U.S. Debt, Today and Tomorrow

[Giant Communist Robot]

Let me go through that oooooooooone more time about taxes and debt. Two pertinent facts:

the debt is paid with taxes

the U.S. has not defaulted



...so, one can reasonable assume in the future debt will still be paid with taxes.

[Shapley]

...and this pays the debt

Currently, it only pays the interest on the debt.

[Giant Communist Robot]

...and this pays the debt

Currently, it only pays the interest on the debt.

The U.S. has not defaulted, so all interest and principal owed have been paid as agreed. Future taxes will pay future debt. Your fear is that the government won't raise taxes high enough to pay in the future. Of course they will.

[Shapley]

Your fear is that the government won't raise taxes high enough to pay in the future.

Actually, no. My fear is that they will incur such a level of debt that they cannot raise taxes high enough to pay it. I realize, of course, that you view this as an impossibility, because they can always print sufficient monies to cover the debt. That's true, of course, as long as it incurred in U.S. dollars. My belief, however, is that there comes a point when the creditors will regard the risk of being repaid in worthless monies as too great to warrant continued credit.

I would rather we curtail our borrowing on our own, rather than have it curtailed by a refusal on the part of lenders to extend any.

[Giant Communist Robot]

See? Curtail borrowing, raise taxes. There are adequate solutions. This is not the problem to worry about, it's the solution Congress chooses that might seem unsatisfactory.

[Giant Communist Robot]

Today the 3 mo. Treasury had a yield of .01%. That's one tenth of one percent. With inflation at 2.7% and expected to go to the moon, why is anyone buying these?

Security.

[Giant Communist Robot]

Uncle Milty's negative income tax.

[Haggis@wk]

raise taxes.

You seem to think that raising taxes actually raises revenue when the history is quite different, unless you meant confiscation?

[Giant Communist Robot]

You seem to think that raising taxes actually raises revenue when the history is quite different

OK, I'll bite. What do you mean by "revenue"?

[Haggis@wk]

You seem to think that raising taxes actually raises revenue when the history is quite different

OK, I'll bite. What do you mean by "revenue"?

When the Bush tax cuts took effect the revenue to the treasury increased to historic levels. When the Reagan tax cuts took effect the same thing happened again. Raising taxes almost always lead to people finding ways to avoid paying it. Obama even admitted during his campaign that he expected tax revenues to decrease if the Bush tax cuts expired but it was all about "fairness".

I think a tax cut from the current levels would have the same effect. When you get the government out of business and let people realize their potential. I'm a big believer that people ccan spend their money better than the government.

punishing the wealthy always hurts the poor.

[piqaboo]

Uncle Milty's negative income tax.

Thanks, GCR. That was interesting.

[Giant Communist Robot]

I don't know that I have the energy for this kind of discussion. Anyway...

the Reagan tax cuts

were mostly repealed almost immediately. One year later (1982) taxes were raised. A year later (1983)some other taxes were raised. A year later(1984)exclusions and tax benefits were eliminated. Then COBRA was enacted, denying some further tax deductions. In 1986 there was a reduction in tax rates, but a drastic number of deductions were lost, a reduction in the number of tax brackets (see my post about this finagling) and corporate taxes were increased.

About the Bush tax cuts from The Heritage Foundation:

Under President Bush's plan, an average family of four's inflation-adjusted disposable income would increase by $4,544 in fiscal year (FY) 2011, and the national debt would effectively be paid off by FY 2010.4
The net tax revenue reduction, after accounting for the larger tax base that would result from higher employment and faster economic growth under the Bush plan, is $1.1 trillion from FY 2002 to FY 2011, 33.4 percent less than conventional static estimates.
The plan would save the entire Social Security surplus and increase personal savings while the federal government accumulated $1.8 trillion in uncommitted funds from FY 2008 to FY 2011, revenue that could be used to reform the Social Security and Medicare systems and reduce the payroll tax.5

[Giant Communist Robot]

Uncle Milty's negative income tax.

Thanks, GCR. That was interesting.

