Taxes At An All-Time Low; Deficits At An All-Time High

The drive to cut taxes is at the heart of the budget mess.

In his review of Obama’s budget, Bruce Bartlett notes that in addition to aging population, one of the biggest drivers of our record-high deficits is our record-low taxes:

According to the historical tables, federal revenues will only consume 14.4 percent of GDP this year – the lowest percentage since 1950. The postwar average is about 18.5 percent and there were many very prosperous years when revenues were considerably higher. In the late 1990s, they averaged more than 20 percent of GDP, which was a key reason why we ran budget surpluses.

He also notes that the President’s budget for future years assumes that the Bush tax cuts will expire and that other revenue increases will happen — a prospect that he and I both find politically dubious given the current state of the Republican Party.

And this is a problem, because the biggest driver of deficits is the drive to cut taxes at all costs. If we were still at Clinton-era tax rates, the deficit would be substantially smaller and much more manageable. And as I’ve noted previously, there does not appear to be any correlation between income tax rates and economic performance, despite the best efforts of conservative pundits to assert the opposite. And as Bartlett rightly notes, not all taxes are created equal:

The budget makes the important point that tax reform is necessary to ensure that the government’s revenue-raising capacity is adequate to fund the health and retirement benefits that people expect. Economists know how to design a tax code that can raise more revenue without increasing the economic burden of taxation. That is because some taxes impose a greater economic burden, which economists call the deadweight cost of taxation, than others. Thus tax reform has the potential to increase revenues while stimulating growth at the same time.

But there is little appetite for such reform by both Republicans and Democrats. Instead, the arguments are simply over whose taxes to cut–and how much? But this is absolutely absurd. That’s because every tax dollar lost in a time of deficits means that a dollar is borrowed. Which means that interest must be paid on it. And simply put, if you care about cutting “government waste,” there is nothing more wasteful than money spent on interest payments. Which makes tax cuts themselves wasteful.

And the cost of tax cuts is enormously high. Consider this:

Starting in 2014, net interest payments will surpass the amount spent on education, transportation, energy and all other discretionary programs outside defense. In 2018, they will outstrip Medicare spending. Only the amounts spent on defense and Social Security would remain bigger under the president’s plan.

That’s insane.

This is not to say that spending doesn’t need to be curtailed. I think it does. Indeed, I outlined a few ideas here — including a bigger federal role in curtailing health care costs, because such costs are the biggest driver of increased Federal spending. But the second biggest driver, going forward, is interest on the debt.

And that debt is caused by cutting taxes when the budget is in the red.

And everytime a politician wants to cut taxes without commensurate spending cuts, he is advocating increased spending on debt service. Which is awesome for bondholders. But pretty terrible for the rest of us.

FILED UNDER: Deficit and Debt, US Politics
Alex Knapp
About Alex Knapp
Alex Knapp is Associate Editor at Forbes for science and games. He was a longtime blogger elsewhere before joining the OTB team in June 2005 and contributed some 700 posts through January 2013. Follow him on Twitter @TheAlexKnapp.

Comments

  1. Gerry says:

    You’ve got a typo in your post:

    > the biggest driver of deficits is the drive to cut taxes at all costs.

    should actually read:

    > the biggest driver of deficits is politicians making promises with other people’s money that they have no business making so they can get re-elected.

    Obviously, this causes problems for the rest of the post.

  2. mantis says:

    No, he had it right the first time, Gerry.

    Tax cuts without spending cuts guarantee increased debt through interest. Republicans constantly pushing tax cuts, like those unpaid for cuts we saw under GWB and the Republican Congress (not to mention all the increased spending they pushed), are the ones making promises with others people’s money that they have no business making so they can get re-elected. That interest on the debt? That’s paid by taxpayer (i.e. other people’s) money. Get it?

  3. Matt B says:

    Gerry,

    I think you had a typo in your reply:

    > the biggest driver of deficits are voters who repeatedly re-elect politicians who make promises with other people’s money that they have no business making so they can get re-elected.

    Of course I realize everyone else’s congressperson is a crook. Likewise pork is only pork when it’s going to other districts. The fact is that we, to a large degree, have the government we deserve.

  4. physics geek says:

    If we were still at Clinton-era tax rates spending levels…

    FIFY.

  5. Brummagem Joe says:

    Bruce has been pointing out for a couple of years that :

    a) that the bulk of public spending is in areas where there is no real public will to cut programs and therefore no politicians of either party are ever going to seriously mess with them

    b) the tax take both as a % of GDP and as a share of income is at record lows.

    c) ergo at some point taxes are going to have rise.

  6. george says:

    You can’t have the kind of military and Medicare spending we have without the taxes to pay for it. Since no one is willing to significantly cut either military or Medicare spending, taxes are going to have to be raised. There doesn’t seem to be any other option.

