By John F. Di Leo -
This may be difficult to believe, for a nation with a multi-trillion dollar economy and a massive government that is itself larger than most countries. Surely with as many accountants as many countries have people, the USA must have a budget!
But no. We don’t have a budget, even though, dutifully, the U.S. House of Representatives has passed a thoughtful and responsible budget every year. The U.S. Senate under Majority Leader Harry Reid (D, State of Insolvency) has been unable or unwilling to pass a budget for the past four years.
They still spend money, however. Even without a budget, the U.S. government can go on collecting taxes and fees, and can go on spending sprees, because of a little trick called the Continuing Resolution. If they can’t agree on a budget, they just keep collecting, and keep spending, and keep kicking that can farther down the road, from our time to our children’s time to our grandchildren’s time.
The normal household, of course, doesn’t have to have a formal budget either. But somehow, the American household has to make its income and outgo work; the family has to figure out how to allocate whatever it is that’s coming in, in a way that will keep them out of bankruptcy.
Rappelling Down a Fiscal Cliff
On New Year’s Day, 2013, the public learned that a deal had been reached in Washington. All the so-called Bush Tax Cuts – the tax cuts mostly for the middle class that the Democrats had for years lied about as “tax cuts for the rich” – had been scheduled to expire. Congress finally cut a deal that the president, on vacation in Hawaii, would agree to sign, continuing most of that bundle of tax rates, while allowing only some of them to increase.
As a result, most voters thought that the tax increases had been averted, that their tax bite would remain the same as last year. How wrong they were.
Conservatives, who pay closer attention to such things, were therefore not blindsided like their non-conservative friends, when the January paychecks started to arrive, and turned out to be considerably lighter than the prior ones.
Many American wage slaves received their first paychecks (or more likely, these days, direct deposits) on Friday, January 4. Most other biweekly employees received them on Friday January 11. And the remaining group of employees, the ones whose employers pay bimonthly, received them on Tuesday, January 15. And went into shock.
The January 1 deal only dealt with some of the many issues before us. Income tax hikes directly on the lower-through-mid middle class were cancelled, while only the income tax hikes on the upper middle class were left to hit in the new year.
But there were also the income tax hikes on small businesses, which look to a politician like a wealthy individual but are really the employers of several or many others. By raising their taxes, there’s less to go around, so raises or bonuses may be cancelled, or hiring may suffer, or expansion may be put on hold.
And then there were the many tax hikes outside the deal, the hikes that weren’t attached to the “Bush tax cuts” so they didn’t come up in the negotiations. The end of the 2% payroll tax holiday, the reduction in the flexible spending accounts for medical expenses, the dozens of small tax increases that were included in Obamacare, from a new tax on all medical equipment to an increase in the Medicare collection of those in the higher brackets.
All these tax hikes have an impact on the American family. Those earning a taxable income of $50,000/year will pay over a grand more per year to the government now. Those earning a taxable income of $100,000/year will pay more than two grand more than last year. This year and every year, as these are permanent tax increases.
That’s another point worth remembering: Republicans have been talked into temporary tax cuts, while Democrats always make sure that tax hikes will be permanent.
While all this is going on, everyone’s health insurance premiums are going up. Obamacare has had the result that every conservative predicted and every liberal denied: every year, the mandates of Obamacare drive insurance prices up, until the system collapses. It is not sustainable, so Obamacare will someday crash, but the intervening years will be unpleasant indeed.
And there are states that keep raising taxes too… property taxes go up, so homeowners see it directly and renters don’t notice that it’s included in their rent. Illinois raised its state income tax from 3% to 5% two years ago; California just did theirs in 2013, moving to a top rate of 13%. Yes, in addition to the federal income tax, the federal Social Security and Medicare taxes, so many taxes…
As a result of all these increases, most Americans now have $50 less per paycheck, or $75 less, or $100 less, in 2013 than they did in 2012.
Politicians and journalists usually think of whether the individuals and their families can afford this reduction, but there’s another, different question that we need to ask: as individuals and families tighten their belts, finding a way to manage with a hundred or a couple hundred less per month, what does this change in spending do to their communities, and to the national economy at large?
The Many Ways to Cut
A couple on a date might spend $50 on dinner, or a less expensive dinner and a movie, depending on where in the country they are. A family of four or five spend that on an inexpensive restaurant alone, or double that on a good restaurant, again, depending on where they are.
They may cut back on these outings to deal with their lowered paychecks. It may not even seem so bad for the families, as they spend more time at home, perhaps cooking together another dozen or two dozen times per year, rather than piling into the car and going out.
