View Poll Results: What Is The Right Size Of The Federal Government
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Same size or bigger, we are on the right track and just need the people with money to poney up additional taxes?
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19 |
20.88% |
Smaller or much smaller, we've gotten out of control and need to get back to limited government ideas of the constitution and founders?
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72 |
79.12% |
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07-12-2011, 12:47 PM
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#101
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by Hamlet
A wisely run government would run surpluses during the boom years so that they could deficit spend in the bad years. We've been deficit spending through the boom years, which has made our situation all the more disasterous.
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If we could do this, deficit spending in a recession might be justified. The problem is, what politician (regardless of party) will stand up to all the special interests who want that surplus money?
What you are describing here is actually close to pure (and complete) Keynesianism. Most people simply refer to Keynesianism as "deficit spending" but that's really only half of the picture. The other half -- the half no one has tried -- involves *cutting* spending and debt reduction during the boom years. But again, who's going to get up and say they want to slash government programs (and employment) 10% because the economy is booming? No one will, and they likely never would.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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07-12-2011, 01:56 PM
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#102
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Moderator Emeritus
Join Date: Oct 2007
Location: Portland
Posts: 4,946
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A lack of arithmetic...
For FY2010 total federal spending is roughly 3.5 trillion dollars. That number, less tax revenue, leaves a deficit of 1.3 trillion, just under 2/5 of the total spending.
If we look at the spending pie, we can slice it up roughly as:
1/5 non-defense discretionary spending
1/5 defense
1/5 Social Security
1/5 Medicare (less than that now, much more than that in 10 years)
1/5 interest (which will be growing) plus smaller bits of entitlements
Now, nobody wants to touch the defense slice.
Not paying the interest is Bad. Really Bad. Greek Default bad, only it's the largest economy in the world, not something the economic size of Connecticut. You really want to zero out your retirement savings to make a political point?
Balance the budget without tax increases by removing 2/5 of the spending without touching any sacred cows.
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07-12-2011, 02:19 PM
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#103
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
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What you propose doesn't really address the so-called "entitlement" issue.The Medicare/Medicaid/SS part of the budget will grow (in real terms) in but a few years to be as large as the total budget is now. Without constraints, (net) taxes (all of them not just income taxes) will need to approximately double.
With taxes at that level you could expect a severe economic downturn. That would then cause taxes to drop causing the need to further increase taxes. After awhile, like they tell us, it just isn't sustainable.
So, we may as well address our problems now.
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07-12-2011, 03:34 PM
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#104
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,244
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Quote:
Originally Posted by M Paquette
For FY2010 total federal spending is roughly 3.5 trillion dollars. That number, less tax revenue, leaves a deficit of 1.3 trillion, just under 2/5 of the total spending.
If we look at the spending pie, we can slice it up roughly as:
1/5 non-defense discretionary spending
1/5 defense
1/5 Social Security
1/5 Medicare (less than that now, much more than that in 10 years)
1/5 interest (which will be growing) plus smaller bits of entitlements
Now, nobody wants to touch the defense slice.
Not paying the interest is Bad. Really Bad. Greek Default bad, only it's the largest economy in the world, not something the economic size of Connecticut. You really want to zero out your retirement savings to make a political point?
Balance the budget without tax increases by removing 2/5 of the spending without touching any sacred cows.
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So, that breaks down to 20% for each area....
cut non-defense by 50% is 10% of the total
cut defense by 20% is 4% of the total
cut SS by 20% is 4% of the total
cut medicare by 20% is another 4%
for a total of 42%...
Once revenues start to come back because of the recovery, use half to pay down the debt which will reduce that amount and the other half to increase spending where it is needed most...
Not as hard as you think.... but this could never get done because nobody wants their special interest cut...
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07-12-2011, 03:38 PM
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#105
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2007
Posts: 5,596
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Quote:
Originally Posted by MasterBlaster
What you propose doesn't really address the so-called "entitlement" issue.The Medicare/Medicaid/SS part of the budget will grow (in real terms) in but a few years to be as large as the total budget is now. Without constraints, (net) taxes (all of them not just income taxes) will need to approximately double.
With taxes at that level you could expect a severe economic downturn. That would then cause taxes to drop causing the need to further increase taxes. After awhile, like they tell us, it just isn't sustainable.
So, we may as well address our problems now.
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OK, so cut entitlement spending. The spiraling cost of health care is a key component of this budget dilemma. We need to take a cold, hard look at our health care system and figure out a better way. I don't think any of us like the idea of sick, elderly and helpless Americans being without decent health care.
__________________
I purr therefore I am.
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07-12-2011, 03:42 PM
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#106
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
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Quote:
Originally Posted by Purron
OK, so cut entitlement spending. The spiraling cost of health care is a key component of this budget dilemma. We need to take a cold, hard look at our health care system and figure out a better way. I don't think any of us like the idea of sick, elderly and helpless Americans being without decent health care.
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So we have an opportunity right now to change things. Or we can continue as we have, head in the sand, and eventually be forced into the same things anyway. We'll end up going through something like Greece is going through now.
What happens if they have a big Treasury bond sale party... And nobody comes ?
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07-12-2011, 04:33 PM
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#107
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,012
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Quote:
Originally Posted by ERD50
I'm not making the argument, I'm only questioning your assertion that lower taxes are linked to lower growth...
