Taxes and Spending

The Federal budget is in the red. Democrats propose to increase certain individual income tax rates in an effort to close the gap. Will it work? History says no. Look at the graph below. It shows that revenue from individual income taxes has been fairly constant no matter what the tax rate has been. That is because low tax rates provide incentive for individuals to generate more income which generates more tax revenue. Higher tax rates do the opposite. Apparently many members of Congress are ignorant of this fact.

tax-receipts

The federal government, with its “entitlement” programs, is committed to increased spending for social security, medicare, and medicaid. By some projections, the cost of those programs will exceed revenue from income tax in about 2052. What then?

spending

It is unlikely that Congress will significantly cut this “entitlement” spending. Their solution instead is more taxes. Perhaps that is why there is a great effort to impose a European-style value added tax (VAT). Such a tax would expand government and raise prices on almost everything we buy. It will transfer vast sums of money from productive use to wasteful government control.

The rational thing to do would be to cut spending, particularly in the realm of government healthcare, but that is probably politically impossible, especially with the current crop of Congress people. The problem will not go away if we ignore it. There are some hard choices to be made about all government spending. It is better to plan now and begin to make those choices rather than wait for even more drastic consequences to be forced upon us.

Advertisements

52 comments

  1. Jonathan, you do realize, don’t you, that posting something from the Heritage Foundation doesn’t really count as any more objection than my posting something from the International Socialist Review?

    It has the stink of Milton Friedman all over it. 

    1. You cite your sources, Left, we will cite ours, and we’ll let the readers decide which ones they respect most.  

      Where are your charts?  Can’t communists draw? 

      1. The graphs are cited as originating from the Heritage Foundation.  You and I both know what the HF is trying to sell. 

  2. “That is because low tax rates provide incentive for individuals to generate more income which generates more tax revenue”.

    This is not only a conclusion unsupported by the facts, but an outright lie.  This Chicago School fantasy has brought nothing but riches to a select few and misery for the many. 

    1. This is not only a conclusion unsupported by the facts, but an outright lie.  This Chicago School fantasy has brought nothing but riches to a select few and misery for the many. 

      And your facts to substantiate this are…

      1. And your facts to substantiate this are…

        The facts to support this are in the history of Latin America, specifically the histories of Chile, Argentina, Uruguay and Brazil; all countries where the Milton Friedman/Chicago school mantra of no trade barriers, privatization of national resources, eliminating social services and unfettered capitalism was forced on the people by military dictatorships that took power in coups engineered by the US and the CIA.  The result was hundreds of thousands tortured (with techniques learned from the CIA and the SOA), thousands murdered and disappeared, millions consigned to abject poverty while a select few individuals and a number of American corporations made billions.  

      2. Here’s a link to an article from The Nation by Orlando Letelier, later murdered by a Chilean Junta agent who entered the US with the complicity of the CIA.  In this article, he explains how the Friedman “Free Market” policies and the torture, repression and murder were not simply coincidental. 

        http://www.tni.org//archives/letelier-docs_thenation

      3. Wow…Milton Friedman sure made an impression on you, didn’t he?

        Did they teach you to talk like that in ideologue school?

        Fortunately for us, we here in the USA probably won’t have the same kind of experience here—unless the CIA is going to take over our local economies.  Seeing as we are the USA, we most likely won’t launch coups against ourselves…so there!  No need to worry, Left.

      4. Milton Friedman, like Ayn Rand, Ronald Reagan and Adam Smith, is on the Lefty “Most Despised Persons” list.

      5. Fortunately for us, we here in the USA probably won’t have the same kind of experience here—unless the CIA is going to take over our local economies.  Seeing as we are the USA, we most likely won’t launch coups against ourselves…so there!  No need to worry, Left.

        Aside from needing to take a look at your indifference to the suffering of others, you should also take a longer view of history, Don.  Every empire falls.  So shall this empire fall; sooner if your philosophy holds sway.

  3. It is unlikely that Congress will significantly cut this “entitlement” spending…but that is probably politically impossible, especially with the current crop of Congress people…
    We know what we have to change then. We change who is in Congress.

