CBO: Tax hikes unnecessary

[Gustaf]

It will likely have to be a combination. Of course, economic growth should be able to deal with part of the deficit, what the CBO is saying is simply that it won't deal with everything.

Whether one should raise taxes or cut spending is basically a political choice. In an international perspective it seems reasonable that tax increases would have to be part of it.

[Gustaf]

First of all, Ernest explicitly said that he did not want to cut defence spending in the short term and furthermore specified several areas where he wanted to make cuts (agriculture, etc).

Secondly, cutting the federal budget by 6% seems like a fairly small cut. If we use the CBO report they posit two scenarios. One in which spending increases while revenue does not as much and one where spending is cut and taxes increased. Let's assume that you keep the Bush tax cuts and do not enact new taxes, using their alternative fiscal scenario. The long-term revenues would then be about 19% of GDP. Under their extended baseline scenario, spending would be something like 24% of GDP. That means that you would longterm have to cut about 5% of GDP. That 20-25% of the current federal budget. I must say I have a hard time seeing that happening.

[Gustaf]

Gustaf,

First, Ernest states “The military, K-12 education, and agriculture are the discretionary Federal programs where the biggest savings are to be had.”

Second, Ernest is a specialist in using ‘weasel’ expressions like “by and large,” which actually means the statement following that expression is just a lie.

Third, again you should carefully read what Ernest says, especially with relevance to his past posts on federal budget matters.  In those posts he has been emphatic in wanting to cut military expenditures.  Further, stating that that his opinion that certain appropriations are “where the biggest savings are to be had” is NOT the same thing as saying he favors cutting expenditures for nonmilitary programs such a “K-12 education and agriculture.”    

If you check, you will see that proportionately, among the largest rates of increase in expenditures under Obama have been for State (foreign aid) and EPA.  Ernest doesn’t mention cutting either of those programs.  Hmm.

Fourth, cutting the federal budget by 6% seems like a fairly small cut, because it is!!!

Fifth, you will note that neither of the scenarios by CBO is anywhere near my proposal, so using them is, well, preposterous.

Sixth, CBO uses several faulty methods in project expenditures and revenues.  They have consistently drastically underestimated domestic federal spending, and generally underestimated revenue when tax increases are NOT present, and/or tax cuts occur.

So, in conclusion, the expenditure cuts recommended ARE relatively small (and quite doable), but, Ernest is 'generally' opposed to them (he DOES favor cutting the military), and he does favor more and higher taxes, so that he can keep the federal budget large.

But the US spends about nothing on foreign aid. That's hardly important in the overall picture. Without having the figures at hand I suspect the same is true of the EPA. Whether the proportional increasehas been large in less important in the context of fixing the deficit. You might want to cut those programs for political reasons, of course.

Beyond that I'm confused. You quoted CBO and now you say they can't be trusted? If you have other figures, feel free to present them. However, without using projections I can't help but notice that you say expenditure is now 39% of GDP and that you want to cut it to a maximum of 25%. Revenue is currently even lower than that (around 20% of GP). Thus it would seem that unless we calculate with any effects of the economy picking up you would have to between 33% and 50% of total government expenditure. That is a far cry from 6%. So I'm curious as to what assumptions you're making to get this to be true.

PS: Just to be clear, I didn't support Obama in 2008. Nor do I generally support more taxes and government spending.

[Gustaf]

First, if you check the figures, you will see that the United States spends billions every year on foreign aid, and billions more on the EPA.  Now, to advocates of big government, a few billion here and a few billion there may seem as nothing, but to me they are real money.

Second, NO I did NOT quote the CBO!!!  Let me note that the CBO is biased to understate domestic spending and understate revenue from tax cuts.  So, apparently YOU are confused!  You are the one who introduced CBO projections.

Third, you really need to understand the difference between the United States and Sweden.  You see, the federal government is the creation of the states, into the United States.  Unlike Sweden, the people of the United States, or at least those legally here, are citizens not subjects of the governments.

Now, the shortfall in government revenue is primarily on the federal government which used the Federal Reserve to create money out of nowhere (monetizing the debt) to cover their spending.

Generally speaking, the state and local governments have acted far more responsibly than the federal government (Illinois being a major exception).

Eh...the billions are not large sums compared to the trillions that the debt is made up of. My point, which I stated explicitly, was that cutting the increases in foreign aid and EPA under Obama will have no effect on solving the problem of the deficit. Do you agree to that?

Your headline of this thread, which you started, was: "CBO: Tax hikes unnecessary" So i twas rather natural for me to use their figures in the discussion, since you introduced them. If you have other projections you prefer, by all means, present them. I doubt they will change the overall picture though.

What the distinction between subjects and citizens has to do with this escapes me. I'm not interested in the ideology of this but in the economics.

I notice that you avoided answering my question: how is the deficit going to dissappear if you use the same revenue as today (not raising any taxes) and only cut spending by 6% at the federal level?

[Gustaf]

Gustaf,

Let me quote you, “the deficit which is about 75% of GDP.’

