You’ll also get more money.
Here is what happened with the Bush tax cuts. The money the government spent didn’t change, in fact it rose but the money it collected dropped. TO make up the short fall, we borrowed some of the exact same dollars that we would have collected in taxes from some of the exact same people.
For example, one person sold out his position in his business and paid a 15% capital gains tax (rather than the 20-% under Clinton or the 28% under Reagan) and promptly invested the proceeds on a ladder of US treasuries.
Last I read the projected deficit over the next 10 years is going to be something like $13T if the Bush tax cuts are extended. The Bush tax cats are estimated to cost $3.2T over that same ten year period. So even if we rescind all the cuts (on all the brackets, since the Bush tax cuts impacted more than just the top marginal rate), we’ve still got nearly a $10T gap.
Cutting a quarter of the deficit is a pretty serious drop in the bucket though. No other cut of that magnitude is even close to politically plausible.
We’re not going to balance the budget this year. The objective is to get yourself on a trajectory where you can credibly balance the budget over a reasonable period of time. We can’t get to a balanced budget without tax increases AND cuts to SS and medicare. All the rest of the stuff has been cut pretty close to the bone (although there is always some fat somewhere that you can trim and yesterdays muscle may look like fat today) so we either say the federal govt is no longer in a particular line of business (e.g. promoting affordable access to a college education via the Dept of Education) OR we must raise taxes and cut entitlements.
Well, the full $3.2T isn’t politically plausible since that would mean killing the tax cuts for the middle class as well. You could kill the tax cuts on the top brackets and that would be politically feasible, but I’m not sure how much removing the middle class taxes from the equation affects the balance.
The $10T mostly comes from the fact that we’re spending money we don’t have. We’re essentially planning on spending 26% of GDP on the Federal budget. Historically we’ve spent about 20% of GDP on the Federal budget (over the past 50 years) and government receipts have average about 18% of GDP over that same time period. So we’ve had an ‘averaged’ 2% deficit over 50 years (which actually isn’t really bad or difficult to finance), receipts are a bit low but are projected to be back over 18% but with spending up to a peace time high of 26% of GDP I’m not really sure what happens long term to fix the problem.
The truth of the matter is we aren’t just bringing less in than we’ve historically brought in, we’re only a little bit off our historical % of GDP in government receipts. We’re dramatically over the average % of GDP in spending. Some countries spend as much as we do on a percentage basis, but they bring in a lot more money on a percentage basis as well.
We honestly need to make the sort of decisions Canada did to shrink spending and increase receipts, or we need to make the sort of decisions other countries have made and increase receipts–to levels never before seen in American history. In essence we either need to reduce spending while making moderate increases in government receipts, or we need to become a very high tax country. Otherwise in 30 years or so we could be in real trouble. (The trouble we’re in now is only real to the people who are in a constant state of doomsaying–it’s trouble but nothing compared to what it could be.)
There was also a good point made about stabilizing government receipts. The rich are by far the most volatile earners of all the tax brackets. You can’t saddle your receipts on their incomes, because they fluctuate far more (on both a % of total income and in raw amount) than middle and lower class tax payers.
For the record I think the wealthiest need to see a higher amount of their money paid in tax, but that’s mostly just a general feeling about fiscal appropriateness. I don’t think it’s going to come anywhere close to getting us out of the massive hole we’re in. Another good argument for raising the top rates back to where they used to be in the Clinton era is I don’t believe any studies have ever shown a very strong link between lower taxes for the wealthy and higher economic prosperity.
This makes intrinsic sense to me for several reason:
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The wealthy are high spenders no matter what. If you’re a multi-millionaire you buy expensive stuff regardless of whether you’re paying 15% or 50% of your income in tax. Multi-millionaires in Finland and Sweden have luxury toys just like ours do. So it’s actually a strong argument that lower taxes on the wealthy aren’t good at stimulating the economy because they do not impact behavior. Lower taxes on the middle class show direct increases in consumer spending, you don’t see that as much with the wealthy because they already spend a lot as consumers, whether they are taxed a lot or just a little. Essentially their wealth makes their consumer spending relatively inelastic and actually means trying to manipulate their tax burden to increase consumer spending doesn’t make much sense.
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Wealthy businessmen by and large do not make business decisions based on their personal income tax rate. If a business entity (be it a sole proprietorship, company or et cetera) is profitable and in a position to hire new employees, they will generally only do so when there is a clear business need that would lead to the company making more money through new business or would enable the company to operate more efficiently. Businessmen who run a profitable business that say, needs a new guy in the mail room, aren’t going to say “don’t hire any new mail room guys” because their personal income tax went down.
