Sass is partly correct
But to simply assume taxes will make everything better is also foolish to think. As you raise taxes you decrease what would be spent in the economy and/or invested in a business. It's not nearly so simple to claim we should just tax the rich more and everything will work out, that is an item of faith among American Liberals now isn't it?

The answer is not so simple as raising taxes unless you want to collapse an already fragile economy. My position is that a modest increase among the wealthy might be in order but modest to me means a few percent at most and temporary increases as well, have them rolled back after "x" number of years or you will find more and more increases to pay for the things we can't afford but want. We can't always have what we want, that needs to be understood!

I'm not suggesting that you should just tax away your deficit Tom. It's obvious that spending is out of control and needs to be reined in and placed on a sustainable footing. Taxes are going to have to be part of the mix though, if you maintain an ideological opposition to any and all tax increases then so far as I'm concerned you're not taking the problem seriously.

I can't recall the exact figures unfortunately and don't really have the inclination to go back and check, but I'm pretty sure I read that something like 60% of the current US Federal deficit can be directly attributed to the Bush tax cuts. That figure shrinks to about 30% in the longer term as the effects of unfunded liabilities really start to bite. I'm going from memory of course so feel to free to contradict those figures if you're able, but I think it's a good starting point for the discussion. The enormous deficits you're now seeing are not entirely down to runaway spending, they're also down to a deliberate policy of cutting taxes to the bone and a corresponding cowardice from the current administration to do anything about rectifying the situation. In my opinion the only way you'll manage to bring the national accounts back into balance is by restoring taxes to Clinton era levels with a quid pro quo of serious structural reforms to entitlement programs to drive down long-term costs. Republicans are proposing the latter but are ideologically opposed to the former, Democrats are probably fine with the former but wouldn't touch the latter with a bargepole. Neither are really serious about the deficit.

While I hate to side with Obama,
"cowardice" relating to any sort of cuts in spending can be attributed to both parties.
and you are correct, neither is serious about the problem.
...note I did not say I am opposed to increased taxes especially for the very high end but not nearly to the extent some have asked for. Cuts in taxes are supposed to be accompanied with cuts in services, not so in American politics!?

Tom, your conception is based on the logical assumption that cutting taxes means the government will have less money to spend. That's not the operative theory in the Republican party. You need to study your Laffer Curves before they drum you out of the party as a pinko/leftist...

Yes, it is that Laffer Curve fallacy that leads people to think that cutting taxes will tend to lead to increased revenue. It might, it might not, but if recent tax cuts have seen reductions in revenue income as a percentage of GDP (as is the case in the USA over the past decade), then it seems unlikely that further reductions will help.

Still, it amuses me that when I point out that one deficit reduction plan included tax cuts, it's assumed that the only alternative being mooted is tax rises. Perhaps a period of stable taxes may not be such a bad idea?

I would love to see stable taxes coupled with serious cuts (20% across the board).

Across-the-board cuts have a certain simplistic appeal, but the reality is that you're talking about a blunt instrument to tackle a much more complex problem. There will be some departments that could easily absorb a 20% cut and still have plenty of waste left over (the military springs to mind) but others for which a 20% cut would be devastating. But the bigger problem would be that a 20% blanket cut in current spending would do little to tackle the longer-term problem of ballooning costs in healthcare and social security. To tackle that you need serious structural reform that's carefully planned out, not an arbitrary budget cut designed to appear even-handed.

Just shooting from the hip...
We could start with a chain saw and cut say 10% across the board
THEN we break out the scalpel and cut more fat where we can find it. But we need a start and that would be a "relatively" painless way to start

Sass,
That is my point. Everyone "thinks" their program should be sacrosanct. The other side does not, and thinks it's programs should be safe. Since they cannot agree, lets make it equal. I wish the government could be trusted to do the job they were sent to Washington to do. With the lack of any budget created for 2011, obviously that is a problem at the most basic level.
Are you saying that your desired to see a budget put forth by the previous congress? Why did they choose not to do their job?

