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Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 29 2012 at 7:00 PM

Coalde  (Login coalde_one)

By Henry Blodget, Dec. 28, 2012, 7:37 AM

Yesterday, I pointed out how, in a stubborn attempt to avoid raising taxes on the richest 2% of Americans, the Republicans in Congress have essentially agreed to raise taxes on everyone.

The Republicans have done this by refusing to accept President Obama's attempt at a compromise, which preserves low tax rates for 98% of the country while raising taxes modestly on the top 2%.

Well, you can't assign blame to the formerly pragmatic and responsible Republican party without getting some flak.

So I received some notes explaining that the Republicans were absolutely right to reject Obama's plan because "our problem is not a tax problemit's a spending problem."

And you know what, Democrats? The writers of those notes were partially correct:

We DO have a spending problem.

If we are ever to get our budget deficit under control, we need to trim long-term spending growth.

But blaming the whole deficit problem on "spending" ignores the other half of the problem: Taxes.

Our federal tax revenue right now is historically low.

To begin to address our deficit problem, therefore, we need to trim spending growth and increase taxes.

Don't believe it?

Let's go to the charts >

In recent years, the federal government has developed a huge budget deficit. This is because federal spending (red) has surged, while federal tax revenue (blue) has stagnated.Those who blame "spending" for this deficit are partially right: Federal government spending is now running at 24% of GD; higher than almost any time in history.
in-recent-years-the-federal-government-has-developed-a-huge-budget-deficit-this-is-because-federal-spending-red-has-surged-while-federal-tax-revenue-blue-has-stagnated.jpgthose-who-blame-spending-for-this-deficit-are-partially-right-federal-government-spending-is-now-running-at-24-of-gd-higher-than-almost-any-time-in-history.jpg
But those who blame "taxes" for this deficit are also partially right: The federal government is only collecting 17% of GDP as tax revenue, a historically low level.Put those two together, and it's no mystery why we've developed such a budget deficit in recent years.
but-those-who-blame-taxes-for-this-deficit-are-also-partially-right-the-federal-government-is-only-collecting-17-of-gdp-as-tax-revenue-a-historically-low-level.jpgput-those-two-together-and-its-no-mystery-why-weve-developed-such-a-budget-deficit-in-recent-years.jpg
The good news is... the solution is obvious. We have to raise taxes as a percent of GDP (blue) and/or cut spending as a percent of GDP (red).How, exactly, should we do that? Well, given that there are 320 million of us who have to agree, we should probably compromise: A little of both.
the-good-news-is-the-solution-is-obvious-we-have-to-raise-taxes-as-a-percent-of-gdp-blue-andor-cut-spending-as-a-percent-of-gdp-red.jpghow-exactly-should-we-do-that-well-given-that-there-are-320-million-of-us-who-have-to-agree-we-should-probably-compromise-a-little-of-both.jpg
But, before we go jacking up taxes and cutting spending willy-nilly, we need to understand that there are two kinds of government spending...The first kind is what we normally think of as government spending: Defense, highways, bridges, NASA, government employee salaries, etc.
but-before-we-go-jacking-up-taxes-and-cutting-spending-willy-nilly-we-need-to-understand-that-there-are-two-kinds-of-government-spending.jpgthe-first-kind-is-what-we-normally-think-of-as-government-spending-defense-highways-bridges-nasa-government-employee-salaries-etc.jpg
The second kind of government spending is what is euphemistically called "personal transfers" -- checks handed out to citizens for a variety of social programs, including Social Security, Medicare/Medicaid, and Unemployment Insurance.Which kind of government spending do you think is bigger?
the-second-kind-of-government-spending-is-what-is-euphemistically-called-personal-transfers-checks-handed-out-to-citizens-for-a-variety-of-social-programs-including-social-security-medicaremedicaid-and-unemployment-insurance.jpgwhich-kind-of-government-spending-do-you-think-is-bigger.jpg
Right--social programs (blue). By a lot. Importantly, though, this "social program" spending explosion has only happened recently.Over the past 50 years, social-program spending has exploded as a percentage of the economy.