You're welcome! It was BigJon who brought it up and I felt the idea needed a closer look.

[Giant Communist Robot]

The Laffer Curve, and its' spending counterpart the Rahn Curve are interesting theories.

[Haggis@wk]

and corporate taxes were increased.

Corporate taxes, ours are amoung the world's highest, are a fiction. corporations never pay taxes, we pay them in higher prices. Punishing the wealthy always punishes the poor.

Well, what did Reagan do that revived the economy that was much in the same shape as the one Obama inherieted? Claims aside, this current economy is not anywhere as great as some would have us believe. Unemployment was the same (actually higher) and the economic situation was much the same as today's. Yet we managed 7-8% growth almost immediately. Compared to our current second year in what looks to be a lost generation maybe Obama should consider emulating Reagan's policies? Or was Reagan just lucky and Obama unlucky?

[Giant Communist Robot]

Or was Reagan just lucky

I believe he did a first class job of delegation of authority and had some good people. Volcker was the right man at the right time, but once the crisis passed Reagan was correct in firing him.

[Haggis@wk]

The inability of the Democratic Party to come up with a budget that it can even propose to the American people is the biggest unreported news story of the day. It's been two years since the Democrats have submittedd a Constitutionally mandated budget!

It would be nice if somebody in the news world decided to cover it. Yesterday, the Republicans on the Senate Budget Committee commented on the Democrats' paralysis:

With the statutory committee deadline having been missed by six weeks, and with 744 days gone by since the Democrat-led Senate passed a budget, it was reported that this week Senate Democrats would finally produce a budget and hold a markup. But no budget was produced and the markup was delayed yet again. ... [Ranking member Jeff] Sessions summarized the "big problem" facing Democrat leaders during a joint interview with House Budget Chairman Paul Ryan on Greta Van Susteren: "they cannot bring forth a budget their members support that the American people will support, and they understand that, they know that, and they've got a big problem." ...

Reports surfaced this week that Senate Democrats' long-awaited budget plan had not been scheduled for committee action, or shared outside of closed-door meetings with the Democrat caucus, because Chairman Conrad lacked the votes to move the budget out of his committee - particularly, it appeared, the vote of Senator Bernie Sanders. The Hill reported that Senator Conrad shifted the Senate Democrat budget further to the left as a result, coupling every dollar of savings with a dollar in higher taxes - even as the President asserted his so-called framework would achieve three dollars in savings for every one dollar in cuts, albeit a claim that is not borne out by the numbers. ...

Following these revelations, [Congressional Quarterly] published a report indicating that the Senate Democrat Budget had even fewer savings than advertised - cutting only $1.5 trillion over the course of 10 years.

Every intelligent American should knows that the federal government is facing a budget crisis that threatens our country's future, yet the Democrats apparently are incapable of coming up with a plan to dig out of the hole their profligate spending created. What could be clearer evidence of the intellectual bankruptcy of liberalism?

[Giant Communist Robot]

What could be clearer evidence of the intellectual bankruptcy of liberalism?

Looking at things from the Democrats' point of view shows another conclusion. They are wrong if you judge them by standards different from their own. Their foot dragging isn't due to stupidity but negotiation. The longer they wait the greater the anxiety and the more likely they'll be able to slip in something Republicans wouldn't otherwise agree to. Relax. We'll get the budget we deserve.

[Giant Communist Robot]

I've begun to think of the debt situation as an inefficiency in the economy. Some things are wrong but this will have to do until something better comes along.

[Shapley]

I think Senator Reid accepts the fact that any budget actually passed will include budget cuts. If no budget is passed, but he can shame Republicans into not letting the government shut down, we'll limp along on continuing resolutions until October, when the issue of 2011 budget will be moot. Even if he has to accept minor cuts in order to get the continuing resolution, they are likely to be less than cuts found in an actual budget, and 'entitlements' will likely be untouched.

It's cowardice at its finest, methinks. He'll even find some way to blame the Republicans for the lack of a budget, when it's all over.