  4. Here’s some more tidbits for you:

    “In 1981, President Ronald Reagan again slashed taxes. Taxation fell from 19.6 percent of the economy that year to 17.4 percent in 1983. The unemployment rate, however, rose over that period, from 7.6 percent to 9.6 percent. By 1989, taxation had drifted upward again, to 18.3 percent of the economy, but unemployment had fallen to 5.3 percent.”
    “Total taxation in Sweden, including local taxes, is equal to 59.2 percent of that country’s economy, the highest level in the 27-member Organization for Economic Cooperation and Development. In contrast, the U.S. total tax burden is 30.6 percent, lowest among the OECD members. Yet unemployment for the past two years in Sweden has been considerably lower than U.S. levels.”

    excerpts from: http://www.reclaimdemocracy.org/…/tax_rates_unemployment_correlation

    The thing is, there are a multitude of other factors involved that the HF is very conveniently leaving out of their graphs; things like interest rates, trade policy, etc; a million little factors that effect revenue along with maximal tax rates.  What I am trying also to point out with the quotes above is that revenue, GDP, corporate earnings, balance of trade, etc, etc, should not be the measure of how economic policy is working.  Rather we should be looking at measures that relate to the welfare of the worker and their families.  Don’t believe the oft-repeated lie that “a rising tide lifts all boats”. 

    1. How do you plan to pay for all the benefits you want, Left?  There are only so many kulaks for you to rob and kill.

      Where do you plan to get the money?

      This ought to be good.

      1. Changing the subject, are we? 

        How do we pay for the all the benefits Halliburton, et al, receive?  The money spent in one week of pursuing the imperialist invasion of Iraq would provide health care for every American for a year.    There’s always been plenty of money around; it’s just very poorly distributed and very poorly used. 

      2. Changing the subject?  Ich?  Nein!

        IIRC, the subject of this post wasn’t a diatribe on “How US policy in Latin America displeases Leftfield.”  It was about the United States of America’s economic situation.

        I’m offering you a chance to add to the discussion Jonathan has started, on the subject he  apparently wishes to discuss.  We all know what topics you like to obsessively discuss.

      3. If you pay attention, you would know that the discussion about Latin America ties into Jonathan’s topic through Milton Friedman.  Milton Friedman is the guy behind all the baloney that the free marketeers promote including the discredited supply-side economics theory that low taxes are the key to prosperity for all. 

      4. You’re propagandizing here, and you know it.  (For all I know, you’ve been trained to do it.  If so, my congratulations to your handlers; they did their job well.)

        You’re welcome to convince us that what you say happened in Latin America, due to capitalism, is likely to happen here.  You can’t, and you and I know it.  What makes me confident is my firm belief that most of the readers of this site know it, too.

      5. That is not the point of my comment, but nonetheless: it doesn’t have to happen here to be a crime, Don; a crime committed by American agents acting at the behest of their corporate handlers.  It is a crime against humanity and this includes the people of this country.  This is why we bombed ITT after the coup in Chile.  It was a propaganda bombing intended to wake everyone up as to who was behind the murders and the torture and show the connection between neoliberal policy and murder. 

        You could be fairly accused of toeing the party line yourself, Don.  You don’t think your “handlers” in the military have influenced your thinking?   

      6. The money spent in one week of pursuing the imperialist invasion of Iraq would provide health care for every American for a year.

        Well Left, there’s the problem.  A majority of Americans supported the Iraq invasion, and even today a majority of Americans (and the officials theyelected) don’t support abandoning Iraq, if they feel it will leave the country vulnerable to chaos.

        I presume you disagree, but I’m confident you’re in the minority.  Majority rules in this country.  

        There’s always been plenty of money around; it’s just very poorly distributed and very poorly used. 

        If you had your own blog, you could lay out your case, convincingly and in detail, on what should be changed and why it should be changed.

        The fact that America has been a capitalist society for over 2 centuries—and you are a cartoon character with a fake name commenting on other people’s blogs—should make crystal clear that no one’s buying into your program. 