right-social-programs-blue-by-a-lot-importantly-though-this-social-program-spending-explosion-has-only-happened-recently.jpgover-the-past-50-years-social-program-spending-has-exploded-as-a-percentage-of-the-economy.jpg
Social program spending (red) has grown so much, in fact, that it now consumes almost all federal tax revenue (blue).Meanwhile, the OTHER kind of government spending--highways, military, federal salaries, etc.--has actually been shrinking as a percent of the economy.
social-program-spending-red-has-grown-so-much-in-fact-that-it-now-consumes-almost-all-federal-tax-revenue-blue.jpgmeanwhile-the-other-kind-of-government-spending-highways-military-federal-salaries-etc-has-actually-been-shrinking-as-a-percent-of-the-economy.jpg
Even Military spending--the other big federal expenditure behind Social Security and Medicare/Medicaid--has been shrinking as a percent of the economy.And don't forget what we're really talking about when we talk about "social programs." It's not unemployment insurance and food stamps. They're small potatoes (Below is Unemployment Insurance--red--versus Defense--blue).
even-military-spending-the-other-big-federal-expenditure-behind-social-security-and-medicaremedicaid-has-been-shrinking-as-a-percent-of-the-economy.jpgand-dont-forget-what-were-really-talking-about-when-we-talk-about-social-programs-its-not-unemployment-insurance-and-food-stamps-theyre-small-potatoes-below-is-unemployment-insurance-red-versus-defense-blue.jpg
The real government budget busters are Social Security, Medicare, and Medicaid.So, do we have to get Healthcare and Social Security spending under control? You'd better believe we do. If we don't, we're toast.
the-real-government-budget-busters-are-social-security-medicare-and-medicaid.jpgso-do-we-have-to-get-healthcare-and-social-security-spending-under-control-youd-better-believe-we-do-if-we-dont-were-toast.jpg
But! Before you cheer on Congress-people who just want to whack Social Security and Medicare/Medicaid spending, remember this...Our economy has become highly dependent on these social programs. They now amount to a record 16% of GDP. If we suddenly slashed them, especially while raising taxes, we would give the economy a heart attack.
but-before-you-cheer-on-congress-people-who-just-want-to-whack-social-security-and-medicaremedicaid-spending-remember-this.jpgour-economy-has-become-highly-dependent-on-these-social-programs-they-now-amount-to-a-record-16-of-gdp-if-we-suddenly-slashed-them-especially-while-raising-taxes-we-would-give-the-economy-a-heart-attack.jpg
So we need to fix our social programs gradually, calmly--not in a fit of panic that will throw us into a Depression.It took us 30 years to get into this mess. (Debt = red, GDP = blue). It will probably take us 30 years to get out.
so-we-need-to-fix-our-social-programs-gradually-calmly-not-in-a-fit-of-panic-that-will-throw-us-into-a-depression.jpgit-took-us-30-years-to-get-into-this-mess-debt--red-gdp--blue-it-will-probably-take-us-30-years-to-get-out.jpg
This is why most Americans want to avoid the "Fiscal Cliff"--the sharp cuts in spending and increases in taxes that will tackle the deficit problem in one go (and hit the economy in the process). The smarter plan is a compromise--an "alternative fiscal scenario."
this-is-why-most-americans-want-to-avoid-the-fiscal-cliff-the-sharp-cuts-in-spending-and-increases-in-taxes-that-will-tackle-the-deficit-problem-in-one-go-and-hit-the-economy-in-the-process-the-smarter-plan-is-a-compromise-an-alternative-fiscal-scenario.jpg
So now you know the truth about our government. But there are other things you should read about, too...

DEAR AMERICA: You Should Be Mad As Hell About This...

http://www.businessinsider.com/government-spending-and-taxes-2012-12#



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Taygibay
(Login 1RCHMDL84)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 29 2012, 10:09 PM 

I'm not seeing the links nor charts, Coalde! Is that normal?

Tay.

Image du Blog bubblesgift.centerblog.net
Source : bubblesgift.centerblog.net sur centerblog.


Speak softly and carry a big stick.

http://dlofr.wordpress.com/

 
 

Timbits20
(Login timbits20)
Elite WAFF Vet Club

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 4:00 AM 

Thanks for posting this.

His "it took 30 years to get into this mess, it should take 30 years to get out of it" smacks straight into the face of the "quick fix mentality" and short-term thinking that is business and politics and the business of politics.

... Boink...

