National debt: Why tax revenue has to go up

[bloomington-lib]

Source: CNNMoney

Nobody likes having to pay more in taxes. And it's true that the country is on track to spend more than it can afford.

So why can't Congress just cut spending to put the federal budget on a more sustainable path?

First answer: The problem is too deep to fix with spending cuts alone.

Here's just how deep: Say lawmakers wanted to permanently freeze the national debt held by the public where it is today -- 67% of GDP. They would need to cut spending by 35%, or about $1.2 trillion, immediately. And those cuts would need to be permanent, according to the Government Accountability Office.

How hard would that be? Consider that in 2010, all of discretionary spending -- including defense -- totaled $1.4 trillion.

Even permanently cutting $1.2 trillion wouldn't be the end of the story. Public debt at 67% is still well above the country's four-decade historical average of 37%. So more cutting would need to occur in subsequent decades.



Read more: http://money.cnn.com/2011/09/05/news/economy/national_debt_taxes/

[Vincardog]

1. Not to mention how those cuts would depress at he economy and future tax receipts. The GOP plan is

for economic suicide

[msongs]

2. cut all services to districts represented by republicans. nt

[Warpy]

3. Unfortunately, that 3% increase on those making >$250,000 a year isn't going to be enough

now that the ruinous cuts were extended another two years. If they restrict themselves to that measly 3%, everyone's taxes will go up as all the Republican cuts are allowed to expire on schedule. This is not going to help the economy.

Taxes on the richest need to go up a hell of a lot more than 3%. One way to propagandize it is to use the name of the President who last had the new tax rate: Reagan's was 50%.

A transaction tax on Wall Street will also help while taking a lot of the profit out of HFT, something that desperately needs to be done.

The government needs to raise revenue, not only to pay the vig on the debt and start to pay the debt down, but to afford to start working on our rotting infrastructure. The next wave of manufacturing is not going to be built on an inadequate infrastructure. It's not going to be created until people paid to redo the infrastructure are waiting to buy.

Economies run from the bottom up. That should be clear to everyone after the experience of the past 30 years. If it isn't, they're either dishonest or crazy.

The only way to jumpstart the economy is to start at the bottom, with jobs rebuilding the country. And that is going to take increased revenue. After all, the rich don't seem to be interested in doing it voluntarily.

[sam11111]

4. dup glitches!!!

N

[sam11111]

5. dup

N

[sam11111]

6. truman's 91% tax on the rich would bring in 6 Trillion more/yr

No none zero nada
cuts are needed.

From any program.

Pay the debt off in 2 and a half years.

Buffet -- "tax the rich"
Gen. Wesley Clark -- "shift all taxes off the middle class"

US wealth is given at fed reserve site, bottom right cell.(Or the cell just left of that depending on browser used)

It will astound you. 154 Trillion. Debt, 15 Trillion.

http://www.federalreserve.gov/releases/z1/Current/accessible/l5.htm

[Psephos]

11. You have confused assets with income.

You're also assuming a static revenue model, but history (including the Truman years) conclusively shows that revenue is dynamic, and the amount of tax paid is never the supposed rate, and the gap grows as the statutory rate increases. There are a lot of ways to avoid paying the theoretical tax, and rich people can pay lawyers, accountants, and politicians to make that happen.

You can tax everyone who makes more than $250,000 at 100% of income and still not balance the budget.

Meanwhile, confiscating assets (vs. income) is what the Bolsheviks did. Nationalization of personal assets would cause the evaporation of most of those assets' value (which is based on ROI and future income streams) as the economy stopped dead. There would be civil war of the bloodiest and most ruthless kind, and what emerged from that would be run by the military, with a "Party Chairman" telling you where to line up for your bread ration.

No thank you.

[dkf]

7. Why are you all not freaking out at the perpetual rise in spending?

That is as a percent of GDP so it isn't caused by inflation. This means every year you need to pay a larger and larger percent of your salary in taxes. And people complain they can't survive as it is?

This looks like it lapses all the Bush tax cuts too so this is beyond Clinton rates.

Crazy.

[Warpy]

8. Spending is not a problem, especially in a deep recession

that's showing all the signs of turning into a depression. Cutting spending on everything but the military has not worked, it's only given us a shredded social safety net and a rotting infrastructure.

Why are you freaking out about spending?

[Psephos]

10. I don't see much evidence of cutting everything but the military.

Quite the opposite. Spending is at an all-time high.

The problem is that even if the military were eliminated, absolutely zeroed-out, we still would be running the largest deficits in history.

The US has had a downgrade in credit, and there will be more to follow. Soon enough, the US will have to start paying more interest (a risk premium) to attract money, which will worsen the budget deficits, which will raise interest rates again, worsening the deficits further, and this will keep accelerating. Take a look at Greece. They're paying 45% interest now on new two-year bonds. A couple of years ago it was well under 10%. Greece will default soon, leading to massive European bank failures. The maelstrom will suck in Italy, then Spain and Portugal, perhaps even France. This is going to happen soon.

It's called an interest-rate death spiral and history offers many examples of foolish countries that thought they could massively borrow other people's money forever and suffer no consequences.

[Warpy]

12. Have you listened to anything but broadcast news for the last 30 years?

Have you read newspaper articles about the cuts in state block grants? Have you paid attention, at all?

You seem to have missed one hell of a lot that's been going on.

[Psephos]

13. Just curious, have you recently studied a table of annual government expenditures?

You can go right here: http://www.gpoaccess.gov/usbudget/search.html

Look at how much, and on what, the government has spent money, year over year. See for yourself.

You're using a single data point (a cull of state block grants) to make your assessment. You would fail basic economics for that kind of statistical extrapolation.

Government expenditure is up across the board by more than 20% in the past three years. And that's just the stuff that's on the books. Off-budget ("emergency") spending has shown even broader gains.

I don't watch TV period, let alone "broadcast news."

[girl gone mad]

15. Have your taxes actually gone up?

[Igel]

9. I'm of two minds about tax increases.

On the one hand, the deficit is caused not just by increased spending over 2008 base levels but by a decrease in revenues.

At the same time, even Obama has pointed out you don't raise taxes in a recession. We're not in a recession, but we're not far from one.

My real problem with raising taxes at the present is this: During a recession there's a temporary decline in tax revenues. This continues until post-recession growth in employment and profits yields higher tax revenues. If you increase taxes during the downturn in revenues, then they increase above baseline levels during the recovery. This becomes the new, second, baseline. During the next recession you increase tax rates and after the recession you have a new baseline that's two steps up from the first. And so it iterates until your union, your boss, your landlord, etc., etc., is essentially the federal government. Or something happens to really knock back the federal government's spending, which will usually entail wailing on the part of those who directly benefit from how the government runs the economy and people's lives.

If it were possible to have truly temporary tax increases, fine. Perhaps. I'm still unsure about raising taxes in such a weak economy. Even Clinton didn't do that. But it's a topic for discussion. Again: As long as the tax increases would expire, without doubt, in a year or two.

[girl gone mad]

14. We could pay off our debt tomorrow if we wanted to.

But why would we want to?

Right now we are better off issuing bonds than raising taxes. Taxes take money out of the private sector. Bonds allow the money to stay in the private sector, and even earn a little interest.