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Old Nov 10, 2012, 02:51 PM   #1
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The fiscal cliff

Now that the election is over, it is time to get down to business. As in, passing a federal budget, setting tax rates, setting a fiscal policy for the next few years, and addressing the long-term Medicare/healthcare cost problem that is not going away by itself.

Before the election, there was a good collection of charts in a previous mcrain post in the "All Things Mitt" thread, but, I'm not sure how to drag all those references over here. Here is the pointer:

http://forums.macrumors.com/showpost...&postcount=309

There are other things to think about also. For example, the Debt-to-GDP ratio was worse post WWII, and yet, was mostly paid off by 15 years later.





There is also a lot of concern about the private debt to gdp ratio. Starting with how to define it, and, what to worry about:



http://www.businessinsider.com/2009/...nd-meaningless


In the end, the U.S. needs a policy and a budget.
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Old Nov 10, 2012, 09:04 PM   #2
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This is problematic because you have democrats that want to increase taxes versus republicans who want to cut government programs...neither, on their own, adds up, and neither are really willing to compromise.

The reality of the national debt is that it is so large that both massive spending cuts (all around) and an increase in taxes are the only ways to get out of debt...and even then, it is a slow process. As it stands now, there is $130,000 of debt for every taxpayer in the US...that is such big money that it is hard to imagine. China and Japan BOTH own more US debt than Americans own...

Neither political party has shown anywhere near what will be needed to do something serious about the debt, and that may be partially because citizens do not want to deal with it. It will require sacrifice on all ends. A balanced budget is one thing, but a balanced budget still doesn't pay off existing debt unless you are bringing in a surplus, and a big one at that. Paying more, getting less, delaying gratification, shaping policy with more emphasis on efficiency, and more emphasis on program assessment and management. It is going to suck for everyone. But the alternative sucks even more, which is a continued decrease in American economic capability and a dollar with increasingly less value. And it is at a breaking point.
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Old Nov 11, 2012, 12:25 AM   #3
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This is problematic because you have democrats that want to increase taxes versus republicans who want to cut government programs...neither, on their own, adds up, and neither are really willing to compromise.
We don't know if they will be willing to compromise or not in the end. We do know that Boehner has been willing in the past, but, he isn't going to try it without the visible public support of people like Cantor and Paul Ryan.

Quote:
The reality of the national debt is that it is so large that both massive spending cuts (all around) and an increase in taxes are the only ways to get out of debt...and even then, it is a slow process. As it stands now, there is $130,000 of debt for every taxpayer in the US...that is such big money that it is hard to imagine. China and Japan BOTH own more US debt than Americans own...
The debt ratio was worse at the end of WWII, and yet, the debt was mostly paid off after 15 years. The way they did it was simple: raise taxes on consumption.

Quote:
Neither political party has shown anywhere near what will be needed to do something serious about the debt, and that may be partially because citizens do not want to deal with it. It will require sacrifice on all ends. A balanced budget is one thing, but a balanced budget still doesn't pay off existing debt unless you are bringing in a surplus, and a big one at that. Paying more,
Actually, this is a misconception. There were a few surpluses from 1946-1970, and yet the debt-GDP ratio dropped steadily. The only surplus that I remember was around 1968 under LBJ when there was an income tax surcharge to reduce inflationary pressure and help pay for Vietnam. I think that was the last surplus until Clinton ran surpluses starting in 1997. Most years there were modest deficits, and yet the economy grew out of debt in spite of the small deficits.

Quote:
getting less, delaying gratification, shaping policy with more emphasis on efficiency, and more emphasis on program assessment and management. It is going to suck for everyone. But the alternative sucks even more, which is a continued decrease in American economic capability and a dollar with increasingly less value. And it is at a breaking point.
I agree that it is time to do something. Whatever is done should be phased in gradually so it doesn't create a big shock. I think modest tax increases and spending cuts could put the U.S. back on track for the next 15 years. Here are some helpful graphs:



Thumb resize.


Last edited by balamw; Nov 12, 2012 at 09:34 AM. Reason: missing / - TIMG
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Old Nov 11, 2012, 04:24 AM   #4
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We should go over the fiscal cliff and let the bush tax cuts expire. Then congress can pass the senate's middle class tax cut bill that cuts taxes for everyone making under $250,000 a year.

The spending cuts for sequestration don't take effect on January 1st. They're rolled out over several months. President Obama can delay them by executive order or a bill can be passed that will set more reasonable spending cuts.

