Late Inning Rally for the Federal Budget

On Friday night, Congress and the President combined on a late inning rally that brought at least one small win. But the win is in a game which is very early in a long season for our country.

Avoiding a Federal government shutdown is, of course, a win at some level, when it appeared the rhetoric and momentum made any victory unlikely. But what did they really accomplish? If it were truly a game of baseball, we couldn't be further from a World Series trip as it relates to realistic fiscal policy. 

The issue is over the 2011 budget which started last October 1st and ends on September 30th of this year. This budget should have been completed 6 or 7 months ago, especially when you consider Democrats had majorities in both chambers of Congress and control of the White House. Now that Republicans control the House, both parties have to compromise to get any bill passed.
 
The compromise they reached was to cut $38.5 billion out of this year’s annual budget of $3.5 trillion. I am happy they actually cut spending, but this only represents a 1% cut in spending. This budget is already projected to be over a $1.5 trillion deficit (where is the belt tightening?).
 
Over the years I have written many blog posts about the impact a huge deficit has on our economy, national defense and the impact it has on my clients and yet these politicians are happy cutting 1% of a budget that needs to borrow 40% of total spending. What other organization could do this?
 
Some people think the key to reducing this budget deficit is to tax more. The fact is that research has proven over the past 60 years that each dollar of new tax collected by congress, they raise spending an additional $1.17 - meaning they never use the money to reduce debt…they instead just spend more (it is so easy to spend someone else’s money…especially if it gets you more votes or contributions).
 
The recent census data is starting to be analyzed by many people and some interesting trends are emerging during the past 10 years.
 
·         The eight states with no state income tax grew 18 percent in the last decade. The other states grew just 8 percent.
·         The 22 states with right-to-work laws grew 15 percent in the last decade. The other states grew just 6 percent.
·         The 16 states where collective bargaining with public employees is not required grew 15 percent in the last decade. The other states grew 7 percent.
 
People naturally choose to live in states where the economies are good, jobs are plentiful, and the cost of living tends to be lower. States with low taxes and workers rights (the opposite of union rights) provide the environment people want. The 2010 Census reveals whose experiment worked best – it is states that create an business friendly environment. It is now time for the Federal Government to do the same.

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by Scott Heintzelman - Scott is a CPA, CMA and CFE living in Pennsylvania. Scott is a partner serving on the executive team at McKonly & Asbury LLP, a regional accounting firm with multiple offices in the Mid-Atlantic. The firm has been an IPA ALL-STAR as well as winning Best Places to Work in Pennsylvania for numerous years.

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