AMERICAN CONSERVATISM IN 2008 AND BEYOND

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http://www.ncpa.org/sub/dpd/index.php?Article_ID=19974&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
French Protests, British Austerity Give U.S. Glimpse of Its Future

The French government has increased the age for a minimum pension to 62 and to 67 for full benefits, sparking furious protests in France. Americans already have to work to age 62 to qualify for early Social Security benefits and to 66 (eventually to 67) to get full benefits, says USA Today.

The U.S. retirement system isn't quite as rickety as France's, but it's not far behind.

Social Security is in the red this year, forcing the Treasury to borrow to pay benefits, just as France is.

Social Security is projected to get better once the economy recovers, but only temporarily.

The system is forecast to go into the red again in 2015 and then get steadily worse.

Social Security is hardly the United States' only budget problem. Massive borrowing is driving the national debt to unsustainable levels. But neither party has a credible plan to restore balance after the economy gets better.

Britain's government, by contrast, decided to act, says USA Today.

Faced with budget deficits just a little bigger in relative terms than the ones in the United States, Britain has just announced its most far-reaching deficit reduction in 60 years.

Most government departments will be cut by an average of 20 percent, almost half a million government workers will lose their jobs and many taxes will go up.

The sheer scope of Britain's spending cuts and tax increases is a pretty good road map for where U.S. politicians will have to go if they're serious about getting the budget near balance.

It wasn't so long ago that Congress and presidents produced serious deficit-reduction plans that helped balance the budget from 1998-2001. That took courage and serious leadership, both of which appear utterly absent today. Before making fun of the French, Americans ought to take a hard look in the mirror, says USA Today.

Source: "French Protests, British Austerity Give U.S. Glimpse of Its Future," USA Today, October 24, 2010.

1 Reply

@ican711nm,

Quote:

The sheer scope of Britain's spending cuts and tax increases is a pretty good road map for where U.S. politicians will have to go if they're serious about getting the budget near balance.

You can't have a tax cut and balance the budget ican. What part of that don't you get?
Britian cut it's military by about 10%.(<--- that may be ican's version of 10%)

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@parados,

parados wrote:

You can't have a tax cut and balance the budget ican. What part of that don't you get?

The reason the deficit is so large is not because of one factor, that being low tax rates. Another huge reason is the fact that the unemployment rate is so high, so that less people are working, and there are more under-employed people, so that tax revenues have slumped in a stagnant economy. Hopefully you are bright enough to know that tax revenues will fall significantly with a slumping economy, even when tax rates remain the same.

I believe spending cuts and tax cuts could in fact balance the budget eventually, if done correctly. In fact, under a healthy economy, not only do more people work and pay more taxes, but there are less people needing handouts from the government. In other words, all of the factors are linked, a vibrant economy can increase employment as well as tax revenues, and it can reduce the pressure on government to spend more.

It all depends upon our philosophy, whether the government can spend its way out of debt? No, I do not think it can, in fact we the people must work our way out of debt. How do we do that? Get government out of the way and run the a government that will work with and encourage free markets and the people to work and prosper, not the other way around. Obama and the Democrats have the whole thing backwards.

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@okie,

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The reason the deficit is so large is not because of one factor, that being low tax rates.

Who said it was ONE factor? I only pointed out you can't balance the budget without raising taxes.

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I believe spending cuts and tax cuts could in fact balance the budget eventually

You live in a fantasy world okie. It hasn't worked that way ever in the history of the US and it won't work that way in the future. The British recognize that it doesn't work that way which is why they cut spending AND increased taxes.

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@parados,

Parados, I think you are the one in the fantasy world in regard to economics. How about we just agree to disagree for now? Also, we will see what the American people think next Tuesday.

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@okie,

What the American people "think" isn't going to fix the problem okie. You can disagree all you want. The reality is that the GOP won't balance the budget and I would bet that any budget they propose will end up with larger deficits than the present Obama projections.

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@parados,

I agree this problem will not be fixed easily. However, at least we need to head in the right direction by reducing the size of the hole we are digging. Digging faster and deeper will not solve the problem, that is for sure, in my opinion and I think most peoples opinion.

What it boils down to is a disagreement in basic philosophy of governing. How to fix the problem? Can we do it with government spending more, or is it up to us to work harder and demand government cut their spending? Which one do you favor? I think I know the answer, but perhaps you could shed more light on it?

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@okie,

okie wrote:

I agree this problem will not be fixed easily. However, at least we need to head in the right direction by reducing the size of the hole we are digging. Digging faster and deeper will not solve the problem, that is for sure, in my opinion and I think most peoples opinion.

Yes, and tax cuts only make the hole bigger. We are looking at a $4 billion deficit over the next 10 years because of tax cuts. More tax cuts will only increase that deficit.
You claim we should stop digging at the same time you are revving up your back hoe to keep right on digging.

