I'm becoming concerned that the National Debt is approaching an unaffordable point. We are now borrowing so much money and running such massive deficits that we may be putting the United States in the same position as the credit card abuser who runs up huge debts and has nno way to erver pay the debts off. And while this trend became somewhat troubling during the Bush Presidency, the acceleration of the spending and piling up of debt which has occurred so far in the Obama Presidency is frightening. Take a close look at this chart:
In today's news, a prominent economist is predicting that the United States will have to default on Treasury Bonds - not pay the debts when they are due. After that, who would lend to us ever again? What about the effect on interest rates? The rate you pay is based in significant part on risk premium, whether the lender believes you'll pay them back. Default, and rates go up. Or do we say this is the US government, let's just print the money? I don't want to become the next Zimbabwe.
I don't have a good feeling about this. The answer seems to me that government spending needs to be controlled, and ways of increasing revenue need to be found. And as I've said before, I don't think the revenue increase is going to come from simply raising taxes on the rich.
Disturbed?
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This is disturbing; however, whenever considering the cost of such things as the wars we are currently participating in and the Bush tax cuts that concurrently decreased revenue, the deficit is understandable (if inexcusable). It is extremely suspicious that so many conservatives who were willing to pour endless amounts of money into war are now shouting, "Hold up!" on programs to assist people at home.
ReplyDeleteThen again, I support pulling out of the wars and having steep tax increases as income levels go up, and I have no qualms about openly stating as much. I do believe that Obama's just left of center, which gives me pause at times since I don't think he is ready or willing to take the steps necessary to decrease spending on superfluous defense programs and to increase revenue through increased taxation on people who can actually afford it.
A few points.
ReplyDeleteI don't dispute that the wars have increased defense costs. If you check the data, it's on the order of $100 billion per year, more or less (even according to the most anti-war of websites). While that has adversely affected the budget, it is orders of magnitude different from what we are now experiencing and is being projected in charts like the one I posted.
A second very significant difference in my mind is that while the war expense has lasted for quite a few years, it does have a terminus, all the sooner given the present administration's positions on that issue. The spending will decrease and someday end. I'm sure we disagree on the level of appropriate defense spending on an ongoing basis, but that is another discussion topic altogether. The spending increases now being proposed and likely to be passed into law represent in many cases entitlement spending, such as Medicare, Social Security, health care spending, and other programs that have no set end. In fact, they are generally designed to be perpetual. One of the lading sources of the current budget problems are the entitlements that were passed long ago where the bills are now mounting and coming due.
As to taxes and tax cuts, there is virtually no evidence that the 2001 and 2003 tax cuts reduced government revenue. There is considerable debate about what revenues might have increased to or decreased had the tax cuts not been passed, but the evidence shows that until the current recession, tax revenue increased following the 2001 and 2003 tax cuts. (I can't seem to be able to post the graph in a comment. Phooey!)
I'm working on a tax related post. For the moment I'll ask this: to a high income person with significant wealth, what effect will "steep tax increases as income levels go up" have on their decision whether to earn taxable income or find non-taxable ways to invest their wealth? Like I say, I think this is a great topic for future discussion, and I hope I get that one up soon for you to discuss with me.
to a high income person with significant wealth, what effect will "steep tax increases as income levels go up" have on their decision whether to earn taxable income or find non-taxable ways to invest their wealth?
ReplyDeleteIf they really would do that then, frankly, they should go elsewhere. This society has given people the opportunity to prosper, and one requirement to be fulfilled in order to participate in said society is the paying of taxes, just like how one would pay any dues for membership in a club or go join another. Clubs offer certain services to members, and so do countries. It's a gross oversimplification, but it is basically the point - if you want to be part of this club, pay your dues or go elsewhere. It's what you have to deal with to be a member, a citizen, a participant, whatever you want to call it. You have to pay for the police officers, for the schools, for the streets, for the water, for the social programs, for the wars, for the fire departments, for the libraries, for all of those services.
I'm about to start attending college on the post-9/11 GI Bill, and it may not have an immediate reward, but it will lead to my being better educated, which will lead to my likely having a better job that pays more, which will lead to my giving back more than I got over time (and, at the bare minimum, stop me from being dependent on the government for my income). It's an unqualified success of a program, a similar one was responsible for the economic boom of the '50s, and it's what most people would call socialism if they were not so uncomfortable associating the word with the military and something so popular.
I am also consistently amazed at the lib-leaning right-wing assertion that, if taxes are raised on the upper classes, they will go Galt en masse and go make a haven where they work as hard as they please and accumulate all the meaningless wealth that they please - yet, when faced with the chance, they do not take it, because they are smarter than that. This is the place that gives them that opportunity in the first place, and more taxes don't reduce that opportunity; they simply divert some of that money to the government so that it can provide more (or more comprehensive, or more effective) services.
