It is a fundamental difference over the role and purpose of government:
Somewhat surprisingly, Mr. Cantor was in fact prepared to bargain on about $20 billion in higher taxes on “the shiny balls of the millionaires, billionaires, jet owners and oil companies” that Mr. Obama so often mentioned in public. “If they wanted to be able to claim the win on that,” Mr. Cantor says, he wanted net revenue neutrality in return, by lowering the corporate income tax rate or perhaps enacting an even larger tax reform. In effect, he was calling Mr. Obama’s bluff on “cheap politics.”
In private, however, the debate always returned to the status of the top marginal rate for individuals earning over $200,000 and $250,000 for couples—aka the Bush tax cuts for people who do not own private aircraft. Mr. Cantor argued that some large portion of the income that flows through the top bracket comes from “pass-through entities”—that is, businesses—and “to me, that strikes at the core of what I believe should be the policy, and that is to provide incentives for entrepreneurs to grow.”
By contrast, he says, “Never was there ever an underlying economic argument” from Democrats. “It was all about social justice. Honestly, one of them said to me, ‘Some people just make too much money.'”
We need at least one more election to remove enough of the Marxists from government to turn things around.
[Evening update]
Obama won’t escape part of the blame for the downgrade:
Defenders of Obama will attempt to pin the blame on his predecessor, President Bush, and on intransigent Tea Party radicals in the current Congress. But that would leave out the part in between. For his first two years in office, Obama’s party controlled both chambers of Congress – for part of that period, he had a filibuster proof majority in the Senate. During that time period, he and his fellow Democrats could have passed his supposedly ideal, long-term, deficit-reduction package — one that represented a “balanced approach” between spending cuts and tax increases. It also could have delayed the deficit reduction for several years, so it wouldn’t have affected the current weak economy or the “investments” he considers crucial. Forget about actually accomplishing serious deficit reduction — he didn’t even attempt it.
Of course he didn’t. Despite all his demagoguery over the last few weeks, he’s never favored a “balanced approach,” if that meant cutting anything other than defense. He, and his Marxist attitude (along with that of the rest of his party) is certainly one of the main perps.
The some-people-just-make-too-much-money constituency bugs me. I think their moral weakness is on display.
For those who are members of it, there is no barrier which prevents them from forking over more of their earnings to the federal government. The FedGov will happily take whatever they want to give beyond their legal tax obligations. I encourage anyone who wants to pay more…to just do it.
If a member of the aforementioned constituency is really serious, if he thinks there is a moral obligation to pay more, then he ought to just start paying more money regardless of what the law requires, and regardless of what anybody else does.
Imagine a Lefty who says this: “Well, of course I’m willing to pay more in taxes. But I’m not going to do it until others are forced to do it, too.”
That tells me that they are soft, and they really don’t consider it a moral duty. An alleged “moral duty” is not really a moral duty if you do not consider it binding on you unless and until it is binding on others.
I recommend that we pay them no mind.
—Tom Nally, New Orleans
I’ve actually caught a few people saying “Some people just earn too much money.” That’s always hilarious. Damn them for working harder than me! Damn them for being smarter than me! Damn them for networking better than me!
Moral bankruptcy is no excuse. The democrats have had all the levers of power in their hands, and they have done nothing, They bear total responsibility for the consequences of their actions. If that message can be broadcast, loud and clear, we can have sanity in our government again. Start by electing a president who believes in American principles. We do not have one today.
The simple solution for the ‘rich’ regarding income tax is not to earn any income. Hmmm… that couldn’t have any relationship to the economic downturn. Naw. That’s just crazy talk.
16th amendment. When stealing from states just isn’t enough.
Am I missing something? Taxing the millionaires and billionaires is such a great help for America. If America is a basketball team and Michael Jordan is on our team, Obama’s answer for having a winning team is to cut the legs off of Jordan. Why, because he is rich in resources and that isn’t fair.
O’s answer to everything is the same – destroy the creators’ ability to create by taking away the resources they create with. Why that is soooo brilliant.
And yet I bet you could ask many of these people if they played sports at some point. “Would you be in favor of strapping weights to the faster players so it’s more fair for the slower ones?” “The bigger, stronger ones less pads than the slower, weaker?” “Should we scrap the NFL and make it the National Fairness League?” “Players that can’t catch and run so well can use a net to help snag the ball?” “Granny put in as quarterback and given a bazooka to launch the ball?” What a second I might actually watch a game or two of this…..