The current federal Deficit is estimated for the current fiscal year to be approximately $1.101 trilion.

http://en.wikipedia.org/wiki/2012_United_States_federal_budget

The IMF estimate of the Gross Domestic Product of the United States is approximately $14,657,800 for 2010. 

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29

Now, according to my math, that would be approximately seven and a half per cent of the GDP, not 75%.

So, the problem, while serious, is not quite as bad as your numbers would suggest (by an order of magnitude).

Now, just as I do not propose to achieve ALL the savings from one department, I do not mean to suggest the entire deficit will be eliminated on one fiscal year.

However, through a combination of expenditure reduction, spending restraint (in subsequent years) and economic growth, we can eliminate the deficit over a period of (I would estimate) four years.

So, as I initially pointed out, we can (and should) deal with the deficit by cutting expenditures, NOT imposing more and higher taxes and Ernest and Obama propose.

Ah, that was a typo. I was thinking of the debt. But as I'm sure you are well aware that does not matter for the point at hand? That is, 0.2% is still a neglibile share of 7.5%

And, to be clear, I was assuming you were not proposing eliminating all of foreign aid? The spending increases in that department under Obama you mentioned must be extremely miniscule. If they are measured in the billions they can't be a large percentage of a deficit measured in  trillions.

I'm still confused as to where you want to make these magic cuts. Or how you think growth will skyrocket under the burden of a large debt and spending cuts that will negatively impact demand.

[Gustaf]

Gustaf,

Let me quote you, “the deficit which is about 75% of GDP.’

The current federal Deficit is estimated for the current fiscal year to be approximately $1.101 trillion.

http://en.wikipedia.org/wiki/2012_United_States_federal_budget

The IMF estimate of the Gross Domestic Product of the United States is approximately $14,657,800 for 2010. 

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29

Now, according to my math, that would be approximately seven and a half per cent of the GDP, not 75%.

So, the problem, while serious, is not quite as bad as your numbers would suggest (by an order of magnitude).

Now, just as I do not propose to achieve ALL the savings from one department, I do not mean to suggest the entire deficit will be eliminated on one fiscal year.

However, through a combination of expenditure reduction, spending restraint (in subsequent years) and economic growth, we can eliminate the deficit over a period of (I would estimate) four years.

So, as I initially pointed out, we can (and should) deal with the deficit by cutting expenditures, NOT imposing more and higher taxes and Ernest and Obama propose.

Ah, that was a typo. I was thinking of the debt. But as I'm sure you are well aware that does not matter for the point at hand? That is, 0.2% is still a neglibile share of 7.5%

And, to be clear, I was assuming you were not proposing eliminating all of foreign aid? The spending increases in that department under Obama you mentioned must be extremely miniscule. If they are measured in the billions they can't be a large percentage of a deficit measured in  trillions.

I'm still confused as to where you want to make these magic cuts. Or how you think growth will skyrocket under the burden of a large debt and spending cuts that will negatively impact demand.

First, its nice to get the size of the deficit clarified.

Second, from 2009 to 2011, state department expenditures increased by $7.9 billion.  Now, much of the expenditures in 2009 were unreasonable.  So, if we just subtracted $8 billion a year for four years, we have $32 billion from one department.  I know, to you big spenders that seems like a minuscule amount, but, when added to savings from the EPA, Department of Education, and others, it is significant.

Third, I find it amusing that you refer to a "burden" of spending cuts, and assume that such cuts will negatively impact demand.

A spending cut which is not accompanied by a tax cut is virtually guaranteed to decrease demand? How could it not? Granted, foreign aid cuts wouldn't have this effect but as I pointed out they're rather small.

Furthermore, you can't (1) multiply it by 4 years, since you must then also multiply the deficit by 4 years and (2) I doubt all spending increases are unreasonable. If nothing else rises in nominal wages will normally lead to at least some increases.

But, to a "big spender" like me 8 bilion is neither more nor less than 0.8% of a trillion. So, congratulations, you cut 0.8% of the deficit. If you repeat this for all of the 100+ departments in the government you will have eliminated the deficit. I'm afraid I'm going to need something more realistic to take your proposal seriously.

[Gustaf]

Ah, that was a typo. I was thinking of the debt. But as I'm sure you are well aware that does not matter for the point at hand? That is, 0.2% is still a neglibile share of 7.5%

And, to be clear, I was assuming you were not proposing eliminating all of foreign aid? The spending increases in that department under Obama you mentioned must be extremely miniscule. If they are measured in the billions they can't be a large percentage of a deficit measured in  trillions.

I'm still confused as to where you want to make these magic cuts. Or how you think growth will skyrocket under the burden of a large debt and spending cuts that will negatively impact demand.
[/quote]

First, its nice to get the size of the deficit clarified.

Second, from 2009 to 2011, state department expenditures increased by $7.9 billion.  Now, much of the expenditures in 2009 were unreasonable.  So, if we just subtracted $8 billion a year for four years, we have $32 billion from one department.  I know, to you big spenders that seems like a minuscule amount, but, when added to savings from the EPA, Department of Education, and others, it is significant.