[IMG][linked image][/IMG]

 
 

Coalde
(Login coalde_one)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 11:37 AM 

"I'm not seeing the links nor charts, Coalde! Is that normal? "

Try hitting reload on your browser. The original article is here...

http://www.businessinsider.com/government-spending-and-taxes-2012-12#


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Taygibay
(Login 1RCHMDL84)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 3:16 PM 

Sill nothing but the link is fine, thnx mate!

Image du Blog bubblesgift.centerblog.net
Source : bubblesgift.centerblog.net sur centerblog.


Speak softly and carry a big stick.

http://dlofr.wordpress.com/

 
 
Hawkssss
(Login Hawkssss)
Elite WAFF Vet Club

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 4:48 PM 

Any more debt on the already bankrupt USA is a good thing for humanity

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[linked image]

 
 

White Devil
(Login ingenting)
WAFFer

Ex Nihilo

December 30 2012, 5:31 PM 

Well the link works! but the diagrams you put up is no show , i think outside US its not working properly , and happy new year.

 
 

Provost
(Login MPOne)
WAFFer

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 6:16 PM 

An interesting assessment. The US needs growth, less federal spending and relatively low taxes.

Proud member of the Imperialistic Matrix and the Brotherhood of Infidels

Nemo me impune lacesset,


[linked image]"The chief aim of all government is to preserve the freedom of the citizen. His control over his person, his property, his movements, his business, his desires should be restrained only so far as the public welfare imperatively demands. The world is in more danger of being governed too much than too little.

It is the teaching of all history that liberty can only be preserved in small areas. Local self-government is, therefore, indispensable to liberty. A centralized and distant bureaucracy is the worst of all tyranny.

Taxation can justly be levied for no purpose other than to provide revenue for the support of the government. To tax one person, class or section to provide revenue for the benefit of another is none the less robbery because done under the form of law and called taxation."

John W. Davis, Democratic Presidential Candidate, 1924. Davis was one of the greatest trial and appellate lawyers in US history. He also served as the US Ambassador to the UK.
[linked image]

 
 

Coalde
(Login coalde_one)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 7:08 PM 

"...and relatively low taxes."

Relative to what?

Personally I agree with the author of this article and think the USA is going to need to generate more tax revenue in addition to cutting spending (across the board)...however I also agree with the article that if that is done too quickly you will crash the US economy in a manner that will make the Great Depression of the '30s look tame by comparison.


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Provost
(Login MPOne)
WAFFer

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 7:13 PM 

Raising tax rates does not, necessarily, generate additional tax revenue. As taxes become more onerous, people alter their behavior in response.

Proud member of the Imperialistic Matrix and the Brotherhood of Infidels

Nemo me impune lacesset,


[linked image]"The chief aim of all government is to preserve the freedom of the citizen. His control over his person, his property, his movements, his business, his desires should be restrained only so far as the public welfare imperatively demands. The world is in more danger of being governed too much than too little.

It is the teaching of all history that liberty can only be preserved in small areas. Local self-government is, therefore, indispensable to liberty. A centralized and distant bureaucracy is the worst of all tyranny.

Taxation can justly be levied for no purpose other than to provide revenue for the support of the government. To tax one person, class or section to provide revenue for the benefit of another is none the less robbery because done under the form of law and called taxation."

John W. Davis, Democratic Presidential Candidate, 1924. Davis was one of the greatest trial and appellate lawyers in US history. He also served as the US Ambassador to the UK.
[linked image]

 
 

White Devil
(Login ingenting)
WAFFer

Ex Nihilo

December 30 2012, 8:38 PM 

- people alter their behavior in response.-

How sure are you?

A muzzie migrant was not satisfied in Denmark so he went on to Sweden and got what he wanted,

 
 

Coalde
(Login coalde_one)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 30 2012, 10:26 PM 

"Raising tax rates does not, necessarily, generate additional tax revenue. As taxes become more onerous, people alter their behavior in response."

Indeed...I am sure many wealthy people in the USA will move to places that do not tax them and continue to earn most of their money in the USA from US citizens, that sounds fair to me, how about you? I can't see anything wrong or unsustainable with someone reaping benefits while contributing nothing... wink.gif


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Hawkssss
(Login Hawkssss)
Elite WAFF Vet Club

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 31 2012, 1:41 PM 

again Coalde is talking like an uneducated hillbilly...The US taxes all its citizens and permanent residents no matter where you work or live....The only way not to pay US tax is to relinquish your US citizenship and that will also subject you to an onerous exit tax the kind no other nation has...So the rich merely moving to other places doesn't change a thing....Go read a book, hillbilly and stop pretending to be Americans...lol

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E7
(Login E7)
Elite WAFF Vet Club

...