But what does it mean to their communities? Since the tax increases hit everyone – everyone with a job, that is – we have to assume that the above choice is hitting every household in America except for those so rich that they don’t have to pay attention to a loss of a grand or two per year.
Say your town has thirty restaurants, ranging from fast food to fine dining. Each of them will have fewer customers in 2013 than they had in 2012. Many, a lot fewer. The best values may not suffer as much as the more expensive places will, but they will ALL suffer, mark my words. There are fewer customers, spending less money, less often.
Most restaurants will cut the hours of their kitchen staff and wait staff. The owners will take a lower salary than they did before, if they get any at all.
Their vendors – the cleaners that launder the tablecloths and napkins, the food and beverage distributors that provide their ingredients – will see the orders drop. The sales rep from Kraft, Sysco, GFS or Continental will see his order quantities go down and ask “What’s wrong? Are you buying more from my competitors?” and the answer will come back “No, our clientele is sinking like a stone. Instead of twenty tables, it’s now ten. Instead of fifty carry-out orders, it’s now twenty-five. We’re just not using as much, not cooking as much, not serving as much.”
The same goes for clothing stores and bookstores. A thousand dollars less per year won’t put most people out of their homes, but it will put many out. And people who had planned on buying their kids a new pair of gym shoes, a new coat, a new backpack, will have to put it off another year.
We have to find SOME way to squeak by. We cut where we can. We can’t short pay the rent or the mortgage, we can’t skip the car insurance or the property taxes. So we cut what we can cut. Fewer trips to the mall, fewer movies or plays. Fewer extras in life, in many cases, even fewer necessities.
More parents will send their kids to community college for the first two years rather than university for all four. Many more will take their kids out of private grammar schools and high schools, and enroll them in the public schools, or just homeschool them for a few years.
Some families will cut their daily newspaper subscriptions – that’s a hundred or more a year. Some will cut back on the magazines – at ten to fifty each, dropping a few magazine subscriptions could provide a savings of another hundred or two for a family that had these subscriptions to spare in the first place.
And what of those who didn’t have frills to spare in the first place? What of those who were living paycheck to paycheck, not wasting a penny already? This new grand or two or three gone from their income will truly change their lifestyle. It may cause them to give up a car, give up a house, and have to find some other way to get by.
The result of all these cuts will be a stunning loss to the business community, especially to the small business community. Stores and restaurants, from stand-alone to strip malls to mega-malls, are continuing to take new hits every year of this Democrat-run administration. Their own taxes skyrocket, their clientele’s taxes skyrocket… all as real unemployment reaches a quarter of the population (the current real number is about 23%, when all the unemployed are really honestly counted).
In most economies, when a family has to contend with the bite of inflation or higher costs for key items, the breadwinner(s) can take on a part-time job for awhile, or work harder for overtime, or job-hunt to find a better-paying primary job. But in this economy, these options are also off the table, as the very places to whom we most commonly turn for part-time work – the stores and restaurants – are tightening their own belts as much as anybody, and when full-time employment is rarer than ever as businesses find themselves forced to cut back, to winnow by attrition in an effort to avoid layoffs.
One of the most frustrating parts of all this, of course, is the fact that many will see it happen and not understand why. Our nation has so many people whose minds are shut to the basic math of economics that they not only don’t understand the hard stuff, they don’t even process the easy stuff.
There’s nothing complex about the subject matter of this article. If all your customers have a grand or two or three less to spend, your store’s receipts will obviously drop. You may be able to offer “recession fighter deals” so that you push some of the losses onto your competitors, of course. You might be able to improve your market share so that you don’t suffer AS MUCH as your fellow clothing stores, your fellow restaurants, your fellow theater troupes, your fellow sports franchises.
But in the end, we all suffer when government confiscates our money. We suffer directly, we suffer indirectly, and our children and grandchildren suffer as well, as the opportunities for their respective futures sink like a stone.
Elections caused these problems, and only elections can remedy them. There will be elections in 2014 and 2016; let us pray that enough eyes are opened in the meantime that the socialist voting patterns of the past century will finally end, once and for all. The next elections can’t come soon enough.
Copyright 2013 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and international trade lecturer. A local spokesman for the Illinois Small Business Men’s Association and Young Americans for Freedom in the 1980s, he served as Milwaukee County Republican Chairman in the mid-1990s, and has now been a recovering politician for over fifteen years. His columns appear regularly in Illinois Review.
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