Third, I find it amusing that you refer to a "burden" of spending cuts, and assume that such cuts will negatively impact demand.
[/quote]

A spending cut which is not accompanied by a tax cut is virtually guaranteed to decrease demand? How could it not? Granted, foreign aid cuts wouldn't have this effect but as I pointed out they're rather small.

Furthermore, you can't (1) multiply it by 4 years, since you must then also multiply the deficit by 4 years and (2) I doubt all spending increases are unreasonable. If nothing else rises in nominal wages will normally lead to at least some increases.

But, to a "big spender" like me 8 bilion is neither more nor less than 0.8% of a trillion. So, congratulations, you cut 0.8% of the deficit. If you repeat this for all of the 100+ departments in the government you will have eliminated the deficit. I'm afraid I'm going to need something more realistic to take your proposal seriously.
[/quote]

First, I'm eliminating the older stuff to shorten the panel..

Second, your presumption that a spending cut by the federal government not accompanied by a tax cut will necessarily result in reduced demand is, well, simplistically pathetic.  Real world economics is NOT a zero sum game, but rather the interaction of a multiplicity of interacting factors.  Specifically, the money supply is NOT simply a matter of diktat by goons like Bernancke, but rather a reflection of the velocity of actual exchange by real people in the marketplace.

Third, yes, I am not surprised that you doubt that even the modest spending cuts I outlined are reasonable. 

Fourth, you conveniently ignore the expenditures outside the State Department that I noted (EPA, Education, etc.).
[/quote]

So...if you stop giving money to people, you don't think they will have less money in their pockets? I'm interested i nhearing the reasoning behind this. I'm not really talking about money supply either.

Ok, and I'm not surprised that you took the opportunity at a cheap shot instead of answering the question. Do you really think that if the tasks were left unchanged, there would be no spending increases at all?

Finally, sure, we can add the miniscule percentage of GDP that is EPA if you like. However, I did not conveniently ignore anything. I specifically asked you to outline where you would make the cuts and you said the state department. I would like to see some hard figures here. How large are those cuts going to be? You keep claiming that they will be modest and only reduce excessive bureaucracy, but I've yet to see any evidence for this.

[Gustaf]

Gustaf,

I must give you credit.

You manage to pack more mistatements into a post than I would have thought possible.

While I understand you really BELIEVE that the more government involvement in the economy is beneficial, let me suggest you try reading the following:

http://www.heritage.org/research/reports/2005/03/the-impact-of-government-spending-on-economic-growth

As a master student in economics, I can assure you that the issues discussed in your link are not new to me. The Heritage Foundation is of course not purely a research institute but a think-tank with a political agenda. I would like to note though that my country (with a substantially larger government spending than the US) has had equal or higher GDP growth per capita compared to the US over the last decade. The difference between US and Western Europe when it comes to GDP per capita is attributable to American sworking more, not due to higher productivity. And, of course, when quality of life or happiness is measured Sweden typically scores higher than the US. That is largely because we have higher social mobility and less inequality.

But this is not, from my perspective, a debate on the ideal size of the government. It's a discussion about the current fiscal woes of the United States. It is my belief that it is politically and socially unrealistic to get rid of the deficit without any increases in taxation. Your belief is that it constitutes no problem to decrease spending sufficiently to get rid of the deficit. I've therefore asked you what cuts we are talking about and you have yet to give me a specific answer beyond vague statements concerning miniscule areas of federal expenditure.

[Gustaf]

Gustaf,

I must give you credit.

You manage to pack more mistatements into a post than I would have thought possible.

While I understand you really BELIEVE that the more government involvement in the economy is beneficial, let me suggest you try reading the following:

http://www.heritage.org/research/reports/2005/03/the-impact-of-government-spending-on-economic-growth

Oh, and feel free to actually state what you think my mistatements are. I'm all ears. But I would prefer it if you didn't slander me without backing it up.

[Gustaf]

Yes, Gustaf, I realize you want to impose more and higher taxes on my country. 

Now, if you had read (and understood) the article whose link I posted you would see that your assertion that a reduction in government expenditures does NOT mean a reduction in the economy.

I recognize that you believe that government expenditures are the most efficient type of expenditures in the economy, but, that simply is NOT the case.

When you finally understand that point, I will introduce you to Paul Samuelson's comments on the variability of the velocity of the money supply.

Jesus. You really have to shut up about being an arrogant prick.

1. I realize you want to impose lower taxes on my country.
2. You seem to have no understanding of the differenec between the short term and the long term. The link you posted regards long-term effects on the overall efficiency of the economy, I'm talking about short-term demand effects. There is no contradiction between the two, but you sem to know very little about economics.
3. I do not think government expenditure is the most efficient type in the economy. I'd like you to apologize for that lie about my views since I never indicated that I had it.


Then, I'd like you to respond to any of the points I've raised, which you keep dodging. Are you afraid of the facts Carl?

[Gustaf]

Yes, Gustaf, I realize you want to impose more and higher taxes on my country. 