By letting the Bush tax cuts expire Republicans don't have to break their no raising taxes pledge. When they pass the senate bill for the middle class, they'll be "cutting taxes", not raising them. Done. Everyone is happy.

The scary fiscal cliff is media hype and Republican spin to make it seem like we'll go crashing back into a recession on January 1st if nothing is done. Republicans just don't want the rates on the rich to go up. They know President Obama can sit on his hands and do nothing and get the tax rate he wants.

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Old Nov 11, 2012, 11:01 PM   #5
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Originally Posted by jnpy!$4g3cwk View Post
We don't know if they will be willing to compromise or not in the end. We do know that Boehner has been willing in the past, but, he isn't going to try it without the visible public support of people like Cantor and Paul Ryan.

The debt ratio was worse at the end of WWII, and yet, the debt was mostly paid off after 15 years. The way they did it was simple: raise taxes on consumption.

Actually, this is a misconception. There were a few surpluses from 1946-1970, and yet the debt-GDP ratio dropped steadily. The only surplus that I remember was around 1968 under LBJ when there was an income tax surcharge to reduce inflationary pressure and help pay for Vietnam. I think that was the last surplus until Clinton ran surpluses starting in 1997. Most years there were modest deficits, and yet the economy grew out of debt in spite of the small deficits.

I agree that it is time to do something. Whatever is done should be phased in gradually so it doesn't create a big shock. I think modest tax increases and spending cuts could put the U.S. back on track for the next 15 years. Here are some helpful graphs:

Image

Image

Image
Thus far, no one has compromised, or at least at a large enough scale to successfully do anything. As our politicians drag our feet, we go billions and billions more into debt. It does seem like Boehner and Obama are trying, but thus far, Congress and other interests have seemed to overwrite the issue. Bush and Congress made the deficit worse and Obama and Congress have continued the trend. And I honestly don't believe Romney would do any better of a job in regards to reducing the deficit.

The surplus that Clinton brought was a great start, but if you look at the level of surplus relative to the debt, it was a small surplus.

The only way to get out of debt is through sweeping spending cuts and tax increases. And these tax increases wouldn't be buying more government programs, but paying off previous government expenditures...some of which were purchased before we were born. Sweeping spending cuts means everything from the military to entitlement programs. It means ending certain 'luxury' programs that can result in harder times for citizens. It could mean a drastic reduction in subsidized student loans. And it means stopping the global policing as military operations are stupidly expensive as we simply do not have the money. The current figure is so high that there is not an alternative, and there is no data on previous debt consolidation plans at this level of magnitude. The problem is no one wants to hear any of that, and so it's been the horse on the dining room table. We aren't going to get out of debt until we all bite the bullet and sacrifice things. All of us, without exception.
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Old Nov 12, 2012, 08:19 AM   #6
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Comparing today's debt (caused by massive burdensome entitlement spending as well as unnecessary defense spending) to the debt of WWII (caused by war spending) is patently ridiculous. The primary reason is what saved us after WWII was not increased taxes... it was the fact that every other major world power was completely decimated by the war and we were perfectly aligned to capitalize on this fact through our advanced manufacturing facilities and business climate.

If you think raising taxes can come anywhere close to solving a 16T debt plus 116T more in unfunded liabilities, you're loony. You might as well try to put out the next California forest fire with a garden hose.

Government revenues in this country are astronomical. Much of our citizenry is taxed over 50% of their wealth already if you combine Federal, state, local, business (price of goods), etc.
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Old Nov 12, 2012, 09:01 AM   #7
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The answer to the issue is devastatingly simple, and can be expressed in terms of the necessary sacrifices each party must be willing to make:

Democrats must agree to scale back spending on social programs - even the ones we don't want to touch.

Republicans need to abandon the lunacy of the Grover Norquist "pledge" and agree to tax increases.

That's it. We need to raise revenue and cut spending. That is only solution that's going to work. It is unpalatable for everyone however, and as a result congress will dither over this as long as possible.
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Old Nov 12, 2012, 09:22 AM   #8
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Originally Posted by Coleman2010 View Post
We should go over the fiscal cliff and let the bush tax cuts expire. Then congress can pass the senate's middle class tax cut bill that cuts taxes for everyone making under $250,000 a year.
Yeah, this. The CBO says going "off the cliff" will "cause employment to decline and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013. After next year ... economic growth will pick up, and the labor market will strengthen, returning output to its potential level (reflecting a high rate of use of labor and capital) and shrinking the unemployment rate to 5.5 percent by 2018."

http://www.cbo.gov/publication/43694

It's going to be **** in the short term, but better long term.

