CBO: Tax hikes unnecessary

[CARLHAYDEN]

CBO: Tax hikes unnecessary

June 27, 2011 by Don Surber

“The CBO calculates that if Congress leaves the tax code as it is today—which would include permanently extending the 2001/2003 tax cuts for all taxpayers (even those greedy, job-producing rich folks and small businesses), patching the alternative minimum tax so it does not impact middle-income families, and continuing a host of other tax-reducing provisions that regularly expire—tax revenues would exceed their historical average of 18 percent of GDP in 2021. Revenue would continue growing thereafter absent any policy changes and soon surpass the all-time record high hit back in 2000 at the height of the Internet-tech boom.”

http://blogs.dailymail.com/donsurber/archives/36663#more-36663

[CARLHAYDEN]

What is sad that there will be some politicians who use the argument that the "CBO says tax hikes unnecessary" so we should make the Bush era tax changes permanent.  What is even sadder is that we will not be able to tell if they are idiots, liars, or both.

What is sad is that some posters believe that what we need is more taxes, higher taxes and more spending.

But enough about Ernest.

[CARLHAYDEN]

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.

[CARLHAYDEN]

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.  We have a decentralized system, even though people like Ernest want an all powerful central government.

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).

Now, you assumption that government revenue is 20% of GNP is false.  Its actually approximately 34%.  http://www.usgovernmentrevenue.com/%

I can understand your confusion, as federal revenues are nearly 20%.

Now, it nice to read that you do not "generally" support more spending and taxes.  It, however, would be nice if you would drop the "generally," as that term is most frequently used as a prefix for, but, I now support what I said I "generally" don't support (or, in short, 'fibbing').

[CARLHAYDEN]

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.

[CARLHAYDEN]

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.

[CARLHAYDEN]

[/quote]

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.).

[CARLHAYDEN]

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.

Carl,

You're being emotional.  Democrats have not made serious moves to shrink the government and Republicans like you have only sought to use the deficit reduction as a gimmick to push your agenda.

A few billion here and a few billion there is peanuts in a $3.7 Trillion budget.  The only thing guys like you make noise about are Planned Parenthood, the EPA, Public Broadcasting, Foriegn aid etc.  We could eliminate all of those tomorrow and you know where we would be?  Right where we are today.

Let's stop talking about all this nonsense and have a serious discussion about paying off the debt.

First, you are correct about one thing, "Democrats have not made serious moves to shrink the government."

Futher, in a news conference Wednesday in the White House east room, President Obama proposed:

 “measures (that) likely would add hundreds of billions of dollars to budget deficits...”

http://www.reuters.com/article/2011/06/30/us-usa-debt-idUSTRE75M80E20110630

Second, you seem to believe that reducing expenditures is "emotional" whereas increasing taxes is the answer to all problems.

Finally, why is it "nonsense" to make efforts to reduce government expenditures?

[CARLHAYDEN]

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

[CARLHAYDEN]

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.

[CARLHAYDEN]

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.

[CARLHAYDEN]

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).

[CARLHAYDEN]

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.

[CARLHAYDEN]

Gustaf,

You have been calling to more taxes on Americans throughout this thread, but now you claim you don't want to tax America to death. 

Its really oh so kind of you to be willing to allow us to keep enough to survive.

However, if the proposal for the massive tax increases you and Obama want to impose on Americans were ever put on the American ballot, I believe it would be massively rejected. 

But, even when Americans make it clear they want cuts in spending rather than tax increase, you and Obama want to punish us with more taxes, but not (quite) to death.

Here’s some evidence from a recent Gallup Poll (which being an ‘adult’ poll, is somewhat more liberal than the actual electorate)

USA Today/Gallup Poll. April 20-23, 2011. N=1,013 adults nationwide. Margin of error ± 4.

"Are you worried or not worried that the Democratic plan for reducing the federal budget deficit in the long-term would . . . ?"
                                                                                                 Worried Not worried Unsure         
                                                                                                 %              %              %         
"Not go far enough to fix the problem"                                     71            24              4
"Use the deficit as an excuse to raise taxes"                           62             36              2     
"Cut defense spending too much"                                            49              48             3

So, the American people agree with me, rather than you and Obama.

Next, you suffer from the inability to understand that government spending does not materialize out of thin air. 