Now, if you had read (and understood) the article whose link I posted you would see that your assertion that a reduction in government expenditures does NOT mean a reduction in the economy.

I recognize that you believe that government expenditures are the most efficient type of expenditures in the economy, but, that simply is NOT the case.

When you finally understand that point, I will introduce you to Paul Samuelson's comments on the variability of the velocity of the money supply.

Jesus. You really have to shut up about being an arrogant prick.

1. I realize you want to impose lower taxes on my country.
2. You seem to have no understanding of the differenec between the short term and the long term. The link you posted regards long-term effects on the overall efficiency of the economy, I'm talking about short-term demand effects. There is no contradiction between the two, but you sem to know very little about economics.
3. I do not think government expenditure is the most efficient type in the economy. I'd like you to apologize for that lie about my views since I never indicated that I had it.


Then, I'd like you to respond to any of the points I've raised, which you keep dodging. Are you afraid of the facts Carl?

Gustaf,

First, I really don't care what taxes you impose on your country.  However, I do care about the taxation system (both level and structure) in my country.  Or, are you now claiming to be an American? 

Second, ah, the old canard about 'short term vs. long term.'  For the benefit of those who are unfamiliar with economic thought, when Keynes was caught on his theories, he dismissed criticisms of his theories with the non sequitur that, 'in the long term we're all dead" and 'our children will pay for it.'  Well, we're the 'children' who are now being presented with the bill for Keynesian policies. 

Third, but Gustaf, you indicated your belief that a reduction in government expenditures would result in a decrease in demand in the economy, totally disregarding that greater efficiency of the private sector would make with the funds not spent by the government.

Now, are we ready of money supply variable velocity matter?  I'm really not a fan of Samuelson, but, he nailed that matter quite well.

Ok. In the sense of political engagement I don't care what taxes you impose on your country either.  I'm engaging in a theoretical discussion and I don't think being an American citizien is a prerequisite for understanding fiscalpolicy (it certainly i snot a sufficient condition, as your posting indicates).

Finally, you seem to be under the misconception that when spending decreases and there is no corresponding decrease in taxation, more money ends up in the private sector. This is not the case. In fact, if anything there is less money in the private sector, since some of the government spending presumably ends up there. That's why I made the initial qualifier. It's hard for me to see too how removing money from the economy can stimulate it.

I'm still waiting for you to quit dodging and actually respond to my previous posts, but I guess you can't because you know that you're wrong.

[Gustaf]

Gustaf,

First let me suggest that you go ahead and load your own country up with more and more taxes if you want.  It should provide a nice example for the rest of the world. (BTW, do you remember why Ingmar Bergman fled Sweden?)

Second, let me point out that we are NOT limited to "fiscal theory," as monetary policy is also involved (as I have noted).

Third, nowhere have I stated nor implied that being an American citizen is either "a prerequisite for understanding fiscalpolicy" as you alledged, nor "a sufficient condition."

Finally, yes, as spending for the government decreases, the money supply does (to varying extents) increase, partially to to an increase in velocity, and partially due to efficiency (which is where Dr. Samuelson, and his notes on the variable velocity of monetary supply applies).

You seem to be unaware of the fact that Sweden has been cutting taxes for several years. Top marginal rates are certainly nowhere near the disastrous levels they were back in the 70s when Ingmar Bergman had to flee the tax authorities. Again, you seem to be committing the fallacy of just assuming that I want higher taxes in order to slander me. I support the tax cuts that have been going on in Sweden. I don't want to increase taxes forever. It's quite bizarre that you would just assume this. If you want to know what I think about taxes, you should ask me.

You seemed to imply that I shouldn't have an opinion on American fiscal policy because I'm not an American citizen. I'm glad to see that you now retract that position. It does, however, call into question whether you are lying and are on purpose trying to dishonestly change your position on this issue (see, I can make up things about your positions too! makes for a fun debate, doesn't it?)

So, why would the velocity of money increase because people have less money in their pockets? See, what you want to do is reduce government money while keeping private sector funds unchanged. How does this increase velocity, exactly?

[Gustaf]

Gustaf,

First let me suggest that you go ahead and load your own country up with more and more taxes if you want.  It should provide a nice example for the rest of the world. (BTW, do you remember why Ingmar Bergman fled Sweden?)

Second, let me point out that we are NOT limited to "fiscal theory," as monetary policy is also involved (as I have noted).

Third, nowhere have I stated nor implied that being an American citizen is either "a prerequisite for understanding fiscalpolicy" as you alledged, nor "a sufficient condition."

Finally, yes, as spending for the government decreases, the money supply does (to varying extents) increase, partially to to an increase in velocity, and partially due to efficiency (which is where Dr. Samuelson, and his notes on the variable velocity of monetary supply applies).

You seem to be unaware of the fact that Sweden has been cutting taxes for several years. Top marginal rates are certainly nowhere near the disastrous levels they were back in the 70s when Ingmar Bergman had to flee the tax authorities. Again, you seem to be committing the fallacy of just assuming that I want higher taxes in order to slander me. I support the tax cuts that have been going on in Sweden. I don't want to increase taxes forever. It's quite bizarre that you would just assume this. If you want to know what I think about taxes, you should ask me.