Hold on to yer butts!
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Old Nov 12, 2012, 09:27 AM   #9
classicaliberal
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Originally Posted by Lord Blackadder View Post
The answer to the issue is devastatingly simple, and can be expressed in terms of the necessary sacrifices each party must be willing to make:

Democrats must agree to scale back spending on social programs - even the ones we don't want to touch.

Republicans need to abandon the lunacy of the Grover Norquist "pledge" and agree to tax increases.

That's it. We need to raise revenue and cut spending. That is only solution that's going to work. It is unpalatable for everyone however, and as a result congress will dither over this as long as possible.
The problem is that any agreement which raises our already high taxation structure, furthers the insane backwards notion that what we have is a revenue problem, and not a spending problem.

If the last 100 years have taught us nothing else, it's that regardless of the top marginal tax rate, tax revenues to the government are stable at between 15-20% of GDP.



Our economy can only handle so many dollars being extracted towards the government. You can raise taxes all you want and all you're going to do is stifle the economy resulting in tax revenues roughly equivalent to where you started!

Our problem is spending. The Dems need to give in big on entitlements, the Repubs need to give in big on defense. The entire government needs to be shrunk down to size and we all need to learn to live within our means. It's not complicated. Stop using credit cards, start paying your bills, stop buying things you can't afford. Stop being a nanny state, and start valuing freedom/liberty. Simple equation for a free and prosperous state.
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Old Nov 12, 2012, 11:13 AM   #10
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There is a problem with this that precedes political or economic beliefs and that is the naming of this issue. It's not a fiscal cliff, it's a set of automatic austerity measures.

The conversation being framed around this impeding cliff is causing all sorts of unnecessary responses and problems.
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Old Nov 12, 2012, 11:54 AM   #11
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Originally Posted by classicaliberal View Post
If you think raising taxes can come anywhere close to solving a 16T debt plus 116T more in unfunded liabilities, you're loony. You might as well try to put out the next California forest fire with a garden hose.

Government revenues in this country are astronomical. Much of our citizenry is taxed over 50% of their wealth already if you combine Federal, state, local, business (price of goods), etc.
Raised taxes alone will not pay off the $140,000 that each taxpayer owes. Again, the ONLY way to pay off this debt is a combo of taxes AND massive spending cuts. When I say massive, I'm not talking about what the clowns in DC are currently doing...the majority of most republicans and most democrats have proven themselves to be fiscally reckless. The current Budget Control Act is a joke. The 2013 budget alone is almost $1 trillion in the hole which offsets virtually all of the savings proposed over the next decade. While I disagree with many ideological stances of the Tea Party, the point they make in which government spending is out of control is undeniably true. IMO terrorism is nowhere near a big of threat as the national debt, and still most people don't seem to recognize how serious it is. If we are committed to reviving the economy, then this has to be a central point. Investors will hesitate in any US interests given the ability for the US to not default on their debt is somewhat in question.

----------

Quote:
Originally Posted by Lord Blackadder View Post
The answer to the issue is devastatingly simple, and can be expressed in terms of the necessary sacrifices each party must be willing to make:

Democrats must agree to scale back spending on social programs - even the ones we don't want to touch.

Republicans need to abandon the lunacy of the Grover Norquist "pledge" and agree to tax increases.

That's it. We need to raise revenue and cut spending. That is only solution that's going to work. It is unpalatable for everyone however, and as a result congress will dither over this as long as possible.
Agreed. There is no other alternative.
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Old Nov 12, 2012, 12:39 PM   #12
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Raised taxes alone will not pay off the $140,000 that each taxpayer owes. Again, the ONLY way to pay off this debt is a combo of taxes AND massive spending cuts. When I say massive, I'm not talking about what the clowns in DC are currently doing...the majority of most republicans and most democrats have proven themselves to be fiscally reckless. The current Budget Control Act is a joke. The 2013 budget alone is almost $1 trillion in the hole which offsets virtually all of the savings proposed over the next decade.
We have to think this through carefully. The kind of "austerity" that causes massive layoffs will only push us into a Depression. Changes to the tax code are important, because to keep people working, you need to keep people investing, even when rates of return are relatively low.

