Prof. Antony Davies: Does Government Have a Revenue or Spending Problem?
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- Опубликовано: 10 сен 2024
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People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what's to blame: too much spending, or too little tax revenue? Economics professor Antony Davies examines the data and concludes that the root cause of the debt is too much government spending.
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The solution is to have those in power make difficult choices. I was a team leader for a major oil company, and was given a budget each and every year that I had to make do with. I wasn't allowed to pull b.s. like the government does saying that I cut my budget, because I proposed to spend 10% more than last year and only spent 8% so I saved 2%.
Some say we spend too much on the military, others too much on social services, not enough on health care. Well for the fed's, there are some 435 members that draw up a budget, and a president that approves it. It the 435 wanted a balanced budget, we'd have it. When times were good, we'd have a "rainy day" fund built up to prepare for the recession times. If the president wanted a balanced budget, he'd veto the pork headed his way. And don't give me the crapola about this being a republican only or a democratic problem only, as both parties have done wrong when they were solely in power, or shared the power.
The truth is, our current spending is unsustainable. We are spending many billions each year servicing the debt,with low interest rates and currently a fairly robust economy. What happens when we have another recession, or the economy heats up and we raise interest rates. Do we print money do work our way out of this mess? I know, lets "inflate" our way out of it, that's working so well for Venezuela. (And don't say I don't care about Venezuelan's, I have several friends from there who are crushed by what their government has done to the people.) Greece is another example of how to mismanage a country to poverty.
Look at the states for more proof, Illinois is a great example of how to mismanage. They have made promises to the current generation that has sold the future generation out.
While one can be socially liberal forever, you can only be fiscally liberal for so long. All Americans are complicit in making this mess, rather than blaming each other, we have to work together to clean it up. If we don't future generations will not speak highly of us.
Chas A were you voted in?
"This suggests that we ought to ask physicians to reform government, than to ask politicians to reform health care". LOL! I love this guy, he is brutally direct and to the point!
I use to teach high school before I opened my own business. I experienced the well-intended consequences of No Child Left Behind, a massive set of federal guidelines. It was a disaster. All my peers began to teach to the test, and some even manipulated results for fear of funding cuts.
The best schools I have worked at had little to do with Federal regulations. Teachers and parents worked together to form a culture of success, and high expectations. I support student-centered education. =)
If the U.S stopped wasting money on shit, the debt would be history. Ending expensive crap like the war on drugs and keeping weed smokers in prison is a good start that will save a lot of money.
+Ingen Ting why worry about govt debt ???? govt debt was created so the private sector would have money ... a monetary sovereign govt can never go broke in its own currency. It makes it up. It doesnt need to borrow, it creates and issues it ... why would it need to borrow money ? does china print our dollars ? no
Notice how they say we must save money but when the rich want a war then they will spend whatever they want on it. the middle class are being conned everyday in the media that we are running out of money. We can afford healthcare and education but the elite dont want the middle class getting the things that they want. Its call oppression.
research MMT on the net
Tax don't fund government spending.
www.moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Milton Friedman once said "History shows that in the long run the government always spend everything it collects plus whatever it can get away with." He said it at a time we had a budget surplus, too.
correction I meant to say
"Via the Federal Reserve the deficits are monetized (money is created)."
Exactly. My grandpop, after months and months of conversations came to me the other day and said, "how is it possible that we owe interest on our own money supply?" He was legitimately upset. Basically, my grandfather has arrived. He sees it now. If he sees it then I know others can as well.
Most accurate comment I've seen here! However, we don't have a revenue problem. A currency issuing nation cannot, by definition, have a revenue problem.
According to Wikipedia, only ~19% of the FY 2011 Federal budget went toward defense... whereas ~24% went to Medicare & Medicaid, ~20% went to Social Security, ~19% was marked as non-defense discretionary spending, and the remainder went toward interest (~6%) and "other". The source for their info was a CBO (Congressional Budget Office) publication that is linked to.
Nice figures. But the real problem isn't government spending, but all those people who *want* government to spend all that money. On their favorite government programs and policies, of course.
Antony Davies, you sir, always have the right questions, and therefore always get the right answers. Thank you for sharing with us
If you thought we had a spending problem back then, welcome to the 20s... 😭
The fact that aggregate wage (resource allocation) is a zero sum game, but the fact that marginal utility is wasted by the laws of diminishing returns, is the reason why there needs to be a minimum wage. As it prevents people from becoming socially stratified, and thus unable to work themselves out of poverty, and prevents their potential utility from being wasted.
