GDP VS Deficit

[Eastoff]

Just curious on the explanation about tax cuts growing our economy,

how does this chart come into play?

 

[Eastoff]

uh wtf, that is not at all what the number look like...

 

[Eastoff]

1700% growth of deficit and 500% growth of GDP.

 

[Denny Crane]

1700% growth of deficit and 500% growth of GDP.

Just based off these two numbers, govt. has grown far more than 1700% when it should have grown by 500%.

 

[PapaG]

1700% growth of deficit and 500% growth of GDP.

Gov't spending is outpacing GDP growth and associated tax revenues.

It's not that hard to understand, is it?

 

[maxiep]

Why don't any of those graphs show up? Is there a setting I can use to see them? I am using IE8.

 

[Eastoff]

Why don't any of those graphs show up? Is there a setting I can use to see them? I am using IE8.

Apparently they weren't permanent. When I first copied them, I didnt' really expect they would copy. I used the website http://www.wolframalpha.com/ and then typed in 'US GDP vs US Deficit'

 

[Eastoff]

Gov't spending is outpacing GDP growth and associated tax revenues.

It's not that hard to understand, is it?

as opposed to, tax cuts for the wealthy do not grow the GDP?

 

[Ed O]

as opposed to, tax cuts for the wealthy do not grow the GDP?

What?

Ed O.

 

[maxiep]

westnob, there are a few economic issues in your post that I may be able to clear up.

First, its an economic truism that when you allow people to keep more of their money, they feel wealthier and act as such--spending and investing.

Second, any time the government takes money and spends it or redirects it for others to spend, there's a dead weight loss that makes that money in essence worth less than money taxpayers get to keep.

Third, lowering tax rates are only one part of the equation. You need a concomitant drop in the amount spent by government, which even Keynes would agree with. Keynes in "The General Theory of Employment, Interest and Money" only argued for deficits during a recession where the private sector had shown itself incapable of restarting the economy. Deficits in good economic times was anathema to him. That was the time when you paid back the deficits created during the recession. Our government needs to make due with less. And the more money that flows to Washington, the more they spend. They don't view that additional revenue as a way to pay off the debt.

Fourth, and finally, is if you tax an activity, you get less of it. Incentives matter. The more you raise taxes, the more money people will spend trying to avoid them. There is an entire legal and accounting industry built around avoiding taxes. Most investment decisions and thousands of investment vehicles are made and built to avoid taxes. All of the money tht goes to the avoidance of taxes really doesn't contribute to the GDP in a way that grows the economy. Instead, it distorts the market. That distortion eventually becomes an informal tax in and of itself.

 

[Eastoff]

westnob, there are a few economic issues in your post that I may be able to clear up.

First, its an economic truism that when you allow people to keep more of their money, they feel wealthier and act as such--spending and investing.

Second, any time the government takes money and spends it or redirects it for others to spend, there's a dead weight loss that makes that money in essence worth less than money taxpayers get to keep.

Third, lowering tax rates are only one part of the equation. You need a concomitant drop in the amount spent by government, which even Keynes would agree with. Keynes in "The General Theory of Employment, Interest and Money" only argued for deficits during a recession where the private sector had shown itself incapable of restarting the economy. Deficits in good economic times was anathema to him. That was the time when you paid back the deficits created during the recession. Our government needs to make due with less. And the more money that flows to Washington, the more they spend. They don't view that additional revenue as a way to pay off the debt.

Fourth, and finally, is if you tax an activity, you get less of it. Incentives matter. The more you raise taxes, the more money people will spend trying to avoid them. There is an entire legal and accounting industry built around avoiding taxes. Most investment decisions and thousands of investment vehicles are made and built to avoid taxes. All of the money tht goes to the avoidance of taxes really doesn't contribute to the GDP in a way that grows the economy. Instead, it distorts the market. That distortion eventually becomes an informal tax in and of itself.