You seemed to imply that I shouldn't have an opinion on American fiscal policy because I'm not an American citizen. I'm glad to see that you now retract that position. It does, however, call into question whether you are lying and are on purpose trying to dishonestly change your position on this issue (see, I can make up things about your positions too! makes for a fun debate, doesn't it?)

So, why would the velocity of money increase because people have less money in their pockets? See, what you want to do is reduce government money while keeping private sector funds unchanged. How does this increase velocity, exactly?

So, you merely want to tax America to death?  I never though you were one of those anti-American types.  It seems however that you want to afflict the United States with a plague of taxes but don't want the same for your country.  Hmm.

Yes, having read your posts I an well aware you "can make up things."

Next, when people are understandably frightened of Leviathan coming to tax them to death, they do tend to convert their wealth into forms (like gold) which they can access, and which they hoard for emergencies.  This slows the velocity of the money supply.

Sophisticated types will engage in complex currency exchanges, sending their money out of the country to escape confiscation, er, the kind of taxes you propose.  This too slows the velocity of the money supply.

I don't want to tax America to death. See, it's really easy to defeat your arguments as long as they are predicated on attributing opinion to me that I do not hold. Sweden, again, isn't taxed to death despite much higher tax levels than the US. We tend to beat you on most ranking concerning quality of life. So you seem to worry too much.

Now you're explaining why higher taxes might decrease velocity, which is all fine. I never contested that. WHat I asked is why a decrease in government spending would increase the velocity. Just to remind you, in case you forgot, this is a decrease in government spending WITHOUT any corresponding tax decrease. So taxes are staying the same.

Now try again.

[Gustaf]

I wouldn't say that I've been calling for more taxes on Americans. I've said that I don't think it is politically realistic to cut spending as much as would be necessary to eliminate the deficit without any tax increases. And I've said that it would hardly destroy the economy, since successful countries with high quality of life such as those in Western Europe have considerably higher taxes than the US.

I'm sure you're right that the American people does not want taxes to be raised. I don't see how that is relevant. As I'm sure you know, the American voters also elected Obama to the presidency but I don't think you would see that as a strong argument in favour of him, would you?

While I agree that unfinanced spending is generally speaking a bad idea and leads to higher inflation, I don't see how it enters into this discussion. Are you saying that velocity of money increases with lower inflation or something along those lines?

[Gustaf]

First, no.

Second, I've already pointed out that those agencies make up for a small part of the deficit.

Third, I never said I wanted to turn anything into a socialist land. I'm not a socialist. Furthermore, you should check out the countries I was talking about (namely, Scandinavian ones, which are vastly different to the Southern European ones you're mentioning). It's especially amusing that you'd mention Ireland, a state that has pursued exactly the type of policies you seem to like with low taxes.

Fourth, yes, I know all these things, which was partly my point.

Fifth, what policy the people wants is obviously relevant for what will actually happen. But it's irrelevant to what I argue in a discussion. The point of a democracy is to convince others of one's view through debate, not to mindlessly accept the tyranny of the majority. I'm surprised you do not agree with this, but think that the majority opinion should be accepted without questioning.

Sixth, I know the velocity of money depends on different factors. I just can't understand why you say most of the things you say. Your claim is that reducing the amount of money in an economy will increase growth substantially. You still have not given a coherent explanation as to how this works.

[Gustaf]

First, if you check the figures, you will see that the United States spends billions every year on foreign aid, and billions more on the EPA.  Now, to advocates of big government, a few billion here and a few billion there may seem as nothing, but to me they are real money.

Second, NO I did NOT quote the CBO!!!  Let me note that the CBO is biased to understate domestic spending and understate revenue from tax cuts.  So, apparently YOU are confused!  You are the one who introduced CBO projections.

Third, you really need to understand the difference between the United States and Sweden.  You see, the federal government is the creation of the states, into the United States.  Unlike Sweden, the people of the United States, or at least those legally here, are citizens not subjects of the governments.

Now, the shortfall in government revenue is primarily on the federal government which used the Federal Reserve to create money out of nowhere (monetizing the debt) to cover their spending.

Generally speaking, the state and local governments have acted far more responsibly than the federal government (Illinois being a major exception).

Eh...the billions are not large sums compared to the trillions that the debt is made up of. My point, which I stated explicitly, was that cutting the increases in foreign aid and EPA under Obama will have no effect on solving the problem of the deficit. Do you agree to that?

Your headline of this thread, which you started, was: "CBO: Tax hikes unnecessary" So i twas rather natural for me to use their figures in the discussion, since you introduced them. If you have other projections you prefer, by all means, present them. I doubt they will change the overall picture though.

What the distinction between subjects and citizens has to do with this escapes me. I'm not interested in the ideology of this but in the economics.

I notice that you avoided answering my question: how is the deficit going to dissappear if you use the same revenue as today (not raising any taxes) and only cut spending by 6% at the federal level?

