjust downward rapidly to reflect their decreased value.

Not only this, but the Obama administration is worsening the uniquely American policy of taxing income of US based companies earned overseas. No other country presumes to tax globally in this manner, so it amounts to a huge penalty for basing a company in the US. Companies have been able to manage this penalty by deferring taxation until it is repatriated or by paying dividends. What will happen to US based businesses with strong international ties if these allowances are abolished as the Obama administration proposes? A massive wave of permanent capital flight will undoubtedly cause the already high levels of unemployment to rise.

Businesses are struggling and failing in this economy. The government ultimately depends on a healthy business climate to provide jobs and a tax base. It is penny wise and pound foolish to add to business tax burden in a misguided attempt to close the colossal gap between our government's revenue and spending. Rather than crippling and absorbing more of our shrinking economy, government needs to be drastically cut - not in 10 years, but immediately.

Those who understand the underpinnings of the dollar and how the Federal Reserve works have known for some time that we are on an unsustainable course, that major chaos is in store if nothing is done quickly to reform things. Politicians pay lip-service to reforms that never materialize or turn out to be at best small and meaningless, or at worst actively harmful. It seems more and more inevitable that because the necessary changes would be too inconvenient for the elites to enact now, we will get them later Greek-style, through collapse and chaos.

Dr. Ron Paul
Project Freedom

Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today. Dr. Paul is the leading spokesman in Washington for limited constitutional government, low taxes, free markets, and a return to sound monetary policies based on commodity-backed currency. He is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives: Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution. In the words of former Treasury Secretary William Simon, Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.

Dr. Ron Paul Archive

Comments

Greg Tomlinson
28 Feb 12, 16:50

Complicit Media

Thanks for this piece, Congressman Paul.

And as always, thank you for being an ever-present advocate for fiscal restraint and forward thinking.

The self-destructive behavior of our so called leaders is certainly bad enough (but is at least a little bit understandable - due to the quirky way our electoral process works.) The larger thing that escapes my reasoning is that we have a media establishment in this country that has so clearly chosen sides. And the side they have chosen is going to fail.

As we reach our inevitable bankruptcy, do our journalist friends actually think they will have the freedom to publish or show what they want? Certainly not! They will most definitely be "state run" involuntarily versus willingly as they are now. In that chaos, controlling the news and more importantly who is at fault WILL be made a matter of national security by those in the “complex” to whom we have yielded power already. I suppose it is a useless point, however. Easy to predict but impossible to stop. We are on this train track to bankruptcy running wide open; there is little chance that any other outcome can/will prevail. Let’s just go ahead and cry wolf – default and get it over with. Then maybe we can start rebuilding for our children in the time tested and responsible ways of our forefathers.

So back on point, why would Obama worry about seniors being taxed on their dividend income at an effective rate of 44.8%? No one is going to tell the poor dupes that the incompetent president half of them voted for is the man responsible for their declining standard of living. It is already the Republicans fault before the question has even been asked.

So if I’m Obama, I'm thinking, why the hell not pour on the taxes, who’s gonna call me on it? And, he’s thinking, if congress says no, then I’ll call them “obstructionist.”

Cheers,

Greg T

PS. I know we have to try to stop it (default), but sometimes, I truly wonder if it is not better to just let go for now and pick it up later. Because it is coming, regardless of our best efforts and intentions.

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