When The Low Hanging Fruit Is Gone In America

From the early 1960s until the housing crash of 2008, America had GDP growth that far surpassed that of any other developed nation. India and China grew faster, but both nations were starting from such a low point that practically all they had to do was move workers from the farms to the cities to churn out an impressive growth rate. A lack of corruption, low taxes and minimal regulations, a friendly business environment, and the world’s biggest, richest consumer market combined with the world’s best source of capital drove our thriving economy. However, there were also some bubbles involved — the tech bubble, the housing bubble, the credit bubble, and most importantly, the population bubble driven by the Baby Boomers.

What this meant was an enormous, unsustainable amount of wealth flowing through the country. That’s not necessarily as bad as it sounds. In fact, it’s almost like restaurants in a beach town. During the summer, they’re packed every night and the owners make money hand over fist. Then, in the winter, when business slows down, they cut staff and expenses and supplement their revenue with the money they made during the summer. They can still make a handsome profit doing that. Unfortunately, because government isn’t as smart as the average restaurant owner, our country didn’t do that. We just assumed that we’d be raking in money at the same pace FOREVER. Then, when the inevitable slowdown came — one that we’ve known was coming for a long time as the formerly productive Baby Boomers started to retire — we didn’t trim any fat. Instead, the government has continued to grow and a smaller and smaller pool of workers is supporting a growing number of retirees.

Suddenly, both the Republican and Democratic parties are on unfamiliar ground. For the last 25 years, because the economy has been growing and credit has been easy, the Democrats have been able to get away with expanding government without raising taxes enough to pay for it. On the other hand, Republicans have also increased the size of government while simultaneously, we’ve called tax cuts. However, we’re now in a position where we can’t afford to make government any bigger and, this may be sacrilege to say, but it’s undeniably true, the American people are dramatically UNDERTAXED given the size of the government that we have.

Either the size of the government needs to be reduced significantly or the American people, including the middle class, need to pay much higher tax rates. Neither party wants to openly and honestly address this issue. The Democrats are still trying to increase government while suggesting tax increases that can’t possibly close the deficit, while the Republican Party is calling for tax cuts and increased military spending.

The policies the Democrats are pushing are worse for the country because they’re deepening the crisis that the country is in, but the Republican strategy isn’t functional either. We already have a debt we can’t pay off, a deficit we can’t fund on the open market, and it’s getting worse every year because more Baby Boomers are retiring and entering into an unsustainable system.

At some point, both parties need to deal with the world as it is, rather than acting as if the country is in the same position economically that it was 20 years ago.

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