Thank you for answering this. I agree with your first idea. I agree with your second idea, in that you are adding a middleman to the process. Would the balancing of the budget under Clinton still be considered "the more they spend?" Finally your fourth idea seems depressing as fuck to me. I interpret that as, don't bother trying because there are always people smarter who will cheat; so instead just don't force them to cheat.

 

[PapaG]

Thank you for answering this. I agree with your first idea. I agree with your second idea, in that you are adding a middleman to the process. Would the balancing of the budget under Clinton still be considered "the more they spend?" Finally your fourth idea seems depressing as fuck to me. I interpret that as, don't bother trying because there are always people smarter who will cheat; so instead just don't force them to cheat.

The budget was "balanced" by Clinton and the GOP Congress by moving a bunch of money from Social Security into the budgetary equation.

Our debt still grew during the "surplus" years. The math just changed.

 

[Eastoff]

The budget was "balanced" by Clinton and the GOP Congress by moving a bunch of money from Social Security into the budgetary equation.

Our debt still grew during the "surplus" years. The math just changed.

Welp, then I guess I"ll stop arguing about financing at all then (not really) because apparently it doesn't fucking matter what president or congress is in office. We have had every combination and they just continue to fuck it up worse and worse. Congrats guys, you've convinced me that voting is completely and fucking worseless.

 

[Denny Crane]

The budget was "balanced" by Clinton and the GOP Congress by moving a bunch of money from Social Security into the budgetary equation.

Our debt still grew during the "surplus" years. The math just changed.

That was done under Reagan. Social Security before that was not part of the govt. budget equations, it was defined as "off budget."

The thing is, it should be on budget for a few reasons. First, you want to have a full picture of what the government actually takes in and spends. Second, with the transfer of money from the SS surplus to the general treasury as the SS fund bought treasuries, it's not really a separate accounting. Third, the transfer is about to go the other way and at a huge and painful cost to all of us as the fund is no longer running a surplus and those T-Bills have to be paid off in full from money from the general treasury.

The budget was balanced under Clinton through the modest growth of government, through shrinking the govt. workforce through attrition (as workers retired or quit, they weren't replaced), and through an unprecedented tax haul from stock sales during the stock market bubble.

 

[Denny Crane]

Welp, then I guess I"ll stop arguing about financing at all then (not really) because apparently it doesn't fucking matter what president or congress is in office. We have had every combination and they just continue to fuck it up worse and worse. Congrats guys, you've convinced me that voting is completely and fucking worseless.

I long ago came to the conclusion that voting for the same people over and over again isn't good for the USA. Your vote does count, no matter how those same people and their parrots (echo the party line) try to discourage you.

Tax rates have averaged about 18% of GDP, +/- 2% over the past 40 years; administrations and congresses of both parties. The rhetoric surrounding taxes is purely partisan and about philosophy ("fairness", "justice", etc.).

Consider that in Clinton's last year, the govt. took in a tad less than $2T from taxes and all other sources. In 2008, the government took in $2.524T (25% increase!) in spite of all those Bush tax cuts.

Yet in 2009, the government took in just $2.1T. Why is that? 18% of GDP, and GDP shrunk.

So in the end, "it's the economy stupid!" is what Clinton got right. And "if the govt. is running a surplus, it's taxing us too much" is what W got right.

I bet maxiep would support a tax hike under the right circumstances. Government would have to show it's getting a handle on its addiction to our money and spending more and more of it (more than it takes in). And the taxes would have to go toward paying off the debt, or paying for services we actually care about.

I'll let him agree or disagree on his own.

 

[BLAZER PROPHET]

westnob, there are a few economic issues in your post that I may be able to clear up.

First, its an economic truism that when you allow people to keep more of their money, they feel wealthier and act as such--spending and investing.

Second, any time the government takes money and spends it or redirects it for others to spend, there's a dead weight loss that makes that money in essence worth less than money taxpayers get to keep.

