I picture you waving your hand like Obi-Wan here.
How would cutting Social Security now influence the actual deficit in any way? We do need reform, in terms of higher caps and perhaps a change in payments per retirement year, but as of now changing it would just change who owns the debt.
Medicare is a different story. Cutting the subsidies to private suppliers is a good start. But otherwise you have three choices
- Throw old people depending on it off the boat.
- Raise Medicare taxes a lot
- Make healthcare more efficient
- seems like the best choice of these. How do we do it? Maybe by copying best practices for health care spending from other countries.
I don’t know why this has been so unacceptable.
If by Americans you mean the United States of America (America implies both North and South continents BTW) then here’s my .02:
First, the British buggers tried taxing, and look what happened to them, bad mistake, shouldn’t have pushed for it. For a while there wasn’t much of a problem, only businesses would pay tax, and not much at that, then WWII happened, and suddenly a ‘temporary’ tax was place on individuals, it was just to help pay for the expensive war. However, a lot of time passed, the bureaucrats fatened their wallets a bit after everything was paid off, then came time to lift the ‘temporary tax’. HA, like that was gonna’ happen, everybody had pretty much forgotten the temporary part of it, and the government wasn’t about to remind them. Today, you get taxed coming in and going out, and businesses are taking bigger hits every time they turn around. Sure, it’s fine for big companies to get the shit taxed out of them, but what about the ‘mom and pop’ stores. My dad used to talk about how he and his patner feel like the government is a third invisible partner that no one can see, does nothing, and takes a huge chunk of the profits, like an extortionist. Now it’s closer to half the profits, and my family as a whole is struggling every day just to make ends meet.
I do indeed mean the people of the USA. I must say I am quite shocked to realize that there are, indeed, other countries in the Americas. I’m glad we got that cleared up so quickly; wouldn’t want any confusion.
(You do know I’m posting from Canada, right?)
I’m using the data from here: US Government Spending. The numbers are not the same as yours. It has 2009 spending at 25% of GDP, a slight decline in 2010 (2009 larger because of TARP, I imagine), and 2011 at slightly more than 25%. This corresponds with figures I’ve seen for 2011 of 25.3%.
Calculating average government spending will obviously require that you pick some arbitrary start date. But if you just eyeball the chart you can pick your own period and see what the average has been. If we start from 1950, the average looks to me to be just under 20%. Paul Ryan’s budget quotes a modern-day average of 18%. I’ve seen Democrats use numbers closer to 20%. I picked a number right in the middle, which I think was fair.
As for revenue, the historical average is between 18.5% and 19.5%, depending on where you start your years. It’s currently right around 15%. (Actually, the number I used above was 16% because I had recently read that, but we’ll use these numbers as a fair comparison).
Therefore… There is about a 10% of GDP gap between revenue and spending. According to these numbers, revenue is down 3.5% to 4.5% of GDP, while spending is up by 5.3% to 7.3% of GDP. Those numbers are a little closer than ones I posted, which came from slightly different sources, but the conclusion is still the same - spending has gone up by more than revenue has come down.
My other point is still completely valid - you can expect revenue to come back on its own if the economy recovers, but only a small portion of spending (unemployment benefits, etc) will be recovered.
The larger point is that looking at the situation today doesn’t give you the full picture. For one thing, spending is going up because of the new health care plan, by over a trillion dollars in seven years. For another, the entitlement system starts to really take off and grow out of control after 2020. All of the pressure on the budget comes from the spending side - no one is talking about cutting revenue further, or if they are they’re idiots.
Yes, so spending continues to increase, as I said. It’s not a matter of avoiding that extra debt servicing cost - no one thinks the deficit in the U.S. is going to be brought under control any time soon under any plan, including Paul Ryan’s. So spending will continue to get worse.
This matters because it is very hard to raise revenue once you get past 20-25% of GDP. You certainly can’t do it on the backs of the rich. Remember we’re talking about just federal spending here - the states take their own tax bites, and have their own fiscal calamities to deal with. An extra 5% of GDP going to the federal government means less taxable revenue for the states.
if you take a close look at that revenue chart, you’ll see that it’s remarkably stable.