      7. There’s nothing in your sacred constitution about capitalism, Don. 

        The majority of people were lied to about the “imminent threat” posed by Saddam in order to build support for an unjust war whose purpose had nothing to do with bringing “Freedom and Democracy” to the people of Iraq. 
        And I would say that Iraq is currently in a state of chaos, unless daily explosions are also just a “cost of doing business”. 

      8. MY sacred constitution?  Well…yes, Left, I do think the United States Consitution is “sacred.”  People of free will came together and built a country that’s benefited the whole world.

        What…it’s not YOUR Constitution?  Care to clarify?

        Something tells me, Left, that you like living in America, taking advantage of its many benefits—while throwing rocks at it from the safety of the freedoms it provides you.

      9. Yes, I like the constitution, Don.  Believe it or not, there are quite a number of things about America that I have a very positive view of.  To take one example, I think we have benefitted greatly becuase Old George Washington had the wisdom and foresight to peacefully cede power at the end of his term as president.  He could have easily, and with public support, decided to become a de facto king, at which point the whole experiment would have been over and done. 

        Unfortunately, in many cases we have quite impressive democratic forms, but undemocratic function.  Nothing in the constitution about endless war or allowing corporations to pervert democracy.  These are the things you stand for, and the things we must fight against to preserve what little democracy we have left.   

      10. Left, you have as much opportunity as I do to convince the American electorate to go along with your ideas.

        You could blog openly.  You could look for like-minded folks to get politically active.  You could do the things that are necessary to really make a difference, make a change in this country.

        But that would require you to stop being a crank, clothed in the safety of digital anonymity.

        Spare me your concerns about the oogedy-boogedy right chasing you down.  You flatter yourself if you think the Tucson Tea Party, led by Karl Rove and Sarah Palin, would actually trouble themselves to hunt you down.

        I think you’re using the specter of the oogedy-boogedy Old Pueblo Right as an excuse to stay clothed in digital anonymity.

        Tell you what:  If you want, I will go to Mark Evans and Ryn Gargiulski and urge them to make an exception to the TC.com requirement that all bloggers identify themselves.  IMO you’ve clearly earned an exception to that policy, through your obsession with…er, devotion to, this site.

        You say the word, and I will contact Mark and Ryn directly, urging them to let you blog in anonymity, as “Leftfield”.  I’ll urge them to let you keep your cartoon face and use only your fake name.

        You don’t have to blog often; blog when you can. 

        It would be worth it, to see you try and make your case.  Instead of throwing rocks and making snide comments at everyone else.

        Are you up for it?

      11. I’m either having trouble with the website or my comments this morning are going to Jonathan’s junk mail.  This is a test posting.

      12. Once again, a reply to your post above, Don, has disappeared.  I will try again later.

  5. FDR’s proposed Second Bill of Rights:

    The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
    The right to earn enough to provide adequate food and clothing and recreation;
    The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
    The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
    The right of every family to a decent home;
    The right to adequate medical care and the opportunity to achieve and enjoy good health;
    The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
    The right to a good education.

  6. FDR’s second bill of rights may sound good and they represent something we all strive for. However, by stating that many of those desirables are “rights” implies a coercive and non-voluntary obligation on someone else to provide those things.
    To paraphrase Margaret Thatcher: The trouble with socialism is that eventually you run out of other people’s money.

    1. You know, that reminds me that I forgot to include old Mags on my list of the most despised, while FDR has to be on the list of most admired.  Margaret Thatcher was another Friedman devotee and she used the Falklands crisis and the resultant whipped-up fervent nationalism as an opportunity to do just what the juntas in Latin America did, much to the detriment of the workers in England and much to the benefit of the wealthy.  

      You’re right, there is nothing voluntary about your obligations as a human being.  As to running out of money, why are we never “out of money” when it comes to invading other countries to expand the empire?

      1.  why are we never “out of money” when it comes to invading other countries to expand the empire?

        Now Left, who’s trying to change the subject?

