Budgets being cut anyway . . .

[bcinvest]

A great article on the revenue impact of tax cuts. Claim That Tax Cuts "Pay For Themselves" Is Too Good To Be True — Center on Budget and Policy Priorities

[Westernskies]

The solution is obvious:

Tax ourselves into prosperity.

[RetiredGypsy]

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Originally Posted by Westernskies The solution is obvious: Tax ourselves into prosperity.

Wait, this has some merit. They tax us, and then we turn around and tax them to get a lot of it back.

[M Paquette]

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Originally Posted by Westernskies The solution is obvious: Tax ourselves into prosperity.

I dunno, Stimpy. That didn't work so good last time we tried it.

I suggest something utterly bizarre. Actually cutting spending, you know, the bit where we really spend less than what we really were spending. Real honest to gosh outside the beltway budget cutting. Across all budgets.

Don't do that goofy thing where you limit cutting to 'discretionary programs' that total less than the budget deficit. You won't cover the deficit even if you run the 'discretionary programs' to zero, and I doubt you'll convince people that shutting down the courts, Federal prisons, FBI, CIA, Border Patrol, Center for Disease Control, and related 'discretionary programs' is good governance.

Cut. Cut til it hurts. Do you really need to buy more C-17s than the Air Force can crew? Could we get by with a few less amphibious landing craft? (and when was the last time we took a beach? WW II?) Maybe one less aircraft carrier? One less flying antitank laser cannon? Maybe Medicare shouldn't provide all those 'free scooters.' Maybe lung transplants for 80 year old smokers aren't such a great benefit. Maybe we could raise the full retirement age one month per year that passes.

Then, after we've carved off the excess, if absolutely necessary, we can look at taxes.

Not that any of this will happen, of course. I fully expect that in 10 years the interest on the national debt will be the tail wagging the dog, the largest non-entitlement expense. I doubt the interest rate on further debt will be 2-3% then. More like 8-10%. Not cutting now is going to hurt later. It'll hurt a lot.

[brewer12345]

MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

[Nords]

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Originally Posted by brewer12345 MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

The Marine Corps faces this funding controversy every year... the last major opposed amphibious landing was Inchon, although they played a mighty fine diversionary fake during DESERT STORM.

USMC's toughest enemy opposed landing operation is explaining to skeptical Congressional staffs why the Navy's Army needs its own V-22 Air Force.

It's not just the Marines facing these justification struggles. WWII was the last time that a U.S. submarine shot a warshot torpedo at a warship.* There's perennial serious negotiations about getting rid of the ADCAP torpedo so that submarines can cram more TOMAHAWKs in their "torpedo" rooms.

The biggest problem with the funding cuts is deciding what missions to give up, which makes it really hard to implement Pax Americana's 911 response forces. Congress isn't willing to give up missions-- just adequate funding.

* For you military-trivia buffs, USS BREMERTON was tasked to sink an oil tanker in 1999.

[Westernskies]

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Originally Posted by brewer12345 MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

Who can forget the image of the media storming the beaches of Somalia with microphones, hindering the troops in 1993? Certainly not our finest hour.

[M Paquette]

Quote:

Originally Posted by brewer12345 MPaquette, I suspect that the last time we took a beach was the invasion of Grenada.

Ah, right! When we almost had a Christmas without nutmeg for our eggnog! (Yeah, and some US students at a Grenada medical school needed rescuing...)

Quote:

Originally Posted by Nords WWII was the last time that a U.S. submarine shot a warshot torpedo at a warship.* There's perennial serious negotiations about getting rid of the ADCAP torpedo so that submarines can cram more TOMAHAWKs in their "torpedo" rooms.

I don't think I could really object to not carrying all that Otto fuel around in a closed atmosphere. (If a torpedo accidentally starts while inboard, the exhaust, which includes carbon monoxide, hydrogen cyanide, and ammonia becomes the crew's new breathing mix. This is generally considered a Bad Thing.)

[Mulligan]

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Originally Posted by GregLee Maybe normal people shouldn't do that. We're talking about future spending, so the only rational way to proceed is by projecting to the future. The effect of a budget change which will take place in the future can only be understood in relation to future income and future costs. It's too bad the world must be so complicated.