  7. Brummagem Joe says:

    Gerry says:
    Monday, February 21, 2011 at 12:11

    Actually Gerry’s response is fairly typical of the unreal and meaningless bs that conservative invariably trot out. No substance, no reality, just trite nonsense

  8. Gerry says:

    mantis-
    As a reminder, the GWB/ Republican tax cuts were “paid for” by the large surplus we had. They were sold as a “refund”- though not many care to remember that. Be that as it may (and I supported it at the time), if I had it to do again I’d prefer the money had been used to pay down debt.

    Matt B-
    I can only quibble with your correction. I think that you are … not incorrect, but not completely correct either. As simply as I can state it, I think people elect their congress people and assume that they will behave as an adult and not require constant monitoring and policing by the voter. Obviously, that doesn’t work in practice.

  9. steve says:

    Also of note, income tax and the more regressive payroll tax are bringing in close to equal revenue now.

    Steve

  10. Trumwill says:

    They were sold as a “refund”- though not many care to remember that. Be that as it may (and I supported it at the time), if I had it to do again I’d prefer the money had been used to pay down debt.

    If they were sincere in that packaging, they could have pretty easily made the cuts contingent on a budget surplus. They didn’t.

    Which is a shame for fiscal conservatives, because in addition to avoiding the amassing of a huge deficit, the triggering of a tax hike might have prevented government growth. Given the war, probably not, but something vaguely resembling consequences to actions may have some sort of beneficial effect…

  11. steve says:

    Gerry- As I recall they were also paid for by letting them expire. The added income from their expiration was needed to make them not run a deficit.

    Steve

  12. Brummagem Joe says:

    Gerry says:
    Monday, February 21, 2011 at 12:37

    However things were “sold” and I’d actually question that but no matter you won’t face up to basic reality that when it gets down to the wire the public wants these programs (Politicians aren’t just doing this on their own they are giving their customers what they want). Hence it has to be paid for. The reason I’m so dismissive of Republican economic governance is they won’t face this simple reality and instead take refuge in junk economic theories like supply side, or claiming reducing govt expenditure in the midst of a recession is going to create jobs. It’s nonsense.

  13. mantis says:

    As a reminder, the GWB/ Republican tax cuts were “paid for” by the large surplus we had.?

    Absolute bullshit. Not surprised you believe it, but still.

    They were sold as a “refund”- though not many care to remember that.

    They were “sold” by a bunch of liars.

    Be that as it may (and I supported it at the time), if I had it to do again I’d prefer the money had been used to pay down debt.

    So you support letting those tax cuts expire, then?

  14. Sorry, can’t buy the argument that the deficit is because we aren’t taxed enough, especially when many of “us” aren’t paying any federal income taxes at all. Check the increase in federal spending again the last few years. The deficit has much, much less to do with revenue than with out of control and rapidly increasing expenditures, most of which are nothing more than wealth transfers.

    It’s all about envy and a radical equality isn’t it? How dare someone else have something that everyone can’t have?

  15. How about this, we go back to Clinton levels of taxation AND Clinton levels of spending?

    Any takers on the progressive side?

    Bueller? Bueller? Bueller?

  16. wr says:

    Envy and radically equality? You mean like saying we need to wipe out teachers’ pension plans because a lot of private sector workers have lost theirs?

  17. Alex Knapp says:

    @Charles –

    Check the increase in federal spending again the last few years. The deficit has much, much less to do with revenue than with out of control and rapidly increasing expenditures, most of which are nothing more than wealth transfers.

    What you call “wealth transfers”, I call, “not letting old people die because they can’t pay their medical bills.”

    I know, I know. Tomato, tomato.

    I’ve offered up my budget cutting proposals, which include breaking health-care cartels and rationalizing the regulatory system by getting the states out of it completely. That’s hard enough. A far superior solution would be to just go single payer. What’s your plan for controlling health care costs?

    The fact remains, though, that had the Bush tax cuts not been enacted, the debt would be far smaller than it is today.

  18. mantis says:

    Sorry, can’t buy the argument that the deficit is because we aren’t taxed enough, especially when many of “us” aren’t paying any federal income taxes at all.

    So, because the people making the least amount of money don’t pay federal income taxes, which would amount to next to nothing in terms of the deficit if they did, you “can’t buy the argument” that lower taxes increase the debt, even though this is an undeniable fact? That’s because you Republicans believe in magic, not reality.

    The deficit has much, much less to do with revenue than with out of control and rapidly increasing expenditures, most of which are nothing more than wealth transfers.

    There are two sides to the equation. Saying one matters and one doesn’t show you don’t understand math, or accept reality.

    It’s all about envy and a radical equality isn’t it? How dare someone else have something that everyone can’t have?

