In the wake of the Sept. 11 terrorist attacks, the United States has gone on a spending spree. Government money has been set aside not only to improve security in the airline industry, but also to keep it afloat. Public officials around the country are looking to improve security in food and water systems. The U.S. Postal Service is purchasing new equipment that will protect against anthrax, and health agencies are beginning to load up on medical supplies. Where is all this money coming from?
Didn’t Republicans huddle a $200 billion tax cut through the House of Representatives a few weeks ago? Does anyone remember the $1.3-trillion tax cut President George W. Bush signed in the spring? It doesn’t take an economics major to figure out that when you spend more money, you need more money. As precedent shows, this isn’t the way America usually heads into war. The typical response to a lengthy military retaliation is to increase taxes, not cut them.
In fact, the first federal income tax was implemented to fund the Civil War. In World War I, the tax rates in the upper bracket increased more than 70 percent. Under President Roosevelt, 40 million more Americans were asked to pay an income tax. Even during Korea and Vietnam, income tax rates rose.
So while combat bills are beginning to stack up on the Federal Government’s desk, $300 refund checks are rolling into households around the country. This makes perfect sense, doesn’t it?
The lack of money the United States has to support its military actions is a serious concern, but future financial strength is also at stake. Economists have forecast that the federal government will spend its full budget created by general tax revenues in 2002 and 2003 and there is a possibility that the Social Security surplus will have to be dipped into.
When you are talking about trillions of dollars, it may be difficult to conceive that America faces the realistic problem of simply being able to put the symbolic bread on the table in the coming years. We were already vulnerable to terrorism, but that risk is greatly compounded when the government has to shut down in order to simply pay the electric bill.
As summer ended, President Bush’s grand economic plan looked like a genius idea. Americans would all have a few extra dollars in their pocket, they would go and spend the money and, like magic, the economy would receive a swift kick in the rear. Now consumer spending is dropping at its fastest rate in 14 years. People don’t want to spent and those tax refund checks are just sitting in bank accounts.
However, raising taxes is not the solution because with less money to tax there is less to gain. Raising taxes also creates a major economic risk that could propel the United States into a prolonged recession or even a depression.
Tax cuts, rate cuts and stimulus packages from Congress are actually the best bet for the economy to rebound and ensure the future financial strength of our country. The next two months set the economic tone for the upcoming new year, and we can’t be afraid to spend. Americans need to carry on as if nothing happened at all. Our leaders have done their part in setting up the economic revival plans, but they won’t work if we don’t actually use them.