Any business that has survived the past few years knows something about balancing a budget. When the depth of the recession hit in 2009 and in many cases, especially the construction industries, sales volume dropped 50% or more there was no option of raising revenues or cutting expenses.  There were no revenues to raise.

We have learned that much of what we used to credit as skill or strategy was luck or other factors beyond control.  We rode a wave of easy money thinking we were skilled investors or sharp business people.

In my industry we have adapted a view that we can control a fourth of our sales volume; the other three fourths comes from economic and monetary factors, and industry movements we may struggle to be aware of, but which we realize that we cannot control.  This is not to say that the 25% is not critically important: that portion that you can control makes the difference between profit and loss.

But when the economy crashes around us we must cut to survive.  In the recent recession,  particularly, we  faced not only sharply lower revenues, but a near shut down of credit. Even then, banks are not in the habit of loaning money to forestall bankruptcy, they loan to solid businesses that borrow to grow or at least get an assured return.

When banks loaned against real estate values rather than projected revenues they were brought down by sharply lower appraisals for their collateral.  Businesses that were profitable were shut down due to lower collateral values on real estate that secured their businesses, even when there was no delinquency on their loan payments.

The government debate over raising taxes (revenue) or lowering expenses is a red herring.  It would be analogous to a business raising prices on its products to face declining revenues.  It will result in even lower revenues.

To ignore the dynamic impact of higher taxes is to ignore history.  Depending on the type of tax and it avoidability, increasing taxes may well result in lower revenue.  Whether the increase is raising the statutory rate (the basic tax bracket rate) or the effective rate (the amount you actually pay after deductions) the impact is real.

Lowering the statutory rate while removing deductions may be desirable to create a more market driven distribution of wealth as opposed to a distribution of wealth based on political meddling.  Much of lobbying activity is to secure tax breaks for sectors of the economy.

To think that the discussion of defaulting on our debt should center on whether corporate jets should be depreciated in 5 years or 7 years is absurd, and just a very cheap class warfare tactic.  Whatever the depreciation rate should be should be decided in different session.  Should we also limit the deductibility of first class air fares?

In the past we have cut taxes on the promises of spending reductions that rarely materialized.  Should we have any more confidence that spending cuts will materialize with tax increases?  The best way to increase revenues is to grow the economy.  You do not grow an economy with higher taxes and complicated unknowable job killing regulations.

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