Continuing...
I think a good chunk of the sentiment at the core of this (mostly empty) threat is a genuine conservative terror that people might be enjoying (or just using) something they haven't "earned". A lot of conservatives seem to earnestly think that they would rather lose all of their money or commit fraud than see some of their money go to, gods forbid, someone who makes less than them (and is thus less worthy) seeing a doctor. There is this concept that seems partially connected to the prosperity gospel that is so prevalent in our evangelical communities (though certainly not universal) and partially connected to the Horatio Alger myth, and it states baldly that, if you are poor, if you are making less, you are not working hard enough - you need to pull yourself up *even harder* by your bootstraps (never mind if you have them or not). If you really want to deserve to have a moment of respite during the day, or healthcare, or time to parent your children, you need to just buckle down and take that third or fourth job before you'll deserve it. If you were working hard enough, you would *already* be ahead.
ReplyDeleteAnd if people would rather commit criminal acts or lose their income in order to perpetuate this myth, I would rather see them go than stay. We can't continue both glorifying the working class as the standard and simultaneously treating them as if they do not deserve to have some respite in their life since they do not have the resources to find a job where they can work twenty to thirty hours a week at desk jobs and clear four times the money they make working fifty to sixty hours at mostly miserable, physically strenuous jobs.
Sorry for such a long comment, but those are my thoughts on the overall sentiment. They may or may not apply to you personally, but they seem to fit the bill pretty well with most of the economic libertarians I've known.
Your country club analogy is interesting, but potentially devastating to your own argument. Clubs do offer services to members, but they are not on a sliding rate. Could you imagine a country club that charged the more wealthy more money for the same services? It wouldn't make any sense. The members would go elsewhere.
ReplyDeleteAs far as the nation is concerned, I doubt that people will "go Galt." There are a number of reasons, not the least of which is that they have nowhere else to go, for now. However, a total exit from the system is not really the issue. The wealthy are the drivers of the economy, they invest in businesses that create jobs and prosperity. As Mr. Balthrop pointed out in class, economics is not a zero sum game: the rich do not need to take their money from the poor to become rich. They did not do anything wrong and should not be punished for the innovations and entrepreneurialism that helps everyone, or they might decide to sit back with the money they have and not contribute to the economy.
Clubs do offer services to members, but they are not on a sliding rate. Could you imagine a country club that charged the more wealthy more money for the same services? It wouldn't make any sense. The members would go elsewhere.
ReplyDeleteAnd that would be their choice, just as it is the choice of these people to leave and go to another country that better suits their wishes rather than staying and benefiting without contributing the required amount to a country they otherwise are pleased with.
The wealthy are the drivers of the economy, they invest in businesses that create jobs and prosperity. As Mr. Balthrop pointed out in class, economics is not a zero sum game: the rich do not need to take their money from the poor to become rich. They did not do anything wrong and should not be punished for the innovations and entrepreneurialism that helps everyone, or they might decide to sit back with the money they have and not contribute to the economy.
Taxes are no more punishment than dues are. They are the required investment in the country from which they benefit.
Also, the statement that the rich do not need to take their money from the poor to become rich is perhaps true, but the rich taking their money from the poor to become super-rich is the situation in our country right now, with the super-rich slicing every bit of pay and benefit they can off of the working-class paycheck so that they can afford another few million on their bonus. While personally not enamored with the whole money thing, I am not logically or emotionally against a system where some are rich and some are not; I am, however, against a system that allows some to have next-to-nothing while some have grossly disproportionate amounts of wealth. That is the system we currently have.
I've got to run out for a while, but something in the posts stirred a memory. I seem to recall a country where one of the seminal events in its founding was a reaction to taxes that had passed the point of necessary and appropriate and had moved into the realm of punitive. Taxes are not always, but can become, punitive in nature.
ReplyDeleteSo the rich have the choice to go to a different country, but the poor do not have a choice to get a job with intact pay and benefits? Do you think there is some collusion by CEOs and the rich to hurt the poor? If so, do you think the same government responsible for a forty year failed war on drugs, the DMV, and the VA hospital system has the means to make everything better?
ReplyDeleteHowever, in said country the people were not getting anything in return for those taxes, where, with the taxes we pay, we get representation (which, if I recall correctly, was the central complaint), and we get returns in turns of infrastructure and programs. The comparison, while ironic, is inaccurate.
ReplyDeleteThe people, incidentally, left the club demanding the dues and formed their own club which demanded its own dues. Said club seems to have met with some level of success.
