Only Half The Story...Again

[Guest]

Before any of us get our shorts in a knot over what's going on in Washington these days, maybe we should take just a quick look at recent partisan politics here in the good ol' US of A.

According to the Treasury Department, there have been 19 significant federal tax cuts since the end of World War II. Three of them were passed under the administration of George W. Bush, the Economic Growth and Tax Reform Reconciliation Act of 2001 (EGTRRA), the Job Creation and Workers Assistance Act of 2002 (JCWA), and The Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA). The total "Bush tax cuts" were dramatically greater than either the Kennedy tax cuts in 1964 or the Reagan tax cuts in 1981. The amount of the Kennedy and Reagan tax cuts totaled $123.6 billion per year (in constant 2003 dollars) compared to the $188.1 billion per year for the three Bush tax cuts combined. So, the ten-year effect of the Bush 43 tax cuts was a reduction of federal revenue in the amount of $1.88 trillion dollars.

It doesn't take an advanced degree in accounting to note that either reduced tax revenues or increased federal spending or a combination of the two will produce annual deficits and increases in the national debt. Interestingly, the three Bush tax cuts were subjects of heated partisan controversy in Congress and were finally passed by the Republican majority at the time using "reconciliation rules" in the Senate to get the three cuts enacted.

So let's fast forward to 2010. The Republicans, now in the Congressional minority, are loudly bemoaning the fact that the Democrats intend to use the same reconciliation rules to pass the President's healthcare reform legislation. The Congressional Budget Office has not yet "scored" the legislation which will be introduced by President Obama within the next couple of days. But the amount of "$1 trillion" has been bandied about by the Republicans as the ten-year cost which is "unaffordable and unsustainable". There may be some changes in the items to be reconciled between the House and Senate, but the Senate bill was scored by the CBO to have a ten-year cost of $871 billion.

So if we calmly consider what our partisan politicians in Washington have done and are complaining about, the Bush tax cuts arguably added $1.88 trillion dollars to the national debt over ten years (even after the benefit from increased economic growth resulting from the tax cuts). If the healthcare reform bill is passed using reconciliation, it looks like it will add about $1 trillion to the national debt, almost double the amount resulting from the tax cuts achieved by the Republicans using the reconciliation process in the Senate about a decade ago.

But the Democrats have not taken action to renew the Bush tax cuts, so the revenue from those increased taxes will not only pay for the healthcare reform bill being "reconciled", but probably reduce annual deficits and the national debt by a few hundred billion per year as well.

There's no sense getting into a deep discussion of other egregiously expensive programs embarked upon by Congress in the last decade of so, but I suppose we could add in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. That bill was written by the lobbyists for the drug companies and was passed in the dark of the night by the majority party at the time with a margin of one vote. At the time the cost estimates for the bill, which was the largest overhaul of Medicare in it's history, was an amount in the neighborhood of $400 billion over ten years. Now, seven years into the program, current estimates are that the prescription drug bill will actually add over $1 trillion to federal expenses in it's first ten years.

Tax cuts are popular with politicians. Until the Bush tax cuts were permitted to be reinstated, there had not been an increase in the federal tax rates since 1994, when they stood at very near the lowest level in the history of federal income taxes. Unfortunately, various spending programs are also popular in getting politicians re-elected. And oh how our politicians have spent.

There's been a couple of flip-flops of the political majority over the last couple of decades, with essentially the same results. More spending, weakening revenues, escalating national debt and more intense partisan bickering year after year. But each time it happens, the politicians give the dumb electorate only half the story. They somehow neglect to tell them that they did exactly the same types of things back when they were in power.

As I've said in an earlier post, I've concluded that we'll be joining ancient Greece, the Roman Empire, the Ottoman Empire, Great Britain, and the Soviet Union among others as former world powers. Future historians will be writing, "...how did they screw up such a good thing?" as the analyze the demise of the U.S..

Like I opined in an earlier post, "think Greece" as what the U.S. is going to look like in a generation or so. Maybe we ought to start teaching Mandarin in our schools so we can better understand what the Chinese loan workout department will be telling us how we're going to have to change our way of life in order to repay their loans to us.

Sorry for the negative opinion. Maybe it's because of another cloudy day in The Villages. Someone tell me my conclusions are wrong. Please.

[Guest]

local and federal, as well as the average citizen is an understanding of a simple income statement?
My observation is there is never a consideration of status of spending to revenues. All they know is pass that which they favor and then let it fall into what ever column it will on the income statement/balance sheet.....with absolutely no accountability or responsibility.

The simple rule most all of us live with/by is if an expenditure is not within our means (check book, savings, current debt capability, etc) we don't do it.

Elected office holders proceed anyway. I would bet 25% or less would be able to adequately describe a simple income statement. And for those that could, they would not be able to connect how it affects surpluses or deficits.

IMHO....for sure their behavior would suggest my opinion to be accurate.