I don't know the situation in your state, but in Nevada and California tax rates have been steadily increasing.
"I don’t think there should be tax cuts for anyone in good economic times, only then the economy is bad there should be tax cuts"
I totally agree.
Furthermore when we talk about "voluntary exchange", were ultimately talking about asymmetrical bargaining power, since the factory owners controls the capital (accumulated labor time). Since the worker has no other choice than labor exploitation, he is forced to accept work on the terms of the employer, it is only collective bargaining through unions and taxation that counteracts that force.
They have a video on that "Funding Government by the minute" you could take out the WHOLE military and still need to run a deficit.
Taxes were higher throughout most of the post war era, but relatively few even paid at the top marginal rate. Furthermore, there were numerous exemptions and loopholes that resulted in few paying those tax rates. In although we have a spending problem. Add up the costs of Social Security, Medicare/Medicaid, interest on the debt, income security (unemployment and related expenditures), and federal pensions and you will see that there is almost no money left for anything else.
A lot of growth in Government has been occurring at the State and Local level. While Federal outlays have increased by 5-6%/GDP. State & Local government spending has increased from approx 11% in 1960, to approx 22% today, an increase of 10-11%. =(
Good input.
Cuts in spending allowed those nations to avoid default, higher interest and crippling inflation. It saved them and was stipulated in the bailout. Gov'ts do not have infinite finances despite what the Greeks thought. The public sector lives off the economy via taxes and does not contribute economically. Fed US unfunded liabilities, not debt, are indeed 220 trillion. Public debt has been proven to be a main factor in shittying of an economy. Read the Cato institute paper on unfunded liabilities.
Finally someone who gets it.
Excellent video Prof.
Could you do a video?
On the Flat tax vs eliminating the IRS
This video should be interesting to you; we are talking here about flat tax: ruclips.net/video/SuOunqT_ORQ/видео.html
You are right that a lot of the time it is that some teachers click with certain students. The problem in the States is that we are running into the problem where we have a lot (not most by any means) of teachers coming in and not actually teaching and just sitting back the entire class, or teachers that teach incorrectly as in false material (I have had the latter several times sadly). Which leads to the point where you are very correct, student teacher relations are extremely important.
As a fan, I suggest that one thing that would make these videos much more powerful is a quick list of sources/references at the end. If you show these to someone who is not already on board the libertarian boat, the first thing they ask is 'where did these numbers come from'.
You're correct, if anyone just looked into our US history they could see how lowering taxes and shrinking govt. has corrected major economic disasters. 1920-Pres. Harding, 1960-Pres. Kennedy, 1980-Pres. Reagan.
I think we are in agreement. I believe that people are and always will be the most important asset of any nation. Everyone has a purpose and skill that only education (formal and informal) can maximise. Its good for the individual, its good for the country, its good for the economy. Definately a win/win situation. Only Government can fully ensure that noboby is left behind.
Hell, even the wikipedia article says as much. ''The Pinto's legacy was affected by media controversy and legal cases surrounding the safety of its gas tank design, a recall of the car in 1978, and a later study examining actual incident data that concluded the Pinto was as safe as, or safer than, other cars in its class.''
I stand humbly corrected, as we have dropped from 1st to 7-11th depending on the source. Thank you for correcting me, as it had been a long time since I had reviewed the stat. I use to be a teacher so I should keep up on this. Only thing I'll counter with is that teachers work an average of 1,000 hours per year, while other professions average around 2000. Teacher get a lot of time off,so you have to factor that into salary as well. =)
I agree that each student has different learning needs =)
That's a very good point about the change in economic behavior, I didn't think about that.
A bit misleading. In our current system, a debt based system, money gets loaned into existence. Therefore Debt -> Spending -> GDP -> Taxes -> Spending -> Debt. Hmm, very circular, that. And that's why it's impossible to lower the debt, as that would cause a direct destruction of everything after it in the cycle. This is also why inflation is always valued over deflation.
I agree. But when i bring that info through the chain of command the most common answer i here is that it is CHEAPER to hire contractors, than it is to hire troops to do the jobs. Don't know how valid that statement is, but it seems to be the most common answer.
