Well, there was the Gramm-Rudman-Hollings balanced budget Act.
Apparently it didn’t work very well.
It’s both.
Conservatives are unwilling to acknowledge the fact that our overall tax rates now are lower than they were when were last in surplus, and thus a huge chunk of our current deficit can fairly be attributed to that.
Liberals are unwilling to acknowledge the fact that even were the Bush tax cuts repealed tomorrow – including the ones for the poor and middle class – and all troops currently deployed in the Middle East brought home the day after, we’d still be in deficit.
In theory we could fix the problem entirely with spending cuts, but it would involve hitting a lot of things that are politically popular, including social programs and is thus easily demogogued. There is also a real possibility that cuts will weaken the economy.
In theory we could fix the problem entirely with increased revenue*, but it would involve raising taxes on pretty much everyone, including the middle class, and is thus easily demogogued. There is also a real possibility that tax increases will weaken the economy.
- On this point the “in theory” needs to be emphasized. The “Total” column on this chart lists the % of GDP that the government has taken in over the last 75 years. Note that even when tax rates were much higher than they are now, (e.g. the 1950s and 1970s), the actual revenue collected was not greater. Why that is is a matter of dispute: conservatives would argue that it’s because the higher rates make investors less likely to grow the economy; liberals would say otherwise.
Balancing the budget without making major spending cuts would mean getting federal revenue as a % of GDP up to the 22-25% range, something that has never before happened. Not to say it can’t happen (most European countries do it) but it’s never been done here.
That’s a very reasonable take, furt.
Sounds like a good idea. I know of a lake house co-owned by three families.
I also know of a guy who went bankrupt and kept his wife out of it. (And now he owns 1/3 of a lake house!)
Well, historically many governments have set out to eliminate citizens they felt were not valuable, and so have some families. Confining ourselves to the morally acceptable alternatives, the comparison would be reducing or eliminating non-essential investments in the children: piano lessons, private tutoring, educational toys, etc. All real investments that will pay off in the long run, but all of which may have to be dropped when times are tight.
I agree that this post is a pretty solid take on the issue, but would add the caveat that there are far more liberals that acknowledge this reality than there are conservatives that acknowledge the need to raise revenues. Obama himself is proposing a 3-to-1 cuts-to-revenue ratio, and has notably kept Social Security cuts on the table.
Except inaccurate. We know well that you can not cut your way to balancing the budget. It takes more revenue. We have been slashing programs for a long time. Even cutting the defense budget will not fix the financial problems. But, it would not hurt. It would be a big boost to balancing the budget, if we kept it at a low rate for the future.
But we have to share the sacrifices. The rich have to give in. The corporations have to give in. Loopholes have to close. Offshore banking to escape taxes has to end.
True. You’ll note, however, that
- Those cuts are based on baseline budgeting – i.e. not actually spending less, just making the increase less than you had originally planned to make it.
- They’re nearly all in the “out years” – i.e. in the later years of a ten-year projection.
It’s a rare day in Washington when anyone, Democrat or Republican, has the sack to advocate actually cutting anything anytime soon.
“Your friendly neighbor” to the south “helps you out” with that. 
American exceptionalism!? We can’t raise enough revenue to balance the budget because math is different for us!? Is it because we’re on the wrong side of the planet!?
The GOP/T.E.A.Party/AmericansForTaxReform/HeritageFoundation complex claims that we can’t raise taxes by 5% of GDP so we have to cut them by 5% of GDP instead. This is mendacity.
Why do we need to balance the budget, especially on an annual basis? Can we still borrow on capital projects? Can we amortize payments. I just don’t understand what is so magical about a balanced budget.
From my perspective, the main issue is that an increasing percentage of our budget is dedicated to paying interest on the debt.
I am not one who believes that the sky is falling, and that we are on the verge of fiscal implosion. In terms of our ability to pay our debt, due to the low interest rates that are around these days, the service on the debt is as affordable as it has ever been. But that’s still $250 billion (roughly) that we are paying each year for the privilege of not balancing our books.