That Obama is a fraud and an economic illiterate is plain to see. For all of his demagoguery about corporate jets (which the Democrats passed as part of his stimulus package), the fact is that cancelling that deduction would perhaps raise $3 billion over 10 years. That’s the same amount he blew in 3 weeks in his bogus “cash for clunkers” debacle. There’s also the very real chance that the losses from the sales of business jets would offset any gains from eliminating the deduction, just as it happened when they pushed through their tax on luxury cars and boats back in the 1990s. The tax raised very little money and a lot of people lost their jobs. Way to go, guys! Who cares how many working people you screw over? All that matters is that you stick it to “the man!”
As long as the idiots control the message it doesn’t matter what’s right.
This is an existential fight. In the past, we could go along believing the idiots couldn’t do enough damage to cause permanent harm. The tea party is a direct result of coming to the realization the idiots can get us all killed.
2012 isn’t the end. We’ve got a long way to go.
I call them idiots because I care. I just want to believe they are just idiots and not totally evil. The weight of evidence is against me on that one.
Ken, rather than idiotic or evil, think of them as innumerate. For a lot of people there’s no difference between a billion dollars and a trillion dollars: they’re both stupidly big numbers and equivalent to a gazillion.
I think this is why you see people arguing over the Bush tax cuts – as if that makes any difference at all compared to the increase in spending under Obama.
That is certainly a big part of it. Thinking is hard. Math is hard.
But they can still pull that lever.
Ross Perot had his problems, but he was effective with his infomercials in getting a message out. The tea party learned his third party problem very well (which is why your third party fantasies Thomas, are not gonna happen.)
This is our third party now and they hold the balance of power: http://www.youtube.com/watch?v=FTS9obMd5tk
Honestly, one of them said to me, ‘Some people just make too much money.’”
I would not have been able to respond to that without resorting to obscenities.
If someone use the term “social justice” to describe the idea that “some people just make too much money”, then that is just a disgusting euphemism for jealousy and theft. Social justice should be about making sure nobody lives in poverty, in other words making sure no one earns too little, not trying to ensure no one earns too much. How do you even decide how much is too much?
intransigent Tea Party radicals
If anyone cannot be blamed for the credit downgrade, it’s the Tea Party radicals. For all I know they may have all kinds of other flaws, but this at least wasn’t one of them.
Bill Whittle has a wonderful Afterburner video about this concept. It expands on a graph from the Heritage Foundation about what stuff the the average American has versus what stuff poor American’s have (refrigerator, computer, tv, etc.) It is amazing how similar it is. Our poor our the most prosperous poor in the world. Thanks to our democrat overlords and those way smarter than us in the media, these people all think they have a grievance against the very people who fund their food stamps and welfare. The goal should be prosperity for all, not poverty for all. This is a perversion. The best way to help the poor is robust economic growth.
I used to attend a monthly dinner of 3 acquaintances; 2 liberals, myself and another conservative.
It was a political discussion dinner – all pretty friendly.
I have 3 memories of those few dinners:
1) The time one say “I think $5 is the max someone should be allowed as income.
– this coming from a guy who minutes before told us all how he was checking out Phillips Exeter and Groton prep schools for his kid; who lives in a very Upscale Massachussets seacoast town and in a house that, today, would be worth over a million. Naturally he made less than $5 mill.
I asked, “Who gets to say? You say $5 mill…a guy from the squalid hideous rat-trap slums of Mexico might come up with a slightly lower figure and TELL YOU that you can’t send your kid to a hot prep school – public school is good enough..and yoru house? move to a dump that’s more house than anyone needs…etc” Deaf ears.
2) He says, “Can we ALL agree that helath care is a right?”
My reply, “no”.
3) Another guy – self-professed Socialist, and owner of a business that employs 20 people, said, “Business people don’t care about anyone else but themselves. I didn’t start my business to create jobs. I started it to make money. Yuo have to force businessmen to care.”
My prely was, “Well this discussion is over! Thanks for singlehandedly proving everything Adam Smith ever said as totally correct.”
The irony was lost on him.
Many of these people live in a world where their starting axioms are so different form Conservatives that in order to have a REAL worthwhile discussion, you have to start at those axioms. Most people don’t take the time to do that.