So the rich have the choice to go to a different country, but the poor do not have a choice to get a job with intact pay and benefits?
ReplyDeleteYes, exactly, unless you consider fast food, waiting tables, or similar things to be jobs with intact pay and benefits - try it! Welcome to the working class. Without a college education, and especially if you were born in the wrong class and/or with the wrong skin color, it can be extremely difficult to find a job with pay and benefits sufficient to cover any kind of family or health problems, and, with physically strenuous jobs, you will have health problems. Sometimes the college education isn't quite sufficient, either.
Do you think there is some collusion by CEOs and the rich to hurt the poor?
Considering that CEOs are often the rich, yes, I do, although not for sheer intent to hurt the poor - generally it's a desire to line their pocketbooks without any consideration for the working poor in their employ.
If so, do you think the same government responsible for a forty year failed war on drugs, the DMV, and the VA hospital system has the means to make everything better?
The forty-year failed war on drugs is a civil libertarian issue that happens to drain tax dollars and has little to do with the issue in question.
The DMV is remarkably efficient for the sheer number of people it has to serve - the difference is that you have to wait in line along with everyone else rather than getting scuttled ahead depending on how much you make, but you will still get your needs met, and often on the same day. Why is it that people only demand one hundred percent efficiency from the government while pretending as if private insurance, which doesn't cover treatments half the time, will dump you if you have anything they can make look preexisting, and bogs everything down in paperwork, is considered perfectly functional as is? My daughter was on Medicaid once and, let me tell you, that was way more efficient than the private health insurance that I have now, which has yet to pay for some appointments that were supposedly guaranteed to be covered. Do you have any experience with both public and private insurance?
The VA hospital system has problems because of understaffing and the same issues that happen with private medical insurance - they don't want to cover anything they don't have to. I would know; would you? However, if we go to a single-payer system with guaranteed coverage and actually staff the facilities, this will not be a problem.
Your long comments are awkward to respond to, so I will summarize somewhat by saying that if the government gets as big as you want it to, you would be surprised how ineffective it is at doing the things you expect it to do. I realize that is an ipse dixit, but I'm not sure there would be any way to convince you regardless of method.
ReplyDeleteI would not be particularly surprised because other countries successfully pull off a great deal of what I want to see done.
ReplyDeleteAlso, I do not necessarily want a large government. I am far from a statist - I am a libertarian in the original sense of the word rather than the current anarcho-capitalist sense. I identify closely with anarcho-syndicalism and sympathize with left anarchism (I actually believe that hierarchy is inherently evil and in the elimination of money when you get right down to it) but find it an unrealistic prospect in our current state, so I work towards social and economic causes that I think are plausible within our nation. Since we seem to require government and require money, I think these are reasonable goals.
Point is, I want an efficient government that does its job, regardless of size. We simply have different ideas about what the government's job should be.
what disturbs me is that when the dollar goes bust, so does the world. The U.S. exports more than half of the materials used around the globe. There is no other country on the planet that could step up and take over in the worst case scenario of an economic collapse in the U.S.,not even China would be capable. However, this worst case scenario could become a reality if government spending is not reduced. Furthermore the increase in the size of the government is squeezing out private enterprise, so in a way all the government spending is doing is hurting businesses-many of them small businesses like "joe the plumber"-and worsening the current recession.
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ReplyDeleteAnother thing that i find quite interesting, you say if they try to find another way to evade taxes that they should just leave. They don't have to... As of now the top 5% of earners pay 60% of the entire national income tax. As you say, these people are ridiculously rich and they live a lifestyle where money is not a means for living, but is an object which means vertually nothing. If you tax these people 75% of their income (which isn't too much of an overstatement because they're already being taxed at around 55%) who's to stop them from just saying, you know what I'm done. I'm going to put all my money into a high interest yield savings account, or several, or I'm going to loan it out to everyone at high-interest, and make a bundle of money (which wont be taxed) while just sitting here, and it's within the law. I wont even have to worry about it. And they can do it all within the safety of their own country (who hates them for making money).
Here's the scary part, if a group of 1000 of these people all did this at once, it could destroy our country.
Also, if you eliminate incentive for people to make it to the top, everything becomes less prosperous. There has to be consequence for stagnation, and reward for hard work. And the stakes quite literally have to be your life to create any sort of motivation. It's simple, competition breeds the best product. Lets take football for example, if you start a game... lets say LD Bell vs. Trinity 2 years ago. Trinity is CLEARLY the better team, they're stronger, faster, better, and they got that way by earnestly working hard so they could beat all competition. They were rewarded with a State championship as well as destroying us by 40 points, the most ever in the series.
