Since last fall I have been saying that taxes, not jobs, will be the main issue in this year’s election.  Now we have many voicing their view that 8%+ unemployment is acceptable, the “New Normal.”  Conveniently overlooked is the issue brewing in Congress to extend unemployment benefits for a longer period of time to accomodate the long term unemployed.  Also overlooked is the fact that participation in the work force has dropped by 3-5% over the last three years which means that there are fewer looking for work.  Also forgotten is that we consider 5% unemplopyment as measured to be “full employment,” we need some slack in the picture to account for shifts in the labor force.  Bottom line, we are almost to the point where jobs are off the election radar screen.

The President’s new budget just released is now the hot topic along with its impact on our national debt.  To put the budget into perspective we have not had a federal government budget for over three years, with the Feds simply spending under “continuing resolutions.”  The budget is simply a political statement, not an actual plan. 

Obama’s newest budget does, however, point to continuing massive deficit spending with the deficit in 2012 and 2013 certainly to exceed one trillion dollars.  Coming in the wake of three years with over one trillion deficits each, no wonder there are those who raise the debt “boogeyman” again.  You know the pitch, if we don’t do something we will go down Greece’s slippery slope (pun intended) to financial ruin.

Once more, I find all this concern with our national debt to be wasted energy.  At present and projected interest rates we can handle a debt double its current size which is the dire warning coming from the “Debt Hawks.”  Japan has a national debt that is 238% of its national economy.  Ours is at 100%.  I don’t hear anyone saying Japan is “going down the tubes.”  More to the point, I have pointed out repeatedly that while our national debt has grown by almost $5 trillion during the Obama years, it costs us no more to service than it did in 2007.  And it is debt service that counts, not debt size.  The US has been in debt since the Revolution and always will be.  The important consideration is can we service the debt?  Clearly we can, even if the debt doubles in size.

Back to the main issue, taxes.  Obama’s new budget calls for increased taxes on the “rich,” the so-called “Buffet Rule,” those who earn more than, now $1 million a year, have to pay an “effective” tax rate of 30%.   First question, does that mean tax on gross or net income?  What tax should a person who gains $10 miilion in gross income pay on the $10 million?  Under tax rules he will pay only on his “net” and I can assure you Buffet pays no where near 15% on his gross income.  

We need to adopt a new tax code, not because the present one is clumsy or complex, but we need to adopt one that is more politically acceptable.  We need a code that first and foremost collects sufficient revenue to cover expenses.  It is worthwhile here to raise the question of collecting sufficient revenue to pay for our Social Security and Medicare expenses.  All agree that both of these “entitlements” will run short of funds soon.  But here we are extending Obama’s cut in the payroll tax that funds these expenditures.  And why cut rather than raise this source of spending specific revenue?  Because it is politically acceptable.

So what is politically acceptable?  For starters let’s tax the rich, they do not have the vote to defend themselves. What’s that I hear, they have the money to influence how we poor people vote.  No, we need some proposals that are acceptable to most, including the rich.  And what are these?  We could go to the popular call for eliminating “loopholes.”  But here we get into a contest between your loopholes and my loopholes.  The most likely acceptable tax proposal would be a “flat tax” like the VAT tax which is the largest source of government revenue among the member states of the European Union.

In any case the election has turned its focus from jobs to taxes.  And it is easier to come up with a tax policy than a jobs plan.