To repeat a comment once made by Reverend Ike (who had NO disdain for wealth), “The best way to help the poor is not to be one.”
Hi All,
I know it’s a lost cause to provide facts to Rand and his followers, but this should enlighten the lurkers here as to exactly why the U.S. credit rating was downgraded. Note this comes directly from the Standard & Poor’s report located here.
http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8
First:
[[[We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.]]]
In plain English the refusal of the Tea Party controlled Republicans to vote yes on a clean bill to raise the debt ceiling as ALL previous Congresses have done since 1917.
Second:
[[[Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.]]]
The Act referred to is the debt ceiling compromise and as you see the unwillingness of the Republicans to consider tax increases was a tipping point in the downgrade.
And just to make it clear they state.
[[[Our revised upside scenario–which, other things being equal, we view as consistent with the outlook on the ‘AA+’ long-term rating being revised to stable–retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating.]]]
In plain English, if President Bush’s tax cuts are extend in 2013 there will likely be another downgrading to AA.
And they repeat it, to make it clear.
[[[As our downside alternate fiscal scenario illustrates, a higher public debt trajectory than we currently assume could lead us to lower the long-term rating again. On the other hand, as our upside scenario highlights, if the recommendations of the Congressional Joint Select Committee on Deficit Reduction–independently or coupled with other initiatives, such as the lapsing of the 2001 and 2003 tax cuts for high
earners–lead to fiscal consolidation measures beyond the minimum mandated, and we believe they are likely to slow the deterioration of the government’s debt dynamics, the long-term rating could stabilize at ‘AA+’.]]]
Again, in plain English, if you extend them again we will downgrade you further.
You may now continue with your philosophical debate on taxes, but in the real world of finance, if taxes don’t go up by 2013, the S&P credit rating of the U.S. will go down again. And if you don’t like that, then go and argue it with S&P, not me, as its their report.
Sorry Tom, your conclusions appear to have been pulled out of your nether orifice – the sections of the report you’ve quoted say no such thing. Stop trying to read between the lines – you are no good at it.
You’re right Thomas, it had absolutely nothing to do with spending out of all historical perspective. Nothing at all.
Obama owns it. It happened on his watch. Yet the people he’s appointed say they are shocked that S&P actually did it.
These idiots are clueless AND evil. The tea party is doing what they were elected to do. The old boys are going to have to get used to it.
Will you change your tune after 2012? Doesn’t matter, keep spinning.
“… indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.”
Because you can’t seem to read big words, I’ll use small ones: The gov’ment is spendin’ more money than they has got. It’s really not hard.. when you see someone who is in hock up to their eyeballs take out another loan to buy a speedboat, you cut them off.
And yet I bet you could ask many of these people if they played sports at some point. “Would you be in favor of strapping weights to the faster players so it’s more fair for the slower ones?” “The bigger, stronger ones less pads than the slower, weaker?” “Should we scrap the NFL and make it the National Fairness League?” “Players that can’t catch and run so well can use a net to help snag the ball?” “Granny put in as quarterback and given a bazooka to launch the ball?” What a second I might actually watch a game or two of this…..
Kurt Vonnegut actually wrote a story about this called Harrison Bergeron.
The perfect example I use is
I think pretty girls should be forced to give 35% of their dates
to ugly socially inept men. Its just not fair that the Smart rich good looking guys get all of the pretty girls.
Eric, Ken,
Sorry but the sections I quoted come straight from the report. Take it them up with S&P. Deny it if you wish, but S&P didn’t have problems with the U.S. credit rating until the Tea Party decided to use the national debt as a bargaining chip.
The Report said:
“Republicans and Democrats have only been able to agree to relatively modest savings on discretionary spending…”
”
Our opinion is that elected officials remain wary of tackling the structural issues required to effectively address the rising U.S. public debt…”
The report did NOT say “The Tea Party…..” did this and that or prevented this and that.
Affixing blame on the Tea Party is a T. Matula artifact.
There are substantial numbers of people in the nation that are frightened to death of the profligate spending in D.C. Many of them for some time – even before Obama was sworn in. Those people voted in Congresscritters who agree with their view. This is the nation at work and how it’s supposed to be.