        Is this a trick they teach you in propagandist school?

      2. Jonathan’s point is that the bill of rights proposed by FDR is socialistic and unsustainable due to costs.  My point is as above-there’s always plenty of money for war, but when it comes to social services, you guys always plead poverty. 

  7. From the article referred to above by Leftfield , the author, Orlando Letelier, sums up the Chilean situation: “While the Chicago boys have provided an appearance of technical respectability to the laissez-faire dreams and political greed of the old landowning oligarchy and upper bourgeoisie of monopolists and financial speculators, the military has applied the brutal force required to achieve those goals.” In other words, a coercive government dictatorship provided the means for the repression and inequities.

    1. I’m glad you read the article, Jonathan, but the point of Letelier’s piece is that the repression, the torture,the murders and the economic policies are not coincidental, separate and non-related, but rather two sides of the same coin.  This argument you present was also trotted out by Kissinger and other admirers of Friedman’s theories at the time.  That the depredations are part and parcel of free market economics is explained at greater length in Naomi Klein’s “The Shock Doctrine”.   

      1. Yes Left, but Jonathan’s piece here is on economic conditions in the United States of America.

        You’re welcome to try to convince the rest of us that what happened in Latin America* might happen here.

        I’m sure you believe it…and I’m equally sure that you’ll be utterly unable to convince a majority of Americans—excuse me, North Americans—-to adopt your views on economic policy…whatever those might be. 

        *assuming it happened the way you described it—and I doubt that anyone (besides “Democracy Now” viewers) considers your perspective on Latin America to be in any way objective. 

      2. Then I’ve not explained myself clearly.  I do not believe what happened in Latin America is likely to happen here.  But, I do believe that the free marketeers and the right wing in general would prefer that such a state could be established here and I do believe that, unrestrained, the right wing would go about rounding up intellectuals, artists, left-wingers, homosexuals, muslims and others it deems undesirable.   Nowdays, you use the IMF and the World  Bank to do your dirty work, so that the violence is understated: no incriminating bodies washing up on shore, just the slower and quieter violence of poverty, ignorance and disease to get people out of the way of profits.

      3. I do not believe what happened in Latin America is likely to happen here. 

        Then, aren’t your critcisms of Jonathan’s points about the American economy just so much hot gas?  I think they are.

        But, I do believe that the free marketeers and the right wing in general would prefer that such a state could be established here.

        OK—but you’ve shown us no plausible evidence that it’s likely that your fears could actually come to pass here.

        I believe that, if you had your way, lots of Americans would be sent to reeducation camps and a command economy forcibly imposed on this country.  However, I’ve no rational reason to believe that might actually happen—because I’m confident most Americans would reject your ideas as being silly and you as being a kook.

        That’s why I’m sure you’re harmless. 

  8.   You could blog openly.  You could look for like-minded folks to get politically active.  You could do the things that are necessary to really make a difference, make a change in this country. Why do you think that I am not politically active?  As an example, I have spent a fair amount of time in the desert looking for migrants in trouble and I’ve helped many.  This work has involved sleeping in the desert, hiking for miles in the sun in July and drinking a lot of really bad coffee; a measure of devotion if there ever was one.   I think you’re using the specter of the oogedy-boogedy Old Pueblo Right as an excuse to stay clothed in digital anonymity. I am still mystified as to why my anonymity bothers you so, or what difference you think knowing my real name would make to you.  Violence is not my biggest concern (though this is a real concern and there are plenty of crackpots out there; present company excepted, of course); black-listing is a bigger concern.  Tell you what:  If you want, I will go to Mark Evans and Ryn Gargiulski and urge them to make an exception to the TC.com requirement that all bloggers identify themselves.  IMO you’ve clearly earned an exception to that policy, through your obsession with…er, devotion to, this site. I appreciate your offer to go to Mr. Evans and Ms Gargulinski on my behalf.  I would not ask them myself to make an exception just for me.  I believe this would be very un-communist of me to ask for special consideration, don’t you?  I don’t want to be guilty of asking for “special rights”.  I also think that the other bloggers, all of whom blog under their real identities, would have to agree for this to be fair to them.  I understand why the policy is in place and have no real argument with the logic, even though it is a problem for me.  After all, it is “Everything for everybody and nothing for ourselves”.  Right, Don?  It would be worth it, to see you try and make your case.  Instead of throwing rocks and making snide comments at everyone else. I don’t think that I make any more snide comments than you or my good friend Jim Kelley.  Anyway, while I do think I make a coherent argument from time to time, I also enjoy some of the name-calling and even the snide comments that go on here.  It’s part of the fun and I can’t take myself or you so seriously all the time. 