Until elected officials are accountable for funds like we are for our home budgets there will be no improvements. I suppose the fact that too many more than 50% are independently wealthy and don't have to worry about what they spend has an effect on the elected office performance as well.

btk

[Guest]

Kahuna, unfortunately you have the distinction of being correct once again. Our Congress has with stimulus and prodding from their leadership and the President have put the United States in peril. It may not come within our lifetimes, but it is sure to descend upon our country just as a Tsunami brushes away all that lies within it's path of destruction. The United States, once the most productive, innovative, and industrious of nations has turned away from what made us great and into a vast land of "Me's and I's. We have allowed foreign lands to take our manufacturing, our production of goods and services, allowed our children to accept much less from their education and have lost parental guidance so necessary to a child's maturation. We have taken in a short 60 year period, since the end of WW 2, our world dominance, leadership, educational values, and our economy and tossed them into the sky for the winds to whip them about and redistribute them over the world. Our future may look decent here in TV, but it is only a facade and cannot protect us from what is coming our way in the future.

[Guest]

Before any of us get our shorts in a knot over what's going on in Washington these days, maybe we should take just a quick look at recent partisan politics here in the good ol' US of A.

According to the Treasury Department, there have been 19 significant federal tax cuts since the end of World War II. Three of them were passed under the administration of George W. Bush, the Economic Growth and Tax Reform Reconciliation Act of 2001 (EGTRRA), the Job Creation and Workers Assistance Act of 2002 (JCWA), and The Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA). The total "Bush tax cuts" were dramatically greater than either the Kennedy tax cuts in 1964 or the Reagan tax cuts in 1981. The amount of the Kennedy and Reagan tax cuts totaled $123.6 billion per year (in constant 2003 dollars) compared to the $188.1 billion per year for the three Bush tax cuts combined. So, the ten-year effect of the Bush 43 tax cuts was a reduction of federal revenue in the amount of $1.88 trillion dollars.

It doesn't take an advanced degree in accounting to note that either reduced tax revenues or increased federal spending or a combination of the two will produce annual deficits and increases in the national debt. Interestingly, the three Bush tax cuts were subjects of heated partisan controversy in Congress and were finally passed by the Republican majority at the time using "reconciliation rules" in the Senate to get the three cuts enacted.

So let's fast forward to 2010. The Republicans, now in the Congressional minority, are loudly bemoaning the fact that the Democrats intend to use the same reconciliation rules to pass the President's healthcare reform legislation. The Congressional Budget Office has not yet "scored" the legislation which will be introduced by President Obama within the next couple of days. But the amount of "$1 trillion" has been bandied about by the Republicans as the ten-year cost which is "unaffordable and unsustainable". There may be some changes in the items to be reconciled between the House and Senate, but the Senate bill was scored by the CBO to have a ten-year cost of $871 billion.

So if we calmly consider what our partisan politicians in Washington have done and are complaining about, the Bush tax cuts arguably added $1.88 trillion dollars to the national debt over ten years (even after the benefit from increased economic growth resulting from the tax cuts). If the healthcare reform bill is passed using reconciliation, it looks like it will add about $1 trillion to the national debt, almost double the amount resulting from the tax cuts achieved by the Republicans using the reconciliation process in the Senate about a decade ago.

But the Democrats have not taken action to renew the Bush tax cuts, so the revenue from those increased taxes will not only pay for the healthcare reform bill being "reconciled", but probably reduce annual deficits and the national debt by a few hundred billion per year as well.

There's no sense getting into a deep discussion of other egregiously expensive programs embarked upon by Congress in the last decade of so, but I suppose we could add in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. That bill was written by the lobbyists for the drug companies and was passed in the dark of the night by the majority party at the time with a margin of one vote. At the time the cost estimates for the bill, which was the largest overhaul of Medicare in it's history, was an amount in the neighborhood of $400 billion over ten years. Now, seven years into the program, current estimates are that the prescription drug bill will actually add over $1 trillion to federal expenses in it's first ten years.

Tax cuts are popular with politicians. Until the Bush tax cuts were permitted to be reinstated, there had not been an increase in the federal tax rates since 1994, when they stood at very near the lowest level in the history of federal income taxes. Unfortunately, various spending programs are also popular in getting politicians re-elected. And oh how our politicians have spent.

There's been a couple of flip-flops of the political majority over the last couple of decades, with essentially the same results. More spending, weakening revenues, escalating national debt and more intense partisan bickering year after year. But each time it happens, the politicians give the dumb electorate only half the story. They somehow neglect to tell them that they did exactly the same types of things back when they were in power.

As I've said in an earlier post, I've concluded that we'll be joining ancient Greece, the Roman Empire, the Ottoman Empire, Great Britain, and the Soviet Union among others as former world powers. Future historians will be writing, "...how did they screw up such a good thing?" as the analyze the demise of the U.S..

Like I opined in an earlier post, "think Greece" as what the U.S. is going to look like in a generation or so. Maybe we ought to start teaching Mandarin in our schools so we can better understand what the Chinese loan workout department will be telling us how we're going to have to change our way of life in order to repay their loans to us.

Sorry for the negative opinion. Maybe it's because of another cloudy day in The Villages. Someone tell me my conclusions are wrong. Please.


The first part of your post sounds like the Democratic party notes !!!

HOwever, I will agree with you that the direction we are headed is a very dangerous destination and nobody seems to want to admit to that.

Our federal government cannot be all things to all people, and most importantly the ONLY game in town ! We are becoming a government, like the spoiled rich kid, who is living only off our "parents" (our government). We have become so dependent on the government and those elected feed off that power they seem to hold over us.