Do some of those people claim to be of the Tea Party? Yes. Although there’s no form you sign nor can you declare yourself Tea Party on your voter’s registration. A Tea Party member is a person who shares common views on government. Are they all republicans? No.
One might disagree with their point of view. But the silliness we see from TM and the evil corrupt polemics we see from a lot of Democrats (all of whom know better) is unconscionable.
” U.S. credit rating until the Tea Party decided to use the national debt as a bargaining chip.”
dude’s got his talking point down pat. oh why did we have to raise the debt limit? we could like balance the gov’t’s cash flow numbnuts.
the sections I quoted come straight from the report
Which only goes to show you are selective in what you choose to believe. Then again, so are we all. That’s why it’s important to look past words to fundamentals to get to the truth.
People fight over things that aren’t the real issues. I think the tax rate should be as low as possible for maximum revenue, but they could tax everyone at 100% and it would have less effect than the idiots imagine. Actions have consequences and behaviors adapt.
A dept ceiling exists for a reason. Your argument boils down to, no it doesn’t. The fact is, it did exactly what it’s design to do… it forced debate. Open debate is suppose to be a foundation principle and I for one happen to agree with that principle.
We spend too much. Argue against that at risk to your credibility.
My belief, and why the markets will fall in the morning, is that the agreement we reached is obvious for not dealing with the issue of too much spending and that, not what they claim, is the reason for the downgrade.
[[[Are they all republicans? No]]]
Name me one Democrat member of Congress who a “member” of the Tea Party movement?
Ken,
[[[A dept ceiling exists for a reason. Your argument boils down to, no it doesn’t. ]]]
Once again you show your lack of historical knowledge. The Debt Ceiling dates to the 1917 to the Second Liberty Bond Act. The Congress decided instead of authorizing EVERY bond issue independently it would just set a limit and allow the Treasury to decide the details of individual bonds.
Until the Tea Party the Congresses simply raised it as needed to cover the money Congress ALREADY authorized the government to spend. It was never an issue until the Tea Party/Republican Party in Congress decided to authorize spending, but not raise the debt limit to cover it.
Thomas, S&P’s managing director says that to stabilize our credit rating will require stabilizing and reversing government debt as a percentage of the economy, which means we’ll have to have a balanced budget and then start showing surpluses.
The Fact Checker at the Washington Post says extending the Bush tax cuts cost the government about $105 billion in revenues in 2010. Our 2011 budget deficit is about $1.4 trillion, so repealing the tax cuts would only bring our deficit to $1.3 trillion (unless it further tanks the economy and results in a revenue reduction). That’s less than 10% of the way to balance.
We spend too much. Argue against that at risk to your credibility.
He, Obama, and Reid have been arguing against it for awhile now, and no surprise, the US credibility has been downgraded.
Gregg,
Ahhh, once again the Tea Party uses its teflon organizational structure to avoid blame. There is no ‘formal” Tea Party, so therefore there is no “Tea Party” to blame. Sorry the public is getting wise to the Tea Party minority.
More signs of public anger with the Tea Party, anti-Tea Party shirts
http://shop.cafepress.com/anti-tea-party
Marketers are always the first to see a trend and milk it for money 🙂
George,
You left out the Bottom line from the fact checker, and used the 2012 figure instead of the 2010 figure of $115 billion.
http://www.washingtonpost.com/blogs/fact-checker/post/revisiting-the-cost-of-the-bush-tax-cuts/2011/05/09/AFxTFtbG_blog.html
http://www.washingtonpost.com/blogs/fact-checker/post/revisiting-the-cost-of-the-bush-tax-cuts/2011/05/09/AFxTFtbG_blog.html
[[[Over the 10-year period, the overall size of the tax cut dropped about 5 percent, or $65 billion, to $1.285 trillion. Some people might call that a rounding error in the context of a ten-year federal budget.
The Bottom Line
There certainly might be other ways to calculate the actual impact of the tax cut, and we would welcome suggestions. It seems clear that the impact was less during the recession — though one could argue that government’s fiscal condition would be much better if those revenues had been collected. No matter how you count it, nearly $1.3 trillion is a lot of money.]]]]
And without them the U.S. would have been able to pay for the wars in Iraq and Afghanistan instead of adding them to the national debt.
[[[(In case you are wondering, the cost of the Iraq and Afghanistan wars was $1.26 trillion through 2011 and the Medicare prescription drug program totaled $272 billion.)]]]