To me though (and I admit I'm no genius), I think if the term "cuts" is used it is in reference to the proceeding years budget."Slowing of growth" should be used to describe what politicians are referring to as cuts. If a family anticipates a 5% increase in wages next year, and still wants to cut their $100 a month "eating out budget". I would assume most would go to say $90 a month, instead of going to $103 a month and calling that a "cut".

[samclem]

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Originally Posted by M Paquette Past experience in the US suggests the peak of the curve is above 24% (Harding-Coolidge tax cuts) and experience in Scandinavian countries suggest the peak for their economic models is somewhere in the 30-40% total taxation range. Note that the economic models there place significant services to be paid via taxes rather than as a private expense. (These are not marginal rates, but reflect the total taxation burden.) The US tax burden currently lies on the left side of the Laffer curve. When the Economic Growth and Tax Relief Reconciliation Act of 2001 and the follow-on Reconciliation Act of 2003 were in place, the drop in tax revenue was partially compensated for by the increase in revenue from increased economic activity.

Isn't the current total US tax burden (Fed, state, local) 27%? (99/365= .27). That's "to the right" of 24%, yes?

Regardless, we should be aware of what we are trying to divine here: "What's the rate of taxation that will result in the greatest overall tax revenue over time?" That is a worthwhile question to ask, especially as our governments continue to spend with reckless abandon, but it's certainly not the same question as "How much is it right to seize from individuals to use for the common good and to redistribute to others who did not earn it?"
Figuring out how much blood can be optimally harvested from an individual each week to yield the greatest "take" for the blood bank is one thing. It's not the same as asking how much a person "rightly owes" the blood bank. And it's not the same as asking how much blood a person can give up each week and still enjoy optimal health.

The private economy (still, most believe) has purposes beyond funding the government.

[MasterBlaster]

The actual shape of a Laffer-type Revenue versus tax bite curve is unknown. So depending on your agenda, the peak of the curve moves to support your position.

Clearly though, if we are to the right of the peak, then increased tax rates will bring in less total revenue.

Notice though, that the Laffer-type curve only foretells government revenue and says nothing about the economic vitality of the population at large.

[Nords]

Quote:

Originally Posted by M Paquette I don't think I could really object to not carrying all that Otto fuel around in a closed atmosphere. (If a torpedo accidentally starts while inboard, the exhaust, which includes carbon monoxide, hydrogen cyanide, and ammonia becomes the crew's new breathing mix. This is generally considered a Bad Thing.)

I don't know why people worry about the radiation. The cigarette smoke (before 2011, anyway), primary-coolant sample sink, asbestos lagging, lead-acid battery, oxygen generator, diesel fuel, atmosphere-control chemicals, and explosives/propellants are much more dangerous. And, hey, just for fun, let's go clean out that electrostatic precipitator.

Were you ever one of the guys deemed lucky enough to be tasked to load a hydrogen-bubbling acoustic decoy into the aft signal ejector?

And then there's the liberty ports. When I'm finished with next month's colonoscopy then I'm going to visit the VA center to learn more about the long-term effects of acute exposure to pneumonoultramicroscopicsilicovolcanoconiosis...

[Independent]

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Originally Posted by MasterBlaster The actual shape of a Laffer-type Revenue versus tax bite curve is unknown. So depending on your agenda, the peak of the curve moves to support your position. Clearly though, if we are to the right of the peak, then increased tax rates will bring in less total revenue. Notice though, that the Laffer-type curve only foretells government revenue and says nothing about the economic vitality of the population at large.

I've tried to find out what's known. I couldn't find a serious economist (as in publishing papers in the standard economic journals) who says we're on the right side of the Laffer curve.

I was able to find one book on the topic that specifically studied people with the top incomes Amazon.com: Does Atlas Shrug? The Economic Consequences of Taxing the Rich (9780674001541): Joel B. Slemrod: Books It's a series of academic papers so it's a slow read, but my bottom line is that although everyone agrees theoretically that taxes impact behavior, the actual impacts appear so small that they get lost in the normal noise of the economy.