Also, although a roughly "balanced budget" is a great idea, the details matter. If spending is not smoothed out year to year, government spending will only make economic cycles worse, not better.

Finally, I know I am being repetitive, but, there is no way that people will want to continue paying for our current insurance-based system in the long run-- people are living too long and the aged require too much healthcare. But, we aren't going to let people die in the streets. We have to find a way to deliver healthcare to the elderly more efficiently than we are now.

Quote:
While I disagree with many ideological stances of the Tea Party, the point they make in which government spending is out of control is undeniably true. IMO terrorism is nowhere near a big of threat as the national debt, and still most people don't seem to recognize how serious it is.
And yet, many "Tea Party" members are still much more committed to being anti-Obama than they are in solving the U.S. financial issues:

http://www.huffingtonpost.com/2012/1...n_2089280.html

http://www.star-telegram.com/2012/11...ial-wants.html

(discussion of raising taxes and cutting spending)
Quote:
If we are committed to reviving the economy, then this has to be a central point. Investors will hesitate in any US interests given the ability for the US to not default on their debt is somewhat in question.

:

Agreed. There is no other alternative.
Agreed. But I don't agree with the use of the word "massive". At least, I don't agree that it should be sudden. Every sudden, massive change, for whatever reason, results in expensive layoffs, unemployment, lost productivity, and generally makes things worse. I agree that we need a major, but gradual change. Major, but smooth. Not a sudden change that will cause many marginal small business employers to go out of business and lay off all their employees.
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Old Nov 12, 2012, 12:51 PM   #13
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Yeah, this. The CBO says going "off the cliff" will "cause employment to decline and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013. After next year ... economic growth will pick up, and the labor market will strengthen, returning output to its potential level (reflecting a high rate of use of labor and capital) and shrinking the unemployment rate to 5.5 percent by 2018."

http://www.cbo.gov/publication/43694

It's going to be **** in the short term, but better long term.

Hold on to yer butts!
A deal can be done on spending cuts before the 4th quarter of 2013. I do think we should "go over the cliff." It's the surest way to get around congressional Republicans opposition to raising taxes on their constituents. (The rich.)

1. Let the Bush tax cuts expire on January 1st.
2. Propose Obama middle class tax cuts.
3. Dare the GOP to obstruct or not to pass tax cuts for the middle class.
4. If they do Dems take back the house in 2014.
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Old Nov 12, 2012, 01:03 PM   #14
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We have to think this through carefully. The kind of "austerity" that causes massive layoffs will only push us into a Depression. Changes to the tax code are important, because to keep people working, you need to keep people investing, even when rates of return are relatively low.

Also, although a roughly "balanced budget" is a great idea, the details matter. If spending is not smoothed out year to year, government spending will only make economic cycles worse, not better.

Finally, I know I am being repetitive, but, there is no way that people will want to continue paying for our current insurance-based system in the long run-- people are living too long and the aged require too much healthcare. But, we aren't going to let people die in the streets. We have to find a way to deliver healthcare to the elderly more efficiently than we are now.



And yet, many "Tea Party" members are still much more committed to being anti-Obama than they are in solving the U.S. financial issues:

http://www.huffingtonpost.com/2012/1...n_2089280.html

http://www.star-telegram.com/2012/11...ial-wants.html

(discussion of raising taxes and cutting spending)


