In the House Budget Committee Federal Reserve chairman Ben Bernanke has called for the federal government to move towards fiscal balance despite the government’s efforts to spend its way out of the current economic recession. Bernanke has cited that it was in the government’s long term interest to maintain a fiscally balanced strategy to maintain a stable and healthy economic growth.

The problem with the Fed Chief’s concern is that the most economically viable solution is not the most politically favorable one. Politicians, especially the recent Presidential candidates, have stressed on tax cuts and slimming down government spending when at the same time government services are at the highest levels of demand. Even then Presidential-candidate Obama has stressed on tax cuts on the middle class America to gain political power for his win in the Whitehouse.

Nobody likes paying taxes unless one has somehow have a more altruistic or patriotic attitude in filling out the tax forms, but with the general tax rate lower than many of our European counterparts, raising taxes in this country should not be ruled out as a viable option. We have the greatest tendency to view the federal and state government has spending hogs, whose wasteful spending on this program and that program are the primary cause of government budget deficits. The primary cause of budget deficit, I believe, is not the inefficiencies within government, although I agree that there are wasteful programs here and there, but that our tax revenues are too low for all the efficient and necessary government services that we receive as citizens.

You know all the highway projects, airport improvements, and other key infrastructure spending? They cost a lot of capital! Even the basic government services costs a lot of money to run, and this is not because our government is “inefficient” in running those programs but that these programs are as expensive to run at face value. Many political commentators attempt to focus on the government inefficiencies without considering the true, optimal cost of such government services. My main argument is that basic government services are a luxury compared to how little we want to pay. Sure, I personally do not want to pay more taxes than I need to, but nevertheless I am arguing that the amount we pay might not be enough to cover our basic government services.

With that being said, let us be more skeptical with any political claims that promises fiscal responsibility and tax cuts, because I have not seen any politicians successfully execute those two together.

General Motors, the icon of American capitalism, has filed for bankruptcy. The U.S. government will be providing the company with billions of tax dollar aid in exchange for significant ownership of the company. President Obama remarked that this will be a good chance for the company to reorganize itself and rebound from the financial hurdles.

Now, some are worried that the billions in tax dollars to save the American giant might be a path to socialism. The problem with such objection is that these individuals do not know what socialism is. Sure, using billions of government money to save a private company might be excessive government intervention in the free market, but that is not the same thing as socialism. If one even cares to do some Marx reading, then one would have to see the minimal condition of abolishment of private property to even set the stage for a socialist revolution. What is happening now is not about abolishing private property but instead a government intervention to save the free market machinery from failing. People who accuse the current government’s role in GM as the path to socialism are either ignorant in their thinking or cunning in terms of using the current development as their political ends.

That being said, I am nevertheless concerned about the amount of government investment on GM and other giant American corporations, because  calls into question on why the government is not so hesitant on investing billions in the giant corporations while nobody really knows the future trajectory of the current state of the economy. Sure, we can use several economic models to project a possible course for the economy, but I am still bothered by the cloud of uncertainty. I also do not have to remind everyone about the frustration that has generated over the seemingly slow pace of progress.

In any case, I still think I am not informed enough to see the full picture here, so I guess I will be reading more expert opinions on this subject matter. I hope GM can rise again.