    You figured it out. It’s all just a drive to socialism fueled by jealousy. Jebus, are there any adults left on the right at all?

    How about this, we go back to Clinton levels of taxation AND Clinton levels of spending?

    Any takers on the progressive side?

    Sure. Does that include the wars? Can we cancel Medicare Part D? Why don’t you Republicans get right on that?

  19. Brummagem Joe says:

    The vast majority of our public debt has been created by Republican presidents who have over the last 30 years cut taxes and increased spending. In 1945 the public debt was about 200% of GDP. Over the next 35 years Republican presidents (16 years) and Democratic (18 years) brought this down to around 40% of GDP. In the thirty years since 1980 (Republican 20 and Democrat 10) nominal GDP has risen five tiimes and the public debt 11 times. The vast majority of this increase occurred on the watches of Reagan who tripled the public debt and Bush who doubled it. And much of the expenditure Obama has included leftovers from Bush. None of this is a matter of debate, it’s a matter of stats. and yet conservatives act as if this were some Democratic created problem. The Republican fiscal record over the last thirty years has been truly abominable and yet conservatives are in complete denial about it. What don’t you understand about it guys?

  20. mantis says:

    What you call “wealth transfers”, I call, “not letting old people die because they can’t pay their medical bills.”

    That’s not a bug for them, it’s a feature.

    Today’s Republican Party: working as hard as we can to make sure more Americans suffer, go broke, and die faster.

  21. Brummagem Joe says:

    charles austin says:
    Monday, February 21, 2011 at 12:52
    “It’s all about envy and a radical equality isn’t it? How dare someone else have something that everyone can’t have?”

    It has nothing to do wtih envy (a juvenile argument if ever I heard one) and every thing to do with spending more than were raising in revenue.

  22. andrew says:

    “None of this is a matter of debate, it’s a matter of stats. and yet conservatives act as if this were some Democratic created problem. The Republican fiscal record over the last thirty years has been truly abominable and yet conservatives are in complete denial about it. What don’t you understand about it guys?”

    When the Republicans controlled both houses of Congress for 12 years the average budget deficits were something like 1-2% of GDP. Hopefully the country learned its lesson after the suicide attempt elections of 2006 and 2008.

    Most of the boost in spending that occurred under Reagan and Bush were caused by the fact that they had to rebuild the military after following Democrats.

  23. Gerry W. says:

    Somebody has the same name as me. Well almost. Gerry W. with a picture.

  24. MBunge says:

    “Check the increase in federal spending again the last few years.”

    You mean, the last few years when America faced the greatest economic and financial downturn since the Great Depression? Everyone who knows a damn thing about economics agrees that the feds HAD to spend more money to deal with that crisis, though there’s certainly disagreement over how money should have been spent.

    Mike

  25. MBunge says:

    “When the Republicans controlled both houses of Congress for 12 years the average budget deficits were something like 1-2% of GDP.”

    And the fact that GOP-controlled Congress did not repeal the tax increases passed under Bush I and Clinton had what to do with that? Let’s look at budget deficits before and after the Bush II tax cuts, if you’re not too chicken.

    Mike

  26. andrew says:

    “And the fact that GOP-controlled Congress did not repeal the tax increases passed under Bush I and Clinton had what to do with that?”

    Nothing. The Republican Congress cut taxes elsewhere (eventually signed by Clinton in 97, I think it was). And the Republicans won the Cold War allowing defense spending to be cut to 3% of GDP, until 9/11 happened.

    “Let’s look at budget deficits before and after the Bush II tax cuts, if you’re not too chicken.”

    The tax cuts were in response to a recession that was in place when Bush came into office and the collapse of the late 90’s NASDAQ/tech bubble.

  27. Andre Kenji says:

    When republicans controlled both houses of Congress they passed Medicare part D, the biggest increase in the size of government since LBJ.

  28. Pete says:

    “instead take refuge in junk economic theories like supply side, ” “Actually Joe’s response is fairly typical of the unreal and meaningless bs that poorly informed demagogues invariably trot out. No substance, no reality, just trite nonsense.”