Agreed. But I don't agree with the use of the word "massive". At least, I don't agree that it should be sudden. Every sudden, massive change, for whatever reason, results in expensive layoffs, unemployment, lost productivity, and generally makes things worse. I agree that we need a major, but gradual change. Major, but smooth. Not a sudden change that will cause many marginal small business employers to go out of business and lay off all their employees.
There needs to be a drive for more efficient healthcare delivery...which I think is possible. Indeed we shouldn't go overboard with taxes to hurt middle class people and small businesses, which is why we also need large spending cuts. Perhaps it should be phased, but whether it is phased or sudden, it will have to be a large amount based on how much is due. And almost certainly, a substantial portion of that reduction will need to be defense spending as defense spending is between a fifth and quarter of the entire budget. And the Tea Party's obsession with bashing Obama rather than solving financial issues is why I said I only agree with that small part of their ideology...in practice, theyve shown themselves to be incapable of the team work needed to tackle the issue at hand.
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Old Nov 12, 2012, 01:43 PM   #15
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Raised taxes alone will not pay off the $140,000 that each taxpayer owes. Again, the ONLY way to pay off this debt is a combo of taxes AND massive spending cuts. When I say massive, I'm not talking about what the clowns in DC are currently doing...the majority of most republicans and most democrats have proven themselves to be fiscally reckless. The current Budget Control Act is a joke. The 2013 budget alone is almost $1 trillion in the hole which offsets virtually all of the savings proposed over the next decade. While I disagree with many ideological stances of the Tea Party, the point they make in which government spending is out of control is undeniably true. IMO terrorism is nowhere near a big of threat as the national debt, and still most people don't seem to recognize how serious it is. If we are committed to reviving the economy, then this has to be a central point. Investors will hesitate in any US interests given the ability for the US to not default on their debt is somewhat in question.
I think you know perfectly well that you wouldn't actually have to raise taxes a dime in order to pay off the debt. Massive spending cuts could certainly do it alone... in fact, you could actually reduce taxes significantly. We as a people would simply have to agree that the role of the government isn't to take care of us from cradle to grave. We'd have to realize that we can't police the world. We'd have to redefine the role of government. Growth is also key, a pro-business pro-entrepreneurship, low-regulation business climate.

Our tax receipts are tremendous as it is, as I said earlier... much of the population is already taxed upwards of 50% already! This isn't a tax problem or a revenue problem. We have a spending problem, and we need to come to terms with that.
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Old Nov 12, 2012, 05:36 PM   #16
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I think you know perfectly well that you wouldn't actually have to raise taxes a dime in order to pay off the debt. Massive spending cuts could certainly do it alone... in fact, you could actually reduce taxes significantly. We as a people would simply have to agree that the role of the government isn't to take care of us from cradle to grave. We'd have to realize that we can't police the world. We'd have to redefine the role of government. Growth is also key, a pro-business pro-entrepreneurship, low-regulation business climate.

Our tax receipts are tremendous as it is, as I said earlier... much of the population is already taxed upwards of 50% already! This isn't a tax problem or a revenue problem. We have a spending problem, and we need to come to terms with that.
Look at the physical figures. Every politician wants to argue we can get out of debt by slashing spending only or increasing taxes only...but the physical math doesn't add up. We absolutely have a spending problem. We have such a spending problem that people are paying 50%+ of their income. And I don't think that is right, but at the current point in time, we are in so much debt there isn't an alternative. Current government income is tremendous and should be plenty more than needed...but current income is not enough to pay current expenses and pay off that debt bill. If we are getting out of debt, it's happening by slashes and taxes, unless you want to cut the infrastructure of the US to nothing...things like water purification, food and drug oversight, wastewater treatment, protection, etc. are things that really can only be cut so much. We need to pay off what we owe and then take a drastically different approach to how we budget. Line item budgeting/PPBS has failed.
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Old Nov 12, 2012, 06:34 PM   #17
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Look at the physical figures. Every politician wants to argue we can get out of debt by slashing spending only or increasing taxes only...but the physical math doesn't add up. We absolutely have a spending problem. We have such a spending problem that people are paying 50%+ of their income. And I don't think that is right, but at the current point in time, we are in so much debt there isn't an alternative. Current government income is tremendous and should be plenty more than needed...but current income is not enough to pay current expenses and pay off that debt bill. If we are getting out of debt, it's happening by slashes and taxes, unless you want to cut the infrastructure of the US to nothing...things like water purification, food and drug oversight, wastewater treatment, protection, etc. are things that really can only be cut so much. We need to pay off what we owe and then take a drastically different approach to how we budget. Line item budgeting/PPBS has failed.
we have a spending and a revenue problem.

My problem with spending cuts only means the people at the bottom bare the brunt of the cuts. The people are not saying the rich take it all. They are saying we want shared pain. That means raising taxes and spending cuts.
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Old Nov 12, 2012, 07:07 PM   #18
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we have a spending and a revenue problem.
Yup. And we have another problem ... arrogance.

It keeps us from acknowledging that other countries are doing a better job governing their respective countries.

American exceptionalism is a delusion.
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Old Nov 12, 2012, 07:09 PM   #19
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The problem is that any agreement which raises our already high taxation structure, furthers the insane backwards notion that what we have is a revenue problem, and not a spending problem.

