Why the Proposed VAT will not Reduce the Deficit


by Richard H. Frank

When I was just a boy growing up in what then was considered to be a middle class family, and had received a birthday or Christmas gift in the form of one or two dollars, I could hardly wait to spend that money.  My parents used to say “the money was burning a hole in my pocket.” It mattered little what I spent the money on as the mentality in my youth was “I had the dollar, I must spend it!”

The difference between the 111th Congress today and me in my youth is that when my dollar was gone, I could spend or get no more. Congress, however, has no such constraint on their spending limits; hence we have a national debt approaching $14 trillion, a burden to be paid by those yet unborn.  Our brilliant legislators know that the American people are adverse to increased taxes on income, property and capital gains, so they are now considering the imposition of a Value Added Tax that will impact the finances of every American.  This national sales tax applied to goods and services at each step in the manufacturing or delivery process is largely hidden from the consumer except in what appears as inflationary costs paid for that good or service.

Those in Congress and the Obama Administration will attempt to sell Americans on the idea for this tax in addition to all other taxes we pay, as being needed to eliminate the national debt. The problem is that all their hollow promises such as the Social Security lock box and trust funds specifically designed to cover some defined purpose, are routinely raided by Congress to pay for their uncontrolled spending.

Congress, like me as a boy, cannot control their urge to spend.  Whenever there exists a surplus, real or in some imagined forecast; i.e., CBO estimates, they cannot resist the urge to spend.  If no real need exists, leave it to Congress or the Administration in power to create the need through some perceived crisis.

The Obama Administration beats its chest as it demonizes big business, wall street and our financial system as requiring new tighter controls.  Well, what about our Federal Government?  I don’t see anyone  in the Administration demanding controls on Government spending.  Perhaps now is the time for a Constitutional Amendment holding our Government responsible for passing a balanced budget, not through taxation, but through constraints on spending.

Our Constitution in Article I, Section 8, is specific in defining the limits placed on Congress for spending.  The  congress has abused the Commerce and General Welfare clauses of this document to a point where there are no limits on what they can appropriate and exercise control over the free market.  A Balanced Budget Amendment may be the only salvation to placing a limit on their mania to spend and return this nation to financial stability and security.

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