Skip to comments.Why governments have deficits now.
Posted on 02/02/2003 7:55:22 AM PST by HankReardon
During the recent years of economic prosperity all levels of government recieved revenues well above what was needed to meet their respective budgets creating budget surpluses. This money was used, in great error, to expand existing government programs, create new programs, expand the bureaucracy and, of course, create new regulations on those creating wealth and jobs. The ensuing recession resulting from this caused lowered revenues. The governments no longer collected enough money to meet the budgets that were increased during the times of prosperity. There are lawmakers who audaciously propose to raise taxes to cover these budget deficts. I do believe there are those in government whose way of thinking is, "take as much money from the people as you can and be sure to spend as much as you take so you can ask for more." These people must go! We need successful business men and women as our lawmakers, not career politicians. Term limits should be considered at all levels. During the coming economic expansion we must demand that measures are taken to allow those who are earning the money to keep more and more of it. Democrats call this giving money to the wealthy, we call it tax cuts on earnings. This will lead to continued economic expansion and all will benefit. Lowered revenues have resulted in the federal budget being less than expected, not the Bush tax plan which has barely been in effect. The fight for lower tax rates and less government must be constant. The ensuing economic growth from this would result in increased government revenues. All, even those with little or no tax burden should know it is right to advocate this cause. A democracy can only last until the people realize they are able to vote themselves the wealth. That is only one reason why this is not a true democracy, but a constitutional republic. This is a nation governed by the "rule of law", and not, as often repeated with deliberate attempts to mislead, a nation governed by the "will of the people."
Glad you got all that out of your system. Unfortunately, it would take a revolution to repair all that is wrong with the American political system.
The paradox is in the details:
Lobbying is freedom of speech. Lobbying is undue influence of laws.
Taxes are required to fund a government. The government decides how to tax.
People are so adjusted to governmental oversight of their pocketbooks and their actions they are immune to the effect is has on them.
Are you asking if we'll keep tilting at windmills? I'm sure we will.
Somehow everything gets messier and muddier as time passes, it seems. Eventually it will get so complex things will start to break. Then there will be progress.
It's not an attitude. It's a reality. Give it time. Slow and steady wins the race -- but not like you think.
I think a little education in the economics of taxations could be very effective and should at least be tried before a depression or hyper-inflation or revolution takes place. Some of the stuff flying around the internet is instructive...have you got the story of the 10 men who met regularly for dinner and paid the tab according to the progressive tax system?
Similar metaphors could be written and distributed based on the "Laffer Curve" - that theory is that if the low earners pay a small enough pecentage of their earnings in taxes, and the high earners pay a large enough percentage, at a certain income level the high earner nets the same as the low earner - hence no incentive to become a high earner - hence no high earners - hence no high tax-payers - hense severely curtailed revenues - hence government bankruptcy or hyper-inflation, you guess which.
A very important point to make to the "tax the hell out of the rich crowd" is that the catastrophic failure of this scheme will not take place in "a few thousand years" like "Global Warming" it could take place within one single Congress...2 years.
The above bears repeating... and repeating... and repeating, so that the message gets out.
That's the problem about taxation. It needs gutted and restarted but reality tells me that isn't going to happen. I pay nearly the top tax rate on the marginal dollar but I stopped fretting about the unfairness of it.
What I fret about is the use and waste of the money once it leaves my hands. I get to cast votes once a year only to have the special interest groups, lobbyists, bleeding hearts, et al, et al, et al, unduly influence how that money is used. I'm resigned to government calling tax "revenue" and seeing a degraded economy as producing a "loss of revenue". Until it all comes tumbling down, and I've yet to see a modern nation with greater tax rates than ours suffer anything close to that yet, it will continue to be as it is with only minor shifts to the left or right.
As to your "Laffer Curve", unless you are in the 100+% tax bracket, earning a dollar means more money in your pocket. Earning two dollars doubles your take. Money people never turn away money because it is taxed. They never have and they never will.
It seems to me that this may be what you are hinting at in your post. I think I may be in agreement with you on this aspect of your thesis. A deep and very painful depression would probably cure a lot of our problems, much as a large enema often helps a human body begin to function properly after a period of improper operation.