If the last 100 years have taught us nothing else, it's that regardless of the top marginal tax rate, tax revenues to the government are stable at between 15-20% of GDP.
A couple points, for the sake of argument:

The chart deals only with the relationship between overall revenue and the top marginal rate. There is a lot of data missing here when you're talking about 70 years of tax policy in a country the size of the US.

Plenty of Laffer Curve junkies appear to think the US can raise considerably more revenue than we are. A number of developed nations are already (and have been for decades) raising up to double the revenue (as a percentage of the GDP) as the US. I'm not advocating this per se, but the numbers you present are not as immutable as you suggest.

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Our economy can only handle so many dollars being extracted towards the government. You can raise taxes all you want and all you're going to do is stifle the economy resulting in tax revenues roughly equivalent to where you started!
"Extracted towards the government"...an interesting statement. Do you see tax revenue as simply going into an economic black hole? Tax revenue is used to accomplish things. While tax dollars can be wasted, tax revenue is not inherently waste. Supply-side economists and advocates of the "night watchman state" often all but imply the latter, and that is reckless.

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Originally Posted by classicaliberal View Post
Our problem is spending. The Dems need to give in big on entitlements, the Repubs need to give in big on defense. The entire government needs to be shrunk down to size and we all need to learn to live within our means. It's not complicated. Stop using credit cards, start paying your bills, stop buying things you can't afford. Stop being a nanny state, and start valuing freedom/liberty. Simple equation for a free and prosperous state.
You begin with some reasonable arguments but then indulge in some very fuzzy language that muddies the waters. Entitlements and defense need to be cut. But shrunk down "to size"? What size? I have a problem with your linking of low tax rates to eventual prosperity, because it is predicated on a shrinking of government to a size that I suspect is too small to protect "freedom/liberty". The free market does not inherently protect freedom in the socio-political sense. It merely provides everyone with the theoretical freedom to economically dominate others and become wealthy.

Next up...Nanny State? There's no metric for measuring that, it's an emotional colloquialism, and a completely subjective one at that. Obviously you think we're already living in one, but just as obviously that's because you see little value in what your tax dollars are buying or may buy. But the polls show a sharp and narrow division of opinion on that topic.

Finally, "valuing freedom/liberty". That's a humdinger. You can't put a price (in the form of your preferred marginal tax rate) on liberty. But some supply-side economists try to, while forgetting that freedom and liberty are not just expressed in the economic sense. Social justice is not effectively quantifiable in economic terms, which is where economic-heavy theories of government fall down...the human factor is, after all the most important. Governments exist to serve the people, not the economy, first. The two are closely related in many ways, but the rights of people are not automatically protected just because an economy is humming along. And social justice can be expensive.

We should not be seeking to create the most finely tuned, free-market economy in the world above all else. With that being said, we are going to have to make some difficult choices in regards to spending. Both conservatives and liberals are going to have to sacrifice some sacred cows on the altar of greater fiscal responsibility - while also allowing their political opponents to continue to fund some of the programs that they wish to cut. NPR and Medicare isn't going to die, just as the F-35 program will not be killed. That's compromise.

In the end though, I question whether your simple equation for prosperity is simply too simple for a state the size of the US in the context of the modern world.

Quote:
Originally Posted by classicaliberal
We as a people would simply have to agree that the role of the government isn't to take care of us from cradle to grave.
Not even the most absurd fringe political candidates have ever suggested this as a role for our government. It is a statement calculated to slander political opponents and frighten receptive idiots.
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Old Nov 13, 2012, 12:41 AM   #20
Vanilla Ice
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I found a pretty good article about the Fiscal Cliff. I believe the GOP will pass a budget before Jan 1st.

http://nymag.com/daily/intel/2012/11...cal-cliff.html

Quote:
You’re probably hearing a lot about this “fiscal cliff” thing nowadays. But unless you live in DC, work on Wall Street, or sleep with a copy of Pete Peterson’s autobiography tucked under your pillow, it’s possible that you have have no idea why everyone is freaking out.

Luckily, your ignorance can be cured. By learning some rudimentary facts about the fiscal cliff, you’ll be able to pontificate on today’s political and economic landscape like a pro, and you’ll have ammo to impress your friends at cocktail parties between now and the New Year.

In that spirit, we present our Absolute Moron’s Guide to the Fiscal Cliff.

<SNIP>
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Old Nov 13, 2012, 12:48 AM   #21
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Senator Patty Murray wants us to fall off that cliff to drive the point of reality home to the Republican Party and I tell you what. If that side doesn't radically change its political stance I would say do it.