Now, lets say some high school official says, no it's unfair. You're faster and stronger than your opponents, we're spotting every team you face 30 points. They still beat us by 10 points because they're that much better, but many of the other teams they face would take that 30 points and beat them with it, only to find that the next season they had a 30 point disadvantage in EVERY game.
What would be the incentive to work out and run mile after mile? The result would be that no teams would work out and the product put on the field would be 2 mediocre teams every single game, not even fun to play or watch. stagnate.
Or you can use the military for example (since you're one of them, as am I). We destroy EVERYONE in death toll, which is why we hold so much power. When we go up against an enemy nation we kill tons of them without suffering many losses (I heard a statistic that for every 1 of our aircrafts that go down in dogfights 15 of their's do [their's being everyone else])
Now lets say the UN steps in and says, nope. We have to execute half of your soldiers to make the conflict fair, or you can only use half of them, if you want to go less extreme. That's not justice. It just doesn't make sense. Capitalism and free trade are the most effective way, if the lazy people at the bottom don't get to live in as a luxurious lifestyle as they wish, that's their fault, they should have "pulled themselves up by their bootsraps" earlier on. I really saw no problem with the first ideas you made about people having to work hard to make it to the top.
Except one key point that I think needs to be pointed out. We have a socialist educational system, I think that's the one key element that makes it all work. Public school is free, and the amount you get out of it is what you put into it. How rich your parents are has no effect on your grades, if you work as hard as you can, you WILL be able to get college paid for, it's as simple as that. And after that, the possibilities are endless. So socialism is necessary to an extent, but only on people who have no power, and don't want it, children. You don't have to work "3 or 4 jobs" if you can get one good one after college (which is free if you work hard).
I wish there was some continent that was uninhabitated that we could move to, to start our own free country where we didn't have to worry about an oppressive ruler (or group of rulers) telling us what we are taxed and what we have to believe.
ReplyDeleteAnybody up for making Antarctica the greatest nation in the world through capitalism?! US (early years) had cotton, WE CAN SPECIALIZE IN POLAR BEAR COATS!!
Sorry to burst your bubble, but polar bears are at the North Pole. Antarctica's got penguins.
ReplyDeleteI think my favorite part about this post would be the graph. Throughout the campaign, Obama often criticized the Bush administration for increasing the national debt so much, which was due criticism, as government spending should be reigned in, and the spending that is done needs to be done more efficiently. The reason I like the graph is that it shows how the Obama administration's own estimates will have them spending more money in their lowest-spending year than Bush did in his highest. Now I have not been able to read the entire comment feed, but from the gist I get of the argument going on, I will say this. One of the factors necessary to bring us out of the recession is investment. Business investments help to create jobs, as well as contributing to GDP, usually with a multiplier effect as the money invested trickles down to the rest of the economy. Who invests in companies, people with high after-tax income, or people on welfare? If you raise taxes on the wealthy, you theoretically have more revenue to distribute amongst the poor (redistribution of wealth, by the way, is known as socialism in most places), but this is debatable. With less spendable income, the wealthy will not spend as much money as before the tax hike, not on consumer goods or capital goods or other business expenditures. This will decrease tax revenue, as there will be less money to tax (again, remember the trickle down effect). There is a chance, which many economists would say would be the result of a tax hike, that this decrease in tax revenue will be greater than the inrease gained by the actual increase in taxes. That aside, if the wealthy invest in creating new businesses or expanding existing ones, jobs will be created. Instead of a $800 a month social security check, maybe that person can take home a $3,000 a month paycheck. This will also help bring an end to the recession, while increasing welfare benefits will have little effect, and possibly even a negative one if it comes at the expense of a tax hike. Let's not dole out benefits, let's dole out jobs with paychecks and get out of this recession. Everyone's sick of it. "This society has given people the opportunity to prosper." Yes, this is true, but I can't seem to remember anyone on social security starting what would become a large corporation providing hundreds or thousands of jobs to fellow Americans.
ReplyDeleteBalthrop, I think that your original post is spot on. I agree and have been worried about the same issue for quite some time. INTP, in my opinion, your view on raising taxes for the rich seems a bit naive. As Corwin said (which I have heard elsewhere as well) "the top 5% of earners pay 60% of the entire national income tax." When you say that they can leave the "club" if they don't like it, what happens to your national income and what kind of damage will it do to the GDP? I may not be rich, but i do have a problem with "from each according to his ability, to each according to his need." For what legitimate reason should one man donate his time and labor to another's wellfare?
ReplyDeleteGreat, now even my hypothetical revolt against the government is failing.. I couldn't kill a penguin.
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