First, you make assumptions which are incorrect.  Revenues will not remain static if we rein in the government, but rather increase. 

This is history, not just a theory. 

Second, as I pointed out, in addition to freezing the manditory spending (i.e. no increases), we should cut expenditures from a number of agencies/departments.  Now, you probably have never seen the GPU publication of the federal budget, but, when printed, it stands several feet tall.  Virtually every department and agency has expenditures which can (and should be) cut.  Listing all of them would take up more room on this forum than Mr. Leip would like to provide.

Third, its interesting to see your changing definition of "Western Europe" to exclude the countries I listed and to consist of "Scandinavian ones." 

Let me suggest that if the people of the scandanavian countries want to emulate lemings and continue on their path to the cliff, its their right.  However, most Americans have some foresight, and do't want to continue on that.

Finally, I am really perplexed by what school of economics believes that unemployment is reduced by increasing taxes?

Heck, even a certain slimebag realized that increasing taxes is bad for the economy.

“You don’t raise taxes in a recession.”

Barrack Hussein Obama, II

August 5, 2009, Elkhart Indiana

Eh...no. Possibly in the long-term but certainly not in the short term. Both Bush and Reagan cut taxes substantially and that led to large deficits.

I haven't changed any definitions. I talked about Sweden from the beginning. And I fail to see how we're walking off a cliff. Our public finances are better than the American. Our growth has been about the same for the last decade. Our productivity level is the same. We have higher social mobility and equality and we tend to score higher on most measures of happiness or quality of life. Right now, Sweden's economy seems to be in much better shape than America's so I'm not sure how you are having such great foresight?

As regards your last point, we're not talking about taxes, but about spending. You're supposed to explain how a decrease in spending will spur growth and you still have not.

[Gustaf]

...cutting the federal budget by 6% seems like a fairly small cut.

That's amazing.  6% sounds like a huge cut to me, given that spending increases are needed for economic survival. 

I for one could not cut my budget by 6% without experiencing the sufferings of the Damned.

That's because you're spoiled. And given the size of the deficit 6% of the federal budget isn't so much.

[Gustaf]

Remember when Gustaf said that CARLHAYDEN was a good poster treated unfairly by the left?

Did I ever refer to him as a good poster? My point has simply been that he's not much worse than posters like Lief, Opebo or you and yet get treated much worse.

But shouldn't my defense of him in spite of not liking him merit me a place in your book of cheek-turning Christians?

[Gustaf]

Remember when Gustaf said that CARLHAYDEN was a good poster treated unfairly by the left?

Did I ever refer to him as a good poster? My point has simply been that he's not much worse than posters like Lief, opebo or you and yet get treated much worse.

But shouldn't my defense of him in spite of not liking him merit me a place in your book of cheek-turning Christians?

Thing is you are also a pretty judgmental individual and don't seem to forgive easily. And why haven't you defended me, Lief or opebo? (corrected the capitalization by the way)

But yes, that also applies largely to me as well. I'm a very sinful individual. opebo is a better Christian than me, LOL.

Judgemental? I'm nowhere near you in that department. On the contrary, I'm perfectly ready to forgive anyone who shows signs of remorse. I always do my best to stay away from bashing the easy targets on here, like Bushie, Josh, Gporter and so on. Unlike you.

And I don't defend you because you have so many people defending you already. I reserve my support for those who need it. You people get away too easily.

[Gustaf]

First, if you check the figures, you will see that the United States spends billions every year on foreign aid, and billions more on the EPA.  Now, to advocates of big government, a few billion here and a few billion there may seem as nothing, but to me they are real money.

Second, NO I did NOT quote the CBO!!!  Let me note that the CBO is biased to understate domestic spending and understate revenue from tax cuts.  So, apparently YOU are confused!  You are the one who introduced CBO projections.

Third, you really need to understand the difference between the United States and Sweden.  You see, the federal government is the creation of the states, into the United States.  Unlike Sweden, the people of the United States, or at least those legally here, are citizens not subjects of the governments.

Now, the shortfall in government revenue is primarily on the federal government which used the Federal Reserve to create money out of nowhere (monetizing the debt) to cover their spending.

Generally speaking, the state and local governments have acted far more responsibly than the federal government (Illinois being a major exception).

Eh...the billions are not large sums compared to the trillions that the debt is made up of. My point, which I stated explicitly, was that cutting the increases in foreign aid and EPA under Obama will have no effect on solving the problem of the deficit. Do you agree to that?

Your headline of this thread, which you started, was: "CBO: Tax hikes unnecessary" So i twas rather natural for me to use their figures in the discussion, since you introduced them. If you have other projections you prefer, by all means, present them. I doubt they will change the overall picture though.

What the distinction between subjects and citizens has to do with this escapes me. I'm not interested in the ideology of this but in the economics.

I notice that you avoided answering my question: how is the deficit going to dissappear if you use the same revenue as today (not raising any taxes) and only cut spending by 6% at the federal level?