Now, when the government tries to create spending without direct taxes, it does it by effectively monetizing the deficit, thereby leading to inflation, which is simply an indirect tax.  Moreover, in many instances, the government using inflation as a means of kicking people into higher tax brackets (where there is no automatic adjustment), thereby effectively increasing tax rates (I had that happen to me under Carter).

[CARLHAYDEN]

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, yes you have been calling for higher taxes on Americans.

Second, as I previously pointed out, eliminating the deficit should not be expected to be accomplished all in one year.  However, just holding spending in check will in and of itself cut the deficit.  With some prudent cuts in outrageous waste (EPA, State Department, and other agencies), the deficit can be reduced, and eventually eliminated.  Or, to use an old adage, 'Rome was not built in a day.'

Third, yes I know you want to turn the United States into a socialist land like much of western Europe, but real Americans (unlike most of the posters on this forum) do NOT want you 'success.'  Oh, and you really should check out what is happening in western Europe.  Ever hear of Portugal, Ireland, Italy, Greece or Spain?  

Fourth, yes the American people did elect Obama, but, there are three points relevant to that error, which you either are unaware of, or deliberately ignore:

(a) McCain was (and is) a worthless SOB who voted for the bank bailout opposed by the majority of the voters!  The majority of the voters opposed the bailout, but both major party candidates supported it

(b) the voters were (I believe understandably) angry at Bush and the Republicans in Congress for their spendaholic ways (remember the bridge to nowhere),

(c) Obama ran his campaign on vague (hope and change) basis.  He did not loudly proclaim his desire for more and higher taxes.  The last time a major party presidential candidates openly proclaimed his desire for more and higher taxes (Mondale in 1984), he suffered a crushing defeat.

Fifth, I'm sure you do not [perceive the relevance of the desires of the American people with respect to government policies.  To many europeans, the mass of the populace are subjects to be ruled over by the government rather than citizens who tell the government what policies to pursue.

Sixth, the velocity of money is dependent upon a number of factors.  Do you really want to get into a discussion (rather lengthy) of those factors?

[CARLHAYDEN]

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,

I really wonder if you can comprehend what I have posted?

First, with respect to the large mandated programs, simply freezing them (no inflation indexing) will save a massive amount of money.

Second, I have given a short list of some of the worst spenders in the federal government.  There are many more (BATFE for anoher example).  Now, just as I believe 'too big to fail' is a bad policy, your supposition of 'too small to cut,' is also a bad policy.

Third, money in private (non-governmental) hands is more efficent than money in the governmet's hands.  So, when we cut back government, we improve the economy.

Let me give you an example, much money is spent on accountants, financial advisers and tax attornies to avoid taxes rather than to produce profits.

[CARLHAYDEN]

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

[CARLHAYDEN]

Third, money in private (non-governmental) hands is more efficent than money in the governmet's hands.  So, when we cut back government, we improve the economy.

Let me give you an example, much money is spent on accountants, financial advisers and tax attornies to avoid taxes rather than to produce profits.

CARL, what your example argues primarily for is tax simplification, not any particular tax rate.  If we were to get rid of all the various loopholes, deductions, and other special gimmicks in the tax code, then the tax accountants, tax advisers, and tax attorneys would have to find more productive work to do. It also would simplify the job of tax enforcement, which would allow for some combination of more revenue from tax cheats that are caught and a reduction in the IRS payroll, as it would no longer have to have agents engage in so many arguments over creative interpretations of the tax code.

Ernest,

My example (just one of many I could provide) illustrates how the greater the tax burden, the more incentive there is to avoid it.

Let me provide another example, in my city the abutting Indian reservations make major profits from sales of items (primarily tobacco) which avoid local sales taxes.

Now, if those sales taxes were lower (when I was a kid they were 5%, now they're 9.1%), there would be less incentive for trips to the reservation.

[CARLHAYDEN]

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

Update:

Today Obama is trying to weasel his way around his tax increase proposal.  Here's what he said today:

 “So, when you hear folks saying ‘Well, the president shouldn’t want massive job killing tax increases when the economy is this weak.’ Nobody’s looking to raise taxes right now. We’re talking about potentially 2013 and the out years.”

[CARLHAYDEN]

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.