They got spanked in the election. The people sent a strong message to Washington .

That was the majority do not want congress slashing and burning social programs. Period.
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Old Nov 13, 2012, 03:48 AM   #22
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Senator Patty Murray wants us to fall off that cliff to drive the point of reality home to the Republican Party and I tell you what. If that side doesn't radically change its political stance I would say do it.

They got spanked in the election. The people sent a strong message to Washington .

That was the majority do not want congress slashing and burning social programs. Period.
What a shock, the majority voted for the politicians who promise them more of the programs we already can't afford.
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Old Nov 13, 2012, 07:05 AM   #23
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Quote:
Originally Posted by Peace View Post
Senator Patty Murray wants us to fall off that cliff to drive the point of reality home to the Republican Party and I tell you what. If that side doesn't radically change its political stance I would say do it.

They got spanked in the election. The people sent a strong message to Washington .

That was the majority do not want congress slashing and burning social programs. Period.
Umm...I'm pretty sure there is still a lot of disagreement here...
http://en.wikipedia.org/wiki/United_...lections,_2010

And I hope the majority realizes that we have no choice to slash social programs. Burn them? No, it would be preposterous to leave people who need help in the dark. But we cannot afford the track we are currently on, unless we plan to sell parts of the US to China and Japan. So change is going to have to occur and as I previously said, it means everyone making sacrifices. But the reality is that falls upon deaf ears to all of the people in DC of all political affiliations...it has for decades and it will continue to. The 2013 budget is nearly a trillion bucks in the hole...a trillion dollars...one year alone
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Old Nov 13, 2012, 08:31 AM   #24
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Originally Posted by Lord Blackadder View Post
A couple points, for the sake of argument:

The chart deals only with the relationship between overall revenue and the top marginal rate. There is a lot of data missing here when you're talking about 70 years of tax policy in a country the size of the US.

Plenty of Laffer Curve junkies appear to think the US can raise considerably more revenue than we are. A number of developed nations are already (and have been for decades) raising up to double the revenue (as a percentage of the GDP) as the US. I'm not advocating this per se, but the numbers you present are not as immutable as you suggest.
There are a lot of missing information in any chart. The role of a chart is to provide consolidated data allowing the observer to draw their own conclusions taking into consideration the data which is made available and the data which is not. Looking at one chart and considering it immutable is a mistake under any circumstance.

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"Extracted towards the government"...an interesting statement. Do you see tax revenue as simply going into an economic black hole? Tax revenue is used to accomplish things. While tax dollars can be wasted, tax revenue is not inherently waste. Supply-side economists and advocates of the "night watchman state" often all but imply the latter, and that is reckless.
"Extracted":
Remove or take out, esp. by effort or force.
Obtain (something such as money or an admission) from someone in the face of initial unwillingness.

By definition, it's extracted. Anyway, moving on... regarding tax revenue being used to accomplish things. You're exactly right, but there is an important distinction beyond just the coercive nature of taxation in that any value that government creates, it must first take wealth/value from the private sector in order for such things to take place. In the private sector, this is not the case.

The private sector builds wealth because it creates wealth where there once wasn't any. A mutual agreement by two parties, labor by an individual, whatever it is, they can start from nothing or almost nothing and create incredible wealth for society. Government on the other hand can create valuable things too... but it must first confiscate said wealth from private citizens. No one is suggesting government can't provide things of value, but understanding how that value is provided and where the resources come from, and the subsequent OPPORTUNITY COST, is a essential thing to understand.

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Originally Posted by Lord Blackadder View Post
You begin with some reasonable arguments but then indulge in some very fuzzy language that muddies the waters. Entitlements and defense need to be cut. But shrunk down "to size"? What size? I have a problem with your linking of low tax rates to eventual prosperity, because it is predicated on a shrinking of government to a size that I suspect is too small to protect "freedom/liberty". The free market does not inherently protect freedom in the socio-political sense. It merely provides everyone with the theoretical freedom to economically dominate others and become wealthy.
Shrunk down to what size? Smaller. Closer to what's defined in Article 1 Section 8 of the constitution.
As for freedom/liberty, based on the language you're using, I'm guessing we probably have different definitions of those words, likely split between ideas of collectivism vs. individualism. It's doubtful we'll ever come to an agreement in that regard, but I would say that the idea that government can somehow provide more freedom by forcefully taking assets from one group to provide for another is on it's face hypocritical and intellectually bankrupt.