1 Reply

@okie,

Quote:

Which one do you favor? I think I know the answer, but perhaps you could shed more light on it

Are you really that stupid okie.
I have said for YEARS that the only answer to deficits is cutting spending AND raising taxes. There is NO OTHER solution. Cutting spending alone won't eliminate deficits nor will raising taxes.

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@parados,

You are not understanding the analogy. The rate of digging is the rate of government spending. Tax revenues are the amount of dirt that can be used to fill the hole being dug. And tax revenues are not only dependent upon tax rates, but also on the growth and health of the economy, which is influenced by many factors, including tax rates. Raising tax rates by themselves are not at all guaranteed to raise more tax revenue, especially if higher tax rates cause higher unemployment, economic output, profits, and personal income.

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Obviously, cutting federal spending without changing tax rates will cut federal deficits.

Additionally, reducing federal taxes will also help reduce federal deficits by incresing federal revenue.

Quote:

http://www.freerepublic.com/focus/f-news/2051527/posts
Minimum and Maximum Income Tax Rates 1971 to 2010
...
1971-1981: minimum = 14%; maximum = 70% [CARTER 1977-1981]
1982-1986: minimum = 11%; maximum = 50% [REAGAN 1981-1989]
1987-1987: minimum = 11%; maximum = 38.5%
1988-1990: minimum = 15%; maximum = 33% [BUSH41 1989-1993]
1991-1992: minimum = 15%; maximum = 31%
1993-2000: minimum = 15%; maximum = 39.6% [CLINTON 1993-2001]
2001-2001: minimum = 15%; maximum = 39.1% [BUSH43 2001-2009]
2002-2002: minimum = 10%; maximum = 38.6%
2003-2009: minimum = 10%; maximum = 35%
2009-2010: minimum = 10%; maximum = 35%[OBAMA 2001-2010]

http://www.whitehouse.gov/omb/budget/fy2009/pdf/hist.pdf
Year.......FEDERAL RECEIPTS FINAL FULL YEAR OF TERM
1980......$0.517 trillion [CARTER]
1988….…$0.909 trillion [REAGAN]
1992.......$1.091 trillion [BUSH41]
2000......$2.025 trillion [CLINTON]
2008......$2.521 trillion [BUSH43]
2010.......$2,931[OBAMA] (current estimate for year not end of term)

QED

1 Reply

@parados,

parados wrote:

I have said for YEARS that the only answer to deficits is cutting spending AND raising taxes. There is NO OTHER solution. Cutting spending alone won't eliminate deficits nor will raising taxes.

Glad to know we at least partially agree. I think cutting spending is the number one and primary solution to the problem. Raising tax rates might help marginally in a vibrant economy, but it is very risky as a solution, especially if the tax rate hikes are serious. Most importantly, I already think the government takes a higher percentage than it deserves, and should be able to pay for its primary purpose of governing with the portion already being taxed. I might agree with a marginally higher rate on very very high incomes, but we probably do not agree on the specific rates and margins.

1 Reply

@okie,

Quote:

I believe spending cuts and tax cuts could in fact balance the budget eventually, if done correctly.

Dude, Pardos is right. The math just doesn't add up for this. I would challenge you to even show us a HYPOTHETICAL scenario in which it worked; I think if you sat down to try and come up with one, you would see that there is no way to do it - especially in the situation we find ourselves in.

There's no evidence that simply cutting taxes will lead to a 'healthy economy.' We can look at a wide variety of situations in the past and show you that there is little correlation between rates of taxation and the performance of the economy. I would especially remind you that the top marginal tax rates used to be more than double what they currently are now; and rates of growth were no lower then than they are now, and in many decades they were higher; all without massive rises in our amount of debt.

Take a look at the following graphs:

http://www.intelligentguess.com/blog/wp-content/uploads/2007/04/usa-historical-debt-as-a-of-gdp-from-1929-w2.jpg

http://upload.wikimedia.org/wikipedia/commons/thumb/3/3b/USDebt.png/300px-USDebt.png

Government SPENDING rose at no faster a rate than it had in previous decades; yet the national debt exploded. How can you possibly look at this, and tell us that the top rates of taxation have nothing to do with the national deficit and debt? When we lowered the rates, the debt exploded. When we raise them, the debt goes down. This isn't a hard thing to figure out.

People worked hard and wanted to prosper when tax rates were FAR higher than they are today. Where do you get this idea that people won't work hard if we raise taxes from their currently historical lows?

Cycloptichorn

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The democrat spending spree since 2007 is epic.

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@ican711nm,

Quote:

Obviously, cutting federal spending without changing tax rates will cut federal deficits.

Obviously, but it won't balance the budget.
No one can propose enough real cuts in spending to balance the budget without stealing from SS. Perhaps if you eliminated the military completely but there really isn't any other way.