    Joe, supply side is about a whole lot more than tax policy. From Ed Breen at supplysideforum.com: “it is based on the economics and metrics of production. That is what distinguishes Supply Side Economics from Keynesian Economics. If you don’t get that you cannot discuss the two different paradigms. Supply side doesn’t reject demand any more than Keynes rejects supply. That is not the point. Supply and Demand are functions in all economics. Supply Side focuses on production as the primary economic driver of economic growth and wealth production. Supply Side refers to the metrics of production because production is central to the Supply Side analysis. In contrast Keynesians focus on consumption as the primary driver of economic growth and wealth creation. Keynes sought to manipulate aggregate demand as a way of regulating the economy. Most economic metrics that we use today were created since World War II by government Keynsians…we have the bureau of labor statistics and we have the bureau of economic advisors that produce many of the metrics that todays economists use and refer to in the construction of their economic theories. These are all metrics created and maintained by keynesians according to their own demand paradigm. As an example, consider that GDP is used to measure growth, when in fact GDP is a measure of spending that is mostly consumption. It does not distinguish consumption from investment. It does not distinguish spending for production from spending for necessities or spending for subsidies. A supply sider has to drill down into that metric and search for metrics that describe production. A supply sider is more interested in new business formation than in aggregated job loss or gain at the end of each month. A supply sider is more interested in the metrics of closed corporation capacity, employment and spending than public corp and government employment and spending. Economic theories are characterized and limited by their metrics. If a supply sider uses keynesian metrics that conflate the issues of production, investment and consumption then the supply side will be speaking and thinking a demand side language.

  29. Pete says:

    Alex: “The fact remains, though, that had the Bush tax cuts not been enacted, the debt would be far smaller than it is today.” Sure Alex, as long as the spending didn’t increase MORE because of higher revenues. You sound like a government bureaucracy making predictions based on static analysis.

  30. Trumwill says:

    I’ve offered up my budget cutting proposals,

    Kind of off-topic, but one of the things you mentioned was eliminating jailtime for non-violent offenders. Would that include armed felonies where no violence actually occurred?

  31. Alex Knapp says:

    Pete:

    The theory that higher taxes leads to higher deficits isn’t borne out by the empirical evidence. See e.g.: https://www.outsidethebeltway.com/the-failure-of-starve-the-beast/

    Trumwill:

    I’d consider that to be a violent crime.

  32. Brummagem Joe says:

    “Joe, supply side is about a whole lot more than tax policy.”

    I’m not unaware that supply side has other features than tax policy and of the primacy that it generally assigns to production over demand which imho is equally loopy. Essentially you seem to be saying the rules were all written by Keynesians and the entire system is operated by Keynesians and thats not t he language we speak. Well tough because Keynesianism is generally the language of reality and when the chips are down
    a lot of supply siders rapidly become Keynesians.

  33. Brummagem Joe says:

    andrew says:
    Monday, February 21, 2011 at 13:38
    So you admit Republicans were responsible for the deficits but it was necessary to “win the cold war” and finance Keynesian deficit spending after the dot com bust?

  34. john personna says:

    It’s really funny to see people claim that tax and spending are different animals, that one “must” change before the other, or that one “matters” more than the other.

    How can that be, when they go together in a simple equation:

    debt = spending – tax

    Taxation and spending are independent variables. Certainly at the margin they can both be changed independently.

    You are an idiot or an ideologue (but I repeat myself) to say that “oh no, you can only change one.”

  35. Dave Schuler says:

    No gripe here. I opposed the tax cuts of the early Aughts when they were enacted and I thought they should have been allowed to expire.

  36. Alex Knapp says:

    John,

    One can have more political import than another.

    The two fastest growing areas of spending in the budget are based around: (a) the increasing cost of health care and (b) service on the debt.

    Cutting taxes increases (b), causing it to contribute to the deficit in two ways — first by decreasing revenue and second by increasing payments to debt servicing.

    You’ll note that in my post above, I do think that spending needs to be curtailed.

  37. Brummagem Joe says:

    Pete says:
    Monday, February 21, 2011 at 13:43
    “Actually Joe’s response is fairly typical of the unreal and meaningless bs that poorly informed demagogues invariably trot out. No substance, no reality, just trite nonsense.”

    Actually I’ve quoted more stats than just about anyone else on this thread not to mention the conceptual flaws that lie at the heart of most Republican bloviating about about the balance between revenue rasing and spending. But don’ t let the facts bother you Pete.

  38. anjin-san says:

    Is there anyone, anywhere who is arguing that we do not need serious spending cuts? To call this a strawman is a vast understatement.

  39. Wiley Stoner says:

    That is the most ignorant post I have ever read. Government does not produce anything. Period. Well, that is not entirely true. Our government has produced massive debt without being able to show comparative benefit, outside of the public sector. Since the public sector feeds off that which is produced in the private sector. When the burden on the private sector becomes to great the system fails. Paul Krugman is full of sh*t right up to his eyeballs. If you spew the same line it just follows. Neither you nor I can spend more than we take in and neither can the government for very long.

  40. Brummagem Joe says:

    Wiley Stoner says:
    Monday, February 21, 2011 at 14:37
    “Period. Well, that is not entirely true. Our government has produced massive debt without being able to show comparative benefit,”

    Yes Wiley most of it by Republican presidents as I’ve demonstrated o you and as Andrew agreed. Of course some of it has been spent on other things. Fighting WW 2, building the interstates, probably puting up your local school….all unneccessary stuff

  41. Alex Knapp says:

    Wiley,

    Government does not produce anything. Period.