George,
And the total impact of them which was discussed the week before.
http://www.washingtonpost.com/blogs/fact-checker/post/the-inside-story-of-tax-cuts-revenue-projections-and-the-nations-debt/2011/05/04/AFfp9trF_blog.html
[[[The Bottom Line
We have previously written that the current sky-high deficit exists because tax revenues are at their lowest level since 1950 and spending is at its highest level since World War II, as measured as a percent of the GDP. Moreover, as demonstrated above, revenues have consistently failed to meet the projections that prompted the original tax-cut frenzy in Congress.]]]
and
[[[Stewart explains McConnell’s statement as being a warning against raising taxes in a recession and says he does not believe the revenue problem can be fixed by raising taxes.
That’s obviously a philosophical point of view. But isn’t it time for the Republicans to retire this talking point? The nation has a revenue problem and a spending problem — or else there would not be a deficit. ]]]
Thomas, the Tea Party is just throwing cold water on unsustainable spending. In the entire post WW-II period, the federal government has never been able to get more than 20% of GDP in direct revenues, and never more than 14% of GDP from income taxes. It hasn’t been able to do that during wartime, peacetime, under any President, under any party in control of Congress, or under any tax structure. Yet the federal government’s spending is now at 25% of GDP. The Tea Party is pointing out what S&P already knows. The government can’t long operate like that. It can’t raise direct revenues sufficiently to match spending no matter what crazy tax scheme Congress tries, unless perhaps we decide to sell California and New York to the Chinese.
And what are we getting for all this extra spending? Near zero economic growth, a perpetual 9+% unemployment rate, a horrible business climate, and greatly reduced federal revenue because taxable economic activity is fast becoming a distant memory. We’re in a hole and need to stop digging, even if it is the only shovel ready project the government can think of.
“And without them the U.S. would have been able to pay for the wars in Iraq and Afghanistan instead of adding them to the national debt.”
We have added to the debt every year since Obama was elected, the cost of the wars in Iraq and Afghanistan during the Bush years. It is sort of like Obama spending as much on (?) every year as Bush spent on war during his term.
“we believe that the prolonged controversy ”
The controversy didn’t come from the Tea Party, it came from Obama and the Democrats calling everyone who wanted to cut spending terrorists.
If the Obama and the Democrats could not agree to cutting $100-200b out of a $1,400b deficit without going apocalyptic in their rhetoric, how could they accept larger cuts?
In relation to raising taxes $100b+ a year the Tea Party said something like, “Raising taxes would be bad in our current economy.”
In relation to cutting spending by $100-200b a year the Obama and Democrats said something like, “These terrorists are holding a gun to the head of our economy and also have bombs strapped to their chests and are going to blow up everyone, especially children and the elderly, unless they get their draconian cuts. Oh ya and they are only doing this because Obama is black.”
So when it comes to blame for the atmosphere, one need only look to the people who were saying the most crazy things.
The Congress decided instead of authorizing EVERY bond issue independently…
You mean instead of doing their job in a way in which they were held accountable for it? Congress weasels would never do that! Never. It’s inconceivable.
Thank you once again for reminding me I’m not omniscient. I’ve never really had a god complex. I know it’s confusing because so many people do.
You don’t suppose the One… nah, that’s just crazy talk.
once again the Tea Party uses its teflon organizational structure to avoid blame
Oh no. Thomas is on to them. Perhaps they should declare someone as their leader (even though that very concept is antithetical to the movement) so the media would know where to direct their talking points. It so frustrating for demagogues not to have clear targets. Thomas [w/ lip quiver] I feel your pain.
Oh, and I just love… “8 years you were silent… Now you’re mad?” Zing. Miss. Glenn Beck (not a tea party member) was such a cheerleader for Bush. It’s so embarrassing. (Question for those with a clue… am I dripping too much sarcasm here?)
It was never an issue until the Tea Party/Republican Party in Congress decided to authorize spending, but not raise the debt limit to cover it.
I really like how you define “never an issue.” Read that again…
Congress decided to authorize spending
Bingo! We have a winner. Direct from the horse’s mouth (rather than the other because I’m not sure a horse can own a donkey.) Besides, I don’t mean to be inflammatory.