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Higher tax rates disincentive the wealthy drawing huge incomes in forms that are traditionally taxable. This is actually a good thing and an argument for higher tax rates. I think economically the economy as a whole is better off when a super rich person draws a lower salary. Some people point to compensation packages as being carefully designed to make sure top earners never have to pay the top marginal rate. This is absolutely true, and I’d argue that the very process of skirting the top marginal rate actually means that person’s assets are in a form that are more economically productive in the long run than the wealthy having more liquid cash in their hands. I think it also forces more executives to have larger ownership stakes in the companies they manage, and more closely tie their personal wealth to the success or failure of the company. Also good things.
It’s politically plausible because all it requires is for Congress to do nothing.
And even though that is somewhat unlikely in this instance, it is still, sadly, more likely than serious cuts to entitlement spending.
Which is not to say I’m advocating it. As I said above, I think means-testing Social Security, adding reasonable cost-saving measure to VA benefits, increasing the FICA cap, and other tough but realistic entitlement reforms are a better course.
To me it sounds like a terrible idea:
The savings aren’t minor ($5 billion a year), but they aren’t going to fix the deficit. Hell, fixing the student loan system alone saved $10-20 billion a year.
Obama is going to piss off a lot of unions. Public sector jobs are unionized at far higher rates than private sector jobs. And unions helped push Obama over the top in 2008. He may cost himself enough support among unions in 2012 that he loses.
He is caving to the GOP again, making him look like a centrist wimp. He adopts ineffective republican ‘solutions’ and talking points, then brags how bipartisan he is when all he really is is a gullible sucker being played by people who don’t have his interests or the interests of the people who voted for him at heart. He even made the military exempt, which is pretty much something straight out of the GOP playbook.
He is cutting fat out of working families, which makes no sense since income inequality is so severe. Corporate profits are up to 1.6 trillion, wall street self pay is 140 billion, the top 1% have recovered, etc. And he wants to cut the income of people who are just trying to pay the mortgage and send their kids to college instead.
Obama is a horrible politician. I think he is better than a republican, and some of his ideas are ok, but he is a horrible politician and negotiator.
He manages to enrage his enemies while supplicating to them, then disappointing his supporters until they give up. What a shitty politician. He is a good public speaker though. But that doesn’t matter anymore.
That was the criticism in 2008 that was always being made about Obama in the primary. Obama is too nice, too naive, not cut out for the cutthroat politican world. They were right. We needed an LBJ instead.
Live and learn.
Obama was a great politician in terms of motivating followers and winning elections. Unfortunately a lot of grease makes government run, a lot of cogs are involved, and if you don’t know how to play the system you get played.
What I mean to say is, whether you’re a left leaning or right leaning President, you need to know how to play both offense and defense. You need to know when to cut and run, when to stick to your guns, you need to be good at managing your people, good at negotiating with the opposition’s people.
It is something totally devoid of ideals or politics. It’s about being able to translate your ideals and political beliefs into reality.
Compare two men: John F. Kennedy, Lyndon B. Johnson. Which one was the most successful at converting their ideals and political beliefs into policy? Unless you’re really uninformed about American history, the answer is easy: LBJ.
LBJ knew how things ran and he was a master politician. He got a lot done on the domestic side that JFK could only dream to have accomplished during his tragically shortened Presidency.
Obama is good at interacting with the America people–that is incredibly important in getting elected. LBJ wasn’t terribly great at that, which is why he never would have been President if Kennedy hadn’t been assassinated. But if you actually want to make a serious mark as a leader you need to be good at working with politicians too.
It doesn’t mean a thing to say this, but if he runs again I plan to vote for the other guy - whoever it is.
Added on edit: For over 30 years, all I’ve heard from politicians is how tough things are and we have to do more with less and work smarter (while high level types make that impossible). I’ve heard them promise us pay parity and then gut the pay raises due to some new “problem” every time.
So excuse me if “In these challenging times. we want the best and brightest to join and make a difference, but these are also times where all of us are called on to make sacrifices,” Obama said in a statement at the White House. “And I’m asking civil servants to do what they have always done. Play their part.” just sounds like the same old same old.
Thing is, the government printed that money. The government guarantees its value. The government protects the institution of private property, deterring some asshole with a bigger gun than yours from taking it from you. And the government designed this Internet thing that you’re using to complain about taxes on.
Without government services, that Andrew Jackson has no meaning at all, except as a mass-produced portrait of a 19th-century douchebag. So when the government asks for you to give it back, that’s just rendering unto Caesar.
I am always delighted to pay my fair share for protection of property rights and my freedom.
Is that what the bulk of my taxes go towards? If you don’t know the answer it’s easily enough cited, if need be.
I’ve worked for the feds for 27 years, and I’ve got to say I’m pissed.
This is merely symbolic. The five billion in savings? We spend that in less than two months in Afghanistan.
I’ve been reading all kinds of comments on various boards, government sites and newspapers. Over and over, I keep seeing comments like “They should feel the same pain as we are in the private sector”. Oh really? So, when the economy was booming along, and we should have gotten some too? Nope, back then, you all were saying, “Tough shit, you work for feds, you want more, work private sector”. You can’t have it both ways.