    Feel free to move to a place with smaller government, then. I understand that Somalia is a rather exciting place to live. Outside the central government district, there’s pretty much no taxes. I’ll bet it’s a utopia!

  42. Matt B says:

    @Gerry:
    As simply as I can state it, I think people elect their congress people and assume that they will behave as an adult and not require constant monitoring and policing by the voter. Obviously, that doesn’t work in practice.
    The problem is that, except when ticked off beyond comprehension and the other party’s base shows up en force, the nature of voters (see the critique of Doug) is “hold your nose and vote for your guy” or stay home (see, in part, McCain’s loss). You’ll complain to high heaven about the idiots in your party and then vote for them all the same.

    Of course, all too often, the threat of the other party taking power, is bad enough, that you’re willing to keep the local/party “crook” in office. I do think that this is generally more true on the conservative side (but that could just be bias).

    Thus, in the voting booth conscience, or cowardice, doth make either republican or democrat of us all.

    Gerrymanding helps this as well.

  43. Wiley Stoner says:

    History has shown tax cuts increase revenues to the government because of increased productivitiy. Reference the Kennedy Tax cuts and the Reagan tax cuts. There are commenters here who state facts not in evidence. Compare the national debt as it was at the end of the G.W. Bush years and that of today. Even a casual glance will see in increase of 4 TRILLION dollars. That being achieved in just over two years. A current budget proposal of 3.6 Trillion dollars and 1.6 TRILLION of that, money we do not have. It maters not if this is a well thought out plan or incompetence, the result is a bankrupt country.
    I don’t know where you live Alex, but I pay more tax on more things than I ever have. You made a statement taxes are the lowest they have ever been. Document that please and do not leave out state and local taxes.

  44. Brummagem Joe says:

    Alex Knapp says:
    Monday, February 21, 2011 at 14:43
    Wiley,

    “Feel free to move to a place with smaller government,”

    There are lots of trees in the Amazon jungle he could live up…its that Wordsworth in your avatar Alex?

  45. Wiley Stoner says:

    What a wise and thought out response Alex. Your knowledge and wisdom must astound college freshman. I put may a$$ on the line for this country. No idiot has the right to tell me to move if I do not like the government stealing my money for projects I do not want. F green energy. If the market demands it we will get it. You should read the constitution. Failing that, have someone fluent in English read it to you. Have a dictionary present as there seems to be many terms used in the consitution you do not understand.

  46. anjin-san says:

    > Compare the national debt as it was at the end of the G.W. Bush years

    You mean when Bush left office with the economy in danger of outright collapse?

  47. Brummagem Joe says:

    Wiley Stoner says:
    Monday, February 21, 2011 at 15:05
    “History has shown tax cuts increase revenues to the government because of increased productivitiy.”

    I’ve got news for you Wiley, not even Art Laffer says that anymore. In addition tthe increase in the budget since Bush left office is either a residue of things he put in there (or hid off the books) like the prescription drug benefit, two wars, unemployment benefits. In his last year in office federal spending was $1.2 billion. That expenditure just doesn’t dissappear you know…actually you probably think it does.

  48. anjin-san says:

    > Government does not produce anything. Period.

    A utterly ignorant statement. Modern computing is in large part an outgrowth of the computers developed for the space program, the Apollo Guidance Computer (AGC) in particular. I could go on for a while, but I think I will recall the old story about trying to teach a pig to sing and get back to something worthwhile.

  49. Axel Edgren says:

    The problem is that one side makes spurious cutting promises but wants to raise taxes, while one party wants to cut (the comparatively minor) spending on the weak and politically unmotivated while never wanting to do anything but cut taxes.

    Meanwhile we have the “sensible” people in the middle who constantly harp on the first party while making excuses for the second. They can be found on this website as well.

    The reason I support democrats is that unlike republicans or libertarians they don’t have The Answer. They don’t actually think more taxes or more government is a perfect panacea – they do however think more revenue and rearranging the health care system is needed now, and they are right.

    If you are pragmatic, you are left of the center. If your are ideological, sentimental or just religious, you write for realclearpolitics or some other mediocre site and constantly lambaste the left.

  50. . I put may a$$ on the line for this country.

    I take it by that statement that you served in the US armed services?

    So, I take that when you were in the military you didn’t do anything? Didn’t produce any security for the United States nor did you do anything to further the national security/defense policies of the United States?

    After all, if ” Government does not produce anything. Period” then what was it you were doing?

  51. wr says:

    Don’t argue with him, Mr. Taylor. After all, he knows more about economics than a Nobel prize winner in the field. He told us so himself.

