Does fiscal responsibility imply low spending

In other threads on politics many people who believe in fiscal responsibility seem to feel that this is more of a libertarian viewpoint, that if you lower spending then you end up with a balanced budget.

Are fiscal responsibility and lower taxes necessarily the same thing? Why can’t you have fiscal responsibility and higher taxes? Clinton was fiscally responisble, in the last years of his admin there were budget surpluses. But tax rates were 33%. Under Bush the deficit in 2004 was around 400 billion and tax rates were 29%. If Bush pushed the tax rate back up to 33% you’d have fiscal responsibility. He seems to be doing that, the tax rate is up to about 32% now. If you look at the chart it has steadily gone up.

Granted, a good deal of people do not want taxes to go up. I am somewhat drawn on the subject. I am not some knee jerk ‘I hate taxes’ person as I realize taxes pay for education, healthcare, infrastructure, scientific research, law enforcement, retirement, etc. But I don’t want to live in Germany with its 50% tax rates either. I’m not horrified of the idea of taxes going from 29% to 33% (that means a median 50k household income pays an extra $160/month, which is about what you make selling plasma or with a couple of paper routes), but I can see why raising them to 40-50% would be bad. But even that wouldn’t be horrible as private spending would just go down. With more gov. spending on education or healthcare there’d be less private spending. People in Europe spend more publically in taxes but less privately on education and healthcare than we do.

So does a person necessarily need to be anti-tax to be pro-fiscal responsibility? Can you be in favor of higher taxes to fund more government spending and still be fiscally responsible at the same time?

It’s kinda like a credit card. Pay the balance off every month and you’re golden. There are times when the government should run a deficit.

However the current admin is like a drunken sailor. Spend like crazy, cut revenues (reduce taxes), and watch oil go up up up and up.

Fiscal responsibility implies spending within your means. Running a temporary deficit is no problem as long as you offset it in a reasonable amount of time with a surplus. Current fuckwads in charge have no concept.

You realize, do you not, that the middle portion of your statement is at odds with the material cited in the OP? That the federal tax rate is a single percentage point below what it was at Clinton’s peak rate? You also fail to take into account an expanding economy. A lower tax rate could actually yield higher revenues if the tax base is greater.

And what in fuck-all does the price of oil have to do with the federal budget?

Fiscal responsibility to me implies firstly that there’s a plan for keeping as much out of debt as possible (and one that’s stuck to, barring unforseen circs), and second that income and spending are very closely linked; a small shift in one need not change the other, but a big change either way should dictate a suitable change in the other.

Fiscal responsibility doesn’t preclude a “blow-out”, or big spending project, but there definetly should be plans in place to recoup the money at some point in the future, and that other current spending projects are as unaffected as possible (no diverting money from one thing to another, although that can be a good idea temporarily).

Fiscal responsibility is a part of good government. You could have government that’s too big (or too small, or spending money on the wrong things) and still have a government that’s fiscally responsible. My national government (which has no net debt) is responsible. I think they tax too much and spend the money rather badly, but their overall position is quite sustainable. My state government - which has just resumed funding infrastructure though debt after much badgering by people like me - is also fiscally responsible. Many of their programmes are moronic.

Those who advocate tax cuts even if they causes deficits use three sorts of arguments:

  1. Deficits don’t matter (due to Ricardian/ Barro equivalence, the idea that deficits are future taxes and that this will be factored into current decisions).
  2. Deficits won’t occur, because cutting taxes is a free lunch (because current tax rates exceed those that maximise revenue).
  3. Deficits do matter and fiscal irresponsibility can be used as a weapon to reduce excessive spending (“starve the beast”).
    None of the arguments amounts to much, IMHO.

Well, because of a subtlety, it’s not at odds with what’s cited in the OP.

The OP just used the “average jerk’s” tax freedom day to back out (I think, Wes, correct me if I’m wrong) a general ‘tax rate.’

Clinton’s may have been 1 percentage point higher, but the richest 1% were paying more than they are now, and the poor were paying less.

IOW, Wes’s numbers are based on each person being weighted equally, whereas to figure revenue you’d need it based on the average tax on each dollar earned.

By lowering taxes on the top 1%, while getting rid of all kinds of tax breaks for the poor, revenue’s actually gone down considerably. Who’da thunk?

Oh, yeah, the OP - fiscal responsibility means doing what’s the right thing money-wise for fiscal health. Usually that’s spending within your means, or at least having the standing debt not grow at a quicker pace than the GDP.

Bush hasn’t done that, and can’t sincerely say he thought his tax program would do that, since his tax cuts were offered as the solution to everything - “it’s your money,” then “it’s a recession,” now “long term growth.”

Yeah it could. But it hasn’t… The link (PDF table) gives tax revenue as a percentage of the GDP, which has fallen from 29.9% in 2000 to 25.4% in 2003 (the last date a provisional number.) The absolute amount of revenue is clearly less important than the percentage of GDP it represents.

The fiscal irresponsibility shown by the Bush administration is cutting taxes first while claiming that politically impossible spending cuts will happen. It is also irresponsible to fund a very expensive war while making not a move to help pay for it. Fiscal responsibility (see Clinton, Bill) involves balancing the budget using whatever combination of tax and spending policy you like, and then cutting taxes - or even, gasp, paying down the deficit.