But, until we wake up (meaning those who vote) we are going to be stuck with what we got. Nobody in Washington....WH or congress shows one single sign of any change..maybe we should pay attention to Jim Bunning's message he is trying to send.....the message being that we just pay "lip service" even to the bills we pass.

This involves BOTH parties and not just one.....we need to break our total dependency on Washington DC, BUT if you look around and know that almost half of the folks in this country pay NO income taxes (I think the real number is 45%)....WHO is footing the bill.

In my lifetime, we will never work this out, but it is my naive opinion that we have now "raised" an entire generation of folks who feel they are owed a living from the federal government !

[Guest]

What Obama and the democrats don't want to talk about is the $500,000,000,000 cut in Medicare that is at the core of the creative fiscal gymnastics they are manipulating to "cook the books" and make the cost look palatable. Their goal is to spread the wealth and health care to constituencies, including unions, who they hope will keep them in power. I ask..."At whose expense?"

Imagine, the elderly on Medicare, the people who arguably need health services the most, losing $500 billion dollars from their current level of service. Suddenly health audits that would preclude treatments for taxpayers of a certain age and/or illness would be excluded from coverage, the concept of "death squads" aka government bureaucrats making decisions about who lives and who dies becomes more believable. All in the name of efficiency. Gee K., do you think politics, you know the phone call from an incumbent to a health care bureaucrat seeking a little favor might find its way and factor into the mix? Could a little contribution insure favorable attention? Nahhh.....but, maybe in Chicago. Obama and his administration could get a real double bang for the spread the wealth and health buck by the early demise of the elderly through the denial of health care options. He would also be relieving stress on Social Security by reducing obligation.....through....you know.... the dearly departed.

I'm sure there may be even fourth and fifth halves to the equation. Wait a minute something doesn't add up.

When in one of my darker moods....I have made the case that Obama and his minions are shooting for, in your words "think Greece". I assure you a compelling case for the sinister, deliberate and calculated bankrupting of America in the name of change is very arguable. Who benefits from this scenario? Ask where ALL the power would go. Yup.....the government. Wow....some change. Better left for another thread.

But the age of chivalry is gone. That of sophisters, economists, and calculators has succeeded; and the glory of Europe is extinguished forever.

Edmund Burke (1729-1797)

....and so goes America

Cabo

[Guest]

Before any of us get our shorts in a knot over what's going on in Washington these days, maybe we should take just a quick look at recent partisan politics here in the good ol' US of A.

According to the Treasury Department, there have been 19 significant federal tax cuts since the end of World War II. Three of them were passed under the administration of George W. Bush, the Economic Growth and Tax Reform Reconciliation Act of 2001 (EGTRRA), the Job Creation and Workers Assistance Act of 2002 (JCWA), and The Jobs and Growth Tax Relief and Reconciliation Act of 2003 (JGTRRA). The total "Bush tax cuts" were dramatically greater than either the Kennedy tax cuts in 1964 or the Reagan tax cuts in 1981. The amount of the Kennedy and Reagan tax cuts totaled $123.6 billion per year (in constant 2003 dollars) compared to the $188.1 billion per year for the three Bush tax cuts combined. So, the ten-year effect of the Bush 43 tax cuts was a reduction of federal revenue in the amount of $1.88 trillion dollars.

It doesn't take an advanced degree in accounting to note that either reduced tax revenues or increased federal spending or a combination of the two will produce annual deficits and increases in the national debt. Interestingly, the three Bush tax cuts were subjects of heated partisan controversy in Congress and were finally passed by the Republican majority at the time using "reconciliation rules" in the Senate to get the three cuts enacted.

So let's fast forward to 2010. The Republicans, now in the Congressional minority, are loudly bemoaning the fact that the Democrats intend to use the same reconciliation rules to pass the President's healthcare reform legislation. The Congressional Budget Office has not yet "scored" the legislation which will be introduced by President Obama within the next couple of days. But the amount of "$1 trillion" has been bandied about by the Republicans as the ten-year cost which is "unaffordable and unsustainable". There may be some changes in the items to be reconciled between the House and Senate, but the Senate bill was scored by the CBO to have a ten-year cost of $871 billion.

So if we calmly consider what our partisan politicians in Washington have done and are complaining about, the Bush tax cuts arguably added $1.88 trillion dollars to the national debt over ten years (even after the benefit from increased economic growth resulting from the tax cuts). If the healthcare reform bill is passed using reconciliation, it looks like it will add about $1 trillion to the national debt, almost double the amount resulting from the tax cuts achieved by the Republicans using the reconciliation process in the Senate about a decade ago.

But the Democrats have not taken action to renew the Bush tax cuts, so the revenue from those increased taxes will not only pay for the healthcare reform bill being "reconciled", but probably reduce annual deficits and the national debt by a few hundred billion per year as well.

There's no sense getting into a deep discussion of other egregiously expensive programs embarked upon by Congress in the last decade of so, but I suppose we could add in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. That bill was written by the lobbyists for the drug companies and was passed in the dark of the night by the majority party at the time with a margin of one vote. At the time the cost estimates for the bill, which was the largest overhaul of Medicare in it's history, was an amount in the neighborhood of $400 billion over ten years. Now, seven years into the program, current estimates are that the prescription drug bill will actually add over $1 trillion to federal expenses in it's first ten years.