The only thing that needs to occur is requiring a balanced budget, then they'll have the proper motivation to make the most of it.

I'd go further and simply tie almost all spending to direct taxation. You want an endless conflict in the Middle East...shazam...now there's a 10% 'security' payroll tax deduction for it. The NeoCons and Liberal Interventionists would be gone in two weeks time.

Sassenach wrote:This is of course an item of faith among American conservatives. Absolutely under no circumstances whatsoever can raising taxes ever be justified, even if all that means is raising them back to the levels that were seen under that notorious communist Ronald Reagan. It's a bizarre position to adopt because it means that in order to bring the budget back into balance you'll need to make much deeper and more painful cuts than would otherwise be the case, which will surely have to include cuts to conservative sacred cows such as defence.

This is not true. However, if there is a time to raise taxes, it is not in the midst of a recession/recovery. Also, before taxes are raised, there ought to be a consideration of the impact of those taxes. It is simplistic to pretend the government simply takes money out of the economy and there are no reverberations. I know that's not what you said, but you mention raising taxes as if it's just a flat pay-raise for the government. In reality, removing money from the private sector has implications.

Furthermore, before taxes are raised, we ought to really wring out the nonsense in government. When we know there are duplicative programs, waste, fraud, and unnecessary and unproductive spending, we ought to go after those things first before trying to figure out how to raise taxes. Beyond that, in a global economy, we encourage people to find new, inventive ways to avoid taxes the higher we raise them.

The sort of cuts you'd need to make to balance the budget without any tax increases are likely to be politically unfeasible. Grown-ups are aware of this problem.

Well then, there are zero "grown-ups" in the White House. The President has done nothing but increase the debt and deficits since taking office. His official budget proposal did nothing about them either. Suddenly, after Paul Ryan's budget was released, the President is going to put out a second budget (allegedly) tomorrow.

It all leads me to believe that American conservatives are not really serious about balancing the books.

Trash. With all due respect, the conservatives are the only ones doing anything more than talk about it.

Tom may believe this is a bipartisan fault, but that is history. What is going on now is that the right is trying to work on this issue and the Left is engaged in felonious demagoguery.

Sure, you guys do want to cut spending, and you're quite right to want that because it's necessary. But there's absolutely no way you'll balance the budget through spending cuts alone and deep down I think you know it.

No one is talking about balancing it tomorrow. Taking a longer approach, I think we can get there with some entitlement tweaks.

The funny thing about increasing taxes is that the "rich" already pay most of the taxes and about half of all Americans pay zero income tax. Zero. So, really, this is all about putting more of the burden for benefits on a few, more "spreading the wealth around."

I'd also like to say that all these folksy metaphors which compare the national budget with Honest Joe Citizen and his household budget are completely absurd and have no grounding in reality.

Not completely true. If our government saved during times of trouble and borrowed only when it had to, would we have a $14+T debt AND $100T in unfunded liabilities? I don't think so.

State finances are vastly more complex than household budgets and governments have a whole host of different ways to raise money other than simply relying on one income stream.

True, but when you are borrowing 40% of everything you're spending, as we are now, it doesn't really matter how many revenue streams you have--it's not enough.

Plus, our recovery is taking a big hit with energy prices. The President's response? Talking about sources of energy that might, possibly be viable in 30 years.

When we're talking about huge governments like the USA then they're also almost invulnerable to their creditors and can always simply print money to inflate their debts away. Sure, there are problems with that, and of course it's not sustainable in the long term to maintain enormous runaway deficits, but it's not the case that a government with huge debts is anywhere near as endangered as a family would be with a similar proportion of debts to income.

Wow. Easy to say when you're not an American, eh?

"Keep borrowing! You can hyper-inflate your way out later! Sure, your economy will collapse, but it's nothing other countries haven't gone through."

Great.

Also, before taxes are raised, there ought to be a consideration of the impact of those taxes. It is simplistic to pretend the government simply takes money out of the economy and there are no reverberations. I know that's not what you said, but you mention raising taxes as if it's just a flat pay-raise for the government. In reality, removing money from the private sector has implications.

