Dear Mr. President;

[Kahns Krazy]

You don't have to borrow money to "pay" for tax cuts.

You flunk government revenue 101.

Fearmonger.

[waggy]

http://photos.bravenet.com/154/159/960/3/2D4A33A194.jpg

[xudash]

You don't have to borrow money to "pay" for tax cuts.

You flunk government revenue 101.

Fearmonger.

Did he actually say that? What an idiot.

Perhaps a better question is this: who was the "Einstein" who named the Internal Revenue Service the Intenal Revenue Service?

[xeus]

You don't have to borrow money to "pay" for tax cuts.

You flunk government revenue 101.

Fearmonger.

No kidding. WTF was that all about?

[madness31]

Actually money might need to be borrowed to pay for tax cuts. It depends on the impact the tax cuts have on GDP and subsequently on tax revenue. Of course if you offset any decrease in tax revenue with cuts in spending then no money needs borrowed or if the cuts increase revenue through higher GDP.

[Kahns Krazy]

Actually money might need to be borrowed to pay for tax cuts. .

Wrong.

[spazzrico]

In the short term, borrowed money will absolutely be needed to pay for tax cuts. There is simply no way to cut the budget in the short term that will make up for the shortfall. You can argue that in the long wrong, economic growth will make it up, but then again supply-side economics is very far from proving itself-the opposite in fact.

[Snipe]

In the short term, borrowed money will absolutely be needed to pay for tax cuts. There is simply no way to cut the budget in the short term that will make up for the shortfall. You can argue that in the long wrong, economic growth will make it up, but then again supply-side economics is very far from proving itself-the opposite in fact.

I don't know the exact numbers. Let us say we take in 3 trillion dollars. Let us also say we spend 4 trillion dollars.

I would proposes cutting what we spend to the amount that we take in. You do that at home don't you? You don't spend a third more than you make, I don't either.

Cut every federal expense by 25%. Then we balance the budget and everything is solved. If you are concerned about a particular program we can cut even more somewhere else. It isn't rocket science. Cut the spending and you won't have a deficit. You can cut out the Departments of Education, Housing and Urban Development, Energy, Agriculture and the National Institute of Health for starters. Just get rid of them. You can means test social security and raise the age for benefits. There is plenty that we can do. We could balance the budget within a year if we want.

Someday the budget will be balanced. We can wait for fiscal calamity (which some argue is already here), or we can do it ourselves. I think if we do it on our own it will be much better than if we are forced into austerity measures by global economic forces.

I think we should shut the government down until we come up with a budget that spends only what we took in last year. Then every year we can only spend what we took in last year. Spend what you have. Good programs get to stay, bad programs have to go away. A balanced budget would solve most of our long term problems and get incentives in line with what we want in the future.

Don't act like it can't be done. It will be done at some point whether we like it or not. Let's not wait until that point. America used to balance our books. Other countries balance their books. We can and should do this.

[Kahns Krazy]

In the short term, borrowed money will absolutely be needed to pay for tax cuts..

Still wrong.

[Porkopolis]

Good programs get to stay, bad programs have to go away.

Why do I have a sneaking suspicion that I already know what you consider good programs and what you consider bad programs?

Our biggest area of waste is "defense" spending. It is funny how irate people get when I say that out loud. No, of course I'm not opposed to national defense; it is one of the jobs specifically delegated to the federal government. But we go waaaaay overboard on our definition of "defense." We are currently flushing obscene amounts of money down the drain in a conflict with no definable end-game. If we stuck to defending our borders instead of empire-building we would have no more budget problems.

[waggy]

I consider myself conservative, and have no problem with cutting defense to balance the budget. I don't think crappy social programs should be exempt either though.

[Porkopolis]

I consider myself conservative, and have no problem with cutting defense to balance the budget. I don't think crappy social programs should be exempt either though.

Agreed 100%. There is plenty of waste to go around.

[Snipe]

Why do I have a sneaking suspicion that I already know what you consider good programs and what you consider bad programs?

Our biggest area of waste is "defense" spending. It is funny how irate people get when I say that out loud. No, of course I'm not opposed to national defense; it is one of the jobs specifically delegated to the federal government. But we go waaaaay overboard on our definition of "defense." We are currently flushing obscene amounts of money down the drain in a conflict with no definable end-game. If we stuck to defending our borders instead of empire-building we would have no more budget problems.

Your sneaking suspicion would be dead wrong. I am not for the war in Afghanistan. After we initially kicked their ass we should have just left in my opinion. I always thought it was useless to “nation build” there. I think the surge was a bad idea. I don’t think we should be bombing Pakistan either. We have spent loads of money and right after we leave Afghanistan will be in the Stone Age. It doesn’t matter if we leave this year, 5 years from now or 10 years, Afghanistan will revert back to the tribal hellhole Stone Age landlocked hill country that it always has been.

I am against Obama’s war there, but my brothers in arms that used to protest naked US Aggression have seemingly left the Anti-War movement. It seems as if their anti-war stance was entirely political. Nobody wants to get Cindy Sheehan’s opinion anymore.

I would pull out of the wars. I would also close down bases and move people to our border. I am right with you on that one. We could use those predator drones to patrol the border instead of bombing Pakistan.

I would close down bases all over the world. Maybe we should keep a select few, maybe not. If countries still want us there, they should pay us for their defense.

I have no problem with shredding the defense budget. I also have no problem with closing all the useless agencies that I have detailed above. It wouldn’t be that hard to balance the budget. All we need is resolve. We can’t afford all of this stuff. The first thing to do when you realize that you are digging a hole is….stop digging.

[Emp]

Let's take Snipe's example. You make $3T a year (tax and other revenue) and you spend $4T. You have to borrow $1T to finance your spending.

