President Barack Obama isn't serious about reducing the country's deficits, is putting the economy at risk of inflation and adheres to tax beliefs that are riddled with economic fallacies, says economist and author Thomas Sowell.
The president's decision to create a commission to draft a plan to lower debt burdens won't work if the government shows no willingness to rein in spending, Sowell says. Sowell’s book "Economic Facts and Fallacies" is now in its second edition.
"When you engage in runaway spending into the trillions of dollars and only afterwards, after you've already spent the money, appoint a commission to ask you what should we do to contain the deficit, obviously if you were concerned about the deficit, you wouldn't have spent the money first," Sowell tells Newsmax.TV.
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"If I go out and buy a Rolls Royce and a yacht and then come back and ask my wife, 'How are we going to get out of all this debt?' — I think I would get a less than happy response."
The average American should expect to deal with rising inflation rates should Obama fail to push through spending cuts of meaningful size.
For most, that's going to feel like a tax hike. "Inflation taxes everybody," says Sowell, a senior fellow at the Hoover Institution.
"Every dollar you have in your wallet or in your bank account is going to be reduced in value because the value will be essentially transferred to the government when the Federal Reserve prints more money."
The Federal Reserve cannot take sole responsibility for the way the economy operates.
The monetary authority's current policy of printing money and keeping interest rates low is making investment vehicles often popular among retirees unprofitable.
Inflation rates, for example, run much higher than interest on instruments like CDs, which provide income for many retirees.
Furthermore, retirees and younger Americans can brace for more fiscal anxiety as both parties face off anew to discuss whether or not to lower the debt ceiling.
"There's a lot of uncertainty about what the outcome will be either economically or politically," Sowell says.
As to the budget cuts, Republican House Speaker John Boehner deserves credit for negotiating $38 billion in spending cuts recently in order to avoid a government shutdown.
"Don't forget you have to judge someone by how well he played the hand he was dealt. And the hand that Speaker Boehner was dealt was one in which he controlled the one house of Congress, and the opposition controlled both the other house of Congress and the veto power of the president. So if he could get anything out of these people, that's something," Sowell says.
Obama, meanwhile, is calling for tax hikes on the wealthy in order to battle deficits, a policy Sowell has heard before.
"The magic formula for the left has always been to increase taxes on the rich, and that will solve our problems. Unfortunately there aren't that many rich if you do the math."
Fiscal policies under four different administrations, regardless of political affiliation, show that lower taxes increase revenue in that people take their money out of tax shelters and invest it back into the economy, which creates jobs.
"The very high taxes that people aren't actually paying do not bring in revenue," Sowell says.
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