Third, lowering tax rates are only one part of the equation. You need a concomitant drop in the amount spent by government, which even Keynes would agree with. Keynes in "The General Theory of Employment, Interest and Money" only argued for deficits during a recession where the private sector had shown itself incapable of restarting the economy. Deficits in good economic times was anathema to him. That was the time when you paid back the deficits created during the recession. Our government needs to make due with less. And the more money that flows to Washington, the more they spend. They don't view that additional revenue as a way to pay off the debt.

Fourth, and finally, is if you tax an activity, you get less of it. Incentives matter. The more you raise taxes, the more money people will spend trying to avoid them. There is an entire legal and accounting industry built around avoiding taxes. Most investment decisions and thousands of investment vehicles are made and built to avoid taxes. All of the money tht goes to the avoidance of taxes really doesn't contribute to the GDP in a way that grows the economy. Instead, it distorts the market. That distortion eventually becomes an informal tax in and of itself.

OK, I was following you fine and agreeing until the very end. In this ending highligted area, the first sentence is fine. But you lost me about the market being "distorted" and that becoming an "informal tax". I don't get that. Can you expand on it.

 

[BLAZER PROPHET]

I long ago came to the conclusion that voting for the same people over and over again isn't good for the USA. Your vote does count, no matter how those same people and their parrots (echo the party line) try to discourage you.

Agreed. That's why I sometimes vote "strategically" and vote democrat or republican if for no other reason to try and break up the statue quo. I learned long ago neither party has all the answers and when one ideology leads for too long, it creates a serious set of problems.

 

[Eastoff]

So just for curiosity sake, would all of you vote for a tax raise if you knew it would only go to paying the deficit and had a guarantee that no other spending changes would occur because of the deficit being paid off?

 

[Ed O]

So just for curiosity sake, would all of you vote for a tax raise if you knew it would only go to paying the deficit and had a guarantee that no other spending changes would occur because of the deficit being paid off?

I would be MUCH more likely to be happy about tax raises if I knew it wasn't going to result in more spending.

I've had this conversation about the state of Washington's budget before... as anti-tax as many of us are here, we'd be much more willing to pay more if we knew it wasn't a "given an inch, take a mile" situation.

Ed O.

 

[maxiep]

I long ago came to the conclusion that voting for the same people over and over again isn't good for the USA. Your vote does count, no matter how those same people and their parrots (echo the party line) try to discourage you.

Tax rates have averaged about 18% of GDP, +/- 2% over the past 40 years; administrations and congresses of both parties. The rhetoric surrounding taxes is purely partisan and about philosophy ("fairness", "justice", etc.).

Consider that in Clinton's last year, the govt. took in a tad less than $2T from taxes and all other sources. In 2008, the government took in $2.524T (25% increase!) in spite of all those Bush tax cuts.

Yet in 2009, the government took in just $2.1T. Why is that? 18% of GDP, and GDP shrunk.

So in the end, "it's the economy stupid!" is what Clinton got right. And "if the govt. is running a surplus, it's taxing us too much" is what W got right.

I bet maxiep would support a tax hike under the right circumstances. Government would have to show it's getting a handle on its addiction to our money and spending more and more of it (more than it takes in). And the taxes would have to go toward paying off the debt, or paying for services we actually care about.

I'll let him agree or disagree on his own.

If we had a budget amendment that spending could not exceed 18% of previous year's GDP, I would certainly support a tax increase for a fund specifically designed and allocated to repay our debt. Say, over a 50 year amortization schedule.

Mostly, however, I'm for eliminating loopholes. For example, Walmart pays a 33.6% tax rate while GE pays 3.6%, simply because GE is in markets the government favors.

http://taxprof.typepad.com/taxprof_blog/2011/01/npr-why-does.html

It's called crony capitalism, where losses and R&D are socialized and profits are privatized, and it has to stop.

 

[hasoos]

Every citizen of the US owns a piece of the deficit. What we should do besides cutting government budgets, is just create a payment plan where every citizen pays their piece off over several years. One payment a year that goes with your taxes. Plan being on paying it off in 4 years. Get that Mofo Paid off.

