Failed Federal Budget Means Middle-Class Tax Hike Likely

Congress appears unable to pass the 2011 federal budget for the first time since the 1974 Budget Act. House Majority Leader Steny Hoyer (D-MD) essentially admitted the budget would put the nation on a path to hemorrhage trillions more than it has already bled out. Of course, there are only two ways to improve the nation’s broken budget: cutting back bloated spending and/or bumping up taxes… especially on the middle class… most likely meaning any individual earning less than $200,000 per year.

According to The Washington Post:

“Hoyer, the second-ranking House Democrat, said in an interview that he expects Congress to extend middle-class tax cuts enacted during the Bush administration that are set to expire at the end of this year. But he said the extension should not be permanent. Hoyer said he plans to call for a “serious discussion” about the affordability of the tax breaks.

“‘We’re lying to ourselves and our children if we say we can maintain our current levels of entitlement spending, defense spending and taxation without bankrupting our country,’ Hoyer says in remarks released in advance of a Tuesday speech sponsored by Third Way, a Democratic think tank.

“Hoyer’s comments come as Republicans are battering Democrats over the soaring budget deficit in advance of the fall midterm elections, accusing Obama and his colleagues in Congress of sinking the nation in red ink with spending to combat the recession.”

There’s no easy way out of America’s financial dilemma… at least today Congress acknowledges some steps toward austerity are required, and yet they still appear unlikely in the near term. As is a frequent refrain here in The Daily Reckoning, the tax increases are bound to come. There’s also a new effort underway from Defense Secretary Robert M. Gates to cut some of the military’s “wasteful spending.” It sounds like a step in the right direction, but instead of “waste” he should probably look at what he would likely consider only the “bare necessities,” the US’ worldwide and ever-expanding war operations.

You can read more of the details in The Washington Post’s coverage of how middle-class tax breaks are not affordable in the long run.


Rocky Vega,
The Daily Reckoning