December 31 2012, 2:58 PM 

Raising taxes in this struggling Western economy, is like trying to get blood from a stone. Tax decreases encourages entrepreneurship, which creates jobs, and in turn, increased tax revenue.

---------------------------------------------

[linked image]

"Is there any kind of anti animal/eagle radar or missile systems?" - Tezel

 
 

Coalde
(Login coalde_one)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 31 2012, 5:51 PM 

"again Coalde is talking like an uneducated hillbilly...The US taxes all its citizens and permanent residents no matter where you work or live....The only way not to pay US tax is to relinquish your US citizenship and that will also subject you to an onerous exit tax the kind no other nation has...So the rich merely moving to other places doesn't change a thing....Go read a book, hillbilly and stop pretending to be Americans...lol"

Yes I suppose if you are an idiot and your tax accountant and lawyer have no idea how to shield your money from the IRS your statement would be true.

I can assure you that there are many ways to move money around in a series of international shell holding companies so that the IRS will never see a penny. This is why most billionaires in the USA pay a lower percentage of their income than those earning $50k do...if you don't believe me go ask Warren Buffet...

http://tusb.stanford.edu/2007/07/warren_buffet_has_a_lower_tax.html

...the US tax system has been systematically undermined so that the super rich can fly their through the loopholes that their bought and for Congressmen have created for them.

You know Hawksss, I am very sorry for your clients that your understanding of how to get around government regulations to their maximum benefit is entirely non-existent. I am also very sorry that I proved you to be entirely clueless about how the world of modern business works in this thread...

Important Read: Chinese Takeover of British Columbia

...perhaps if you stopped pretending you had the slightest clue about how the world, that is now almost entirely run by sociopaths, actually operates then I would not have to embarrass you so.


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Coalde
(Login coalde_one)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

December 31 2012, 5:58 PM 

"Raising taxes in this struggling Western economy, is like trying to get blood from a stone. Tax decreases encourages entrepreneurship, which creates jobs, and in turn, increased tax revenue. "

The fact of the matter is that jobs are not being created in this "recovery"...

[linked image]

...I really hope that graph "hockey sticks" in the next few months, but that seems unlikely as the billions in taxpayer dollars that were given to the banking sector in 2008/2009 are not being used to issue additional loans to small and medium business to expand, but are instead being used to buy both US and other government/large company bonds (both US and foreign) to pad bank profits (which hit another record this year).


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E7
(Login E7)
Elite WAFF Vet Club

...

December 31 2012, 6:05 PM 

They're "too big to fail"... So now the American tax payer is stuck paying the trillions in banker bail outs, while the same banks turn around and foreclose on the homes of the very people who just bailed them out. When is the planet going to stop spinning? I want to get off.

---------------------------------------------

[linked image]

"Is there any kind of anti animal/eagle radar or missile systems?" - Tezel

 
 
Hawkssss
(Login Hawkssss)
Elite WAFF Vet Club

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

January 1 2013, 1:51 AM 

lol, canadians criticising the USA while pretending to be americans...lol Lack of confidence and self identity at its best..lol

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[linked image]

 
 

Coalde
(Login coalde_one)

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

January 1 2013, 2:35 AM 

"lol, canadians criticising the USA while pretending to be americans..."

Where did E or myself ever pretend to be Americans? Please point it out to me.

You know Hawksss, just because you pretend to be Chinese, and pretend to be some business person (while failing to know the slightest thing about modern business...I am guessing your grandpa told you everything...and how government rules are mostly suggestions these days) despite not actually having ever been there, doesn't mean the rest of WAFF is as big a loser as you are.

...just thought I'd point that out to you.



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E7
(Login E7)
Elite WAFF Vet Club

Re: Sorry, Folks, We Don't Just Have 'A Spending Problem'

January 1 2013, 1:31 PM 

How can I be American.. I thought I was an Indian half breed lol.. wink.gif

---------------------------------------------

[linked image]

"Is there any kind of anti animal/eagle radar or missile systems?" - Tezel

 
 
 
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