Tax cuts are popular with politicians. Until the Bush tax cuts were permitted to be reinstated, there had not been an increase in the federal tax rates since 1994, when they stood at very near the lowest level in the history of federal income taxes. Unfortunately, various spending programs are also popular in getting politicians re-elected. And oh how our politicians have spent.

There's been a couple of flip-flops of the political majority over the last couple of decades, with essentially the same results. More spending, weakening revenues, escalating national debt and more intense partisan bickering year after year. But each time it happens, the politicians give the dumb electorate only half the story. They somehow neglect to tell them that they did exactly the same types of things back when they were in power.

As I've said in an earlier post, I've concluded that we'll be joining ancient Greece, the Roman Empire, the Ottoman Empire, Great Britain, and the Soviet Union among others as former world powers. Future historians will be writing, "...how did they screw up such a good thing?" as the analyze the demise of the U.S..

Like I opined in an earlier post, "think Greece" as what the U.S. is going to look like in a generation or so. Maybe we ought to start teaching Mandarin in our schools so we can better understand what the Chinese loan workout department will be telling us how we're going to have to change our way of life in order to repay their loans to us.

Sorry for the negative opinion. Maybe it's because of another cloudy day in The Villages. Someone tell me my conclusions are wrong. Please.
Your understanding of economics is based on Liberal bias.
The way political accounting works is like this:

You raise taxes and revenue goes down always has always will.
Not understanding this means you do not understand our smart Americans.

[Guest]

Kahuna, unfortunately you have the distinction of being correct once again. Our Congress has with stimulus and prodding from their leadership and the President have put the United States in peril. It may not come within our lifetimes, but it is sure to descend upon our country just as a Tsunami brushes away all that lies within it's path of destruction. The United States, once the most productive, innovative, and industrious of nations has turned away from what made us great and into a vast land of "Me's and I's. We have allowed foreign lands to take our manufacturing, our production of goods and services, allowed our children to accept much less from their education and have lost parental guidance so necessary to a child's maturation. We have taken in a short 60 year period, since the end of WW 2, our world dominance, leadership, educational values, and our economy and tossed them into the sky for the winds to whip them about and redistribute them over the world. Our future may look decent here in TV, but it is only a facade and cannot protect us from what is coming our way in the future.

Succinct writing and a wonderful expression of my views. I agree with your reasons and outlook for our country. Now what to do to reverse our position on the slippery slope............

[Guest]

exactly why you voted for them.

btk

[Guest]

Under the Reagan tax cuts, revenues to the government almost doubled. Tax cuts always spur the economy. The more people working and spending, the more revenue to the government. Lower the tax rates and people have more of their money to spend and invest. Works every time it's tried.

I've asked the question before. When has a society ever taxed itself into prosperity? Less taxes, balanced budget, less government = a growing economy.

[Guest]

Under the Reagan tax cuts, revenues to the government almost doubled. Tax cuts always spur the economy. The more people working and spending, the more revenue to the government. Lower the tax rates and people have more of their money to spend and invest. Works every time it's tried.

I've asked the question before. When has a society ever taxed itself into prosperity? Less taxes, balanced budget, less government = a growing economy.

You are right dklassen. With the threat of tax increases and government takeover of healthcare companies have dropped employees like flies. People have threatened to hold their earnings below $200,000. Lack of enthusiasm and people going Galt have led to significant drop in federal taxes. Meanwhile congress and this administration talk constantly of spending us to oblivion.
Priorities in the White House and Congress are despicable.

[Guest]

I'm not defending either party. I don't identify or feel I belong to either party. As I've said before, I'm best described as an independent, with strong conservative fiscal principles and equally strong feelings regarding certain domestic and foreign policy issues.

In my post I was trying to demonstrate that both political parties have become more partisan and have increasingly governed with gross irresponsibility over the last 2-3 decades. During that time, both parties were in the majority at different times and both parties used exactly the same arcane rules to pass legislation they desired at various times. Neither party has acted with fiscal conservatism, regardless of what their party platform or daily soundbites say. Comparing all of our elected representatives in recent decades in terms of family finances, they have legislated the country to a level of spending well above our means and using the term of the day "unsustainable". It is now almost impossible that we will ever be able to get our debt to an acceptable level in any reasonable amount of time.

Part of the cause for the behavior of our political leaders lies with the American public. As some have said here, we are a population who demands entitlements. We are a population who somehow believes that we can get something for nothing and not have to work for it. We have elected representatives for our government who have fed our ill-concieved expectations in the interest of prolonging their own electoral longevity. We like entitlements, services and things government can provide, so they give them to us. Everyone likes lower taxes, so they give us them as well. We have lived for at least a decade now by simply borrowing more and more to satisfy our insatiable but unaffordable desires.

Between us and those we elect, we have ruined what was one of the most productive economies in the history of the world. Through greed and avarice, we have badly damaged the productive and innovative capitalist economic system that was so effective in providing Americans with the highest standard of living in the world for several decades. Because life was so good, we became unwilling to work hard all day to earn a day's pay. Why should we, our government or our union would protect us from having to work up a sweat or get dirt under our fingernails.