We can do better than that. We shouldn’t expect to fix the deficit overnight – we still have a recovering economy to worry about – but I think it is a wiser use of money to eliminate the deficit to pay down the debt and re-invest the money we pay to investors for interest on the debt into programs that better serve the country.
But you don’t need a balanced budget to lower the debt, you just need to retire more debt than you take on.
We are always retiring old debt, even with large deficits. But some of that debt cost is covered by issuing more debt. I’m talking about making a substantial dent in the total debt held by the public. The intragovernmental holdings don’t bother me a bit.
If they say it’s impossible, then yes, it’s probably untrue. If they merely say it’s unlikely or improbable, well then their guess about the future is as good as yours, and they do have history on their side.
In 1953, the lowest bracket paid 22% in tax and the highest paid 91%. It decreased steadily until by 1988, they stood at 15% and 28%. Tax revenue during the whole period fluctuated narrowly, between 17-18% of GDP.
From 1988-2008 the lowest rate dropped to 10%, while the highest went up to 39%, then down to 35%. And all though that while, tax revenue fluctuated little, though in a slightly higher range between 18-20% of GDP.
That’s not ideology, that’s data.
For 60 years, across various booms and busts, with personal and corporate taxes rising and falling and all sorts of policy changes back and forth to maximize revenue, the government has never been consistently able to get above 19% of GDP. You’re welcome to believe that raising rates to (say) 1970s levels will lead to higher revenues then they did in the 1970s; and it may work out that way. But it’s far from some foregone conclusion.
If your idea is that whatever works in Europe will naturally work here, you should be in favor of raising personal income tax, while lowering corporate tax rates pretty sharply. Cite. Good luck getting many progressives on board for that campaign.
Of course, given that most of Europe usually has historically had much higher unemployment levels than the US, as well as their own debt problems, I’m not sure “be like Europe” is a solution.
Sure, and a company can lose money one year and not go bankrupt. Maybe two years. Maybe ten years.
If a company had lost money 45 of the last 50 years, and was losing more and more money every year, would *you *invest in it?
Oops, too bad, you already have.
I am quite aware, that is why you can reduce the debt by retiring MORE debt than you incur. But there is no fundamental reason why a country should be debt free and the idea that is more fiscally responsible does not make sense either. Now I am not saying anyone here is saying that, but there are of course those who truly believe that is the case. I understand folks here are talking about the size of the debt, but as a percentage of GDP it isn’t alarming Now, if we can get the economy moving again that will do a a lot to help reduce the debt, IMO. Now some argue that reducing the debt is what’s needed to move along the economy, I am not particularly in that camp. But many seem to argue that we need to reduce the deficit because debt is bad. That just is not true.
So, you cite says that the US debt is just under 59% of US GDP. Out of curiousity, at what percent of GDP would you begin to grow concerned? 70%? 85%? 95%? 110%?
As you will note, that is not what I said at all.
Well, the US has run 90% or greater before, so has the UK, so has Canada. Rogoff and Reinhardt argue the 90% is problematic, although admitting it isn’t a bright line. Others point out that there is evidence that that isn’t the case and 90% can be sustained as well. You know what my debt-to income ratio is? probably something like 350%, given my house loan. The house is an asset, well, the government has considerable assets, not to mention other advantages such as the power to tax.
So I do not know the answer to your original question, but there does not, in my estimation seem to be a critical need to reduce the deficit. the critical need now is to lower unemployment and create economic growth, which is a related but separate discussion.
Yes, I know and apologize for not being clear about that.
For what it’s worth, the new Mason Dixon poll cited by the righty Daily Caller shows most of the public wants a Balanced Budget Amendment.
That poll has a really bad way of asking the question, IMO:
I wonder what you’d get if you took out the leading part, and asked the question straight up. Here’s an interesting counter-point:
So, it’s the usual voter sentiment - balance the budget, don’t raise taxes, and don’t cut Social Security or Medicare.
Agreed. Americans are like everyone; selfish, want something for nothing.
I’d amend your comment of
To