  52. jbc says:

    Workers having a voice at work (whether public or private) through unions is not the cause of state deficits. Just look at a recent map posted by OTB https://www.outsidethebeltway.com/public-employee-bargaining-rights/
    It lists five states (TX, GA, SC,NC and VA) where collective bargaining is “explicitly illegal” for public employees. Each of those states have huge projected deficits as well as most states (TX:$13.4 billion 31.5%; GA:$1.7 billion 10.3%; SC: $877 million 17.4%; NC: $3.8 billion 20.0%; VA: $2.3 billion 14.8%). The GOP is simply using the recession that was caused by Wall Street greed not worker rights, as a phony excuse to attack unions and the working middle class they represent. The GOP is executing a power grab at the behest of the Koch brothers and the uber wealthy (that fund their campaigns) who want to destroy any obstacles to their unprecedented accumulation of wealth. Shame on them. Wake up America. Power to the people.

  53. Gerry W. says:

    ***Wiley Stoner says:
    Monday, February 21, 2011 at 15:05
    History has shown tax cuts increase revenues to the government because of increased productivitiy. Reference the Kennedy Tax cuts and the Reagan tax cuts. There are commenters here who state facts not in evidence. Compare the national debt as it was at the end of the G.W. Bush years and that of today. Even a casual glance will see in increase of 4 TRILLION dollars. That being achieved in just over two years. A current budget proposal of 3.6 Trillion dollars and 1.6 TRILLION of that, money we do not have. It maters not if this is a well thought out plan or incompetence, the result is a bankrupt country.
    I don’t know where you live Alex, but I pay more tax on more things than I ever have. You made a statement taxes are the lowest they have ever been. Document that please and do not leave out state and local taxes.***

    If we lived in a world of our own, you may be right. But what you want to do is have two or three years of tax cuts to jump start the economy. Bush used it as an ideology and ignored the problems we had. Bush said “stay the course” and he ran the country into the ground.

    The Bush economy was years of neglect. Tax cuts don’t mean much if you don’t fix the problems. All I saw was years of our jobs going overseas, our money going to Iraq, and our infrastructure in neglect. There are things that have to get done and you can’t keep ignoring them.

    In short, at the end of the Bush term you had financial crisis, a housing crisis, companies in too big to fail, jobs lost because of “free trade”, two wars not financed and in a quagmire, added medicare part D, a Military Industrial Complex, and an infrastructure that needs 2 trillion dollars to fix.

    And now to get out of this recession, the republicans keep saying more and more tax cuts in which we had tax cuts since 2001 and 2003, the democrats spend money on useless programs, the fed wants to lower interest rates, and the states want more casinos for jobs. In other words, we lost our leverage. As long as we keep sending jobs overseas, we cannot solve our own problems. And therefore, globalization is the biggest obstacle we face.

    And since you say you are paying more taxes, it does make sense, as we had more and more tax cuts from the federal government, the states have had to make up with what the federal government is or is not doing. If we lost jobs, then the cities and states is losing revenue.

    All Bush did was the old “guns and butter” trick that LBJ did before. LBJ used inflation to finance his war and the Great Society and Bush used deficit spending for his wars and tax cuts. And for that, we will pay the price for 20 years to come.

  54. anjin-san says:

    > I pay more tax on more things than I ever have

    Document that please.

  55. MBunge says:

    andrew – “Nothing. The Republican Congress cut taxes elsewhere (eventually signed by Clinton in 97, I think it was).”

    This is just willfully ignorant of the facts. The deficit went down in 1993. It went down in 1994. It went down in 1995. It went down in 1996. It went down in 1997. The deficit declined before any tax cuts in 1997 and before the GOP took control of Congress in 94.

    I’m not sure how we survive as a democracy if more and more folks like andrew are simply going to rewrite even recent history to support their ideological obsessions.

    Mike

  56. Pug says:

    How about this, we go back to Clinton levels of taxation AND Clinton levels of spending?

    That sounds pretty reasonable. Think the Republicans would go along with the tax inreases?

    Here’s when taxes go up and they go up drastically: When those old folks who went out last November and voted big for Republicans realize that most of that “out of control spending” goes to them and their benefits need to be slashed.

    They still believe at this point that all that money goes to lazy people who won’t work. When they find out they are those lazy people, they will storm the polls again and vote for anybody promising to maintain their benefits, even if he is also promising to raise taxes.

    This will conincide with the shock millions are in for when they discover that the $150,000 in the old 401K isn’t going to last more than a few years into retirement and their bennies are on the chopping block. They don’t call us the “Me Generation” for nothing. We demanded those tax cuts when we were working, but we can certainly change our minds. Yes, I’m a Boomer.

