So How Much Are Taxes Going to Have to Go up?
So for the last couple of years, the federal government has been running a budget deficit. It was, however, never as bad in terms of proportion of the GDP as in 1990-1. Because in 1989-90, the federal government had had to cover the collapse of a large chunk of the financial sector during a recession. Fortunately, in 2007, that wasn't the case.
Whoops.
So we're back to 1990 levels of federal budget deficit. Now then, this is bad, but the 1990's showed that a deficit this bad can be turned into a surplus in less than a decade.
Now then, once Barry O undoes the GW tax cuts, we should get within striking distance of Clinton-era tax rates (unless he actually goes through with his middle class tax cut promise). Now then, since he's also planning on giving out lots of goodies from the gummit, it probably won't actually push us back into surplus range, but it *should,* possibly, get us close to the sort of deficit that an industrialized nation normally carries.
So it'll be interesting to see this all play out.
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References -
It adds a whole new element of fun to the analysis of who should pay more taxes, and how people who don't pay any taxes have no patritism. (The rest of us apparently are on a sliding patriotic scale.) And not just because as it undercuts Biden's own supposed patriotism.
--Even a dead midget is far from light. - Confucius
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)No love lost between me and Joe Biden, but c'mon. It's pretty obvious that's not what he meant.
--The other day I heard that ignorance and apathy are sweeping the country. I didn't know that, but I don't really care.
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| parent )But for some reason tomsyl is planting this tomato all over the site. It's an old trick. If you get the opportunity to distort the meaning of someone's words in order to create division and resentment?
Go for it. Even if you have to lie in order to do so. But sometimes the distortion is so obvious that it backfires. Which is probably why you don't see too much of this outside of Wingtardia.
--To think is not enough; you must think of something -- Jules Renard
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| parent )Willingness to sacrifice for your country is a measure of patriotism. Moreso than the presence or absence of the (burning) flag pin on the lapel.
It seems to me that willingness to sacrifice for those who were careless with their money has nothing to do with patriotism.
--Nothing resembles virtue more than a great crime. Saint-Just
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| parent )Cost of the recent credit crises bail out: $700B
Cost of Fannie Mae/Freddie Mac takeover: $200B
Defense spending is $514B for the 2009 budget. While only 3.7% of GDP, the numbers allocated to procurement of new weapon systems of questionable value should be hotly debated by Congress.
Alas, It won't. It's the new third rail of politics. That's a shame.
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)I haven't seen it discussed. I can guess what McCain's is.
--Even a dead midget is far from light. - Confucius
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| parent )But, does discuss review of weapon's systems and force structure given evolving threats. He supports Star Wars but wants to do it in a more deliberate, slow, and "cost-effective" manner.
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| parent )does that include Iraq?
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| parent )...
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| parent )So for the last couple of years, the federal government has been running a budget deficit. It was, however, never as bad in terms of proportion of the GDP as in 1990-1
To gauge our fiscal health, we can't just look at deficits as a % of GDP in isolation or even publicly-held debt as a % of GDP in isolation. We have to put them in the context of projected spending, projected revenues, projected deficits, projected GDP, and ultimately projected publicly-held debt as a % of GDP ("debt-to-GDP"). Comparisons to 1990 miss the fact that the baby boomers are starting to retire NOW and projected spending is projected to rise rapidly over the next couple of decades, while the Social Security surpluses that we've used to mask the "on-budget" deficit will evaporate. Our fiscal outlook is very bad, folks -- in fact, it's literally unsustainable, and will require much sacrifice at some point -- and our fiscal outlook would get much worse under either Obama or McCain if the plans of either are enacted and maintained.
Some good links for an overview of the problem:
Charts: http://www.heritage.org/research/features/BudgetChartBook/fed-rev-spend-2008-boc-P6-Entitlement-Reforms-are-Needed-to.html
http://www.heritage.org/research/features/BudgetChartBook/fed-rev-spend-2008-boc-P4-Entitlements-Alone-Will-Eclipse.html
Comptroller David Walker on 60 Minutes: http://youtube.com/watch?v=OS2fI2p9iVs
Diverse think tank group paper: "Taking Back Our Fiscal Future" http://www.concordcoalition.org/files/uploaded_for_nodes/Taking_Back_Our_Fiscal_Future.pdf
http://www.concordcoalition.org/act/fiscal-wake-tour/fiscal-wake-call
CBO report, December 2005 http://www.cbo.gov/ftpdocs/69xx/doc6982/12-15-LongTermOutlook.pdf
CBO report, December 2007 (same type of report as the 2005 above) http://www.cbo.gov/ftpdocs/88xx/doc8877/12-13-LTBO.pdf I suggest reading at least the Introduction and Summary (note that in Box 1-2, CBO understates the impact of aging due to an analytical oversight explained here http://www.concordcoalition.org/files/uploaded-pdfs/ff-1220-demographics.pdf)
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)is that we'll have to increase taxes by 1 - 2% of GDP.
It's interesting to note that if the bailout goes through our deficit for this year will easily top a trillion dollars.