Think about what our politicians are saying. "Our economy is driven by small businesses, by Main Street", they say. What the heck does that mean? Is our economic future tied to the success of small shopkeepers and service providers? What about all our strong basic industries...steel, automobiles and trucks, computers, building materials, farming and food processing, planes and aerospace? Ooops, none of those employ many Ameericans anymore. Most of that stuff is produced in other countries. Most of that stuff is made by foreign workers. We've become a country of small retailers, restaurant owners, consultants and software writers. Even the busnesses which depend on low-level phone banks have moved that function offshore. The telephone attendants in India or Bangladesh don't speak English very well, but they sure work hard for not too much money.

The jig is up...or nearly up. There is virtually no way that any economist can project that we can grow our economy at a rate that will provide the necessary tax revenues at current rates to come close to repaying the debt we've run up in anything less than a couple of generations. The structure of our debt is increasingly scary. A greater and greater proportion of the amounts we owe are becoming fixed costs, costs that we can't reduce, even if we wanted to. In only a few years, half of our federal expenditures will be interest on the debts we owe.

Those that have pointed out that our birthrate, like the birthrates of other former strong economies will work against us. It is simply an arithmetic impossibility for fewer and fewer younger working Americans to pay for the retirement and healthcare benefits of a growing population of older people.

Our economy has changed. A lot of the old rules that we learned and repeat like a mantra don't work very well anymore. "Our" economy has become a world economy. We have become consumers, not producers. The businesses that make most of the stuff we consume--like food, oil, most natural resources, processed metals, electronics, building materials, automobiles, medicines, etc.--increasingly produce it somewhere outside the U.S., where the wages and benefits they have to pay workers are far less.

The old principle was that if taxes were reduced, the tax savings would "trickle down" through the economy, resulting in increased demand, increased capital spending and increased employment. That's not working anymore. Nowadays, Americans spend the tax savings to buy stuff that more often than not is produced outside the U.S. The tax savings still trickle, but more often than not they wind up employing workers in third world countries. One of those countries is China, the fastest growing economy in the world, and the one which virtually everyone admits will surpass the U.S. in size and productivity in less than ten years.

No, I'm afraid the jig really is up. We got into this position because our political leaders lead us here. And we LET them lead us here. They have all been equally guilty...both parties, all ideaologies, virtually all political leaders in the last two decades share the responsibility for what is happening and what will happen to the United States.

I was deadly serious when I said that we are quickly becoming another Greece. We have a lowered work ethic, higher demands for entitlements and almost complete disregard for the financial results of our collective conduct. But our habits and expectations will change, Like Greece, they will change as the result of the intervention of others. In Greece's case, Germany and France and the other EU countries are going to tell the Greeks how their lifestyle and standard of living will change. In our case, it will be China and India who will be telling us how we're going to have to change our lifestyle and expectations in order to repay the debts we owe them. They will have no concern for the effect on Americans as individuals or on the U.S. and it's values in the world of nations.

We are well along losing our position as an economic and political leader in the world, as well as frittering away the lifestyle which future generations of Americans will enjoy.

And our political leaders--those we chose to represent us because we believed what they said, what they promised, and the mud they slung at thier political opponents in their own self-interest. Shame on us. If we don't accept the shame now, we'll surely feel it from wherever we are when our future generations realize how our conduct has changed their lives.

[Guest]

I'm not defending either party. I don't identify or feel I belong to either party. As I've said before, I'm best described as an independent, with strong conservative fiscal principles and equally strong feelings regarding certain domestic and foreign policy issues.

In my post I was trying to demonstrate that both political parties have become more partisan and have increasingly governed with gross irresponsibility over the last 2-3 decades. During that time, both parties were in the majority at different times and both parties used exactly the same arcane rules to pass legislation they desired at various times. Neither party has acted with fiscal conservatism, regardless of what their party platform or daily soundbites say. Comparing all of our elected representatives in recent decades in terms of family finances, they have legislated the country to a level of spending well above our means and using the term of the day "unsustainable". It is now almost impossible that we will ever be able to get our debt to an acceptable level in any reasonable amount of time.

Part of the cause for the behavior of our political leaders lies with the American public. As some have said here, we are a population who demands entitlements. We are a population who somehow believes that we can get something for nothing and not have to work for it. We have elected representatives for our government who have fed our ill-concieved expectations in the interest of prolonging their own electoral longevity. We like entitlements, services and things government can provide, so they give them to us. Everyone likes lower taxes, so they give us them as well. We have lived for at least a decade now by simply borrowing more and more to satisfy our insatiable but unaffordable desires.

Between us and those we elect, we have ruined what was one of the most productive economies in the history of the world. Through greed and avarice, we have badly damaged the productive and innovative capitalist economic system that was so effective in providing Americans with the highest standard of living in the world for several decades. Because life was so good, we became unwilling to work hard all day to earn a day's pay. Why should we, our government or our union would protect us from having to work up a sweat or get dirt under our fingernails.