You decide to take a cut in pay (or reduce your revenue further by giving tax cuts) so you only make $2.5T. You have to borrow an additional $.TB on top of the $1T you are already borrowing to finance your cut in pay/tax cut.

The only time you can take a lower paying job (read: don't have to borrow more to finance a tax cut) is when you already have surplus revenue.

Example B, same initial premise, $3T revenue, $4T spending. You decide to reduce your spending to $3B a year AND to take another lower-paying job/make a tax cut that reduces your revenue to $2.5. You still need to borrow to finance that tax cut.

Unless you are still living on Reagan's Voodoo Economic time and swallowing that supply side baloney, the math is simple.

[blobfan]

Emp, my problem with that is salary is something you earn; taxes are something the government takes. Not the same thing.

[smileyy]

http://en.wikipedia.org/wiki/Deficit_spending

Seemingly reasonable summaries of various positions.

Some opinions of mine:

* The fiscal policies you want for your business are not the same ones that you want for your household, and neither are the same ones you want for your government
* Countercyclical spending makes sense

[XU 87]

You decide to take a cut in pay (or reduce your revenue further by giving tax cuts) so you only make $2.5T. You have to borrow an additional $.TB on top of the $1T you are already borrowing to finance your cut in pay/tax cut.

Unless you are still living on Reagan's Voodoo Economic time and swallowing that supply side baloney, the math is simple.

That's a common misperception of the Reagan tax cuts- that tax revenue fell. In 1980, tax revenue was $517 billion. In 1990, tax revenue was $1.032 trillion. Increased economic activity results in more tax revenues, even with lower tax rates. Decreased economic activity results in lower tax revenues, even with higher tax rates.

[Kahns Krazy]

Let's take Snipe's example. You make $3T a year (tax and other revenue) and you spend $4T. You have to borrow $1T to finance your spending.

You decide to take a cut in pay (or reduce your revenue further by giving tax cuts) so you only make $2.5T. You have to borrow an additional $.TB on top of the $1T you are already borrowing to finance your cut in pay/tax cut.

The only time you can take a lower paying job (read: don't have to borrow more to finance a tax cut) is when you already have surplus revenue.

Example B, same initial premise, $3T revenue, $4T spending. You decide to reduce your spending to $3B a year AND to take another lower-paying job/make a tax cut that reduces your revenue to $2.5. You still need to borrow to finance that tax cut.

Unless you are still living on Reagan's Voodoo Economic time and swallowing that supply side baloney, the math is simple.


The only time you need to borrow money is if you are spending it. You do not need to "borrow" money to "pay" for a tax cut. You need to borrow money to pay for spending beyond your revenues. Tax rates affect the revenue side, not the spending side.

Your own example clearly illustrates this. The requirement to borrow is based on the spending, not on the tax revenues.

False: We need to borrow to finance tax cuts.
True: We need to borrow to finance outrageous spending levels.

[smileyy]

http://www.wsjprimerate.us/wall_street_journal_prime_rate_history.htm

I feel like this has a lot to do with the economic climate of that time period? I'm young (34), so I have no memory, but how does anyone do business or buy houses with a 20% prime lending rate?

[dc_x]

That's a common misperception of the Reagan tax cuts- that tax revenue fell. In 1980, tax revenue was $517 billion. In 1990, tax revenue was $1.032 trillion. Increased economic activity results in more tax revenues, even with lower tax rates. Decreased economic activity results in lower tax revenues, even with higher tax rates.

People forget that Reagan also shut down a lot of tax loopholes and broadened the tax base while he was president. Those moves mostly offset the reductions in the personal and corporate tax rates.

The connection between economic activity and tax rates is hard to measure. Economic activity was at its highest under Clinton when tax rates were at their highest.

[XU 87]

The connection between economic activity and tax rates is hard to measure. Economic activity was at its highest under Clinton when tax rates were at their highest.

Tax rates were not at their "highest" under Clinton, as compared to other decades. But Clinton benefited from the dot.com explosion. He also lowered the capital gains tax (I think he cut it in half).

Clinton was a slimy guy as president. But after he was essentially forced to move towards the center/right after the 1994 elections, he was generally pro-business. And we saw some of the results.

[madness31]

You can't assume the increase in taxes is because of a lower tax rate. There are numerous other factors involved such as global economic growth, interest rates, Fed money supply, and technological advances. Anyone that believes lower tax rates always yield increased government revenue is simple minded. The same is true of anyone believing that it always results in lower government revenue.

In general low tax rates are beneficial for the economy but some rate changes have greater impacts than others. There is also an optimal tax rate that maximizes government revenue, though it is fluid just like optimal prices for consumer goods and services.

Bottom line is that the tax code needs simplified and corporate rates must go lower. Government spending must be cut drastically. Social security benefits need delayed and reduced and military spending has to be cut. Medicare fraud must be eliminated.

[smileyy]

Social security benefits need delayed

If I had any belief that this country would have jobs for me until age 70, I'd be in favor of this. But with 22% non-employment in the country, I feel like that's a non-starter.

[Kahns Krazy]

If I had any belief that this country would have jobs for me until age 70, I'd be in favor of this. But with 22% non-employment in the country, I feel like that's a non-starter.

What does "Non-starter" mean? If you'd like your benefits to start at 65, that's fine, but they need to be adjusted to reflect the absolute fact that you will (on average) live to be much older than was originally expected when you were contributing to social security.

[smileyy]

My point is, I'm happy to work until a later age, but when 1/5th of the country can't find work at the moment, is that a realistic expectation? A 65-year-old looking for work is going to fare far worse than the 45-year-olds who already aren't faring well.