This is an interesting chart: Total revenue, individual and corporate taxes, 1950-2010. The blue line is total revenue, the green line is corporate taxes, and the red line is individual income taxes.
First, note that corporate taxes came down steadily from 1950 until 1970, at which point they fluctuated with the business cycle - down in recessions, up in booms. I don’t see any other ‘signal’ in there that reflects changes to corporate tax breaks, loopholes, etc. In fact, it looks like corporate taxes in 2007-2008 were at the highest level they’ve been since 1979.
Now look at individual income taxes, which are even more interesting, because the income rate has fluctuated dramatically over those years - from a high top marginal rate of 90% to a low top marginal rate of 28%. And yet, the amount of taxes collected hardly moves with those changes - instead, it seems to fluctuate mostly with the business cycle. The four big ‘dips’ in the income tax come in 1972, 1983, 2001, and 2009. All four of those dates mark the start of the four largest recessions in that era.
In contrast, here’s a chart showing a history of the top marginal tax rates over the same era: Top Marginal Rates, 1910-2010. Does the chart from 1950-2010 look much like the revenue chart? Nope. Note that the lowest top rate since 1950 occurred between 1985 and 1990 - but income tax revenues went UP slightly in that period. Top marginal rates went up steadily from that point to about 40%, but tax revenues actually declined over the first half of that period, then they took off. Why did they take off? Because the tech bubble happened, and revenues went through the roof.
The point I’m making here is that you can’t expect to get massive increases in revenues by jiggering around with the tax rates of the major taxes that are already being collected. Certainly not the individual income tax, anyway. The corporate tax averaged 2-3% of GDP higher in the 1950’s, so maybe there’s a bit of room there. But if you think you’re going to solve the deficit by going back to ‘Clinton-era tax rates’, there’s no evidence that that’s the case. Clinton’s shrinking defict was not due to higher tax rates, but due to a rapidly growing economy and a rapidly shrinking government as a percentage of GDP. Government didn’t grow at all in the Clinton era, while the economy boomed. THAT is what got the deficit under control.
This is why I said that if you think you can come anywhere near to a balanced budget by raising taxes on the rich, you’re crazy. If the tax revenue didn’t change when the rate went from a high of 90% to a low of 20%, tweaking the top rate by a few percentage points won’t do bupkis in the long run.
No, if you want to do it with revenues, you’re going to need a NEW tax. Looking at other countries around the world that have managed to tax their citizens more, every single one of them has some form of national sales tax and generally higher excise taxes. That’s where you’re going to have to go, but that means taxing everyone - the poor, the middle class, and the rich. It means giving up your vaunted progressivity in favor of bulk. If you want to raise more money, you have to go at large swaths of the population and trim a bit off them.
I’m not being misleading here. I’m providing all the data so you can look at it yourself.
Speaking of being deceiving - I never said anything about not taxing the rich at all. I just said that they aren’t going to solve your problem. I find it maddening when people point out that serious budget cuts are needed, and Democrats respond with, “How about we just make the rich pay their fair share?” Then when you point out that the rich don’t have enough money for that to work, the response is, “Hey, but at least it’s something, right? It’s better than not taxing them at all, like you’re suggesting.”
In other words, it’s a smokescreen. Tax the rich or not, it’s not going to change the budget deficit by more than a rounding error. Even the Obama administration, using as favorable a set of numbers they can find, admits that repealing the Bush tax cuts on the rich only will only result in revenue gains of 70-90 billion per year. That’s somewhere between 5 and 8% of the deficit. It doesn’t even begin to cover the gap. In fact, it’s a number smaller than the difference in revenue that will ensue if annual GDP growth is off by maybe a couple of tenths of a percent from the forecasted GDP numbers. It’s little more than noise.
As a political matter, I think you probably will have to raise taxes on the rich if you want to seriously raise revenue. Not because they’ve got the money you need, but because you’ll have to raise taxes on the poor and middle class as well, and the only way to make that palatable is to make everyone share the pain. So I’m not against hiking taxes on the rich - I just want to be clear that it doesn’t change the fact that the U.S. needs to make deep, deep cuts in its spending. Hell, you’re borrowing 40% of every dollar you spend right now. That’s insane.