Think about what our politicians are saying. "Our economy is driven by small businesses, by Main Street", they say. What the heck does that mean? Is our economic future tied to the success of small shopkeepers and service providers? What about all our strong basic industries...steel, automobiles and trucks, computers, building materials, farming and food processing, planes and aerospace? Ooops, none of those employ many Ameericans anymore. Most of that stuff is produced in other countries. Most of that stuff is made by foreign workers. We've become a country of small retailers, restaurant owners, consultants and software writers. Even the busnesses which depend on low-level phone banks have moved that function offshore. The telephone attendants in India or Bangladesh don't speak English very well, but they sure work hard for not too much money.

The jig is up...or nearly up. There is virtually no way that any economist can project that we can grow our economy at a rate that will provide the necessary tax revenues at current rates to come close to repaying the debt we've run up in anything less than a couple of generations. The structure of our debt is increasingly scary. A greater and greater proportion of the amounts we owe are becoming fixed costs, costs that we can't reduce, even if we wanted to. In only a few years, half of our federal expenditures will be interest on the debts we owe.

Those that have pointed out that our birthrate, like the birthrates of other former strong economies will work against us. It is simply an arithmetic impossibility for fewer and fewer younger working Americans to pay for the retirement and healthcare benefits of a growing population of older people.

Our economy has changed. A lot of the old rules that we learned and repeat like a mantra don't work very well anymore. "Our" economy has become a world economy. We have become consumers, not producers. The businesses that make most of the stuff we consume--like food, oil, most natural resources, processed metals, electronics, building materials, automobiles, medicines, etc.--increasingly produce it somewhere outside the U.S., where the wages and benefits they have to pay workers are far less.

The old principle was that if taxes were reduced, the tax savings would "trickle down" through the economy, resulting in increased demand, increased capital spending and increased employment. That's not working anymore. Nowadays, Americans spend the tax savings to buy stuff that more often than not is produced outside the U.S. The tax savings still trickle, but more often than not they wind up employing workers in third world countries. One of those countries is China, the fastest growing economy in the world, and the one which virtually everyone admits will surpass the U.S. in size and productivity in less than ten years.

No, I'm afraid the jig really is up. We got into this position because our political leaders lead us here. And we LET them lead us here. They have all been equally guilty...both parties, all ideaologies, virtually all political leaders in the last two decades share the responsibility for what is happening and what will happen to the United States.

I was deadly serious when I said that we are quickly becoming another Greece. We have a lowered work ethic, higher demands for entitlements and almost complete disregard for the financial results of our collective conduct. But our habits and expectations will change, Like Greece, they will change as the result of the intervention of others. In Greece's case, Germany and France and the other EU countries are going to tell the Greeks how their lifestyle and standard of living will change. In our case, it will be China and India who will be telling us how we're going to have to change our lifestyle and expectations in order to repay the debts we owe them. They will have no concern for the effect on Americans as individuals or on the U.S. and it's values in the world of nations.

We are well along losing our position as an economic and political leader in the world, as well as frittering away the lifestyle which future generations of Americans will enjoy.

And our political leaders--those we chose to represent us because we believed what they said, what they promised, and the mud they slung at thier political opponents in their own self-interest. Shame on us. If we don't accept the shame now, we'll surely feel it from wherever we are when our future generations realize how our conduct has changed their lives.

Some research will tell you that "Small Busines" is the backbone of capitalism in the USA. They represent over 97% of the exporters. They create 64% of all jobs. You raise their taxes and they employ fewer people. This is economics 101 and the facts.

[Guest]

Some research will tell you that "Small Business" is the backbone of capitalism in the USA....You raise their taxes and they employ fewer people. This is economics 101 and the facts.

First of all, I'm not proposing a tax increase on anyone. But I'll take one last whack at trying to clarify why the mantra that if we lower taxes demand and employment will increase isn't working.

30-40 years ago, when the U.S. was a major producing nation, exporting all kinds of products to buyers in other countries all over the world, the basic economic theorem you have stated worked perfectly.

But what has happened in the intervening decades is that the U.S. has become a major consuming economy rather than a producing economy. The measure of that is the trade balance of payments, which has been growing increasingly negative for years. While we still export a lots of goods and services, the problem is we import a whole lot more.

So now, when we apply the economic mantra you have stated, reducing taxes doesn't have the leverage it used to have in creating economic growth and additional employment. What's increasingly happening now to the savings resultant from tax reductions is that when consumers ultimately spend those dollars, it is more and more likely they will buy products produced in foreign countries. That means that a substantial portion--not all, but an increasingly substantial portion--of U.S. consumer purchases are being spent to buy foreign goods made by foreign workers.

The "trickle down" still works, but in increasingly large measures, it's resulting in increased employment outside the U.S., not new jobs for Americans. Tax reductions simply don't get us the bang for the tax reduction buck that they used to.

The solution to this serious economic problem is a complicated one. But one thing is for certain--when our politicians stand up and tell us that they're going to a good thing and get our economy rolling again by reducing taxes, it may tend to make people like them more and vote for them, but that action alone WILL NOT cause a major recovery in economic growth and a reduction in unemployment.

While it may seem counterintuitive, what will be a more powerful lever in improving our economy is for the government to reduce spending while possibly at the same time selectively targeting some tax reductions.