    The old folks vote and there are going to be more and more of them. I’m thinking FDR-style income tax rates will be back before Medicare and Social Securtiy are slashed. Obama found out last November with his $500 billion in Medicare spending reductions that you don’t get between an oldster and his benefits.

  57. steve says:

    “History has shown tax cuts increase revenues to the government because of increased productivitiy. Reference the Kennedy Tax cuts and the Reagan tax cuts. ”

    Nope, factually wrong. Go look at the data. Be sure to use real dollars and not nominal dollars. What happens is the GOP cuts taxes. A few years later, revenue reaches the same level as when taxes were cut, then it passes that level. In the years between, there are large deficits generated. So, when you look at the Reagan years, we end up with much more total debt. Res ipse loquitur.

    Steve

  58. Brummagem Joe says:

    steve says:
    Monday, February 21, 2011 at 19:09

    Do you think he knows the difference between real and nominal?

  59. Eric Florack says:

    This is not a problem with not enough income. It’s too much spending.

  60. Eric Florack says:

    Oh.. and Pug is also correct.

  61. Alex, come on, federal expenditures in this country hummed along at roughly 19% of GDP for a long time. Suddenly we are approaching 24% and that has absolutely nothing to with how much revenue has been taken in. It is spending that has gone wild, not the loss of tax revenue. Oh, and we’ll get along better if you drop the gratuitous I just want old people to die. Enough with the false dichotomies please.

    As for the other responses, thanks for being so, as you say, adult. Now, try again to answer the questions if you can.

  62. wr says:

    Charles — I’m glad you don’t want old people to die. When you slash Social Security and Medicare, what do you propose we do to keep those old people from dying? Or should we just all feel sad?

  63. anjin-san says:

    > How about this, we go back to Clinton levels of taxation AND Clinton levels of spending?

    Works for me. Go back to where we were under Clinton? Hell yes.

    The problem we can’t just summon up magic ponies and have all the damage done during the Bush era go away.

  64. anjin-san says:

    > This is not a problem with not enough income. It’s too much spending.

    Correct. And when your truck runs out of gas, its not a problem with not enough gas, it’s too much driving.

  65. george says:

    >This is not a problem with not enough income. It’s too much spending.

    Yup. But since the two biggest items – the military and medicare – aren’t going to be cut by either party, there’s approximately zero chance that spending is going to decrease enough to make a difference.

    Which only leaves raising more tax money. One theory is that you increase net tax income by cutting tax rates, which encourages enough growth that total tax revenues increases. The other theory is that tax rates are now low enough that further cuts won’t encourage noticeable growth (at least not in America – it might encourage growth in China, where the products being bought are actually manufactured), and so the only way to increase revenues is increasing taxes. Right now, raising taxes looks like a better bet.

  66. michael reynolds says:

    Bit and Charles to the rescue! Screw the facts, restate the faith!

    My version of every Florack conversation:

    Alex: 1 + 1 = 2

    Florack: Nuh unh.

    Repeat ad nauseam.

  67. anjin-san says:

    You have to forgive bit, he has been a little busy standing shoulder to shoulder with Mubarek….

  68. Ben says:

    anjin – “Correct. And when your truck runs out of gas, its not a problem with not enough gas, it’s too much driving.”

    well said.

  69. Alex Knapp says:

    Charles – the five biggest sectors of the federal budget are Medicare, Social Security, Defense, Veteran’s Benefits, and interest on the debt. The biggest driver of the increase in cost is healthcare price inflation driving Medicare and the VA. That’s what needs to be controlled.

    But cutting taxes to 14% of GDP is just stupid.

  70. andrew says:

    “This is just willfully ignorant of the facts. The deficit went down in 1993. It went down in 1994. It went down in 1995. It went down in 1996. It went down in 1997. The deficit declined before any tax cuts in 1997 and before the GOP took control of Congress in 94.”

    It went down because the economy was in a growth cycle after the last recession ended in 91 and defense spending was cut to 3% of GDP because the Cold War was over. And the Republicans taking over Congress didn’t hurt either. My point about taxes was in response to something else.

    “I’m not sure how we survive as a democracy if more and more folks like andrew are simply going to rewrite even recent history to support their ideological obsessions.”

    Personally, I’m not sure how our democracy can survive as long as mongoloids like you are allowed to vote.

  71. Eric Florack says:

    So, beause you can’t afford the flat screen TV and he BMW you’ve already bought with insufficient income, the solution is to get more income?

  72. Eric Florack says:

    Yup. But since the two biggest items – the military and medicare – aren’t going to be cut by either party, there’s approximately zero chance that spending is going to decrease enough to make a difference.

    The military, as demonstrated well by world events, should not be cut.
    The federal government’s outlays on healthcare should never have existed.
    And that will be cut. A matter of time before that happens, either by intent, or by lack of funds incidental to a collapse.

