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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 757804  
Subject: The problem is spending, not revenues Date: 12/10/2012 3:50 PM
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The problem is spending, not revenues

"The Federal Reserve Bank of St. Louis published an excellent paper offering a longer-run perspective on the US debt/deficit problem.

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Most importantly for the present discussion are the following observations:

“the increase in the debt during the 38 years before the financial crisis was due to increased spending rather than decreased revenue. Furthermore, nearly all of the increased spending was in the form of transfer payments—that is, government payments to individuals for which the government receives no goods or services.”

And

“Finally, the long-run perspective offered here shows that there is a deeper and more fundamental issue that must be addressed if the problem is to be resolved solely or primarily by raising taxes. Specifically, the analysis shows that the deficit/debt problem began when the government decided to increase spending significantly without increasing taxes. If the problem is resolved by increasing taxes to a higher percentage of GDP to match current expenditures, there would be no guarantee that the government would not simply increase spending further, thereby starting down a path to the next deficit/debt problem. The long-run perspective suggests there can be no permanent solution to the deficit/debt problem until a mechanism can be established that prevents the government from running persistent deficits.”"

http://www.aei-ideas.org/2012/12/the-problem-is-spending-not...

Go figure.
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Author: 2828 Big funky green star, 20000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 659270 of 757804
Subject: Re: The problem is spending, not revenues Date: 12/10/2012 4:08 PM
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If the problem is resolved by increasing taxes to a higher percentage of GDP to match current expenditures, there would be no guarantee that the government would not simply increase spending further, thereby starting down a path to the next deficit/debt problem. The long-run perspective suggests there can be no permanent solution to the deficit/debt problem until a mechanism can be established that prevents the government from running persistent deficits.”"
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I'm wondering when Mr. VAT makes his first trial balloon appearance next year? Once the republicans cave on tax increases and the tax increases don't close the deficit, i'm guessing some dem in a safe seat will float a VAT as a way to be fiscally responsible.

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Author: lowstudent Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 659271 of 757804
Subject: Re: The problem is spending, not revenues Date: 12/10/2012 4:13 PM
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I'm wondering when Mr. VAT makes his first trial balloon appearance next year? Once the republicans cave on tax increases and the tax increases don't close the deficit, i'm guessing some dem in a safe seat will float a VAT as a way to be fiscally responsible.
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Once someone accepts that anything but growth and spending sanity is going to get us out of this problem, 'fiscal responsibility' really are just kind of like asdfalniuh okkneae2

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 659280 of 757804
Subject: Re: The problem is spending, not revenues Date: 12/10/2012 5:28 PM
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If the problem is resolved by increasing taxes to a higher percentage of GDP to match current expenditures, there would be no guarantee that the government would not simply increase spending further, thereby starting down a path to the next deficit/debt problem. The long-run perspective suggests there can be no permanent solution to the deficit/debt problem until a mechanism can be established that prevents the government from running persistent deficits.”"
---------------------------------------------------------
I'm wondering when Mr. VAT makes his first trial balloon appearance next year? Once the republicans cave on tax increases and the tax increases don't close the deficit, i'm guessing some dem in a safe seat will float a VAT as a way to be fiscally responsible.


It would be interesting to see how much individual income tax as a percentage of GDP is raised by other countries. The U.S. record high was 10.2% in FY 2000 (and that wasn't even sustainable). Are other countries able to raise higher percentages of GDP as income taxes?

I have a theory that we would *have* to look at other forms of taxation besides income taxes (such as a VAT) if we were determined to raise more tax revenue relative to the size of the economy. It seems like all the high-tax countries have something like a VAT plus very high payroll taxes.

Assuming that Congress cuts spending to *only* 22% of GDP, we would probably have to raise our income tax revenues by about 40% over the unsustainable record high of FY 2000 to get an additional 4% of GDP in income tax revenue to balance the budget. This assumes that total tax revenue as a percentage of GDP would be about 18% in a "normal" economy under the current tax system.

Income taxes just won't get us there.

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Author: twopairfullhouse Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 659365 of 757804
Subject: Re: The problem is spending, not revenues Date: 12/11/2012 9:34 AM
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Income taxes just won't get us there.

But that's the thing: they're not intended to. Show me where Obama has done *anything* to help put the U.S. economy in a position to grow. He's taken away the work requirement for welfare, lengthened the unemployment benefits and allowed people to go on disability without consequence after they run out. Now we find out that he set up the Pigford claim program of 'I attempted to farm' as a giant taxpayer swindle. I'm sure there are many more swindles ('goodies', to his supporters) about which we will find out, simply because $5.5 trillion of excess spending has to go somewhere. The alternative media is going to have to do the investigative journalism, because the traditional media is too busy singing Obama's praises.

The 2012 Presidential election was about redistribution (called 'fairness') versus a return to prosperity, and redistribution won. Obama will do absolutely nothing that is intended to help the economy. Sure, if the economy does better, he'll take credit, just like he did for Killing Osama With His Bare Hands. But his focus is on a jihad against anyone who has been, is now or intends to be successful, because success is apparently racist and mean-spirited. From 'you didn't build that' to 'the rich aren't paying their fair share' (despite the top 10% paying 70% of the bill), it's always about the producer class not producing enough so that the slacker class can go on slacking (and voting Democrat).

The income tax battle will do nothing to solve anything, but it was never intended to; it's simply the opening act in Obama: War on Prosperity, Part Deux. I don't have a problem paying more in taxes to get the country back on track, but Obama is 'gorging the beast' of entitlement spending far faster than any tax revenue has ever grown in the history of taxes, and that's just fine with him. He knows that no matter what he does, he won't be blamed, and he will be given carte blanche authority to blame anyone else, starting with anyone in Washington with an (R) after their name. Our national finances will be absolutely horrific in 2016, and none of us will hear a thing from the left about why none of his policies worked, only that they would have worked better had we spent more.

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Author: JoshRandall Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 659460 of 757804
Subject: Re: The problem is spending, not revenues Date: 12/11/2012 4:04 PM
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Check out Lou Dobbs on Fox Business Network illustrating how the fiscal cliff and 0's and Boehner's plans effect the debt in 10 years:

http://video.foxbusiness.com/v/2026946680001/will-fiscal-cli...


Neither party has the nads to do the right thing. But republicans should be ashamed of themselves to let themselves be owned by 0. They have become the party of surrender.

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