The problem is that our politicians have told us, the people who vote for them, only half the story year after year in their campaigns to get re-elected. They continually talk about cutting taxes while at the same time tell us of all the wonderful new spending programs they got approved for us. It might be a new bridge, an increase in entitlements, the tremendous cost of continually fighting wars all over the world, or any of a myriad of new spending programs they dream up to keep us happy and voting them back into office year after year.

Did you ever ask yourself why our Congress quietly let the Budget Enforcement Act of 1990 (the Pay Go bill) "sunset" and go away in 2001? That bill required government spending to be funded by revenues. It required a balanced budget. There were no increases in the national debt for the ten years it was the law of the land. But the administration at the time let the law expire. Then, within three years the Congress approved the largest tax reductions in the history of the country, whle at the same time they went on a spending spree that even members of the majority party described as "spending like drunken sailors". We, the people who sent them to Washington, loved it. Who wouldn't like reduced income taxes while at the same time getting all kinds of expensive new "stuff" paid for by the government?

The effect of increasing spending while at the same time reducing federal revenues (taxes) has the same effect as it would have in anyone's household budget. A family cannot keep spending more than it takes in for very long before it goes broke! Families have tried to limp along by borrowing more on their credit cards, getting new cards, or getting a second mortgage on their house. The U.S. has done the same thing by borrowing from other countries. But the end game for both individual families as well as sovereign nations who are fiscally irresponsible is the same. We will go broke!

As I've said here before, the jig's almost up. China is already begun reducing the amount of U.S. bills and bonds that it holds--they sold off $64 billion last month alone. When our politicians find they can't pay for the day-to-day government expenditures, only one of two things can fix the problem. They will either have to dramatically and quickly cut spending...or they will have to raise taxes! Oh, I forgot, there's one other thing they can do first--print lots more money. The effect of that will be a rapid drop in the value of the dollar and equally rapid increases in the rate of inflation. Sure, people will bitch and moan about inflation and the Congress will hold hearings, and they may even squeak thru and get re-elected again. But in the end , the result will be the same--we'll go broke.

Please, please, don't try to convince me that we can cut taxes enough to cause our economy to return to a reasonable level of growth and cause employment to be reduced to former accpetable levels. It cannot happen.

And as I've said here before--if we continue to listen to those self-serving arguments from politicians trying to get re-elected, believe that stuff, and maybe even repeat it to others, such as on this forum...all we're doing is endorsing the political behavior that has gotten us into this mess in the first place. If we don't demand the right actions from our elected leaders, meaning we're all going to have to suffer quite a lot, each and every one of us will experience a major change in our way of life. It will be worse for our kids and grandkids.

Think about what I've said and don't just continue to repeat the mantra that the politicians drone on about in their campaign speeches. It ought to be obvious to everyone that it isn't working!

And please don't lecture me on Economics 101. Both my formal and practical study of economics has gone far beyond that.

[Guest]

You are correct that the Government should reduce spending.

We should elect Conservatives to solve this problem whether they be Democrat or Republican.

Raising taxes will increase unemployment and drive business out of America.

[Guest]

Jim Bunning, while picking the wrong issue, the wrong time, etc.....has a point !!!!!!!

[Guest]

There is a trend that is flying under the radar which is very disturbing. Government is expanding in alarming proportions. Instead of tightening their belts they are creating needless jobs and hiring rapidly. Even Boston (liberal) TV station did an expose on it the other day.
Some agency that was created to work with business to improve energy efficiency, has doubled in size and their salaries once averaging in the $70,000 are now over $100,000.

It seems that getting a government job is like winning the lottery. They average double the private industry wages and their pensions are comparatively exorbitant.

[Guest]

Kahuna, as usual you present articulate and well defined viewpoints. Your background gives your posts significant credibility and are worth the read even if occasionally opinions diverge.

I'm on the run to a tee time but wanted to express another perspective. I believe the tax system itself (60,000 pages) is archaic, inefficient, unfair and contributes to the very issues you raise.

What are your views on abolishing the tax system in favor of a Flat Tax, Fair Tax or combination of both.

For perspective I use these simple definitions. The Flat Tax Taxes Income While the Fair Tax Taxes Consumption.

Anyone else feel free to jump in.

[Guest]

...but only if Congress REALLY simplifies the tax code, removing all the exceptions, deductions, credits, shelters, etc.

But what I like even better is the reinstitution of the 1990 Pay Go legislation. That basically requires Congress to demonstrate full funding of any and all spending legislation, essentially requiring a budget with no annual deficit, just like the states. Any legislator that runs on that combination of fiscal reforms would have my vote.

Understand that with as far out of control that Congress has gotten in spending our money, the reinstitution of Pay Go would really cause some serious belt-tightening. There would have to be massive cuts in government spending, which would effect each and every one of us.

[Guest]

For your reading pleasure;



http://www.downsizinggovernment.org/



Six reasons to downsize Federal Government:

http://www.cato-at-liberty.org/2010/03/03/six-reasons-to-downsize-the-federal-government/

[Guest]

For your reading pleasure...

http://www.downsizinggovernment.org/

Six reasons to downsize Federal Government:

http://www.cato-at-liberty.org/2010/03/03/six-reasons-to-downsize-the-federal-government/

All these recommendations should be placed on the table, probably plus some others such as a reduction in the entitlements that all who participate on this forum enjoy. If our elected representativs really get serious about balancing the budget and reducing the national debt, it's going to hurt...all of us.

