Where do "cut the spending" GOPs envision the cutting?

Great Debates
81

I’m in favor of cutting the corporate tax rate as well - but I would make sure it’s a revenue-neutral cut by removing loopholes, tax credits, subsidies, and other means by which many corporations lower their effective tax into single digits.

The problem with the structure of corporate taxes in the U.S. is that the tax code has been hijacked by special interests. By jacking up the rate and then giving big companies tax breaks and incentives, they act as barriers to competition. So long as a tiny factory automation company has to pay 30-40% of its profit in tax, but GE doesn’t pay much of anything, GE will have a big competitive advantage over smaller, more nimble companies that drive innovation.

Put everyone on an even playing field by making the tax more broadly applied, then lower the rate to make the whole reform revenue neutral. America’s corporate sector would become much more competitive.

Just look around the world to see what other countries are doing with their corporate rates: They’re all going down. Canada is on a trajectory to a 12.5% corporate tax rate by 2015. We’re at (I think) 16% now, or maybe it’s 14.5%. Other countries are doing the same.

In addition, one of the reasons the U.S. has an over-developed consumer economy and an under-developed export economy is because taxes focus on production instead of consumption. Other countries have lower corporate rates, but make up the revenue with value added taxes.

This does wonders for their export economy: In the U.S., companies pay the corporate tax on the products they export. Products that are imported are produced with lower corporate taxes. Since there’s no federal sales tax, this biases purchases towards imports. But if Canada exports a product, the corporate tax component is smaller. And if an American product is imported into Canada, the purchaser pays a sales tax on it just as they would if they bought a Canadian product. This makes Canada more competitive with the U.S. on world markets.

The U.S. government gets around this by creating all sorts of export tax breaks, but that lowers overall revenue. So the rates are jacked up to compensate. And then the companies that do not export their products or which do not have overseas offices or ways to park profit offshore wind up paying the full tax, so the big export companies have a competitive advantage against their own domestic counterparts. It’s messed up, and needs reform.

82

:confused: :confused:
Let me ask you a simple yes/no question:

Are you aware that the Federal Reserve has the right to order Federal Reserve Bank Notes (“greenbacks”) printed, and can use these, in unlimited quantities, to purchase U.S. T-bonds? (The greenbacks are FRB obligations, those obligations are collateralized by the T-bonds.)

Now, if you don’t understand how the creation of money works, you can ask in GQ or consult older threads on the topic.

If you want to complain that paper money is just paper, and likely to be worthless with those damned liberals in charge, that’s a point you can pursue if you wish.

But the claim seems to be that FRB banknotes are “real money” in a sense that checking accounts or T-bills or T-bonds are not, and this just shows severe confusion about elementary finance.

83

Can you explain how simply printing more greenbacks wouldn’t weaken the dollar? There has to be a reason the treasury hasn’t simply printed out 14 trillion new dollar bills, after all.

84

I haven’t read over the laundry list of small things that add up to 200 billion dollars, but other than that, I could endorse Martin Hyde’s plan wholeheartedly.

And we’re going to need to get back a sane right-wing party eventually; if his staying a Republican can help that process, so be it.

85

It might be fairly said that we have a sane right-wing party now, and that what we need to get back is a sane left-wing one.

86

:confused: :confused:
Can you explain why no one in this thread can understand simple statements, or answer yes/no questions?

The processes of money creation and inflation have been discussed in many other threads.

The question on the table is why someone thinks “a lock-box stuffed with greenbacks” has real value that “a lock-box stuffed with T-bonds” does not.

Your reply, elfkin477, may suggest you have a vague idea of the correct answer. We’re making progress.

87

Septimus, the fact that it is possible to replace the bonds with greenbacks does not mean the bonds are the equivalent of greenbacks. Nor does it mean that the government intends to simply replace the bonds with greenbacks. Thus, there is a value to having greenbacks already printed in the lockbox, as opposed to having bonds which only have the probability of being replaced by greenbacks in the lockbox. I’ve already made this point, and you have yet to answer it.

88

The existence of the bonds and the trust fund are irrelevant to the over all flow of revenue in and out. In order to use the bonds to make SS payments, incoming money must be used to pay the bonds off.

89

Unless you can point to an instance when the government failed to pay on a bond, I call bullshit, on both counts.

90

So the government borrowed the money and now should be able to ignore it?

14th Amendment, Section 4 (bolding mine):

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

91

This is a total no-brainer. Assuming I have sufficient cash flow to meet short term obligations, of course I’d rather have government bonds rather than cash. Having a big pile of cash under my bed that won’t be spent for years means that I’m losing money from inflation, having government bonds under my bed means I’m making money from interest.