Also, there is no need for the government to borrow its own money back from the private sector. This only exists to target an interest rate which is falsely believed to balance inflation and unemployment. Proper analysis of Milton Friedman's own work (he promoted that construct) leads to a different conclusion about inflation. I'll be glad to furnish resources if you are interested.
From 1:34 to 2:12 would make an AWESOME political ad.
Here's something else for you to ponder. When a company hires & pays an employee for labor, this is not a redistribution of the company's wealth. Rather each are engaging in trade, which is win-win. The employee sells his labor, and the company makes a profit which exceeds the cost of the employee, & the employee gains because he values his earned money more than the time and effort to get it, (hence the voluntary agreement). Each party is wealthier from the trade. Free trade CREATES wealth.
You demonstrate the fundamental problem when dealing with the debt issue. There is a difference between public and private debt. What one government agent owes another is nothing more than a transfer. Entitlements, funded by government transfers are, in no way, in any sort of fiscal danger. Both Medicare and Social Security are solidly funded for decades to come. Attempting to fix the debt by attacking entitlements is a solution looking for a problem.
I can't comment on whether the US system is "broke". I can say that many people here in Australia who get their views from 30 second news sound bites &/or shock jocks have similar views to yours. Often govt schools & teachers get bad press, playing on people's prejudice. It is not a case of good or bad teachers IMO but the right teacher. The relationship between teacher/student is so important for example. In my 13+ years as a relief teacher I have been the "best" & the "worst".
Ack!You're right. The Tax Policy Center compiles its data from the Congressional budget office,which began tracking effective rates in 1979. But the info is still relevant. The top marginal rate in 1979 was 70%, but the top 5% only paid an effective rate of 31.8%. In 1982, the top rate was 50%, but top earners paid 27.7%.
Here is another chart demonstrating that Fed revenue has remained fairly constant regardless of tax rates:
whitehouse. gov/sites/default/files/omb/budget/fy2008/pdf/hist.pdf
One variable that is not mentioned here. Are we getting more services out of this "3 times more" money? How did military, subsidies, infrastructure and social programs spendings evolve over time? Where do the additional revenue go?
If the minimum wage increases costs then the aggregate prices of products are raised slightly, or the person is now is unemployed and automation replaces them. However the factory remains to be productive, and the person can now be trained to work a more better job, which can be more productive than the sweeping job. Thus since you now have a tool that produces with less labor time, and you now have a person who is more productive per labor time, and the total factor productivity rises.
I take that back. You are correct, it exists. I meant it doesn't harm anyone. Anyone should be free to buy and sell oil for any purpose. Anyone can buy a lot of oil hoping the price will go up, just like stocks and bonds. When you start to control who can buy what and at what price, then you create unintended consequences. The speculators, or investors, are not the cause of the price increase. The cause is the fall of the U.S. dollar (money printing) and OPEC oligopoly.
Actually, Luke, there's more to it. Our currency issuing government does not require taxes to pay for anything. Proper fiscal (tax & spend) policy realizes that taxation is only to place a burden on economic externalities such as speculation and excessively concentrated consumption. Government spending is limited only by the economic capacity of the nation. Taxation allows for further spending by providing a hole, of sorts.
How can the government constantly spend more than it collects without some sort of market force stopping them?
Answer:
Via the Federal Reserve the deficits are money is created.
Hey! Doesn't that cause hyperinflation eventually?
Answer:
Yes.
[[what exactly do they overspend?]]
Expenditures are 40% more than revenue, and revenue, as it has done for over the past 40 years, is running right around a constant 18% of GDP. So it's really not a deficit problem (deficit includes expenditures & revenue), but rather it's solely an expenditure problem.
Here's a question for you regarding taxes. Why should we the people be forced to have more government than we are willing to voluntarily pay for?
That is completely incorrect. Tax cuts are the parents refusing to pay for the teen's credit card, not cutting it up. It does not stop the teen from buying more stuff with the credit card, it simply increases the amount on the credit card.
It's true that there is no danger of a technical default on debt of a nation who issues debt in a currency it issues by fiat, the same problems can occur for any institution that becomes massively in debt. There is a limited resources in any economy from which a government can tax, surely there is some size which is unsustainable
I like this guy. A conservative economist is always great.