Quote:
Originally Posted by Lord Blackadder View Post
Next up...Nanny State? There's no metric for measuring that, it's an emotional colloquialism, and a completely subjective one at that. Obviously you think we're already living in one, but just as obviously that's because you see little value in what your tax dollars are buying or may buy. But the polls show a sharp and narrow division of opinion on that topic.
A government which outlaws private charity, making it the sole provider of giving is without a doubt a nanny state. Especially when it's the same government that doesn't let me drink a large soda, or passes laws like the Patriot Act. I can't imagine many honest people see the term nanny state much differently... it's just that some (many actually, as you pointed out) are willing to accept the nanny state for a real or perceived benefit to their collectivist society.

Quote:
Originally Posted by Lord Blackadder View Post
Finally, "valuing freedom/liberty". That's a humdinger. You can't put a price (in the form of your preferred marginal tax rate) on liberty. But some supply-side economists try to, while forgetting that freedom and liberty are not just expressed in the economic sense. Social justice is not effectively quantifiable in economic terms, which is where economic-heavy theories of government fall down...the human factor is, after all the most important. Governments exist to serve the people, not the economy, first. The two are closely related in many ways, but the rights of people are not automatically protected just because an economy is humming along. And social justice can be expensive.

We should not be seeking to create the most finely tuned, free-market economy in the world above all else. With that being said, we are going to have to make some difficult choices in regards to spending. Both conservatives and liberals are going to have to sacrifice some sacred cows on the altar of greater fiscal responsibility - while also allowing their political opponents to continue to fund some of the programs that they wish to cut. NPR and Medicare isn't going to die, just as the F-35 program will not be killed. That's compromise.

In the end though, I question whether your simple equation for prosperity is simply too simple for a state the size of the US in the context of the modern world.
Social justice is a disgusting word. It implies that every human is born with a right to someone else's property, and that we're all entitled to eachother's wealth... we're all entitled to equal RESULTS, not equal OPPORTUNITY. It's communist/socialist at it's core IMHO, although some people try and walk the tight rope between some form of free-market and social justice...

You're dead right when it comes to both sides needing to give up their sacred cows, and you're dead right that usually the so-called 'compromise' that the Republicans and Democrats end up reaching is to sacrifice nothing and kick the can down the road.

I grant that my simple equation is too simple - it's designed to make a point, not be an implementable plan w/ actual policies to implement. I'm not a policy wonk and I'm not a congressman, but philosophies and core beliefs are where all good change originates... it's where policies are born, so I fail to see the problem with beginning with a simple equation to get the ball rolling. I'm glad to talk policy if that's what people want to do.
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Old Nov 13, 2012, 11:46 AM   #25
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Quote:
Originally Posted by classicaliberal View Post
Massive spending cuts could certainly do it alone... in fact, you could actually reduce taxes significantly. ...

Our tax receipts are tremendous as it is, as I said earlier... much of the population is already taxed upwards of 50% already! This isn't a tax problem or a revenue problem. We have a spending problem, and we need to come to terms with that.
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Originally Posted by astrorider View Post
What a shock, the majority voted for the politicians who promise them more of the programs we already can't afford.
We can afford the programs we have if they are done effectively and efficiently. Someone making a billion dollars can afford to pay more taxes. We can easily manage a military that does what we need for a lot less.

What we can't do is have an entire political party hell-bent on destroying government and that complains about how government is ineffective and inefficient.

How much has our population grown since 1980? How many government employees manage more stuff/money/programs for that larger population?

{edit - 1980 - 227 million people - there were just shy of 5 million federal employees. 2010 - 307 million people with a total of 4.43 million federal employees. In other words, in 1980, there was one federal employee for each 45.4 people. In 2010, it is 68.2. In 1980, the government took in about 600 billion and spent about 678 billion. In 2010, we took in 2.1 trillion and spent 3.4.}

The majority didn't vote for the politicians who promised them more programs, they voted for politicians who were willing to make tough choices so that we could afford the types of effective and efficient programs that actually work.

Give it up right-wingers. Your fantasy tax arguments are nothing more than fantasy. You've had the better part of 30 years to prove you were right, and all you have done is take our country down the tubes.

Last edited by mcrain; Nov 13, 2012 at 11:53 AM.
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