Anyone who thinks it is a good financial strategy to have piles of cash locked away to pay bills that may not be due for years to decades ought to have his head examined.

92

Republican here: fiscally conservative but socially progressive.
I thinks every politican needs to take a primer in U.S. fiscal policy. The debacle that was the bank bailout would never had occured if someone in Congress or the Cabinet had studied the RFC.

93

Restorers for Christ?

94

Republican here: fiscally conservative but socially progressive.
I thinks every politican needs to take a primer in U.S. fiscal policy. The debacle that was the bank bailout would never had occured if someone in Congress or the Cabinet had studied the RFC.

Reading this thread, it is a miracle we survived for close to 110 years as a country before the Progressive Age 145 years before the New Deal. The federal government has entwined itself so much in the economy that to pull out now in any significant way would be detrimental. The problem of course are neo-Keynesians like Krugman and 90% of this board and Reagan.* Neo-Keyesians forget Keynes original work which was that governments have a role to supply a boost to the economy in times of crisis. This is now translated by neo-Keynesians as the government should be the dominant force in the economy at all times and now we have an overly-bloated budget whose reduction would be comparable to massive amputation. Reagan with his supply-side economics as a way to combat stagflation made it OK for conservatives to be neo-Keynesians too. As long as it was defense, then spending is acceptable but heaven forbid any social programs get government $. Also remember that despite his pledge to reduce government, Reagan actually added a Cabinet post (Veteran Affairs). It was with Reagan that the trickle-down theory of Feds -> big corporations -> workers -> economy really became a cognizant economic theory.
So where would I make the cuts? First of all, some fundamental changes.
Hold the Democrats to their promise that tie spending cuts with new taxes. Remember the 3-1 cuts/tax deal that cost Bush I his second term? The Dems never followed through and made the promised cuts.
Create a rational tax system that increases corporate tax and long-terms capital gains. Aim for these taxes together to be half of personal income tax making a $120B increase in revenue.
Streamline government. Of the 15 Cabinet positions + EPA, we can get it down to 10 or less.
Now for the cuts:
Defense. I am sure that we could cut 20% easily to make a lean mean fighting machine. ($140B)
Discretionary. 50% gone. We have to get out of the abuse that Keynesianism has become. ($330B)
Medicare/Medicade. 20%. This is bigger than our defense budget. These cuts need to correspond with insurance/tort reform to lower medical costs. ($160B)
So $120B in tax increase ansd $660B in spending cuts so half of the record deficit taken care of.

95

Krugman points out in a recent article that he’s been right all along.

96

The devil is in the details. What precisely would you cut from discretionary spending?

It’s hard to take the notion that torts are in any way a significant factor in health care costs seriously. How about for starters, let Medicare bargain for drug prices?

97

The financial crash was caused by wealthy bankers. They were made whole. The poor and middle class, who had nothing to do with the crash, are supposed to pay for it. Makes no sense.
Bankers should have been jailed and fired for incompetence. That is what the government felt free to do in the auto industry. But auto execs did not act illegally. They did not crash the economy.
There is some mention ,now, of going after the Rating companies. That should have been done after the congressional hearings that exposed their illegal and immoral actions… Bankers also should have been taken to court .
But instead we protect them and ream the rest of society that is innocent in the international crisis.
Now there is evidence that the SEC has allowed an employee to shred documents that would allow the government to prosecute the bankers, especially Goldman.

98

Uh… what does any of that have to do with budget cuts?

99

So, you think Treasury will not default on the T-bonds owned by SocSec?

So, you think Treasury might default on the T-bonds owned by SocSec?

I don’t want to “hit and run” but neither do I want to engage in a debate where we just talk past each other. Do you keep your savings in the form of greenbacks, checking accounts or what? What about funds you know you won’t need for several years? In what form do you think SocSec should keep its savings? Assuming neither greenbacks nor T-bonds are your first preference, how would you compare those two as choices?

I might start another thread (in BBQ Pit!) giving a grade-school level overview of how U.S. paper money works, but it seems almost redundant since this was discussed in other recent threads. Did those of you who are confused about “greenbacks” read and understand those threads?

100

Which points to the problem that neo-Keynesian has caused. When government spending forms the bulk of day-to-day economy stimulus, then how can it possibly create an adequate stimulus during economic hardship? If anything, Krugman’s observation should call for a return to classical Keynsian theory where the government is there when the counrty gets in a rut (early 1930’s; late 1970’s)