  73. george says:

    >The military, as demonstrated well by world events, should not be cut.
    The federal government’s outlays on healthcare should never have existed.
    And that will be cut. A matter of time before that happens, either by intent, or by lack of funds incidental to a collapse.

    I disagree that the military shouldn’t be cut, and that there should be no public component to healthcare. But that’s irrelevant; the fact is, neither party is going to touch either (both have had the necessary majorities in the recent past and neither has been willing to do so) – and eventually both military and healthcare will be cut because when large states collapse everything is cut. The only way to avoid that is to increase revenues, and it seems unlikely that further cutting tax rates will provide those, which means the only route left is raising taxes.

  74. MBunge says:

    andrew – “It went down because the economy was in a growth cycle after the last recession ended in 91 and defense spending was cut to 3% of GDP because the Cold War was over.”

    Again, how do you have a conversation with someone who just blinks significant facts out of the discussion? According to andrew, the federal deficit went down in the 80s because of economic growth and cuts in defense spending. What’s missing from that equation? The Clinton tax hike. He simply takes it out of the equation, like someone who says 2+4=3 because he leaves out the step where you subtract 3.

    Mike

  75. anjin-san says:

    > The military, as demonstrated well by world events, should not be cut.

    What events are those? Did you see some Muslims on TV and wet yourself again?

  76. andrew says:

    “Again, how do you have a conversation with someone who just blinks significant facts out of the discussion? According to andrew, the federal deficit went down in the 80s because of economic growth and cuts in defense spending. What’s missing from that equation? The Clinton tax hike. He simply takes it out of the equation, like someone who says 2+4=3 because he leaves out the step where you subtract 3.”

    I didn’t mention the Clinton tax hike because it had nothing to do with what happened.

    I don’t know how to talk to a simple mind whose thought process consists of:

    1. Raise taxes
    2. ?
    3.Prosperity!

    Obviously your mind doesn’t have the capacity to comprehend more than one variable at a time.

  77. MBunge says:

    “I didn’t mention the Clinton tax hike because it had nothing to do with what happened.”

    It did. That’s not my opinion. That’s fact. Without that tax increase, the federal government would have collected less revenue from the economic growth of the 1990s. We’re talking 2+2=4, here.

    I mean, you’re not even bothering with the BS argument that without the Clinton tax increase, the economy would have done even better and the lower tax rates would have brought in the same amount of revenue as the higher rates. Which is probably a good thing for you, because then we’d have to get into how virtually every single conservative was totally and spectacularly wrong about the economic impact of the Clinton tax hike.

    Mike

  78. Rob in CT says:

    Go back to Clinton-era spending and tax rates: deal, but there’s a problem. We’ve racked up a bunch more debt since then (due to 2 wars – 3 if you count the “War on Terror”, the Bush [now Bush/Obama] tax cuts, Medicare part D, the recession and the stimulus). The interest on that debt means we need either more revenue or less spending elsewhere in the budget.

    Anyway, revenues & spending at ~19% of GDP is fine by me (I’d shoot for 20% revenue, 19% spending and use the 1% surplus to get the debt back down to reasonable levels). What we have now is 14.5% revenue and ~24% (I didn’t look it up, I’m just going with a figure posted upthread) expenditure.

    We can hope that economic recovery + the wind down of the stimulus will close that gap, but it won’t be enough. The real 800lb gorilla is projected healthcare cost inflation and the best shot anybody has taken at that in a while has been thoroughly slandered as a budget-busting/kill grandma (both at the same time!! LOL) law.

  79. wr – when we feel sad everyone can ride their free pony.  I mean, we are all getting ponies, aren't we?
    Michael Reynolds – I promise henceforth to do you the service of never quoting you again to save you the embarrassment.
     

  80. Rob in CT, nice summary.  But it makes the deficit spending the last two years (and the next ten according to the President's own projections) even more duplicitous and contemptible.
     
    It's really sad when the fix to the next fiscal year's $1T deficit is a $61B cut that can't even get passed. 

  81. An Interested Party says:

    "It's really sad when the fix to the next fiscal year's $1T deficit is a $61B cut that can't even get passed."  
    Well there you go…if such a cut can't get passed, how are these conservative fantasy scenarios of the budget being brought into balance solely or mostly through spending cuts going to become reality?  Magic ponies, maybe…

  82. So you want to raise taxes to make up the remaining $940B in deficit spending this year?
     
    And what happens when interest rates raise and the payment on the debts doubles, or triples?  As I think has been stated before, if I had any faith that spending cuts where coming, I might advocate for higher taxes to pay off the debt, but I don't think I'll advocate for higher taxes just to increase the day to day spending problem we have now.  Say, whatever happened to the Democrats insistence on PayGo?