I work on a military base, and I see what your talking about daily. The main issue is contractors, you have to have special permits and licenses to work on a base which is really hard to get. Case in point, a certain building i saw had a 8 video camera security system that cost $10000.00 Now tell me you cant do something similar a whole lot cheaper.
Why is there a secular trend of increased spending among governments in the West and what can be done to stop it?
marshall886 Public Choice Theory
+marshall886 why stop it ? govts. need to support their economies. Why cut spending and raise taxes to destroy your own economy ? and take peoples life savings for no reason ?
"public service should not have profit motives"
Let's see if I got this one correct: profit is incentive to serve the customer, giving them the best service for the lowest price. In the case of prisons, that service is to make certain the criminal is well-cared for and won't escape until their sentance is completed, which sometimes includes a "reform" element.
"regardless of whether they have been reformed and are ready to be absorbed by society again"
If that is in the contract...
Not sure if you're arguing, being sarcastic, or... I don't even know. But I like it.
If you look at spending and revenue both as percentages of GDP, spending has been at historically unrealistic levels since the Reagan years. Clinton was the only one to actually reduce spending below the historical revenue average. Regardless of what tax rates have been, we have never achieved the 23-24% of GDP in revenue that we are spending now. We can either hope that higher tax rates will do something unprecedented, or we can spend less than our historical revenue as a % of GDP.
"With free uncoerced trade, each party only engage in trades that benefit them, creating win-win trades."
Except that "free uncoerced trade" is completely inapplicable to individual people, which is why you're using Costa Rica and Canada as your examples. A person does not have the choice to refuse to buy food or clothing or shelter, for example. This is why we have government laws against monopolies.
"Why are we dramatizing all the gov't spending as evil?... everyone complains about how much money we are spending, but everyone disagrees on what needs to be cut"
How about if we put a metric onto it... something like this: If it can be done by a private entity rather then a public (government) one, allow the private entity to take it over completely.
In a private entity, there is less overhead and often a profit motivation to provide the best service.
What new entitlement are you referring to? The insurance mandate is not an entitlement. There was an expansion of Medicaid, but that's not new. It's worth noting that the entire point of the ACA is to rein in health care costs, which are exactly why we're having problems paying for our current entitlements.
"there needs to be strict budget guidelines"
I agree. Most states in the US have balanced budget amendments, and it would be wise for EU nations to adopt something similar.
One thing to point out, our fed gov doesn't impose budget guidelines on States, it offers incentives for federal funds,but it doesn't tell States how to tax or organize their system.Imo,the Fed should only be referee, not player
I have a bias against central planning,I mistrust it, since it has often failed in the past =/
go to Wikipedia and look at the section that says "other military spending". You will note that support for the military in not included. This mean, food, maintenance, transportation of goods, and contractor jobs. And that is where the grey area comes in. If "supporting" the military as well as R&D are not included on their budget, we do not have a clear picture of what the actual figure is.
(note that I used the same article you did)
this does ignore that to pay off a debt you do need more revenue AND less spending. Yes, you could just cut spending but that only works to a point, and takes longer to do. If you want to pay off your debt in any type of efficient, timely manner (and avoid the extra costs of interest rates) you need more money in as well. Without a doubt this country has a spending problem that needs to be addressed FIRST, but revenue increase should increase at some point as well, if only temporarily
I have a "Revenue" problem.
2009- Made $12k, spent $9k. Car, food supplies, "luxury" items.
2010- Made $14k, spent $11k. Car, FS, "L" items.
2011- Made $16k, spent $14.5k Car, house rent, same2.
2012- Made $18.5k, spent $18.2k, Car, House rent, same2
2013- Making $18k, spending $17.5k, House rent, same2
Working 3 jobs. If and when I finally get a "permanent" monthly paid job, I could then make $40k a year, and spent $32k. For house payments and family.
The problem is legislative. Reagan and Greenspan deregulated finance industry, major warnings of impending collapse were ignored, finance industry tried to cut personal losses which accelerated collapse, finance industry said were too big to fail, government bailed them out. Economic recovery spending fails miserably, budget surplus during Clinton becomes wishful thinking.
I'm not saying the government shouldn't spend more, just that spending more without making some major changes to the system won't help much. It's not really about the US; the school system is becoming outdated, because everyone has access to the same information as school and can likely learn it better by themselves.
I can't elaborate much here: try watching the TED playlist or I can send you a PM.
