Posted on 04/20/2011 12:00:14 PM PDT by SeekAndFind
This is odd. A rare note ot sorta-optimism from Nouriel Roubini (AKA Dr. Doom) regarding the US debt situation.
In a note this morning that he put with fellow analyst Arnab Das, he writes:
"The United States has the most manageable fiscal issues of any major advanced economy because federal, state and local revenues as a share of GDP are very low, for cyclical and other reasons. Therefore, fiscal balance can be restored by fiscal adjustment without major economic difficulty in the near term."
In other words, US revenue and spending can be brought closer into line via raising more revenue (as a share of GDP) and so in reality this means raising taxes.
Obviously though the GOP is totally anathema to the idea of tax increases as a debt solution.
But back to Roubini's point, this chart -- via a recent Jeff Gundlach presentation -- demonstrates nicely that tax revenue as a percentage of GDP is what's really fallen off a cliff lately.
(Excerpt) Read more at businessinsider.com ...
So we hear from another “expert” who might have been right once and the media declares him infallible.
Federal receipt % and taxation levels are so not the same thing.
US GDP has a huge component of Government spending. The spending isn’t productive, and shouldn’t be in GDP, but there it is.
If the Government injects sackfuls of dollar-heroin into Goldman Sachs’ wives’ offshore accounts etc - which probably counts as “GDP” - then the tax receipt % will obviously be lower.
Roubini has always struck me as a socialist.
That's your imaginary GOP, right?
Dr. Roubini is correct: we do have a tax revenue problem... When unemployment soars to 10% and the country sinks into a huge recession/near depression as it did in 2009. We also have a growth problem... next week we’ll probably find that the GDP slowed to under 2% in 1-Q-2011.
So buying into the Dem/Progressive logic that we can repair the revenue/receipts by raising tax rates is crazy — it doesn’t happen. The last time rates were raised (1993), growth once again slowed... Yes, revenues went up — we were recovering from from the minor recession late in GHWB’s term when Bill Clinton pushed through his retroactive increase in tax rates (which his wife beat by taking her Rose Law Firm benefits early to keep them out of the 1993 tax year — but growth slowed and was anemic for a recovery year.
If Federal expenditures were pulled back and constrained to the 20.6% of GDP that Senator Coburn is advocating as a structural spending restraint target, we could get our revenues and expenditures back into relative balance.
I’m surprised he does not specify that revenue grows as the economy, and personal wealth, grow
increased taxation just bleeds the economy
he worked in the Clinton White House, for one thing
that chart is meaningless
what is GDP?
would you rather have 50% of the 1929 GDP or 10% of the 2007 GDP?
Hauser’s Law - government’s revenue historical level @ 20%. There’s no way on earth they’ll get more.
Obama’s goal is 25%. Rude awakening coming.
If socialists could ever be logical about this, they would realize that there is a taxation rate where revenue is optimized. If the taxation rate is lower than this optimal point, they won’t have as much money available to fund their desired programs. Less obviously to them, if the taxation rate is higher than this optimal point, they still won’t have as much money available to fund their desired programs. How can they not realize this? I suspect that some of them do know this, but it doesn’t bother them that their policies will lower the standard of living for most Americans, and raise it for only a very few.
Even more to the point, if you look at the graph, there’s a dip (which lags the years as one might expect) from the early 2000s recession, then it gets back up to what looks about an average value for receipts as a percentage of GDP, then it tanks again from the next recession.
Anyone would have a hard time convincing me that tax cuts had much of anything to do with it (well other than maybe suppressing the high rate from the late Clinton dot com bubble years).
A big, socialist government with big, worthless revenues is...a socialist government that will shrink very much. Worthless dollars make no one big or rich. But the political class, some members directly and others indirectly supported by big government, will cling to the debt regime for their lives, until calls for repudiation overwhelm them (understatement).
The government of Argentina is not so big any more without its globalist ties. Large numbers of people there are participating in an enormous barter exchange, while government folks look on helplessly.
translation: Lots o’ room to RAISE those TAXES!
What most folks don't REALIZE OR KNOW about GDP is that it includes Investment of all that free Fed money into commodities AND government spending.
Yes, GDP is doing much, much better than the "real" economy. Private consumption is in the toilet.
And, it's the PRIVATE economy that generates the tax revenues.
Roubini is either an idiot or a commie...or both.
Take out government spending and investment of free Fed money and we've likely taken a 30% hit in the real economy. Therefore taxes, as a percentage of the REAL economy are as high as ever...generating lower revenues as a result of a shrinking real economy. Raise those taxes and the real economy will shrink further.
Roubini was right about the mortgage crisis, but then so was I, so no big deal there (and I made a decent chunk of change on it).
The real question is what of the other 97% of the “experts” that were unable to figure that having banks make loans to people for 10 times their income probably wasn’t going to work out too well? Why does ANYONE listen to them, and just who was paying them off?
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