[CARLHAYDEN]

My example (just one of many I could provide) illustrates how the greater the tax burden, the more incentive there is to avoid it

Let me provide another example, in my city the abutting Indian reservations make major profits from sales of items (primarily tobacco) which avoid local sales taxes.

Now, if those sales taxes were lower (when I was a kid they were 5%, now they're 9.1%), there would be less incentive for trips to the reservation.

Those tax breaks and loopholes Boehner is too scared to touch, lest he be electrocuted by the tea partiers, work in exactly the same manner, CARL. They encourage what would non-optimal economic behavior in a tax system where taxation is evenly applied.

In the example you give, the waste is in the extra mileage on the vehicle, and in the time spent driving out to the reservation.  Plus, I'm willing to bet that the pre-sales tax prices are higher on the reservation, so the actual price differential won't be as great as the tax differential, since it behooves the stores on the reservation to try and capture some of the profit on the tax arbitrage.

However, we were talking primarily about the Federal tax code, not differences between jurisdictions.

First, you need to check your facts.  As every analyst has pointed out, the revenues produces from tax breaks and loophole closing is only a small portion of the proposed tax increases.  If those were the sole matters involved in revenue enhancement, a deal would have been stuck days ago.  The truth is that Obama WANTS massive tax increases!!!

Second, you seem to miss my point on legal tax avoidance.  While there is some cost on hiring accountants and tax attorneys to find ways to prevent the government from grabbing money, if the benefits outweight those costs (and the alternative revenues from taxable investments), then people will continue to invest their funds in tax avoidance.

I gave you a simple example (so you might be able to understand it).  Let me give you a more complex one.  American based corporations hold profits made on investments outside the United States for years, rather than repatriating them and paying them to stockholders, waiting for an advantageous point in tax law.  Check out how GE paid almost NO federal income taxes last year (btw, Immelt is a pal of Obama).

[CARLHAYDEN]

you seem to miss my point on legal tax avoidance.  While there is some cost on hiring accountants and tax attorneys to find ways to prevent the government from grabbing money, if the benefits outweight those costs (and the alternative revenues from taxable investments), then people will continue to invest their funds in tax avoidance.

Didn't miss the point at all.  What you apparently keep missing is that tax avoidance only becomes possible when there is disparate tax treatment for different economic activities.  Whether those disparities are due to location (as in your reservation example) or in the type of activity (as in the case of specialized tax breaks) the effect is essentially the same, and will still be there under whatever supposed base tax rate is there.

I gave you a simple example (so you might be able to understand it).  Let me give you a more complex one.  American based corporations hold profits made on investments outside the United States for years, rather than repatriating them and paying them to stockholders, waiting for an advantageous point in tax law.  Check out how GE paid almost NO federal income taxes last year (btw, Immelt is a pal of Obama).

Which is a broken area of the tax code and has been for decades under both Republicans and Democrats.  I'd love to see corporate income taxes changed from their current net worldwide income basis to a gross domestic sales basis. Doing so makes most corporate tax avoidance strategies impossible, and I fail to see why the US should be taxing foreign economic activity in the first place.

You still keep missing my point.

If taxes are further increased by the federal government, more employers will 'off-shore' employment to save on costs.  So, do you want to increase unemployment by raising taxes?  Oh, and omitting taxes on foreign operations, as you propose, will do nothing but make this even worse!

[CARLHAYDEN]

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?
[/quote]

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 mandatory 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 Scandinavian countries want to emulate lemmings and continue on their path to the cliff, its their right.  However, most Americans have some foresight, and don'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



[/quote]

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.
[/quote]

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.

[/quote]

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.
[/quote]

First, I must emphatically reject your assertion that there is NOTHING that government expenditures inexorably will increase as fast or faster than revenues!

Second, the instance I cited (with url source) came during a period of tax rate cutting.  So, are you asserting that that there can be revenue increases when rates are cut but not when they are kept static?

Finally, the term is "ceteris paribus."  For those without latin, that simply means "everything else being equal."  I will assume the omission of the "s" in ceteris, is merely a typo.  Further, while tossing in a latin phrase may impress the impressionable, it has absolutely no significance otherwise.  The facts speak for themselves. Do I need to give the phrase in latin?

[CARLHAYDEN]

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).

[CARLHAYDEN]

Yes, we appear to finally be getting somewhere.

First, let me say it is nice you have heard of David Ricardo (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.