What's Your Idea on Taxes and the Deficit?

As a nation:

  • We are approaching a half-trillion dollar federal deficit.
  • Under Bush, America has borrowed more money from foreign nations than all previous administrations - COMBINED.
  • Republican Congressional leaders pushed through and approved a $9 trillion debt ceiling.
  • Under Republican control, our federal government has ballooned, growing more rapidly under Bush’s watch than under Clinton’s.
  • We’re spending hundreds of billions of dollars in Iraq.
  • Our competitors - India and China - are growing by leaps and bounds.
  • In fact, both outranks the United States in terms of preferred places for future investments.

With record deficits, debts, war costs and fierce financial competition abroad, America is less financially secure today than at any time in recent history.

And yet, when asked, barely a third of Americans would cut spending to reduce the federal deficit. Even fewer want to raise taxes.

Clearly, something has to change.

If America fails - and countries can fail - we’ll have no one to blame but ourselves. America - we can’t have it all. And we have to stop pretending that we can.

The harsh reality is this: The question is no longer “Should we raise taxes?” The question is “HOW should we raise taxes? And on WHO?”

Personally, as a first step, I would like the tax rates returned to where they were prior to Bush. That alone won’t be enough. But it will make a significant impact on the debt.

Secondly, as an incentive to oil companies - who have reported RECORD profits but have done NOTHING to increase the number of processing plants (which would help lower costs) - I would definitely support a windfall tax; one that would be phased out when as they bring more plants online.

Lastly, the South Americanization of America is continuing. And one sure sign of that is that the gap between the rich and the poor is growing - and fast. So for me: I’d fully support raising taxes on the wealth while exempting the middle class.

Any other ideas out there?

My buddy is a diehard conservative, ostensibly on financial grounds. When I bring up all the shit about the current admin, his response is that he doesn’t care, as long as his taxes aren’t raised.

While a case can always be made for financial objectivism, this one is particularly stupid, because I can guarantee you that he would agree with me that credit cards are insanely stupid things to use if you carry a balance. Which is exactly what the country as a whole is doing by raising spending and lowering income.

H.

If your friend understands that concept, he should read:

http://www.cbsnews.com/stories/2005/08/27/ap/business/mainD8C88SP80.shtml

I’d also love to get something from the federal government on a regular basis telling me what the sizeo of the federal debt costs me personally. The government already does something like this with Social Security.

Imagine how quickly fiscal sanity would return to Washington if the party in power knew that the longterm effect of their policies were being explained and mailed around the country.

From 1998 to 2000, you would have received something saying that your share of the cost of the federal debt is ZERO.

Today, you would receive a notice announcing that “due to an $8,364,150,198,351.38 national debt, your individual portion comes to $28,002.30” - the annual salary for many Americans.

A booming India and China can only be good for the U.S. in the long run.
America’s economic strength relative to the rest of the world will decrease, but having billions of new consumers for American high tech exports will be a gigantic shot in the arm.

As for your recommendations, I don’t mind the first one.

I don’t get the second one – if it’s economically rational to build more plants, the oil companies will build them. If you’re arguing that there is a de facto cartel among the oil companies which is causing them to deliberately limit supply, that’s something different and should be addressed with price-fixing laws.

Thirdly – I’m not sure what South Americanization means, but raising taxes on the rich is not a panacea for shrinking the deficit. I’d rather see a tax increase on oil (or carbon emissions in general), and of course spending reductions.

Actually, even when the deficit is zero, there is still interest being paid on the existing debt. But I agree with your larger point that greater accountability for government spending is a very desirable thing.

You’re confusing deficit with debt – the federal gov’t was over three and a half trillion in debt in '98.

Agreed. And actually even back then that figure used the surpluses from the Social Security trust fund to get us into surplus territory. If the Social Security surplus weren’t counted, then even back then we’d still be in debt (nearly out, but still in).

I just used that primarily as an example of the value of such a notice.

Here’s a fun article from 1999, projecting that the budget surpluses could reduce the debt to well under three trillion dollars by this year:

http://news.bbc.co.uk/1/hi/business/the_economy/411973.stm

You’re entirely right. I stand corrected. We were out of deficit and paying down the debt then.

(and to further refine my suggestion above, I’d love to get a notice on both. AND on outstanding federal promises, like continued funding for Social Security, Medicare and Medicaid).

My view is very simple:

Keep taxes constant for now, or raise them–no more bribing the doners/voters, by any party

Slash federal spending by an enormous and painful amount (political suicide, but absolutely essential)

Pay off the debt completely with the savings

Then cut taxes to match the lower expenditures

We must stop living beyond our means. However, I very much doubt that we will. The “I’m entitled” attitude present at all levels of society will, if unchanged, eventually lead to the economic collapse of the world’s richest nation. Irony abounds.

Lessee. Politically doable revenue:

Keep Bush’s new 10% bracket.
Raise taxes on capital all over the place (capital gains, adjust depreciation rates, a zillion things here.)
Undo the various tax giveaways to companies. A useful starting point might be “every tax adjustment to a corporation passed from 1995 on.”
Switch as many EPA programs as possible from regulation to cap-and-trade, which will both reduce pollution and create a new highly profitable revenue source for the government.

On the spending side, “if Bush passed it you can probably repeal it” is a good guideline. That plus the tax changes would probably close the deficit.

How are we living beyond our means? The U.S. is a rich country and most of these deficits came about not because the expenditures were beyond what the tax base could bear, but simply because politicans wanted to score some popularity points for lowering taxes or at least not raising them.

If you don’t see it, I’m sure I can’t convince you of it.

No, I don’t see it.

At this point in time I would rather just see the Bush tax cuts remove (thus “raising taxes”) as just a first step. I don’t know if we can significantly raise or create new taxes or slash spending.

Which is fine. Afterall, no one here is truly an economic expert, though you never know, I suppose.

That said, here’s what someone else with a little more economic credibility had to say about it:

Just to clarify, I wasn’t denying that our amassed national debt is a problem. I was questioning Dave’s assertion that America was living beyond it’s means. I think we could be debt free right now if previous administrations had raised taxes instead of going for deficit spending. I think America could have absorbed those tax increases relatively painlessly.

Yeah, I just realized that. Sorry for responding with an “oh yeah? Well check out what THIS guy has to say.”

Though I don’t feel that bad. Afterall, I’m basically pointing to a bookkeeper. How insulted could you be?

[Unbeknownst to Jake, Nick is in fact, a bookkeeper.]

No, I don’t see it.

The government spends more than it takes in… I’m not sure I understand how this is difficult. Could the nation support higher taxes to cut the deficit, probably but the government isn’t raising taxes so yes they are “living beyond their means.”