--I blame it all on the Internet
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)I leave the changes to the velocity of the Social Security Trust Fund and Medicare Trust Fund as an exercise for the class.
--It's impossible to debate if people simply hold beliefs that have no grounding in reality.
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)Herbert Hoover tried raising taxes: it only made things worse.
I don't think we can bear much more taxation as a nation, and I'm pretty sure we can cut corporate taxes if we start hammering the offshore corporations and prising them out of their tax avoidance schemes. The whole system is skewed in favor of corporations who can afford all these tax specialists. I sure wish I could get a Bahamas incorporation and get away with it: the IRS takes a dim view of that.
Now why can some corporations get away with this? Why do these corporations still get away with this crap? I file my quarterlies and get whacked every time. Andersen Consulting gets away with it, and the big government contracts, too.
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)you just don't contribute enough to political campaigns. Do that and you too can write sections of our tax code.
We can and will bear more taxation. It may be phased in, it may be called something different, but it will need to take place. S&P has been making noises that the US credit rating of AAA may have to be revised. And the decision is not in our hands, it's in the hands of those countries that are funding our profligacy - China, Japan, Oil states, EU, Russia, etc. etc. One whiff of the idea that they aren't interested in investing in T-Bills and the rest of the house of cards will come down. One hint from OPEC that they're willing to start trading oil in other currencies will bring inflation like you wouldn't believe.
I bet no one thought our Appomattox would be Wall Street.
--I blame it all on the Internet
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| parent )The gaffemeister strikes again, calling 30% of the populace unpatriotic in the process.
--Even a dead midget is far from light. - Confucius
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| parent )- Login or register to post comments
| parent )Equating paying more taxes with patriotism, which is exactly what Biden did, logically means that people who pay less taxes are either unpatriotic, or are less patriotic than those who pay more. Qualitative or quantitative - take your pick. Or just admit that his statement was idiotic and move on.
But if you want to stick with the theme, perhaps you can explain why Biden is so unpatriotic himself.
--Even a dead midget is far from light. - Confucius
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| parent )I get why politicians jump on something like this. It's just another dumb show for the hooples. Distort the meaning of someone's words, try to gin up resentments and divisions. Score whatever political points you can. It's stupid venal work for professionals who get paid to do it.
what's your excuse?
--To think is not enough; you must think of something -- Jules Renard
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| parent )More light, less heat, please.
--Before you criticize someone, you should walk a mile in their shoes. That way when you criticize them, you're a mile away and you have their shoes. -JH
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| parent )Let me know when you get around to Bird calling someone a big pussy. Thanks.
And describing something as Wingtard Nonsense, aside from being accurate, is not a violation. Neither is the body of the comment. Which refers, and refers explicitly, to politicians and professionals.
Unless you're referring to 'what's your excuse'? Which suggests that tomsyl is in fact NOT acting in the described manner. And is an honest question. I'm genuinely curious as to why he's proffering up this nonsense.
Words matter, Jordan. I am, usually at least, very careful in the way I use them. The tenor of the comment may in fact be personal. That doesn't make it a posting rules violation.
--To think is not enough; you must think of something -- Jules Renard
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| parent ).
--It's impossible to debate if people simply hold beliefs that have no grounding in reality.
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| parent )words? If so, whip out your own strained interpretation of what he said so I can shoot it down.
--Even a dead midget is far from light. - Confucius
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| parent )Only interpretations, as such.
--It's impossible to debate if people simply hold beliefs that have no grounding in reality.
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| parent )Even the AP has written that this is a lie (er, misstatement):
http://news.yahoo.com/s/ap/20080918/ap_on_el_pr/biden_taxes
Biden was talking about how the wealthy are not asked to do much for the country, and that a big way in which they could help would be financially in these economically tough times.
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| parent )the deal, time to help get America out of the rut.”
That's a direct quote from Biden in your link, made while he was explaining why Americans who make more than $250K/year should pay more taxes. Biden specifically chose to state the issue in terms of patriotism. That was beyond idiotic because it establishes a link between the amount of taxes someone pays and their patriotism.
As an aside, do you believe that the wealthy "are not asked to do much for the country"? More, or less, than you? if you pay more taxes than I do, are you doing more for the country than I am? If Bill Gates donates billions to charity, is he doing more or less for the country than someone on welfare? Are people who don't pay any taxes not doing anything at all for the country? Is someone in the military doing more for the country than someone who pays the same amount of taxes but is a civilian? If so, what is the patriotism multiplier?
Again, the stupidity in touting a patriotism metric in the context of taxes paid is painfully obvious. And in this instance, much more than a gaffe - it's a class warfare theme.
--Even a dead midget is far from light. - Confucius
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| parent )"it establishes a link between the amount of taxes someone pays and their patriotism"
Sheesh, tomsyl, you're a reasonable guy, so why are you playing this silly perception & gotchas game? It doesn't take a rocket scientist to understand that when Biden tells wealthy people that they can show their patriotism by contributing financially, it doesn't mean that cash is a measure of patriotism. If an animal rescue org says you can show your love of dogs by contributing to their funds, are you going to scream at them as well? Next time you get a fundraiser letter in the mail, are you going to call them back and tell them that they're "beyond idiotic"?