I know you like to use the weeds for cover but it’s not going to work because up to the 2012 election… sp… spend… spending… Spending… SPENDING… SPENDING… Mr/Ms Politician.
Thomas Matula Says:
August 7th, 2011 at 6:59 pm
[[[Are they all republicans? No]]]
Name me one Democrat member of Congress who a “member” of the Tea Party movement?
You are so tortured that now it’s hard for you to read and comprehend?
I was clearly talking about the “Tea Party” not congress-critters.
Apparently, Matula is unable to read entire sentences: “We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.”
So what does this mean, let’s ask the person who wrote it, shall we?
Beers called the U.S. Treasury Department’s criticism of the credit rating agency’s analysis a “complete misrepresentation.” Even with the debt limit agreement passed by Congress, he said, “the underlying debt burden of the U.S. is rising and will continue to rise over the next decade.”
The Tea Party began as Pork Busters. People who, during the Republican Congress and Presidency, complained about substantial and unnecessary government spending. Back then, it was just discretionary spending, because the deficit was only in the hundreds of billions. When the deficit became a trillion dollars overnight, the Tea Party was born. People were told the record and staggering deficit would be a one-time deal to correct a dangerous situtation. So now, in year three of running trillion dollar deficits, the problem is clear. We are spending too much money.
As for “raising revenue”, average income has dropped 4% in the US. This means much more of the population is now paying no income taxes at all, and the few that are would have to get a tax rate increase of over 4% to pay more than they were in 2006, before the Democrat Congress took over and gave us record spending with consensus from Bush and Obama (and McCain and Reid).
George,
The federal government is only getting 16% of GDP now. Lots of the debt problems we have now, including the downgrade, would not exist if it had been getting 20% over the last decade. I am glad you support increasing taxes to return to that level.
Ken,
I thought Glenn Beck was out as an example of Tea Party positions. Is he back in the fold again?
Gregg,
ahh, the Teflon Tea Party. I am sure if you look hard enough you find a card carry communist claiming to belong to the Tea Party, but again, name a Democrat Representative who identifies with the Tea Party. I seem to recall some Democrat trying to run as a member of the Tea Party and being hooted down as a fake.
I love how Matula is trying to paint this as the S&P was all fine and dandy with our spending until the Tea Party had to muck things up. Uh, as soon as charts starting appearing that showed that growth in spending was going to cause U.S. debt to reach 100% of GDP is about when you started to hear grumblings of downgrade. China has been talking about a global currency exchange based on something other than the dollar for a few years now.
Leland,
And President Obama has offered to look at entitlements (Social Security & Medicaid) if Republicans would look at tax raises. The Republicans refused.
It will be interesting to see if they change their mind in the Super Committee.
“The federal government is only getting 16% of GDP now. Lots of the debt problems we have now, including the downgrade, would not exist if it had been getting 20% over the last decade. I am glad you support increasing taxes to return to that level.”
This is laughable on its face. You have no idea what the effect would be on the economy with taxes high enough to reach that level.
Josh,
China has sought to undermine the U.S. Economy for many years. Is that your proof? Read the S&P report.
And President Obama has offered to look at entitlements (Social Security & Medicaid) if Republicans would look at tax raises. The Republicans refused.
So what you are saying is Obama refused to do what was right and wants to blame others for his moral failings. S&P noticed and downgraded his credibility.
Thomas,
We’ve never gotten a sustained 20% level. We only reach that during economic peaks (booms) when stock dividends and capital gains are rolling in. The only other time we come near such peaks is just after a cut in the capital gains tax when people cash out some of their stocks. It seems 18% of GDP is about the maximum sustainable rate over the course of the business cycle. Right now we’re dragging in borderline recession, where we’re not going to see 18%, more like 16%, which is amazingly exactly what we’re taking in. The tax rates haven’t changed, the taxable income has dropped. Raising tax rates on the top earners, upping the capital gains taxes, etc, just makes revenues even more sensitive to economic downturns, as states like California have been finding out.
Perhaps we could try to bump revenues up to 18%, but unless the economy is booming there’s no way revenues will hit 20% of GDP, so spending 25% of GDP is the problem. To maintain long-term balance, based on our post WW-II history, the government shouldn’t spend more than 18% of GDP because it won’t take in more than 18%. If we let parasites suck up blood faster than the bone marrow can make it, the host organism (the private sector) sickens and possibly dies.