As for government cuts, I am in favor of cutting every program across the board a single percent at a time until they deficit is eliminated. After the cuts any program that still isn't viable because of lack of budet is cut period. That would guarantee a balanced budget, and if a program is so important it must stay, then something stupid can be cut so that it can stay alive.

 

[Eastoff]

Every citizen of the US owns a piece of the deficit. What we should do besides cutting government budgets, is just create a payment plan where every citizen pays their piece off over several years. One payment a year that goes with your taxes. Plan being on paying it off in 4 years. Get that Mofo Paid off.

As for government cuts, I am in favor of cutting every program across the board a single percent at a time until they deficit is eliminated. After the cuts any program that still isn't viable because of lack of budet is cut period. That would guarantee a balanced budget, and if a program is so important it must stay, then something stupid can be cut so that it can stay alive.

the deficit is less than 2T$ and the gdp is 14T$. so we just have to put 10% of all our GDP into deficit. Now how could that happen...

 

[maxiep]

Every citizen of the US owns a piece of the deficit. What we should do besides cutting government budgets, is just create a payment plan where every citizen pays their piece off over several years. One payment a year that goes with your taxes. Plan being on paying it off in 4 years. Get that Mofo Paid off.

As for government cuts, I am in favor of cutting every program across the board a single percent at a time until they deficit is eliminated. After the cuts any program that still isn't viable because of lack of budet is cut period. That would guarantee a balanced budget, and if a program is so important it must stay, then something stupid can be cut so that it can stay alive.

We own a piece of the debt, not the deficit. And the debt is roughly $14T, or approximately $45,454.55 per person or $140,000.00 per household. While many people could just write a check, most others couldn't hope to pay their share in their lifetime.

 

[blazerboy30]

I would be MUCH more likely to be happy about tax raises if I knew it wasn't going to result in more spending.

I've had this conversation about the state of Washington's budget before... as anti-tax as many of us are here, we'd be much more willing to pay more if we knew it wasn't a "given an inch, take a mile" situation.

Ed O.

I agree with Ed.

The other interesting thing about a proposal like this is that it doesn't just reduce our debt and the burden on the future, it results in a drop in spending by reducing our debt principle and thus reduces the yearly spend on interest payments.

If our debt was gone, we would have a 6% lower yearly spend due to interest.

 

[Eastoff]

I agree with Ed.

The other interesting thing about a proposal like this is that it doesn't just reduce our debt and the burden on the future, it results in a drop in spending by reducing our debt principle and thus reduces the yearly spend on interest payments.

If our debt was gone, we would have a 6% lower yearly spend due to interest.

As a democrat, I'd wager we'd spend that 6% on something else though.

 

[blazerboy30]

As a democrat, I'd wager we'd spend that 6% on something else though.

True, but your original question was if we would support a tax increase if there was a promise to not increase spending.

 

[Eastoff]

True, but your original question was if we would support a tax increase if there was a promise to not increase spending.

yeah, sorry just making a little joke at my own expense

 

[PapaG]

I long ago came to the conclusion that voting for the same people over and over again isn't good for the USA. Your vote does count, no matter how those same people and their parrots (echo the party line) try to discourage you.

Didn't you vote for Jerry Brown?

 

[Denny Crane]

Didn't you vote for Jerry Brown?

Yes, and I would do it again.

 

[Denny Crane]

We own a piece of the debt, not the deficit. And the debt is roughly $14T, or approximately $45,454.55 per person or $140,000.00 per household. While many people could just write a check, most others couldn't hope to pay their share in their lifetime.

Household of 4 it's over $180K. And in 10 years, given the status quo of government spending habits, it'll be $360K.

westnob,

We're already putting 18% of GDP into the government so to put in another 10% would be 28% or something like > 50% tax hike on everyone and everything. That's not accounting for any state and local (sales tax, property tax, state income tax, etc.) taxes, which would be over and above our doubled tax rates.