No, this was your cue to end an otherwise on-point message with a gratuitous and inappropriate personal attack.
No, I did not realize that you’re Canadian, my apologies, I should have checked. However, this raises an even greater concern, If you’re referring to the USA as America, and on an American continent, are you not offended that citizens of the USA call themselves Americans and expect that one would automatically assume the US in the Americas? I live in the country just South of yours (USA :D), and I’m offended that my own countrymen would be so bold and cocky. Now I see that this infection has spread to other countries on the same continent…I do apologize that this has happened, but alas, there is nothing I can do to fix the issue. We even refer to it as the US, but there are other United States on the planet besides ours. I feel that the way to identify it properly is to use all the appropriate identifiers: United States of America…
Now, to keep this thread from being hijacked, I will now refrain from discussing this further. If you would like to (or anyone else), then another thread can be opened and I would gladly give my opinions on said thread. 
I skim posts before I bother studying them, and when I saw this I realized your spiel was just more of the usual Stone.
I want to be respectful but before I bother with you I’d like you to clarify the magnitude of this “rounding error.”
We don’t need an exact number. Just help us to the ballpark and estimate this “rounding error” over the next decade to the nearest multiple of a trillion dollars.
Why don’t you can the personal commentary? Is it impossible for you to ask questions politely?
Too late.
Sure thing. Tell you what: let me cite the Center for American Progress, which I hope you will agree is not exactly biased towards my point of view. According to them:
Okay, so let’s set the parameters. We’re talking about letting the Bush tax cuts expire on everyone making $250,000 or more - the top 2% of Americans. The administration and ‘virtually everyone in Congress’ agree that the people earning less than $250,000 not have their taxes raised.
According to that article, this will save about $690 billion over ten years. Add in interest, and you get to about $830 billion.
Over that same period, the CBO predicts that the debt will go up by about 8.5 trillion dollars. But that estimate, less than a year old, is already wrong. For example, it predicted a deficit of 1.48 trillion this year, and it’s now tracking closer to 1.7 trillion. That’s a difference of 220 billion dollars in an estimate only a few months old, and that’s more than 1/4 of the entire revenue from raising taxes on the rich. But it gets worse, because the CBO predicted GDP growth of 3.1% this year, and so far the first two quarters came in at annualized rates of 0.4% and 1.3%, meaning the deficit numbers are going higher. The estimate for next year’s deficit is 1.1 trillion, and that already looks wrong. The CBO was predicting growth of 2.8% in 2012, but now it’s looking more like another recession. If that happens, the error in the CBO’s estimates for just this year and next will likely be about as big as all the revenue raised from expiring the Bush tax cuts on the rich.
But even given the CBO’s numbers, the bush tax cut is about 10% of the projected increase in the debt, leaving you to find 90% somewhere else.
And then after 2021 it starts to get really ugly, because the baby boom leaves the workforce en masse and turns from being revenue generators to revenue consumers. The result of that is pretty bad. Look at this chart: Debt_to_GDP_Forecast_Chart I would like to point out that the chart was written before the recession, and before Obama added a new trillion dollar health entitlement. The curve has been shifted forward by over a decade.
With those kinds of numbers, the added revenue from new taxes on the rich doesn’t really change the picture at all.
Conclusion: The taxes on the rich Obama wants will lower the growth in the debt over 10 years by less than 10% in the best-case scenario, much less in the worst-case scenario, and after that when the unfunded liabilities from Medicare and SS appear, the revenue from the Bush tax cut drops into trivial territory compared to the magnitude of the liability outstanding.
So if you want to avoid increasing the debt over the next ten years, you can cut spending by about a trillion per year, or you can implement Obama’s plan for raising taxes on the rich - and then cut spending by 931 billion per year. Unless growth estimates are off by a few tenths of a percentage point, in which case you’ll be cutting that trillion anyway.
CBC reports Obama is planning tax cuts. Really, Obama? Now, admittedly we’ll have to wait a few weeks for the details, but I’m more than a little surprised.
Good grief, not this again.