Sure, and I'm not arguing for swingeing tax increases by any means. Obviously having lower taxes is preferable if the country can afford it. Fact is though that you have a crisis on your hands with a runaway deficit and you need to be raising more money to help bridge the gap. I agree that spending cuts are more important than tax increases, but it's going to require a bit of both.

Furthermore, before taxes are raised, we ought to really wring out the nonsense in government. When we know there are duplicative programs, waste, fraud, and unnecessary and unproductive spending, we ought to go after those things first before trying to figure out how to raise taxes. Beyond that, in a global economy, we encourage people to find new, inventive ways to avoid taxes the higher we raise them.

There's an obvious problem here that you're overlooking, which is that recent tax cuts have been one of the biggest contributors to the deficit. I had a quick scout around on Google to see if I could find a few figures on it and came up with this Wiki page about Bush's economic policy:

http://en.wikipedia.org/wiki/Economic_p ... nistration

Here's the key point:

From the end of Fiscal Year 2001 (ending Oct. 1, 2001) to the fourth quarter of 2007, the economy has produced $6.5 trillion (in constant 2000 dollars) over and above third quarter 2001 GDP levels of $9.87 trillion per year.[34] In the same period the federal government accumulated $3.0 trillion in gross debt (in constant 2000 dollars) or a debt load of 46.5¢ per dollar of the increased production (for comparison purposes in expressing the size of the debt; that is, new debt didn't exceed new production, but growing economies of growing populations are dependent for their vitality to certain consumption levels, so the increased production isn't necessarily immediately usable in its entirety to pay for the debt).[35][36]

Most debt was accumulated as a result of tax cuts and increased national security spending. According to Richard Kogan and Matt Fiedler, "the largest costs — $1.2 trillion over six years — resulted from the tax cuts enacted since the start of 2001. Increased spending for defense, international affairs, and homeland security – primarily for prosecuting the wars in Iraq and Afghanistan – also was quite costly, amounting to almost $800 billion to date. Together, tax cuts and the spending increases for these security programs account for 84 percent of the increases in debt racked up by Congress and the President over this period."[37] Lawrence Kudlow, however, noted "The U.S. has spent roughly $750 billion for the five-year war. Sure, that’s a lot of money. But the total cost works out to 1 percent of the $63 trillion GDP over that time period. It's miniscule [sic]." He also reported that "during the five years of the Iraq war,. . .household net worth has increased by $20 trillion." [38] Nobel laureate Joseph Stiglitz has estimated the total cost of the Iraq War at closer to $3 trillion.[39]

Interest on the debt (including both public and intragovernmental amounts) increased from $322 billion to $454 billion annually. The share of public debt owned by foreigners increased significantly from 31% in June 2001 to 50% in June 2008, with the dollar balance owed to foreigners increasing from $1.0 trillion to $2.6 trillion. This also significantly increased the interest payments sent overseas, from approximately $50 billion in 2001 to $121 billion during 2008.[40]

As you can see from the figures produced there, between 2001 and 2008 you added $3 trillion to the national debt, of which about 2/3 came from tax cuts and increased military spending. So far as I can tell from a bit of brief reading around it seems the rest was mostly down to Bush's decision to extend medicare benefits.

The 2001 starting point is slightly arbitrary I suppose, but then again it isn't as well because in the previous year there had been a surplus of $128 billion in the federal budget. The situation has obviously gotten even worse since 2008, but nevertheless it does seem pretty clear to me that a major contributory factor has been the tax cuts. I haven't seen you propose any tax increases or any cuts in military spending despite these accounting for 2/3 of the deficit that accrued after the last balanced budget, so am I really supposed to believe that you have a credible plan for balancing the books again ?

I think I have seen Doctor Fate saying he would like to see cuts to the military in terms of levels of overseas bases (such as in Okinawa, Germany etc).

But you do bring up a point I mentioned before - if the last sets of tax cuts led to falling revenue, that should be an indicator of which side of Laffer's curve you are on.