    1. Sorry about the mess above, but I’m not willing to go through typing all that de novo only to have it disappear again and when you paste things off a word document, wordpress apparently reformats things after its own fashion.

      1. Left, sorry for the delayed response—last week was quite busy at Fort Buckley.

        I am still mystified as to why my anonymity bothers you so,

        If I’m understanding the situation correctly, your desire to remain anonymous is what’s preventing you from accepting Mark’s offer to run your own blog on TC.com.  IIRC, people who blog on the TC.com site have to use their real name or their real picture.

        You certainly have the time to maintain your own blog, based on the volume of comments you post on other people’s blogs.

        I’m OK with you staying anonymous, as I’ve already said.  I’ve offered to make the case for you to keep your anonymity

        My point is, you seem to prefer throwing rocks at other people’s blogs, instead of maintaining one of your own.  That makes you a bit of a pest.

        You have a LOT of work to do, if you want to change hearts/minds in Arizona and America enough so that a majority of voters will choose to implement your view of how America should be goverened.  Don’t you want to get started?

        Karl Marx didn’t start communism by writing millions of letters to the editors of major European newspapers.  He put his ideas on paper, stepped out on his own and did his best to accomplish something. 

        I’m starting to conclude that you’re not really interested in accomplishing anything with your online efforts, Left.  I’m starting to conclude that you prefer to be a pest.

  9. Poor demos are really in a catch 22.
    They have spent how many billions to stimulate the economy and that didn’t work,  Bernanke can’t lower the fed rate anymore because it’s at zero now, and the great consumer-driven economy sputters because unemployment is at 10%.
    Meanwhile, the national debt skyrockets, and needs to be addressed.  Only solution: raise taxes.  But to raise income  taxes or pass a national sales tax (VAT) will  pissoff the peons, deflate a sick economy even further and send us further down the road to more and more government control.  
    Doesn’t bode well for incumbents, especially demos, come fall elections.  

  10. FortBuckley:

    Leftfield seems to have this problem. He insulted me in anther site. Just for having a different opinion. It went well beyond the norm. Maybe he doesnt get out too often.
    He seems like a “Commisar” from the Soviet Union in 1939. He would have looked good in the long leather coat. Maybe we should call him “Commisar Leftfield”

  11. FortBuckley:

    Leftfield seems to have that problem. In another post on the Tucson Citizen he insulted me as a human being just because I had a different opinion. It went well beyond the norm. He seems not to get out too often.
    He reminds me of a Soviet Commisar in 1939. He would look good in a long leather coat….. Maybe something in a dark NKVD sir?? LOL

    1. Thomas, my “problem” is with your anti-Latino attitude.  If you were just the super-patriot and arch-conservative that Fort Buckley is, that would be another matter.  I don’t mind that FB thinks I’m a “kook” or that he calls me one.  If you want to call me a kook or something similar, I can tolerate that.  I don’t believe FB is a white supremacist though, just misguided in his opinion about economics and politics.  

      1. Hey Lefty: A bomb throwing Trotskyite, yes. But a “kook,” my friend, never. I defy you to go back and pull up any post that I have ever uttered those words about you.
        I’m sorry to say that I can’t say the same about your poor, unfortunate nephew, ‘Many-Mini-Gods Dion,’ (of World Class Education fame) who is hopefully resting comfortably in the Arizona Hospital for the Habitually Bewildered as we speak. I just hope that his new med schedule allows the doctors to loosen his straps enough to allow him to use the rec-room computer like back in the old days.
        Yer pal, Ferrari Bubba

    2. Thomas D, Leftfield is TC.com’s resident lefty crank.  He comes with the territory here.  He’s irritating but harmless.  I know of no one who takes him seriously. 