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| parent )We are what we pretend to be. So best be careful how we pretend.
--To think is not enough; you must think of something -- Jules Renard
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| parent )The wealthy are not asked to forego anywhere near as much as an Iraq War veteran returning without a limb, years of her life, or comfort within his own mind.
Much less the smaller but very real comforts all of us will lose as if the bailout your boys are pushing comes through.
--It's impossible to debate if people simply hold beliefs that have no grounding in reality.
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| parent )Link. What was that you were saying about whose "boy" is doing what?
--Even a dead midget is far from light. - Confucius
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| parent )...to white politicians, out of general principle.
--It's impossible to debate if people simply hold beliefs that have no grounding in reality.
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| parent )http://thecaucus.blogs.nytimes.com/2008/09/21/obama-no-blank-check-on-bailout/
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| parent )by definition.
--Even a dead midget is far from light. - Confucius
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| parent )I don't think now's the time for increasing taxes in anything but the most modest increments. It may sound bizarre for a self-described Liberal to say this, but capital gains taxes hit retirees the hardest, talk about a Death Tax, the capital gains taxes are a Dying Tax. Lowering corporate taxes, absolutely. We need to attract entrepreneurs. We need to keep the ones we have.
Let's put it this way. I contemplated expanding my consulting practice to include workshops for entrepreneurs, teaching them the ground rules of getting value for money from their IT expenditures, especially custom software. IT consultants are terrible explainers: give them an objective and they'll do what they're asked. They're like the genie of the lamp. They won't question you, and unless you understand how treacherous such objectives can be, they'll give you exactly what you asked for and not what you want.
So where's the market for such a practice? In China and India. No kidding. Entrepreneurs are going to China and India first, they're not outsourcing scutwork any more. They start there, because that's where the talent is. For every H1-B job in the States, there's six or seven jobs opening up in India and China. Here in the States, the trend is to go with expensive canned software, but customizing those packages requires more than the ability to code. You need people with business chops, too, who can read a chart of accounts and a corporate charter, talk to marketing people, talk to manufacturing and logistics people, deal with executives.
Do you think I'm going to find that talent here in the States? Do you think I'm going to expand beyond my little one man band practice here in the States with this rate of corporate taxation? Dream on. The more I look at it, a city like Kerala looks better and better. I can get top shelf talent for a tiny fraction of the price. And I wouldn't look for US gigs, I'd take on Indian clients, Persian Gulf clients. Brazil looks pretty good, too.
In short, give me one good reason for an entrepreneur to start up here in the States.
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| parent )salaries - to stay in India and work. If that's true, we are going to have a difficult time w/r/t skilled software engineer types needed in the US, given that we don't seem to have a program for educating, training and apprenticing them domestically.
--Even a dead midget is far from light. - Confucius
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| parent )In 1993, granted, India and China hadn't hit the level of growth that the did over the next fifteen years, but East Asia was still doing pretty darned well. And a modest tax increase not only didn't hurt the economy, but by helping to clear up the deficit, it wound up creating a feedback loop, with the deficit decreasing, the economy growing, and thus the deficit decreasing even more until 1997.
I'm curious as to your thoughts as to why this time would be different. And that's a genuine question, since much of economics usually seems like wizardry to me.
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| parent )one or two percent difference in taxes won't affect entrepreneurship, you said yourself the limiting factor is people, not capital. As far as cutting taxes to stimulate growth, that's what the Bush tax cuts were supposed to be, remember? If we hadn't blown trillions on Bush's tax cuts and Iraq, we might have been in a position to weather this without increasing tax revenues, but that's not the way things are today. You're a smart guy, you know what will happen if we increase our debt like this without increasing revenue to the Treasury. No, it's fire sale time and we've lost control of our economic policies. Our creditors are setting the terms, Paulson is just their PR flack.
--I blame it all on the Internet
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| parent )play in your calculations? I heard Obama promise he would perform what amounts to a line-item veto if he becomes president, without giving any statistics or information about what he will cut. So at this point that is just an empty promise along the lines of "no new taxes."
--Even a dead midget is far from light. - Confucius
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| parent )The Bush Administration just proposed giving $700,000,000,000 to Wall Street with absolutely zero oversight.
And you're worried about whether or not Democrats are fiscally responsible?
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| parent )on national security and fiscal responsibility in the space of about 6 years. They don't realize it yet -- catchy tune, though. :)
--Before you criticize someone, you should walk a mile in their shoes. That way when you criticize them, you're a mile away and you have their shoes. -JH
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| parent ).
--It's impossible to debate if people simply hold beliefs that have no grounding in reality.
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| parent )Now then, once Barry O undoes the GW tax cuts
I know you know this, and I think you knew that somebody would come along to remind you, but the GW Tax Cuts will undo themselves, all on their own, without any input from Barry O (or Johnny Mac).
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)But I suspect that their original expiration date of 2011 might get nudged forward in time a bit. Seriously, a trillion dollar deficit is about five kinds of absurd.
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| parent )