In the English language, the word “American” means someone who lives in the country called “The United States of America.” It may not be logical, but that’s the way it is. Language is not logic. If someone told you he was an American, would you really think he might be a Canadian or a Brazilian?
As for the OP, it’s not just Americans. The problems in Greece, Italy, and Spain largely stem from their people’s extreme reluctance to pay taxes, so much that tax evasion is commonplace.
Sam, I respectfully urge you to be more considerate when you post numbers in these threads.
For example, suppose there is a straightforward question to which the straightforward answer is “about a trillion dollars.” Which of the following answers do you find best?
I’ve listed the three possibilities in decreasing order of my preference. (The long discussion would be fine if it were responsive, but not just to repeat an obvious and repetitious argument.) If “rounding error” somehow has come to mean “about a trillion dollars” in modern American parlance, then I apologize. It’s a new idiom for me.
Let me also offer my way of presenting numbers of which I’m not sure. Suppose I think a number is 7%, that a smaller number would improve the case I’m making, but I’m too lazy to Google for a correct number. I might write “less than 7.5%” or some such. What I won’t do is write “5%”, and hope no one checks the number. And I certainly won’t accuse them of “nitpicking” if they do.
I sincerely hope I’m being respectful. I’ll plead guilty to being easily annoyed. In fact (and maybe my low-wealth upbringing is showing) I’ll admit I get annoyed just when someone refers to “about a trillion dollars” as “a rounding error.” The Trillion-Dollar Mistake in Iraq? Hey – that’s just a rounding error! If one of the “fiscal conservatives” complains about a few billion dollars of “waste”? Hey – that’s not even a rounding error!
But let’s set aside the quibble of whether “almost a trillion dollars” is “just a rounding error.” Your figure derives from a tax hike of 35% to 38.6%. One might instead revert to the 50% rate that was applied during most of the Reagan years. That would translate to about 3 trillion dollars (or three rounding errors!). Do I hear you say “That’s not what Obama proposes”? I didn’t know Obama’s proposal was the topic, but given the squawks about onerous class warfare with even a proposed modest hike, obviously no higher hike would be seriously presented.
Thanks for listening. And would it be disrespectful if, when a “fiscal conservative” in future wants to strip regulatory agencies to save money, we answer “The savings wouldn’t even be a rounding error – talk to Sam.” 
I am being considerate. I’m considering the error inherent in these numbers. When I said that the Bush tax increase is ‘a rounding error’, I meant it. Or rather, it’s shorthand for saying it’s an amount small enough that it’s within the error bars of the estimate for the deficit over 10 years.
I’m sure you studied significant digits. You don’t want to give numbers that imply a precision that doesn’t exist. That’s why, when talking about government projections, I tend to use terms like “about a trillion dollars”, “somewhere between 5 and 7%”, etc.
“About a trillion dollars” and “a rounding error” can both be correct, if they are being compared to numbers that are gargantuan in size and estimates that have a tendency to be all over the map. The total unfunded liability the U.S. faces is between 55 and 75 trillion dollars just for entitlements. It’s running deficits on the order of 1 to 1.5 trillion dollars per year on top of that. Compared to those kinds of numbers, $69 billion per year (itself an estimate that is at best an approximation) really is a value that exists somewhere down near the noise floor in the data.
For an example of the kinds of errors we’re talking about and their magnitude, let’s look at the estimates for what the deficit would be in 2011-2014 for the three budgets FY10, FY11, FY12:
FY10:
2011 estimate: 1.081 trillion
2012 estimate: 729 billion
2013 estimate: 704 billion
2014 estimate: 734 billion
FY11:
2011 estimate: 1.267 trillion
2012 estimate: 828 billion
2013 estimate: 727 billion
2014 estimate: 706 billion
FY12:
2011 estimate: 1.645 trillion
2012 estimate: 1.101 trillion
2013 estimate: 767 billion
2014 estimate: 644 billion
Total estimate of debt increase out to 2014:
Fy10: 3.248 trillion
FY11: 3.528 trillion
FY12: 4.157 trillion
Any bets that when we get to 2014, the actual numbers will be significantly higher still?