First, you make assumptions which are incorrect.  Revenues will not remain static if we rein in the government, but rather increase.  

This is history, not just a theory.  

Second, as I pointed out, in addition to freezing the manditory spending (i.e. no increases), we should cut expenditures from a number of agencies/departments.  Now, you probably have never seen the GPU publication of the federal budget, but, when printed, it stands several feet tall.  Virtually every department and agency has expenditures which can (and should be) cut.  Listing all of them would take up more room on this forum than Mr. Leip would like to provide.

Third, its interesting to see your changing definition of "Western Europe" to exclude the countries I listed and to consist of "Scandinavian ones."  

Let me suggest that if the people of the scandanavian countries want to emulate lemings and continue on their path to the cliff, its their right.  However, most Americans have some foresight, and do't want to continue on that.

Finally, I am really perplexed by what school of economics believes that unemployment is reduced by increasing taxes?

Heck, even a certain slimebag realized that increasing taxes is bad for the economy.

“You don’t raise taxes in a recession.”

Barrack Hussein Obama, II

August 5, 2009, Elkhart Indiana

Eh...no. Possibly in the long-term but certainly not in the short term. Both Bush and Reagan cut taxes substantially and that led to large deficits.

I haven't changed any definitions. I talked about Sweden from the beginning. And I fail to see how we're walking off a cliff. Our public finances are better than the American. Our growth has been about the same for the last decade. Our productivity level is the same. We have higher social mobility and equality and we tend to score higher on most measures of happiness or quality of life. Right now, Sweden's economy seems to be in much better shape than America's so I'm not sure how you are having such great foresight?

As regards your last point, we're not talking about taxes, but about spending. You're supposed to explain how a decrease in spending will spur growth and you still have not.

Well, lets take your allegations one a a time.

You said, changed what I said.  I was NOT proposing tax reductions at this time, but rather freezing much of the mandated spending.  Further, yes, revenues do increase over time, reducing deficits.  If you deny this, I will produce the numbers.  The problem is that expenditures increase even faster than revenues.  

In 1978, federal receipts amounted to $446.5 billion dollars, which grew to $997.2 billion in 1988 (223.34%).  However, during the same period, expenditures grew from $478.1 billion in 1978 to $1,118.5 in 1988 (233.95%).

http://www.infoplease.com/ipa/A0104655.html

Next, you said "Western Europe," then changed your definition to the "Scandanavian countries," and now have changed it to "Sweden".  Hmm.  If Swedes believe that big government is the secret to prosperity, then go ahead.  Just don't insist others join you.

Finally, I realize this is difficult for you, but, history has shown that spending in the private sector produces more jobs and prosperity than spending by the government.  So, when we reduce government spending (especially on matters which adversely impact the economy), we grow the economy.

Both expenditures and revenues will always be increasing as long as the economy grows, ceteri paribus. Besides, unless I'm mistaken those figures are not inflation adjusted so they're sort of irrelevant.

I never claimed that every country in Western Europe was successful. But several of us are. You have still not come up with any counter to those facts.

You keep claiming that private spending is better than public spending. That's fine. What you haven't shown is how a reduction in public spending increases private spending when taxes are left unchanged.

[Gustaf]

Remember when Gustaf said that CARLHAYDEN was a good poster treated unfairly by the left?

Did I ever refer to him as a good poster? My point has simply been that he's not much worse than posters like Lief, opebo or you and yet get treated much worse.

But shouldn't my defense of him in spite of not liking him merit me a place in your book of cheek-turning Christians?

Thing is you are also a pretty judgmental individual and don't seem to forgive easily. And why haven't you defended me, Lief or opebo? (corrected the capitalization by the way)

But yes, that also applies largely to me as well. I'm a very sinful individual. opebo is a better Christian than me, LOL.

Judgemental? I'm nowhere near you in that department.

Uh, take a look at what you say about me and opebo. Kind of hypocritical too since you've admitted to not having a problem with people you know in real life who have been to strip clubs and hired prostitutes...

On the contrary, I'm perfectly ready to forgive anyone who shows signs of remorse. I always do my best to stay away from bashing the easy targets on here, like Bushie, Josh, Gporter and so on. Unlike you.

Please find a post of me making fun of gporter. I've probably defended Josh more than mocked (especially around 2006.) Yes I've gone after Bushie but certainly less minor than the stuff he was doing. It was largely out of disgust with his False Christianity and promotion of a Church of Evil anyway rather than the ridiculous schaudenfreude of some people.

And I don't defend you because you have so many people defending you already. I reserve my support for those who need it. You people get away too easily.

What I am not understanding is why CARL is so deserving of this with the type of crap he's posting here and his "creative math" which is on par with J. J. and pbrower.

There's a difference between pointing out that something is wrong in a discussion on a political message board and preaching about it to friends who disagree. I'd have thought that pretty obvious, even to you. What bothers me is not being in favour of legal prostitution or even attending a strip club but the callous attitude to the issue that the two of you display. It's frankly disgusting. It's like thinking the Iraq war was a good thing because you can make cool computer games off of it. It's immature and narrow-minded.