No, not all parents are responsible. But many who are don't want to have funds going into a broken school system. I don't support abolishing school, but right now just giving money to parents might very well have better results on average, which means the changes necessary don't have a lot to do with money.
In other words, it could be used MUCH more wisely.
"You raise taxes you hurt the rate of growth" it's not that simple. You also hurt growth by laying off teachers and other public employees. This is what ppsdemocrats tried to explain to you. Government spending doesn't vanish, it goes into the economy just as private spending does. We currently have inadequate activity in the private sector, and throttling the public sector makes the problem worse. In 2008 we were not only losing jobs, but losing more each month. The stimulus stopped that trend.
Excellent video. A perfect example is California with its $12-25 Billion "structural deficit".. When tax revenue is pouring in the politicians give it away (primarily to public sector union employees) and then when revenue drops CA screams for higher taxes. While cities and counties across CA (who can't "kick the can down the road") layoff 30-40% of their employees and private companies are leaving in droves - the State keeps adding employees - now over 210,000 or 15% since 2008, Bankruptcy.
Inflation occurs when the Federal Reserve purchases Treasuries,not necessarily from issuing bonds. Internal domestic gov lending doesn't inflate the monetary base,it only reallocates capital from the private sector to the public sector. One exception is bonds sold to foreign investors, which represents "new" money flowing into the US,but most US debt is still owned domestically.
Of course, when inflation does take off, the Fed will sell bonds, therefore destroying dollars to stem inflation ;)
I wasn't saying that the system was good. The system doesn't care how you spend the money, as long as it keeps moving.
The money that we have spent has NOT been spent in the best interests of the citizenry, you're right about that. But if you give the government more tax receipts you will get more spending in areas that historically haven't been in the best interests of the citizenry :)
Thanks for the upload.
I have to admit, I love Professor Antony's videos, but this one leaves me wanting more. This video does well at concluding that relative to the times the government has increased it's revenue but increased it's spending even more. however I feel like this is an unfinished argument, I'd like to see a continuation that addresses those people who think we should have a high revenue high spending model of government
All taxes, at some level or another, are a barrier to entry for business creation. Regulations create legal barriers to entry. Taxes create capital barriers, by shifting wealth from the productive side of the economy, to the government spending side, which tends to carry a lot of deadweight loss. =/
The corporate tax rate has very little to do with how much we actually tax corporations - consider the oft-discussed fact that GE paid no taxes at all in 2009. As a percentage of GDP, we have relatively low corporate tax revenue. We also have no VAT, as do most countries in Europe.
2:02 the average cost of health care has risen only 2000%. ONLY 2000%??? geez, that makes me feel so much better.
It depends on how you look at it. For example, personal income tax rates are higher on middle class in Germany, but their CG rates are almost zero compared to the US at 15%. Their Corporate tax rate is 15%, whereas US is 39%.
The US and Germany spend at approximately the same rate (40%/GDP). But Germany is better at paying for its spending. They tax at about 40%, Whereas the US is at 28%.
Since a lot of services are on the state level, I think that 20%/GDP is a good target for our Fed gov. =)
You can raise taxes, cut spending, or vice versa: every dollar in our bank accounts is a bit of debt that must be repaid at some point. Unfortunately, due to fractional reserve banking, there are more paper IOUs than physical dollars to pay them back with. However, as long as people, the gov't, corporations, keep spending and not saving, the flow of money is high enough to keep the system going. People can't afford to spend now, so now the gov't is spending for them to keep the system alive.
I'm inclined to agree with your assessment.
(2 of 2) Private debt is what's actually running the economy right now. The government couldn't hope to keep up with the rate that people borrow and waste money. Corporate debt has grown four times the growth of GDP since 1971. Corporations borrow $4 and wind up with $1 in revenue to show for it. Private mortgage and student loan debt is at 15 trillion and the big numbers are in bank debt. Banks owe investors $630 trillion! It's private consumer debt that's making our economy appear to grow.
The government does not "steal" anything - this is a government of the people, by the people, for the people. This is the reason Congress has the power of the purse by the Constitution. Our elected representatives directly determine how much is taxed and how much is spent. Trying to pretend like we live in an authoritarian government is how we got here in the first place - because people don't seem to care who they vote for or what they say they will do.