In just three years, the estimate for how much would be added to the debt was in error by 909 billion dollars, or 303 billion dollars per year. So when I said that the proposed ‘revenue enhancement’ by Obama was little more than a rounding error, that’s what I meant. Throwing 69 billion dollars per year into numbers of this scale and with this amount of inaccuracy in measurement truly is nearly irrelevant to the long-term outcome. It doesn’t change the nature and magnitude of the cuts required to balance the budget by an amount large enough to really make a difference.
This gets back to my original point, which has been successfully deflected up until now - EVEN IF you raise taxes on the rich like Obama wants, you still have to make essentially the same cuts you would have made if you didn’t. There’s no ‘balance’ to be found here where you can get 50% of the of the money from the rich so you only have to cut half as much.
What’s going on is that the Republicans made a tactical error by refusing to consider any tax increases. This has allowed the Obama administration to use a relatively small tax increase (compared to the size of the deficit and debt) as a smokescreen to avoid admitting that major structural change is required in the U.S. government, and that people’s expectations for entitlements are way out of whack with reality.
The fact that nearly a trillion dollars over ten years can be considered a rounding error is entirely due to the fact that the U.S. budget is exploding on a gargantuan scale. Don’t blame me for that. Blame the idiots in the government.
Now you’re accusing me of lying with numbers by intentionally choosing numbers just a little smaller than reality to make my case. In fact, where real numbers are known I quote the original sources. For example, the numbers above were taken directly from the budget documents at gpoaccess.gov. Where the best we can do are estimates, I have been careful to NOT use estimates from sources like Heritage or Cato, and when there is a a disagreement between two sides such as between Paul Ryan’s estimate for historical revenue and the Democrat estimate, I picked a number in between.
I also linked directly to all the source documents and charts that I used to make my case, so you could check the numbers for yourself.
How many other posters in these debates A)try to put hard numbers to their claims, and B) go to these lengths to make sure the numbers they pick aren’t from partisan sources? I can think of maybe a couple.
No, you’re not. If you were being respectful, you would have answered the substance of what I was saying. Instead, you launched into a series of ad-hominem attacks and nitpicks about wording that had nothing to do with the the actual point, and which didn’t change the conclusion drawn from those numbers one iota. And not only that, your attacks were groundless. You capped it off by making comments on my character such as, “your spiel was just more of the usual Stone,” and “<Stone’s> posts are chock-full of exagerations, misconceptions, distortions, and selective data.”
On what planet is that being respectful?
A trillion dollars is only insignificant in this one specific context - as a TEN YEAR total compared against a government that will spend over 40 trillion dollars over the same period, while borrowing 40% of every dollar it spends. In that context, yes it’s insignificant. In every other way, it’s a huge freaking amount of money. But rather than shoot the messenger, you might want to reflect on the fact that the U.S. budget is so out of whack that saving 830 billion dollars over ten years will barely make a dent in the fiscal imbalance.
Not only is it not what Obama proposes, and not what anyone else is proposing, but you need to consider a few other things. First, you’re using static scoring - assuming that you can get 3 times the revenue by raising marginal rates 3 times as much. That is demonstrably not true. Go back and look at that chart I posted which shows income tax revenue over time, then look at the chart of marginal rate changes over time. You won’t find a strong correlation between marginal rates and total revenue. There is no precedent for being able to collect the kind of revenue you’re talking about by tweaking marginal rates like that.
In fact, the number we’ve been using for the amount of revenue that will be collected by expiring the Bush tax cuts on the rich is probably too high - I let that go and used the high estimate to avoid opening another debate, but the fact is that higher rates also translate into more deadweight losses due to taxation, more tax avoidance activity, and a suppression of GDP growth, all which counteract to some degree the rate increase.
Not if they claim that cuts to a regulatory agency’s budget would balance the budget. Then feel free to tell them that it’s a rounding error - because it would be. It’s all about context.
Let me give you an example, to be fair, of a similarly-sized number: The cost of the new health care entitlement. Its cost is of the same order of magnitude - a trillion dollars over ten years. If someone on the right suggested that we could balance the budget by just getting rid of the Affordable Health Care Act, I would say the same thing - that it is pretty much a rounding error compared to the scale of the problem. That does not mean it is an irrelevant topic for discussion, or that it does not have large effects on the economy in specific areas. It just means that you can not appreciably change the long term fiscal trajectory by repealing it and saying your job is done.