Targeted tax increases may not be so harmful in a recovery, but they need to be carefully considered. One area to look at is the elasticity of the incomes affected. People on lower incomes suffer more from a tax increases because the proportion of their income that is non-discretionary (food and board and other essentials), and those on higher incomes are affected less.

Well now that you've gotten that little rant off your chest perhaps you'd like to come out with some concrete figures to illustrate precisely where you'd weild the axe and how much money it would save. So far you've ranted and raved about Planned Parenthood, which accounts for a tiny trickle of funding, so where else would you find the money ? What cuts would you make to Social Security to bring it back into balance ? how much would you trim from medicare ? how many armoured divisions and aircraft carriers would you put into mothballs ? how far would you extend the state retirement age ? exactly how many people would you make redundant ? If you're not willing to answer these questions and show how you plan to make the necessary savings from the big ticket expenditure items then all you're doing is engaging in bluster and bullshit. So what's it to be ?

I don't think you're going to be able to answer those questions in a way that manages to cut enough spending to bring the books back into balance. Or rather, I don't think you can come up with a plan that's even remotely feasible electorally. I also don't think you're unaware of this problem, which is why you concentrate on vagueness, trivialities and irrelevant folksy metaphors.

Sassenach wrote:Sure, and I'm not arguing for swingeing tax increases by any means. Obviously having lower taxes is preferable if the country can afford it. Fact is though that you have a crisis on your hands with a runaway deficit and you need to be raising more money to help bridge the gap. I agree that spending cuts are more important than tax increases, but it's going to require a bit of both.

I doubt it. Lower taxes don't result in lower revenue. There are a multitude of ways to tackle this, but it is fairly useless to argue with someone whose prejudice is for higher taxes.

I will cite one: what happens to "lost revenue?" Does the recipient of the tax cut bury it? That is the ONLY case in which it has no positive impact on the economy as a whole. Now, measuring this might be difficult. However, there can be no doubt about two things: 1) money earned does not de facto belong to the government; 2) were taxes to fall massively, the government would have to spend less or go bankrupt. Our government has, historically, refused to spend less.

There's an obvious problem here that you're overlooking, which is that recent tax cuts have been one of the biggest contributors to the deficit. I had a quick scout around on Google to see if I could find a few figures on it and came up with this Wiki page about Bush's economic policy:

http://en.wikipedia.org/wiki/Economic_p ... nistration

No, it is you who is overlooking a few things--a recession that started as Clinton was leaving office and 9/11.

As you can see from the figures produced there, between 2001 and 2008 you added $3 trillion to the national debt, of which about 2/3 came from tax cuts and increased military spending. So far as I can tell from a bit of brief reading around it seems the rest was mostly down to Bush's decision to extend medicare benefits.

And, Obama has made Bush look thrifty.

The 2001 starting point is slightly arbitrary I suppose, but then again it isn't as well because in the previous year there had been a surplus of $128 billion in the federal budget.

Well, beyond the fact that it was a hypothetical surplus, there's also the simple fact that one year doesn't make up for decades of overspending. I am a major proponent of a balanced budget amendment. Instead, Obama and the Democrats just want to keep spending and borrowing until the country collapses or the world ends, whichever comes first.

The situation has obviously gotten even worse since 2008, but nevertheless it does seem pretty clear to me that a major contributory factor has been the tax cuts. I haven't seen you propose any tax increases or any cuts in military spending despite these accounting for 2/3 of the deficit that accrued after the last balanced budget, so am I really supposed to believe that you have a credible plan for balancing the books again ?

In addition to what Danivon said, I have said we should leave Afghanistan (maybe two years ago?). I would do away with the Departments of Energy and Education. I would end corn subsidies. I would stop paying for the UN.

After I got done cutting, if there was a need for more revenue, I would look at more cuts. There are plenty of ridiculous things being funded by our government. I would also reform entitlements, using means testing, delaying retirement, and other measures.

Your man Obama simply wants to raise his credit card limit and keep "investing" so we can "win the future." There's never been a more insipid and less effective economic strategy.