Your reply is positioned as if I promoted Keynesian economics which I did not. I was stating that a free-market economic theory promotes the most economically effective policies while negating the humanity of individuals. I would suggest that free-market economics is not the always the right answer all of time, and I'm adverse to absolutes.
I could follow this up with an exaggerated assc where free-market principles would not be the best for society, but I'd be more intrigued if you could.
You only need to cut spending. You don't need to raise taxes and it has been proven by the Laffer Curve that raising taxes does not always bring you more revenue since it changes your economic behavior. If you cut spending below or at 18% of GDP, we'll no longer have budget deficits and we can then grow our way out of our debt through economic growth so long as our economy is growing at a faster rate than we are spending.
The funny thing is that the fuel tank being behind the axle, which was the fatal flaw, was common in American cars. And the 27 people that died, when you take into account the 3 million vehicles in circulation, was not substantially worse than was typical for the time. In fact, later studies concluded that the Pinto was as safe, or safer than other cars in the same class. Still, I support govt studies and reports acting as a neutral third party to come to conclusions for consumer knowledge.
Cutting defense will not fix our deficit problems. The deficit for 2012 is $1.3Trillion. Cutting defense to the worldwide average of 2.5%/GDP would reduce the deficit by $280B. Cutting defense to ZERO,would still leave a $700B hole in the budget.
According to the CBO, if tax increases on those making over 250K expire, it will generate an additional 83B per year in revenue. So heavy cuts to defense, coupled with tax increases on "the rich" won't come close to fixing our spending problem. =(
How many schools had a PC lab in 1970? Since the '70s, the US government kept pace with the scientific and technological innovations in education to maintain their lead in an economy based on science and technology.
Why are we dramatizing all the gov't spending as evil? we as a society have agreed to give money in other to promote development, security, and welfare to our nation. everyone complains about how much money we are spending, but everyone disagrees on what needs to be cut. military, food and shelter for the elderly (SS), healthcare for the poor and elderly (medicare and medicaid), R&A for cancer and other research, oil subsidies, etc, etc, etc.
The problem with the Pinto was the poorly arranged bolts and the thin walls of the fuel tank, not the fuel tank placement itself. My father told me a bit about it, since he's a mechanic and a bit of a car nut. I tried digging up some sourced for you, here's what I found: en.wikibooks[DOT]org/wiki/Professionalism/The_Ford_Pinto_Gas_Tank_Controversy
None of this accounts for quality or value of spending, only amount. For example, in 1950 we weren't funding an international military establishment or two incredibly wasteful wars which were essentially conduits for corporatism.
I disagree in the strongest possible terms that "we have very little to show for [it]." 11/08 to 04/09 we were LOSING ~750 thousand jobs per month. That changed. If you don't think the stimulus was responsible for that change, what was?
Interest rates are historically low. If you count inflation, people are lending to the gov't at negative rates. We're charging to borrow. That's why the debt is not a problem right now. We need to get back to full employment, then we can worry about the debt.
It's a matter of both people. We need to have a HIGHER revenue with SMARTER spending.
I'm not saying we need to stop spending. I'm saying that the money needs to go into things that will give us higher spending power later on. Like investing in green tech now more then ever will help improve this nations image but also give us a market to sell said tech, or at least the hardware, to other nations that want to go green.
There is a limit to revenue, there is no limit to spending with fiat. Spending will always be higher than revenue with our current system. Until it fails completely.
Part of the revenue and spending problem is that only 53% of people pay income tax. Stated the other way, almost half of people DO NOT pay any income taxes. So if a way could be found to have almost everyone pay income tax (ie the fair tax plan) then the deficit could be reduced at current spending levels. However we all no it is political suicide to even entertain the idea of cutting entitlement spending.
Glass-Steagall is something I have to look into. A 1932 law that gives the Federal Reserve power is the opposite of what I think is needed. And the ones from 1933 seem to be oppressive on individual freedom. I'll read more on it later, but it isn't Amendment material unless it upholds people's freedoms, IMHO.
But the discussion was about revenue vs taxes vs spending and if the poor were better off. To that end, I made my argument.
Peak oil hit in 1971. The only government assistance that was offered from 1946-1966 was social security; government spent nearly every dime it took in paying off debt, with only a tiny fraction going towards the military until McCarthyism spread and the "cold war" went into overdrive and the arms and space races started.
