Lot’s need to be done, but to take tax increases off the table is irresponsible in the extreme. We should have gotten rid of the tax cuts when we went to war!
I don’t think that tax increases have been taken off the table. Republicans have simply demanded that corresponding cuts in spending also be made.
Yes, this is also true for taxes. The question is whether the reduction in direct taxation is offset by the increased stimulus of the economy. This is the whole point of the Laffer Curve (more macroeconomics, of course). If taxes are too low, decreasing them further will decrease net revenue. If taxes are too high, decreasing them will increase net revenue. Where we are on the curve is up to debate, but I doubt you will find much support outside of non-economists that we are on the latter portion.
Re: your analogy, government spending beyond their means can increase revenue permanently in the long run. For a really simplistic example, say you spend $200 in one year but take in $100 in income. The next year, due to the spending, you may once again spend $200 but now take in $500. Say the project was bulding the interstate highway system. This was a huge initial outlay, but few will argue that it did not have a hugely positive net effect on the economy.
The only analogous example for household budgeting would be some sort of investment that paid off in the future, which you have to borrow to invest in. It’s not the same as blowing $500 you don’t have on a TV, but more like investing $500 you don’t have in order to acheive a guaranteed payoff of $1000 a few years later. Nobody would argue that this would be a foolish investment if reasonable funding were available.
Also, please don’t ascribe motives to what I write. I may no indication to whether or not I ‘work for the government’, or that I think we can continue spending at the same rate without consequence, or that we need to drastically raise the tax rate on the ‘rich’ (a word I never mentioned in my post), or whatever straw man you come up with. I’m merely explaining the economic underpinnings that the Tea Party and other Republicans seem to ignore or misunderstand while grandstanding on the national debt. Fighting ignorance is the name of the game, no?
Regginbrow - I apologize for any inaccurate ascriptions. You’ve done quite well explaining these economic theories (I will stay far away from the Laffer theory, if you don’t mind). To relate what I’ve been rambling about to your above post, it seems that many who are arguing that reform isn’t possible without tax increases seem to ignore the fact that, in a great many ways, Congress is “blowing $500 [they] don’t have on a TV.”
I’m acutely aware of the exaggerations made on both sides, whether it’s arguing that without the Iraq war we’d have more to spend on education, or arguing that the President flying Air Force One to a fundraiser is bankrupting us. But the discussion here seems to get bogged down in “It’s Bush’s fault - raise taxes on the rich!” versus “Stop giving welfare payments!” Neither side can even see the middle ground from where they are.
My contention has been with the idea that raising taxes will solve the problem. I don’t see what’s wrong with Republicans demanding corresponding cuts in spending. If Congress wants to allocate money to create a highway system that will increase commerce, so be it. But adding the expense on top of frivolous, unnecessary expenditures (shrimp on treadmills and the cowboy poetry festival have been popular examples lately) is simply foolish and irresponsible.
And they’re not even talking about raising rates or letting the Bush cuts expire; this is about closing some loopholes in the current tax code.
From Andrew Sullivan
And they’re also not even tying it to spending cuts. They’re tying it to raising the debt limit.
Taxes go up by a bit, Country gets destroyed, Uma, Oprah. What’s the difference, really? If you were a Congressman, wouldn’t you threaten to default on the debt unless there weren’t tax increases, too? Who wouldn’t!
[quote=“Penderel, post:158, topic:586686”]
So, to follow your logic, if “The Rich” pay less in taxes they will have more money to invest with, meaning that companies will have more money with which to hire employees. These employees will be taxed on their income and on their expenditures, which will increase tax revenue. <snip>/QUOTE]
I believe this is the fallacy. It has been widely reported that corporations are sitting on huge piles of assets (anybody want to provide some figures?) but the employment situation remains in the crapper. Why? Because there isn’t any additional demand for goods/services.
Companies are not going to hire those additional employees, no matter how much money accumulates whether from normal profits or from tax breaks, unless those employees will be servicing a demand. This is why tax breaks cannot reduce unemployment, nor increase government revenue.
Republicans aren’t even following their own advice. The March 11, Republican Joint Economics Report suggested 85% spending cuts and 15% tax increases.
http://www.speaker.gov/UploadedFiles/JEC_Jobs_Study.pdf
Recent reports are stating, though I don’t know how accurate they are, that when the the Republicans walked out of negotiations, Democrats were offering 83% budget cuts and 17% revenue increases.
Apparently that was so unacceptable, they couldn’t even continue to negotiate.
Well, they sometimes could, at certian places in the Laffer curve, and in certain economic climates. Just not now (with no pent-up demand and huge monetary reservers) and at this tax rate (far from confiscatory.)
Just to get all this straight: The surest way to get out of debt is to spend more and accrue more debt? Apparently I’ve been living my life entirely the wrong way.
Since political pragmatism has been brought up, I’ll mention again that increased tax revenue won’t be seen by politicians as a way to pay down the debt, it will be seen as more money they can spend.
I’ll also mention (once again) the stark philosophical difference running through these posts, this time the demonization of corporations and the wealthy.
And while I’m at it, the idea that increasing taxes and entitlement payouts will help everyone (apparently because of a trickle-up effect) doesn’t seem to have worked out yet. Why would it suddenly work now?
Seeme to work okay in the 90s. I’m unaware that we’ve tried it recently.
Read that again if you have to. The democrats are proposing a mix of revenue increases and spending cuts. And not on a one-to-one basis either; but greater than three-to-one in favor of the cuts. It is Republicans who are digging in their heels and playing brinkmanship with the economy.
Did it work well from the '30s through the '80s? And if it did work well in the '90s, why are there still people who need public assistance? And by the way, that’s rhetorical - I don’t really expect it to eliminate all poverty.
What we seem to be arguing here is a system where one works for money, keeps it (except for taxes that must be paid for essential programs), and spends it as he/she sees fit versus a system in which those who work for money pay more to the government, which then parcels it out to the poor and claims that this will help those above the poverty line. Sounds an awful lot like wealth redistribution to me.
We didn’t build this nation on the premise that if you work hard and try to be successful you can support everyone else, or on the premise that the government is the best arbiter of what is good and bad for each individual.
Yes, it did work well from the 30s through the 80s relative to now. The budget deficit was much lower then except during WW2.
Seem to, but are not. The vast majority of spending by the federal government in this country is far from means-tested in a way that removes all but the poor from receiving it.. The rest – at least 80% if not more – is either the government paying its employees, paying for goods and services, paying retirement or medical benefits to the aged regardless of income, or subsidizing corporations.
Isn’t there any correlation between the lower budget deficits that you mentioned and the fact that fewer people were on welfare during that time period?
I don’t even need to do the homework on that. As everyone has been trying to tell you, even if you eliminate all medicaid and welfare to the poor from the budget, we’d still be running a huge deficit.
They never answer this sort of question other than to say “its too high”
Yes. I was being brief rather than comprehensive. Your point(s) is/are quite correct.
I know that we’d still have a huge deficit - as I’ve said, cutting medicaid and welfare can’t be the only solutions, but I was addressing something you wrote earlier in response to my saying that increased welfare output doesn’t help everyone. You said that we are running greater budget deficits now with lower taxes than in past decades, but declined to address the fact that the welfare rolls were smaller in those decades. You seem to be moving the goal line - rather than defending the proposition that budget deficits are higher because of lower taxes, you’re suddenly arguing that elimination of entitlement programs won’t cure the deficit. If I’m wrong about this, please let me know.