The key word here is "theory". We are no where near a tax rate that would make someone earning minimum wage equal to someone earning $75,000 a year. In fact it seems that the more taxes are reduced, the more the wealthy scream (I am NOT suggesting that someone earning $75,000 is wealthy). Check out the tax rates of the 50s and compare them to current tax rates.
It concerns me that if we continue on our current path we could well end up in the same economic condition of some third world countries with a large percentage of our GNP going to service our debt.
Yes. We agree. I will state again that there are other nations, Great Britain, Germany, Italy, Spain, for example, who tax at higher rates than we do. They still have wealthy and poor. They are still quite viable economies and societies.
Save every foreigner calling in their debt in government bonds at the same instance or refusing to buy more, we're a very long way from the triggers that will cause those in "power" to fix what is broken.
It's not my Laffer Curve, it's Dr. Arthur Laffer's (Economic advisor to President Reagon).
In case you aren't familiar with the Laffer cure here is an hypothetical example of how it works. Lets lay a family of 4 with a taxable income of $40 thousand pays zero taxes while at the same time a family of 4 with $100 thousand in taxable income pays 60% in taxes. Both families of four net $40,000. Show me the incentive for the latter family to "earn" that extra $60,000 of "taxable income."
This presumes however more education and effort is nececssary to earn that extra $60K - many in our society think that the extra $60K comes from luck or dishonesty.
ANSWER: Because of significant numbers of trash now holding office at various levels of government. People who do not even belong to our society for various reasons i.e. criminals, perverts, vice addicts, bribe takers, aliens etc.
Taxes increased for the wealthy during the last great depression.
Can't you infer "your" as being "your reference to" as most people would?
I am aware of the "theory". While it may hold for working stiffs on fixed incomes, it does not hold for those who generate the real wealth in this country. As long as there is a penny to be made on a dollar, they will earn the dollar. Since, as we've been told over and over, it is those people who pay the greatest percentage of taxes, then they will continue to do whatever they do to generate them regardless of the tax rate in place.
The tax system needs destroyed and rebuilt. We need a balanced-budget amendment. We need voter approved spending ceilings. Rearranging the tax rates just makes someone madder and someone happier.
Care to illustrate your oxymoron?
First: We are now facing unprecidented budget deficits at the Federal level (around $300 Billion) and at the State level (cumulatively states are expected to run approximately $50 Billion in deficits) I can only guess that Counties and Cities (definitely New York City) are in a similar circumstance. Unless there are enormous spending cuts, there will have to be enormous revenue increases - where might that come from?
(BTW in President Bush's State of The Union address, the other night, the President said he is submitting a budget with a 4% increase in spending because that is the amount by which personal income has increased, no more. Well inflation only increased by 2.2% (CPI) during the year, while he is asking for tax cuts...bottom line is if you increase spending by an amount equal to GROSS income (not after tax income) and decrease taxes by a negligable percentage, the deficit and need for more monopoly money will increase.
Second: Prior to President Reagon's tax cuts, the maximum Federal tax bracket was 70% and in California the the maximum bracket was 9% - the minimum Fed was 18% and the minimum CA was 0%. So you might do the math with a discrepancy between 79% and 18% leaves a wide area where the people paying the max might "take home" no more that some paying at or near the minimum. You are correct the spread between minimum and maximum now leaves a fairly small "window of disincentive."
Third: You might consider ignoring the GDP number, no one can "spend" the GDP it is a very esoteric number and is definitely not directly correlated to "revenues."
Keep this in mind - in the event of any short-fall of revenues, the Federal Reserve (the people who issue the 'Federal Reserve Notes' that we call money) have a relatively unlimited supply of paper and ink. They will always produce enough to meet the Federal debt service. Unfortunately this can cause what was referred to in the '70s and '80s as "viralent inflation."
I would say that the economy is now in a critical and unstable condition - fortunately it is still functional.
Is there reason for hope? Sure. Is there reason for fear? Yes.
According to President George W. Bush, during his State of the union address, a family of four making $40,000, who now pay $1100ish dollars, would under his package, pay over $1000 less...something like $45. So that's not quite zero.
I guess I should have said "adjusted gross income."
I also may have been incorrect in assuming that President Bush was NOT being disingenous about his numbers...you know "fuzzy math," either intentionally or innocently misinformed.
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