It will take a steel political will to refuse to participate in the demonstrations that are certain to occur. Just look at the TV today, when students all over the country are demonstrating because state's funding of education is being reduced at the same time their tuition is being dramatically increased. It is altogether possible that in order to return our country to fiscal balance, spending will have to be dramatically reduced, but taxes may have to be increased at the same time.

As a country, we have simply lived way beyond our means for too long to avoid the probability of both these actions. If we get our wish, we will have to have wills of steel and patience of saints to avoid resisting the obviously needed corrective actions.

[Guest]

All these recommendations should be placed on the table, probably plus some others such as a reduction in the entitlements that all who participate on this forum enjoy. If our elected representativs really get serious about balancing the budget and reducing the national debt, it's going to hurt...all of us.

It will take a steel political will to refuse to participate in the demonstrations that are certain to occur. Just look at the TV today, when students all over the country are demonstrating because state's funding of education is being reduced at the same time their tuition is being dramatically increased. It is altogether possible that in order to return our country to fiscal balance, spending will have to be dramatically reduced, but taxes may have to be increased at the same time.

As a country, we have simply lived way beyond our means for too long to avoid the probability of both these actions. If we get our wish, we will have to have wills of steel and patience of saints to avoid resisting the obviously needed corrective actions.

Interesting. Do you believe that everyone in this country, every one, should pay their fair share? If 50% of the taxpayers are shouldering 96% of the tax burdens, should they be expected to pay more, less or stay the same? There are very many, myself included, who don't pay nearly enough and there are millions of free-loaders who pay nothing. Where do we begin?

[Guest]

VK said the following...

"But what I like even better is the reinstitution of the 1990 Pay Go legislation. That basically requires Congress to demonstrate full funding of any and all spending legislation, essentially requiring a budget with no annual deficit, just like the states. Any legislator that runs on that combination of fiscal reforms would have my vote."


Thought you might be interested in this editorial on that subject...

"When a White House statement refers to a "bedrock principle," it means something slushy and soft and not really a principle at all, but a gimmick, still one more fraud to fool the public, a joke of the kind that must keep presidential aides rolling on the floor in laughter at all the fools who cheer them on.

The "principle" referred to was what would bind Congress if it passed a pay-as-you go law: It could then "only spend a dollar if it saves a dollar elsewhere." But when the legislation actually became law and Sen. Jim Bunning of Kentucky tried to have Congress observe its provisions, the Democrats were outraged and Vice President Joe Biden portrayed the Republican in one reported interview as inhumane.

"We are faced with calamity, and the Obama administration plays games with words while Congress cannot even offset new benefits with a $10 billion savings?

It's time to start worrying, fellow Americans. Really worrying."


http://www.realclearpolitics.com/articles/2010/03/05/the_paygo_fraud_104662.html

[Guest]

Interesting. Do you believe that everyone in this country, every one, should pay their fair share? If 50% of the taxpayers are shouldering 96% of the tax burdens, should they be expected to pay more, less or stay the same? There are very many, myself included, who don't pay nearly enough and there are millions of free-loaders who pay nothing. Where do we begin?

Yeah, I think everyone who has income should pay taxes. I think many more corporations should pay taxes--only about one-third of them pay any taxes currently. When the tax burden is increased, I think it needs to be increased to a greater degree on the wealthiest Americans than on the middle and lower classes, but everyone should pay some taxes. And I can't see anything wrong with increasing tax rates across-the-board. Our federal tax rates are currently very near the lowest they've ever been in the history of the income tax system. I see no reason why they shouldn't be increased in order to begin to repay the national debt created by our political leaders over the last decade or so. They can always be reduced in the future when the revenues are less critically needed.

I'm not buying the outmoded political theory that taxes need to be decreased in order to encourage economic growth. Like I said, taxes are near a historical low point right now, and no particular economic recovery is evident. In fact, I think it's pretty well accepted by economistsa that the crushing debt load on the country will be a greater inhibitor of future economic growth than almost any other factor.

But underlying all of this must be a program to reduce spending by the federal government. For lack of a better idea, I like the though of simply reinstituting the 1990 Pay-Go law. In essence, it prohibited any increase in government spending unless there was a concurrent reduction in sending somewhere else in the budget. I also think there needs to be a pretty dramatic across-the-board cut in the federal budget--something in the range of 10% or so. Businesses cut budgets like this all the time--why not the federal government? The recent "cut" announced by the administration was embarrassingly tiny--1/2% as I recall--and they tried to make a big deal of it.

Nope, we need to cut spending pretty harshly, and then enact a law that prevents spending from escalating out-of-control once again.

That's where I come from. And that's why I'd never be elected to Congress!

[Guest]

Well, business has been spooked for 2 years with all the radical proposes working their way around congress and this white house and the proposal is to raise taxes.

Yea, that should really instill confidence in our shaky climate and get the economic engine humming. Like throwing an anchor to a drowning man.