Over and over and over and over again we hear how the Bush tax cuts added to the deficit. This falsehood is utterly and entirely UNtrue. It is basic Accounting 101 and you don’t have to be an Accountant to grasp the concept. Since I happened to be an Accounting Major, it’s pretty simple for me to understand; however, there seems to be an entire block of society (the Left) that clearly cannot think through logic and numbers at the same time. So I decided to write this blog and attempt to explain in very, very simple terms that even a 5-year-old can understand about how tax cuts do not increase the deficit.
Scenario 1 – Balanced Budget
You earn $100
You spend $100
$100 – $100 = $0 This is a balanced budget. You spent exactly what you earned.
Scenario 2 – Deficit
You get a pay cut and earn only $80
You spend $100
$80 – $100 = -$20 This is a deficit. You put the $20 on your charge card because you don’t have enough cash to pay the entire amount.
Scenario 3 – Spending Reduction
You still have your pay cut and earn only $80
You cut your spending to $80
$80 – $80 = $0 This again is a balanced budget. You spent exactly what you earned.
The pay cut didn’t cause the deficit – the spending over the amount earned caused you to use your credit card; therefore, creating debt that you did not have before.
As you can see the concept is quite easy and anyone should be able to grasp this. If you reduce what you take in (tax cuts) you MUST reduce spending to go along with it or you will have a deficit. I don’t know how to explain these facts in any simpler terms other than maybe to change $100 to $10? I cannot grasp the concept of millions of people NOT understanding this basic math. Do they not have checking accounts? Do they not have credit cards or not get pay checks? The tax cuts do not cause the deficit – it’s the spending stupid.
This blog was brought to you by Accounting 101; Logic 101; Math 101; Are you smarter than a 5th grader; 1 + 1 = 2 not 3
July 9th, 2011 at 11:19 am
Her’s an idea:
You have a pay cut. You now earn $80. Cut your spending to $75. Now you have a $5 surplus. Saving for the future! Every American, especially the Government, should always – ALWAYS – no matter what, put 10% away for a rainy day. Period!
July 9th, 2011 at 7:23 pm
[…] Source: Granite State Indy […]
July 12th, 2011 at 1:07 pm
[…] The Left has been railing on the wealthy for decades. They believe there is some sort of money tree and somehow the wealthy get up earlier and grab the majority of the wealth and the rest of us just get whatever is left over. That is simply not the case of course. Aside from the fact that the wealthy EARN their wealth (even trust funders got their money from someone who at some point EARNED it) and aside from the fact they already pay the majority of taxes in the United States, the wealthy help invest in and create jobs across this country because they have the money. I’m going to try to make this simple like my last blog ‘It’s the Spending Stupid – Tax Cuts do NOT increase the Deficit.’ […]