Davies makes the great logical leap that because spending exceeds revenues, revenues are set properly and spending is not. There's no connection there. If I bought an apple in 1950 for five cents, but today I'm buying a four-course meal at a restaurant for $30, you can't compare those and say, aha, $30 is far too much spending! The only firm argument you can make from spending exceeding revenues is that government is incompetent in raising revenue to pay for what it decides to buy.
Does public debt negatively affect GDP growth? Of course.Three years ago a study by the International Monetary Fund reached similar results. It concluded that the negative impact of borrowing increased as the debt/GDP ratio climbed from 30 percent to 90 percent. Economies with ratios above that level grew more slowly than economies below that threshold, 2.3 percent compared to 3.5 percent. Between 30 and 60 percent, a ten percent hike in debt/GDP ratios reduced growth by about .16 percent.
But Medicare, Medicaid and Social Security were never meant to be a safety net or a retirement plan. It was meant for people who grew too old for work, people growing older than the life expectancy. However, we started to live longer and it put more strain on all the systems, however we never changed them. Rand Paul and the Republicans wanted to try and raise the age where you qualified for them for people under 55.
Living standards seem higher because we've promised to pay for what has raised our standard of living... some day. The percentage of people in poverty from 1946-1966 consistently dropped without a hiccup. The percentage of people in poverty from 1967-today has gradually increased, with sharp jumps in 2001 and 2008.
Of course a low debt is trivially better than a high debt. That's not the issue. The issue is "Is a low debt so much better than a high debt that we should drastically cut spending to get there?" And the answer is a resounding no. Drastic spending cuts during a recession are far worse for the economy than debt.
Europe made drastic spending cuts (partly at the IMF's suggestion) and it's been disastrous.
Agree, generally. I think limiting spending to 20% of GDP might be more like it. The thing is, I have been fighting the good fight for classical liberal economics my whole life, I am now 51, and it seems we never get anywhere. And now we have federal government mandates designed to influence consumer behavior (geez). Personally, I'm ready for an outright tax revolt.
As suspected,the website Think Progress totally ignores effective rates, the charts I found there are all about marginal rates. Websites with an agenda are seldom a good sources of info. =/
The article from cbpp doesn't say that tax increases boost GDP, it says that a small tax increase on only high income earners is not likely to have a negative impact on GDP.
Your point on the 85B is well taken. But my point is,increasing taxes won't solve the deficit problem b/c it is a spending problem. =/
If there is no such thing as the 'War Budget', then how can you know that it makes up 58% of the budget?
But lets use your math: 4 trillion over 10 years is 400 billion. In 2011, Medicare and medicaid made up 835, Social Security: 725, Discretionary spending was 646, Defense: 700, Net interest and others cost: 692. By your own math, the War costs less than all of those: about 11% Proving both of us wrong.
"helping the poor helps everyone "
I agree. I'd give people jobs, as I need to increase my income via my business and need the labor. To do the jobs, there is training, skill and attitude.
"The rich should pay for the poor guy to go to school because it helps himself!"
The do, often. But the poor should also crack a book and learn on their own. It is the attitude of self betterment.
And the point of the topic is to better all rather than to harm one to help another.
I'd agree with that.
"Taxes are not barriers"
Taxes are absolutely,without a doubt, barriers of entry for new business. I know this because I experienced it when I opened my business. Every week a write a big fat check to Uncle Sam. I had to do this even when I was starting out and losing money. I often ponder how easy it would have been to make a living and pay my employees a living wage without those barriers.
I'll send you my essay on the minimum wage. I went through a 40% increase beginning in 2007. =/
On inefficiency, government waste is so common that economist have a term for it, and account for it in their models. Examine deadweight loss, in economics. Honestly, I don't expect gov to be efficient, it's not its function, but knowing it is, we must be careful what we allow gov manage.
On corruption,Large corporations, Unions, special interest groups, and congressmen all fight over Federal handouts. The process is interested in favoritism,not prudent expenditure on behave of the people =(
As far as socialized edcuation, agree 100%. Imo, it is a roll of government to protect the elder, who cannot care for themselves, and to protect children, to provide the opportunties and skills needed in life.
But I do believe that the public funding system should be revamped. I support 100% subsidy, but the funds should go to parents, in the form of a voucher. This would guarantee free education, and also allow greater choice for parents. Kids shouldn't be condemned to a failing school =/