      To be clear and fair:  Leftfield is passionate, dedicated and sincere in his beliefs.  He makes you think and he forces you to bring your “A” game to these blogs. 

      However, I don’t see him taking any steps to take his opinions to a wider audience, to try and change hearts/minds or sway public opinion in a meaningful way.  Instead, he’s chosen to stay within the confines of our comments section.

      He must know that that’s not going to do much to bring about the changes he claims he wants to see in this country.  Yet he remains a commenter.

      I’ve concluded that he wants to be a pest.  And, no one is obliged to engage with a pest.

  12. Sorry about the couble posting–thought the first one didnt go through……..I liked the second one anyway.

  13. So I am a anto-Latino because I think it is not correct that 20 million illegals can waltz across our border and then feel like they are put upon because we try to stop the flow. Such arrogance! Just think if 20 million Americans went south and then did the same thing. Watching the TV coverage on Spanish Language TV in Phoenix sure gave that impression. No number of staged demostrations can change my mind.

    No nation, country or empire EVER let uncontrolled populations move across their border in such this way.

  14. Leftfield:

    Why do you always revert to personal attacks? I state historical facts and opinions and you come up with statements like this. Just because I don’t want 20 million illegal aliens in the country, makes me a target for your personal attacks.
    Get a life.

  15. Congratulations to us! We just passed the $13 Trillion Dollar mark for our national debt.
    Can you comprehend the magnitude of 13 trillion? I sure as hell couldn’t until it was explained to me that it’s $13 followed by 12 zeros.
    Picture a single grain of rice.
    A bushel of rice contains about 900,000 grains of rice and a hopper- car in a train can carry about 1020 bushels.
    That means that it would take 14.2 hopper-cars to carry the 13 trillion grains of rice, which is our national debt if each grain of rice was one dollar. Ever see how big one of those hopper-cars are?
    The new Jobs Bill, if it passes, will add $over $200 Billion more dollars to the National Debt. Does anyone have any idea who’s going to pay for it in the future, sine we are broke, and can’t fund it now?
    Just wondering . . . Yer pal, Ferrari Bubbas

  16. Does anyone really care about our national debt, or am I just whistling Dixie down here? Most of us who work and pay taxes, live by a budget. We spend no more than we bring into the household. It’s just that simple. Why can’t FedGovCo balance their budget like we are forced to do? Why can’t FedGovCo be forced to live by the same rules that they force us to live by? That might mean eliminating the free vacations, cruises, junkets, meals, and all the other perks that they and their families get on a regular basis, that we, the ‘Great Unwashed’ don’t. It’s time to clean house in Washington and stop letting our representatives play like it’s the last days of the Roman Empire before it’s too late. I just hope to God that it’s not. Yer pal, Ferrari Bubba

  17. That might mean eliminating the free vacations, cruises, junkets, meals, and all the other perks that they and their families get on a regular basis, that we, the ‘Great Unwashed’ don’t. It’s time to clean house in Washington and stop letting our representatives play like it’s the last days of the Roman Empire before it’s too late. I just hope to God that it’s not. Yer pal,

    If the vacations are free, I’m not sure how that saves any money.  Still, I’m all for eliminating perks.  I think we could also save an awful lot of money if we stopped invading countries willie-nillie.  Even if you want to continue invading small countries for whatever reason, stopping no-bid, cost-plus contracts and the privatization of military adventures would save a whole bunch too.  The aim of the free-market Republicans is to turn government into nothing more than a conduit for moving public money (i.e. your taxes, FB) into the private sector.  It ain’t that black guy somewhere whose mortgage is underwater or the undocumented worker that is stealing your money, it’s Bechtel and Halliburton, et al.

Comments are closed.