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

[Lief 🗽]

Are you illiterate? Because what your title says is the opposite of what the CBO actually says.

[Linus Van Pelt]

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LOL

[t_host1]

You must be logged in to read this quote.

LOL

 My reading of this CBO point, is - Growth is needed for the revenues to increase. It is an old premise/point, however with job destruction being the current norm, "yes", taxes would be the only option if the "hold" on more debt is the trend. This is where all this is at, that is, to continue with a tight circle of the currency trade - government and its funding of selected companies/unions, or, opening up / deregulating / going back to a free market - people making things that more people need, want and most importantly, can afford.

? what do you figure the cost is on this non recommendational grade school CBO analysis.

[King]

Are you illiterate? Because what your title says is the opposite of what the CBO actually says.

CARL refuses to read the liberal bias put into the details.

[True Federalist (진정한 연방 주의자)]

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.

[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.

[True Federalist (진정한 연방 주의자)]

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.

Once again you're wrong about me.  I favor lower spending overall.  The military, K-12 education, and agriculture are the discretionary Federal programs where the biggest savings are to be had.  (By and large, military cuts shouldn't happen soon as we first need to get Afghanistan in shape to go on its own, and I doubt that will happen by 2014. Obama's time table is wildly optimistic there.)

Entitlements such as Social Security will take longer to fix, for example gradually raising the SS retirement ages from 67 to 70 in the same manner it is being raised from 65 to 67 (and increasing the age for early benefits from 62 to 65) will likely be a necessary part of any fix, but won't help with short term budget problems unless the current plateau of age 66 is ended early and we start increasing the retirement age in 2-month increments starting in 2012 instead of waiting until 2020 as is now the law.

We could get a nice one time jolt of money for the Treasury by getting rid of the Postal Rate Commission and the requirement for 6-days per week postal delivery in preparation for an IPO of the USPS.

The ludicrous efforts to jumpstart passenger rail are another cut that should be made, tho I would like to see more spending on road construction and maintenance as well as our ports and waterways.

Plenty of other small cuts to be made, but I don't see any single area the Federal government can get out of and miraculously solve the budget problem.

[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.

[opebo]

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

Without drastically greater government spending your capitalist system is doomed, Carlhaden, to the classic cycle of depression and deflation to which it is always prone.

[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.

[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.

[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.

[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').

[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?

[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.

[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.

[t_host1]

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.

Once again you're wrong about me.  I favor lower spending overall.  The military, K-12 education, and agriculture are the discretionary Federal programs where the biggest savings are to be had.  (By and large, military cuts shouldn't happen soon as we first need to get Afghanistan in shape to go on its own, and I doubt that will happen by 2014. Obama's time table is wildly optimistic there.)

Entitlements such as Social Security will take longer to fix, for example gradually raising the SS retirement ages from 67 to 70 in the same manner it is being raised from 65 to 67 (and increasing the age for early benefits from 62 to 65) will likely be a necessary part of any fix, but won't help with short term budget problems unless the current plateau of age 66 is ended early and we start increasing the retirement age in 2-month increments starting in 2012 instead of waiting until 2020 as is now the law.

We could get a nice one time jolt of money for the Treasury by getting rid of the Postal Rate Commission and the requirement for 6-days per week postal delivery in preparation for an IPO of the USPS.

The ludicrous efforts to jumpstart passenger rail are another cut that should be made, tho I would like to see more spending on road construction and maintenance as well as our ports and waterways.

Plenty of other small cuts to be made, but I don't see any single area the Federal government can get out of and miraculously solve the budget problem.

w e l l ... don't tell all those who voted for Obama that.

however, with alittle bit of vision the SD check-out plan does give certainty - long term fixed cost.

[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.

[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.

[True Federalist (진정한 연방 주의자)]

Ernest apparently believes those functions should be performed at the level farthest from the voters (I guess this is why he styles himself a "True Federalist").

How little you know me.  I mentioned K-12 education as one area where I favor cuts in Federal spending as except for possibly some spending on research or in helping States coordinate their curricula (if the States choose to participate) I want the Federal government entirely out of K-12 education.  I.e., no Federal dollars to pay for teachers, school administrators, etc.  Ideally, the Federal government should be sending zero dollars to State or local governments.  The whole reason most such programs exist is that most State and local governments are required to run a balanced budget while the Federal government isn't.  So historically, they've gone for an end-run to Washington to increase their spending without having to raise State or local taxes. Those which don't exist for this reason usually exist to give the Federal government a club with which to force the States to do their bidding.

If I was given the chance to add a single amendment to the U.S. Constitution it would be something like this:
"Except to pay for the expenditures of the militia called into Federal service, no appropriation of monies that go to State or local governments shall be passed except upon a two-thirds vote of each House."
I'm hesitant about including the two-thirds opt-out clause, but I'll concede there may be a few other circumstances where such payments might be necessary.

[True Federalist (진정한 연방 주의자)]

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.”

Then let me make it clear even to you.  I favor cuts in K-12 education and agriculture.  Indeed I favor the complete elimination of all Federal funds for teacher pay, and the complete elimination of all agricultural subsides (including the ones disguised as tax breaks).  The former is because I feel spending for local education should be paid for at the local level.  The later is because despite the myth of the continuing relevance of the small family farm, most such subsidies these days go to large agribusinesses either directly or indirectly.

[True Federalist (진정한 연방 주의자)]

Just to make things clear.  Elimination of Federal funds for State and local programs would ideally be phased in over two to five years, so as to give State and local governments a chance to decide that they either will find other funding sources for the programs or eliminate the program.

[True Federalist (진정한 연방 주의자)]

Like Ernest, you make the false presumption that the only place to cut is large expenditures, rather than a multitude of smaller, but more wasteful ones.

Not only is this a misrepresentation of what I said, it's a blatant lie.

Plenty of other small cuts to be made, but I don't see any single area the Federal government can get out of and miraculously solve the budget problem.

[Lulz]

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.