There's a much more general book Amazon.com: Taxing Ourselves, 4th Edition: A Citizen's Guide to the Debate over Taxes (9780262693639): Joel Slemrod, Jon Bakija: Books (in spite of the title, it looks like it's designed by a tax policy course) that bumps into this issue. Again, it's hard to find an impact.

Then there's the report from the Treasury Dept when Bush was president http://www.treasury.gov/press-center...july252006.pdf They said that extending the 2001 and 2003 tax cuts would indeed increase economic growth only if the net lost revenue is covered by spending cuts. They didn't put a specific number on the net loss but it appears to be around 93%. That is, the additional economic growth would pay for about 7% of the static tax loss, so the dynamic loss is 93% of the static loss.

[MasterBlaster]

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Originally Posted by Independent but my bottom line is that although everyone agrees theoretically that taxes impact behavior, the actual impacts appear so small that they get lost in the normal noise of the economy.

I'm not sure that I agree. For someone in one of those 85% plus (historical) marginal rates I don't see much incentive at all to keep producing. I see quite a big disincentive to add any output.

For lower incremental taxes the same effect is there but watered down. It's like the headwinds just keep getting stronger and stronger against additional production with increasing taxation. Different people bail out at different levels, but eventually everyone except those few die-hards give up.

[Hamlet]

Exempting those programs makes it mathematically impossible to balance the budget.

Those are the four areas we should be looking at seriously for real reductions.

The rest of the budget is just pocket change compared to them.

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Originally Posted by Lisa99 If it isn't related to keeping people alive and healthy (Medicare, Medicaid, defense in its various forms) and keeping government's promises (SS) then it should be looked at for reduction. I realize my post is a gross oversimplification, but I'm just about fed up with our government's inability to make the necessary hard decisions.

[Westernskies]

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Originally Posted by Hamlet The rest of the budget is just pocket change compared to them.

A billion here, a billion there... pretty soon you're talking about some real money...

We need to change the tax and spend mindset, IMO.

[MasterBlaster]

The post from Hamlet is accurate.

Without speaking of changes to

1) Social Security
2) Medicare and Medicaid
3) Defense
4) taxes

You just can't get there from here. The size of the deficit is so large and the impending growth in SS and Medicare gets so big as the boomers retire en masse. That something has to give.

The concept of trimming around the edges just won't work.

[Independent]

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Originally Posted by MasterBlaster I'm not sure that I agree. For someone in one of those 85% plus (historical) marginal rates I don't see much incentive at all to keep producing. I see quite a big disincentive to add any output. For lower incremental taxes the same effect is there but watered down. It's like the headwinds just keep getting stronger and stronger against additional production with increasing taxation. Different people bail out at different levels, but eventually everyone except those few die-hards give up.

Certainly, the marginal rate you start with matters. The calculation is strongly non-linear.

If we start at a 90% marginal rate, reducing it to 80% would increase after tax income by 100%, and that would probably have a visible effect.

But if we start at 36%, reducing the rate to 32% (which has the same static calculation cost to the gov't), only increases after tax income by 6%. That will result in hardly any changes in behavior - so little that standard economic studies won't be able to prove there was any change because of all the noise in the data.

All the studies that I saw were after the 90% was history. These days we're talking about much smaller numbers.

[haha]

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Originally Posted by samclem The private economy (still, most believe) has purposes beyond funding the government.

This "most" you refer to but be posting somewhere other than ER.ORG, the pink forum.

Ha

[MasterBlaster]

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Originally Posted by Independent Certainly, the marginal rate you start with matters. The calculation is strongly non-linear. If we start at a 90% marginal rate, reducing it to 80% would increase after tax income by 100%, and that would probably have a visible effect. But if we start at 36%, reducing the rate to 32% (which has the same static calculation cost to the gov't), only increases after tax income by 6%. That will result in hardly any changes in behavior - so little that standard economic studies won't be able to prove there was any change because of all the noise in the data. All the studies that I saw were after the 90% was history. These days we're talking about much smaller numbers.

You are suggesting that changes to tax rates don't matter. I suggest otherwise.

Even at 32/36 % there are those who are on the edge and will stop producing.

And, by the way, a 12.5% tax increase isn't negligible.