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@okie,

US budget 2011

Military spending - 681
Veteran's benefits - 124
Physical resources - 225
Interest on debt - 250
Other functions - 217
Total - .... $1,497

Medicare - $497
Social Security - $721
Total ...... $2,715

Other Human Resources - $1,123
Includes unemployment, medicaid, welfare

Expected Revenues assuming only SOME tax cuts extended - $2,567.

Even if we eliminate ALL welfare, medicaid, unemployment okie, we still can't balance the budget.

Cutting taxes that increase short term deficits increases long term interest costs okie. By 2020, interest will be more than military spending. How do you propose to cut that line item?

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@parados,

Let's do the though experiment.

If the total GDP of the country was a billion dollars, and you taxed that at a flat rate of 10%, the government would have 100 million dollars annually in order to pay all the bills it takes to keep the place going.

Let's say that you CUT taxes by 50%. The government now takes in only 50 million dollars to do the same duties it was doing before. Let us say that spending is FROZEN so it grows no higher in the future.

The first year your tax cuts are in effect puts you in a 50 million dollar deficit. In order to make up for that - to reach the levels of income that we had before - the economy would have to grow considerably, because the new rates are so much lower.

At 5% taxation, in order to get 100 million dollars of revenue that you need to run the place, you would have to have a GDP of two billion dollars, or roughly double what you had before. Does anyone really believe that cutting taxes causes by half would cause the GDP to rise by that much?

Let's do a smaller example - a 10% tax cut. Now, instead of collecting 100 million annually, the government only gets 90 million, so there's a 10 million deficit. How much does the economy have to grow to make up for that? Eleven percent. Does anyone honestly believe that a 10% cut in modern tax rates will cause the GDP of the country to rise by eleven percent?

Not only that, the rises have to be instant, because every year they don't happen, we get farther in debt, and the economy then has to rise farther to pay it off....

It quickly becomes clear that the only way to really take care of your problems is to either freeze or cut spending AND raise taxes somewhat. This leads to the absolute quickest retiring of deficits and debts, with none of the trickery or problems you encounter by trying to only lower taxes....

Cycloptichorn

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An AP article earlier today talked about what might be proposed by the GOP if they end up winning the House - which seems likely. There were quotes from Boehner and McConnell. Nothing real specific 5 days before the election, of course. Not at all unexpected or unusual.
The bullet points seemed to be:
* Reduce Federal government spending by $100Bn. Where the cuts would be was not spelled out.
* Reduce taxes.
* Undo parts or all of the health care and financial "reform" legislation passed in the last 2 years.
* Introduce legislation mandating "Congressional reform."

1 Reply

@parados,

Everything has to be on the table, parados. We did not get into this mess overnight, and we won't get out of it overnight. We need to decide as a country and as a people that we the people need to step up to the plate and do what we can do for ourselves. An example is education, we need to transfer virtually all of the financial support and management of that function back to the people that know best what their own children need.

I realize education is only one example, and cutting it will not solve the entire problem, but it can serve as an example of what we need to do with every issue. What can be managed locally, should be managed locally, and the federal government should bow out of the equation. The one function that I believe the federal government should legitimately have a purpose in performing is national defense and security. Everything else needs to be reviewed and evaluated to determine first whether the federal government should even be involved, and then secondly how the programs can be economized and made more efficient.

The other part of the equation is maximizing tax revenues. We do that by maximizing the economy to its full potential. We do that by looking at all regulations and tax laws to figure out how we can unfetter the ingenuity and capability of free enterprise. Free enterprise holds the key to generating the economy that can produce the tax revenues needed. I am in favor of eliminating totally the income tax on all business, perhaps on everybody and replacing with a national sales tax. I have said this many times, and I have listed the reasons why I believe this could unleash one of the largest economic booms in the history of the country.

1 Reply

@okie,

Quote:

An example is education, we need to transfer virtually all of the financial support and management of that function back to the people that know best what their own children need.

That is nothing but a shell game okie. Moving the cost from the federal government back to the local government doesn't eliminate cost. It simply changes who pays the taxes.

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I realize education is only one example, and cutting it will not solve the entire problem, but it can serve as an example of what we need to do with every issue.

It is a good example of what you do with an issue okie. You don't examine it at all. You haven't saved money.

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The other part of the equation is maximizing tax revenues. We do that by maximizing the economy to its full potential.

So if the economy is growing at 17% and the tax rate is 0% how do you maximize revenues? You don't seem to understand the trade off or anything else. The economy will grow maximum about 2-3% because the FED wants to control inflation. That means tax rates in a 17-22% of GDP has very little effect on GDP growth since money costs have more effect than the small effect tax rates do. To maximize the tax revenues you find the highest tax rate that allows growth of 3%. Anything else is NOT maximizing tax revenues at all.

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We do that by looking at all regulations and tax laws to figure out how we can unfetter the ingenuity and capability of free enterprise.

Sure okie. Why do we need the derivatives markets regulated? What could possibly go wrong?

1 Reply

AMERICAN CONSERVATISM IN 2008 AND BEYOND

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