If repealing the Bush tax cuts on the rich gets you 69 billion dollars per year, that is obviously a lot of money. It is more than three NASA budgets. It is more than the cost of the entire Department of Education. So I do not want to trivialize its effect. But in the context of getting the budget back in balance, it is barely a start. This should frighten you.
So many words, and you missed the whole point.
Had you written “about a trillion dollars which is a rounding error” we could quibble about the characterization but at least your post would have been informative.
But you didn’t.
You wrote “a rounding error”, leaving the reader to guess whether this was a billion or trillion or what.
I’d love to be respectful, but it has to be reciprocal. I’d ask you, first of all, to be responsive. (Yours was another long diatribe on budgeting in response to my post which had nothing to do with budgeting, but rather how to represent numbers informatively.) If you apologize for calling me a “nitpicker” for calling attention to large errors in your favor in some of your arguments, I’ll apologize for referring to your posts as “spiels.”
You didn’t read my post, did you? That whole post was a justification of the use of the term ‘rounding error’ as shorthand for meaning 'it’s an amount that barely registers, and which is swamped by the error of estimation of the deficit itself."
And now your nitpick is even more nitpicky - It’s not so much that I used the term ‘rounding error’, but that in your judgment I had to include the dollar amount. Why? If it’s true that it’s an amount small enough that it doesn’t appreciably change the calculus, my point is made. I provided cites to the data.
Then when I DO go to the trouble of posting all the relevent data ad nauseum, wasting hours of my time to give you the backup you asked for, you hand-wave it away and slightly change your nitpick into something else. You are not debating reasonably. You’re not addressing the substantive points I made. You are simply wasting my time.
And then in your last message you repeat the claim that there are ‘large errors in my favor’. Please name them. Be specific. This is the third time now you’ve essentially accused me of lying. I want you to list the numbers that you think are wrong, which err in my favor, and which show a bias (i.e. the errors aren’t just trivial differences that exist between estimates and that they all work in my favor). Then you can explain how they change the substantive nature of my claims.
Then when you’ve done all that, perhaps you could try ADDRESSING THE FREAKING ARGUMENT. And hey, if you don’t like my numbers, feel free to go find some of your own. I’m not sure why I should be the only one doing the heavy lifting here.
If you can’t do that, I’m done with you. You aren’t debating reasonably, and I have better things to do with my time.
Wow. You still can’t admit that “about a trillion dollars which is a rounding error” is more informative than “a rounding error.” I guess I’m done with you too.
So let me get this straight: Your entire argument devolves down to whether I wrote a sentence that could have been more informative had I included a number along with the characterization of that number? That’s it? Seriously?
In that case, I concede: Had I included the number value, the information content in the sentence would have been higher. You got me there. Of course, had I included the range of errors on that number, it would have been more informative still. And perhaps I could have digressed into a discussion of the methodology used by the government to project those numbers, and there would have been even more information. All true.
Now, how about you address the substance of my argument?
I am with you Sam Stone. I think you made some very good points backed up with hard numbers as always. Some people are left just taking shots at minor personal quibbles about style rather than the topic hand. Then again, that’s the way most of politics itself works too unfortunately.
The deficits are equal to the Bush tax cuts, the drug giveaway program and the costs of the unfunded wars. We are discussing slashing programs now, because we have had a decade of the terrible fiscal disaster that was Bush. Clinton left Bush is a strong financial position, with a surplus far into the future. There was no talk of slashing programs.
So why not start with what caused the mess. Tax and start paying for the wars of Bush. Kill the drug program. Bring the soldiers back from iraq today . Afghanistan tomorrow. While we are at it, slash the defense budget by about 50 percent.
We have to end the tax loopholes, tax shelters and offshore banking cheats.
Then we talk about healthcare. The new healtcare act saves us money over the mess we have morphed into.
http://tpmdc.talkingpointsmemo.com/2011/05/chart-bush-policies-dominant-cause-of-debt.php
Here is the damn chart showing what happened to our economy under the Shrub.