Of course, I've defended JJ as well. Both JJ and CarlHayden are far superior to your beloved idol. That says more about him, obviously.

[Gustaf]

Carl,

First, your statement seems to miss a word so I'm not sure what you're saying. I will assume that it was a typo and not because you don't know Latin.

Second, I'm sure you are aware of how useless it is to use nominal figures, especially starting in a period of very high inflation. Besides, my argument was never that it cannot increase over the long run - that's when the dynamic effects of a more efficient economy would start kicking in. Furthermore, we're still not discussing tax cuts. We're talking about spending cuts, but you keep try to change the subject.

Finally, yes that was a typo. Since I study economics I'm fairly used to the term and did not use it to scare you.

I refer to my question which you still have not answered: how does cutting public spending while keeping taxes unchanged increase private spending, in the short run?

[Gustaf]

Carl,

First, your statement seems to miss a word so I'm not sure what you're saying. I will assume that it was a typo and not because you don't know Latin.

Second, I'm sure you are aware of how useless it is to use nominal figures, especially starting in a period of very high inflation. Besides, my argument was never that it cannot increase over the long run - that's when the dynamic effects of a more efficient economy would start kicking in. Furthermore, we're still not discussing tax cuts. We're talking about spending cuts, but you keep try to change the subject.

Finally, yes that was a typo. Since I study economics I'm fairly used to the term and did not use it to scare you.

I refer to my question which you still have not answered: how does cutting public spending while keeping taxes unchanged increase private spending, in the short run?

Gustaf,

Not sure whether you consistently are unable to comprehend what I am posting, or merely misrepresent the same.

Next, you again engage in evasion.

You seem to (finally) acknowledge that revenues can increase without increases in tax rates, or imposition of new taxes.

Will you finally also acknowledge that spending can increase at a lower rate than revenue increases?

Finally, while you (incorrectly) assume that when government spends money, it is somehow magical, and that if such expenditures are not made by the government, then the economy shrinks.  This simply is not the case.  Government 'crowds out' the private sector with its expenditures (as well as with borrowing).

I never said revenue can't increase in the long-run. That's not even the issue here. I also never claimed spending cannot increase at a lower rate than revenue increases. Why do you leep attributing positions to me that I never claimed to have?

But perhaps we're finally getting somewhere. I don't know why it had to take you 4 pages of arguing to provide a coherent analysis (I'm being generous, I suppose - the embry of a coherent analysis), but that's water under the bridge.

Given what you said before, I suspect your crowding out argument is based on the notion of Ricardian equivalence. That notion is, however, largely discredited in its pure form. While there certainly are crowding out effects they are nowhere near 100% (I believe something like 25% has empirical support). This has many reasons, one of which is imperfect rationality, another whic is liquidity constraints.

[Gustaf]

Yes, we appear to finally be getting somewhere.

First, let me say it is nice you have heard of David Ricard (I enter that name for the purpose of educating others who may be reading this thread).

Second, it is nice that you now admit "While there certainly are crowding out effect."  Now, one of the problems with econometrics is that there are no permanent ratios between different parts of the equation.  In this case, some government expenditures are more productive/less unproductive than others, as is the case for private expenditures.  In addition, a government expenditure for infrastructure may be reasonably beneficial up to a certain point, and wasteful beyond that point (building of dams illustrates this).  Now, your supposition that it is at a fixed 25% ratio is simply misguided (its like the bi-metalists of the 19th century who sought a permanent ration between gold and silver).  Some expenditures by government, like many of those for the EPA actually depress the economy.

Heard of? I've been teaching university students on his model of trade for 3 years now.

It is obviously true that both public and private spending can have different levels of efficiency. And of course 25% is not a fixed number, it's merely a number I seen suggested by empirical literature on the topic.

My point is simply that if pure Ricardian equivalence does not hold (and it does not) a spending increase will not be entirely off-set by people saving up for future tax increases. Thus, it will still lead to an overall increase in spending in the economy.

[Gustaf]

This is for you Carl:

From the Economist (http://www.economist.com/node/18928600):

"A gamble where you bet your country’s good name

This newspaper has a strong dislike of big government; we have long argued that the main way to right America’s finances is through spending cuts. But you cannot get there without any tax rises. In Britain, for instance, the coalition government aims to tame its deficit with a 3:1 ratio of cuts to hikes. America’s tax take is at its lowest level for decades: even Ronald Reagan raised taxes when he needed to do so.

And the closer you look, the more unprincipled the Republicans look. Earlier this year House Republicans produced a report noting that an 85%-15% split between spending cuts and tax rises was the average for successful fiscal consolidations, according to historical evidence. The White House is offering an 83%-17% split (hardly a huge distance) and a promise that none of the revenue increase will come from higher marginal rates, only from eliminating loopholes. If the Republicans were real tax reformers, they would seize this offer.

Both parties have in recent months been guilty of fiscal recklessness. Right now, though, the blame falls clearly on the Republicans. Independent voters should take note."