We traded money for security, in most cases. Yes, there are highly paid federal workers, but most are middle to lower class average working people.
Oh, and guess what? We have to contribute to our healthcare premiums too, which creep up on average 15 to 20 percent a year.
So, if in fact the freeze does happen, many of us WILL lose money. Our little raises basically covered the increase in our health premiums each year.
Oh, and we’ve been “sacrificing” and doing our part for my entire career. The 80s saw freezes and reductions in force.
So yes, as a federal employee, I am pissed. Will it completely break me? Probably not. But the little GS-5 clerk, working to help support her family, is really going to feel it.
This is purely politics and it’s stupid.
Interesting. But wrong, as usual.
This chart shows that federal receipts measured in constant 2005 dollars rose from $1.991 trillion in 2001 (at the start of the Bush tax cuts) to $2.524 trillion in 2008.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200
That’s an increase in real dollars of 27 percent. There weren’t population figures available for those years, because there wasn’t a census, but there is no way the US population grew by 27 percent between 2001 and 2008.
That means that the federal government receipts increased in constant dollars**on a per capita basis between 2001 and 2008.
So no…nobody “gave” anybody anything. The federal government actually took more from it’s citizenry. Much more.
Unfortunately, they spent much, much much more. And continue to do so. We have a spending problem. We do not have a revenue problem.
Sorry to confuse the issue with some facts. Now, we return to our regularly-scheduled class warfare and victimization narrative.
Um… that’s not what that says… in 2005FY dollars:
2001 - 2,215.3
2008 = 2,288.5
You seem to have been reading the “in current dollars” column by mistake. And, as pointed out, those numbers include all federal receipts, not just income tax.
If you go the Receipts By Source chart on the census website you will find that personal income tax receipts dropped by 20% from 2000 to 2004, and only rose back above 2000 levels (in unadjusted dollars) in 2006. It was increases in social insurance payments and corporate taxes that kept federal receipts high. (Cite: http://www.census.gov/compendia/statab/cats/federal_govt_finances_employment.html)
Finally, one could point out that as a percentage of GDP federal receipts went from 19.5% in 2001 to 17.5% in 2008. A 2% rise in receipts as a percentage of GDP would look pretty good for the budget right about now.
Snark like this requires you read your tables correctly…
I’m not sure how I feel about Obama’s announcement.
On one hand, I think it’s really bad for the Federal Employees.
On the other hand, I can look around at my coworkers, typically multiple-degreed scientists, engineers, or both, who not only have had no raise or bonus for 2 years, but some had a 5-10% pay cut. And our company has already announced “no raises” for next year, despite making record profits. And almost all of my clients, representing some highly skilled workers in scores of companies, have either had no raise or a pay cut.
Never mind all the ones laid off…perhaps 1/5 of all my key clients lost their job in the last two years.
Therefore, I have trouble finding any more or less sympathy than for anyone else hit by the Great Recession.
It’s bad all around, but I really get tired of federal employees being kicked upside the head whether things are good or bad. This constant us/them stuff get’s really old.
You’d be surprised at how many feds have multiple degrees who are not working in their chosen fields either and are not making the money that’s supposed to come with those degrees.
This is GD, not trying to start a pity party for feds; wouldn’t get much anyway;).
Taters, you make a lot of sense.
Personally, I’m fortunate to earn enough and live modestly enough that I’m plenty comfortable. But I agree with your suspicion that this is merely symbolic. I would be extremely happy to forego any COLA/raise/furlough if it were part of an overall reduction in spending. But I’d like to see them meaningfully reform Social Security, farm subsidies, military spending, or any number of other categories of entitlements.
You are right on about the attitude of private sector folk 15-20 years ago. As the years went by, it was weird to see so many of my formerly high-flying friends become joless, as I plodded along… :rolleyes:
Which is exactly why it is important to do.
If Obama caves on this, he is signaling in the clearest possible manner that he will not cut spending, and therefore will not reduce the deficit. If he can’t make small cuts, he sure as hell can’t make big ones.
This kind of argument is going to come out no matter what is cut, and no matter how much or how little we cut it. We have a freeze on COLAs for Social Security, and the morons in Congress (the Democratic morons, at least) want to override that and try to buy votes by spending more. Obama claims hundreds of billions in waste, fraud, and abuse in Medicare, and then doesn’t cut a dime from it.
If Obama caves to the federal unions on this, then he can shut the hell up and get out of the way and let the grown-ups take the heat and address the problems he created with his fucking trillion dollar deficits. If he wants to be President, then he has to do it when it is hard to do, when it doesn’t help to smile nice for the camera and talk about changey-hopey new era of openness and blah blah.
As pointed out above, raising taxes will deal with about a quarter of the deficit. *That means three quarters of it will have to come from spending cuts. *
So fucking get to it, already.
Regards,
Shodan