I don’t even know what you mean by “Federal tax rate.”

According this pdf report from the Whitehouse’s OMB, federal revenues are rising. And that rise is projected to continue. 2000 saw actual federal revenues of 2.025 trillion dollars which fell to a nadir in 2003 at 1.782 trillion. 2005 projected revenues were calculated to exceed the 2000 number. I guess we gotta correct these figures for inflation yet to see the whether net federal revenues are actually higher or lower than previously.

Why? A lower percentage could indicate more efficient spending by government, no?

Spending? We’re not talking about expenditures as a percentage of GDP, but revenue. If the budget were in balance, then maybe (but there would be debate on whether the budget met the needs of the country.) Maybe we’re “efficient” in collecting revenue and inefficient in spending it - which is why we’re in a mess.

In any case, revenue plummeting as a percentage of GDP kind of shows that the tax cuts are not paying for themselves .

While we’re speculating, spending on research and infrastructure that serves to improve the economy might more than pay for itself also.

In theory. But nobody is really sure how to calculate the right tax rate to produce maximum revenue, or even what a “Laffer Curve” really looks like.

As a patriotic citizen, I offer to swap the government’s my financial problem with mine! :slight_smile:

True. Given that in the UK people’s taxes can be 95%, and yet they still try to earn more, my guess is that the point where you earn more revenue by lowering tax rates is really high.

I can’t see the PDF (weird bug on this PC I haven’t figured out), but I don’t understand how it’s a rejoinder to what I said.

My point is that you can have the average person’s tax rate be the same as it used to be, yet still raise much less because the tax rate on the average dollar have gone down.

I guess I can see where you’re headed, but it’s unfair to start the dawn of time at 2000. Tax revenues grow consistently, because the GDP goes up. Bush’ policies have us almost to where we were in 2000? That sucks.

If you convince me that the GDP has grown more than it would have because tax rates are lower, and that the amount the GDP has grown extra makes up for the difference in revenue, that’d be swell. But that’s a huge hurdle in general, never (I believe) shown in any real world case, and demonstrably untrue with regard to the Bush administration.

Not only that, but even if the tax cut did eventually grow the GDP more than it would have otherwise, there was a long latency before the revenues caught up again, during which expenditures did not shrink with the lower tax revenues. To have been responsibie, revenues would have to grow enough more than expenditures to pay for the deficit (unlikely.)

UncleBeer should remember that it always rains, eventually, after the rainmaker dances. But you might want to irrigate, just in case.

It’s unlikely that many people really face this rate. In most countries - including the US, Australia and the UK - it is possible to avoid tax (by deferral, for example) by structuring your affairs appropriately. Poor workers switch to the informal sector (a big problem in developing countries and a huge problem with targeted welfare programmes in developed ones). The rich change the form and timing of their income streams. In that case, the obvious reform option is to broaden the base and lower the rate.

There have been clear examples of tax rates that exceed revenue maximising ones - Australia’s old “scientific” sugar tariff and Japan’s rice tariff of years gone by are examples. Indeed “water in the tariff” involves a situation where a country can cut the tariff and still get no revenue from the tax at all.

They can? How? Top rate of income tax is 40%. I believe the 95 (or it may have been 99) percent rate was one of Thatcher’s early scalps.
Under some very specific circumstances I believe poor design of the welfare system results in benefits being withdrawn at almost 1:1 as earnings increase, but those sort of welfare traps occur in lots of different countries, including the US. And they have the effect of reducing the incentive to work hugely, as you’d expect.

Government fiscal responsibility is a bit of a complicated topic. If the government doesn’t borrow enough, there are shortages of bonds which some classes of investors really need (e.g. pension funds). If the government sticks too hard to a balanced budget, the economy can fall apart (see: Great Depression). If it borrows too much, the economy can implode. Ditto if it taxes people too highly. Mess up the balance between who pays most of the bills (plutocrats, middle classes, working stiffs) and society can come apart at the seams.

Keeping the national debt to some low number doesn’t seem that important, providing the repayments are affordable. England built itself into a global superpower while carrying a national debt that was the envy of other nations (who couldn’t borrow nearly that much), in large part because they managed it responsibly.

Well then. There are plenty of countries (including the UK) where the top tax rate is much higher than the US, and rich people don’t stop trying to earh (partly because, when you earn that much, lots of your earning invariably comes from passive activity - another problem with the whole Laffer argument). Nobody, when the rate was 95%, was discouraged enough to not want to earn that extra pound. We’re certainly not in the magic zone in the Laffer curve here (in the US) where you can increase revenue by reducing tax rates.

“Repayments affordable” is highly correlated with “debt climibing at or lower than the GDP.” I agree that it’s not a strict rule that fiscal responsibility = don’t grow the debt. I think that’s usually the case, absent some compelling purpose. I sure don’t think the debt we’re mushrooming right now is at all defendable as responsible.

I think it’s fairly obvious that fiscal responsibility requires some degree of spending restraint. Spending as much as you want and just raking in more money to pay for it is at best aresponsible* (if the additional funds can be obtained without damaging the economy) or at worst actively irresponsible (if obtaining the additional income does cause economic damage).

*A coined word for “neutral as to responsiblity” – i.e. “aresponsible” is to “irresponsible” as “amoral” is to “immoral”.