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Likewise, it's hard to see how raising taxes would not put a relative damper on business investment and therefore job growth. Other environmental effects may swamp that out, but the effect is still there.
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I can see how raising the tax rates at the higher income levels can lead to job and therefore economic growth. It comes in 2 parts.
For the 1st part, consider an example of a business owner, who owns a non-corporate business or a single owner LLC (which files profits/losses on the owner's personal tax return) that employs multiple people. Fortunately for this business owner, s/he is expecting a large net profit from his/her business this year. This business owner has a decision to make, s/he can choose to 1) use that net profit to expand the business this year. This expansion would be done by either upgrading/buying additional equipment or hiring more employees (or both) which makes said profit tax deductible (by eliminating it) and increases the value of the business. Or 2) not expand the business and therefore realize the profit on his/her 1040 schedule C, pay income taxes on said profit and then either spend or save what is left. I suggest that the higher the marginal income tax bracket rate is for this business owner the more likely s/he will reinvest that year's profit back into the company, so as to avoid those taxes and make the company more valuable, hoping to cash in on the CG laws. This reinvestment will create jobs at this company and/or the companies that build the equipment used by this company.
For the 2nd part, consider the higher income taxes paid to the federal government. All else being equal this additional tax collected will offset with an equal about of debt and therefore our public debt will be lower. This means there will be less interest paid by our government and therefore there will be more effective use of those tax dollars (again all other things being equal). More effective use of tax dollars (via less interest paid) should help the economy grow.
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07-12-2011, 04:43 PM
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#108
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Moderator Emeritus
Join Date: Oct 2007
Location: Portland
Posts: 4,946
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Quote:
Originally Posted by Texas Proud
So, that breaks down to 20% for each area....
cut non-defense by 50% is 10% of the total
cut defense by 20% is 4% of the total
cut SS by 20% is 4% of the total
cut medicare by 20% is another 4%
for a total of 42%...
Once revenues start to come back because of the recovery, use half to pay down the debt which will reduce that amount and the other half to increase spending where it is needed most...
Not as hard as you think.... but this could never get done because nobody wants their special interest cut...
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That non-defense discretionary slice includes things like Homeland Security, FBI, CIA, federal prisons, and The Usual Suspects like agriculture subsidies.
The budget is chock full of special interest goodies.
The nearer term issue I find highly entertaining is the "We don't need to raise the debt ceiling" crowd, who don't seem to understand that once the cupboard is empty, and we can't borrow, that we will only have 3/5ths of the monthly income needed to cover expenses.
Treasury's best estimate is that the cupboard is bare as of August 2, when we will have exhausted all the short term shuffling and scrounging that has kept us afloat since April. Which bills and paychecks do we not pay?
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07-12-2011, 04:57 PM
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#109
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Thinks s/he gets paid by the post
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,393
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Quote:
Originally Posted by ziggy29
Yep -- cut MY taxes, cut THEIR programs.
Frankly I'm neither wedded to "big" government nor "small" government dogmatically. I want a government that works well and provides reasonable services and programs relative to the taxes I pay.
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Now that seems like an intelligent approach. Difficult to implement of course.
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07-12-2011, 04:59 PM
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#110
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,726
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Quote:
Originally Posted by M Paquette
Treasury's best estimate is that the cupboard is bare as of August 2, when we will have exhausted all the short term shuffling and scrounging that has kept us afloat since April. Which bills and paychecks do we not pay?
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Well, we could start with the House of Representatives and then move quickly to the Senate. Then TSA.
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07-12-2011, 05:52 PM
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#111
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,012
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Quote:
Originally Posted by Texas Proud
So, that breaks down to 20% for each area....
cut non-defense by 50% is 10% of the total
cut defense by 20% is 4% of the total
cut SS by 20% is 4% of the total
cut medicare by 20% is another 4%
for a total of 42%...
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10% + 4% + 4% + 4% = 22% (not 42% unless you plan on not paying any of the interest)
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07-12-2011, 06:34 PM
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#112
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Quote:
Originally Posted by jdw_fire
. . . Or 2) not expand the business and therefore realize the profit on his/her 1040 schedule C, pay income taxes on said profit and then either spend or save what is left.
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... and if it is spent it contributes to job growth and to another business's balance sheet. If it is "saved" it is (likely) invested directly or indirectly in a different business, which helps it become more efficient, or in US government obligations, which (through increasing demand for same) reduces the interest rate paid by the government on these notes.
I think your example only holds true if we neglect the "what next" or if the business owner takes the profit and buries it in a hole.
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07-12-2011, 07:26 PM
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#113
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,012
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Quote:
Originally Posted by samclem
... and if it is spent it contributes to job growth and to another business's balance sheet. If it is "saved" it is (likely) invested directly or indirectly in a different business, which helps it become more efficient, or in US government obligations, which (through increasing demand for same) reduces the interest rate paid by the government on these notes.
I think your example only holds true if we neglect the "what next" or if the business owner takes the profit and buries it in a hole.
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so then are you saying that if the business owner invests (100% of the net profits) directly in his/her own business it wont produce greater job/economic growth then would happen if s/he invests (100% of the profit - taxes) in bonds or stocks? i think not, therefore my example still holds, reguardless of the "what next"!
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07-13-2011, 03:22 AM
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#114
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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Quote:
Originally Posted by jdw_fire
so then are you saying that if the business owner invests (100% of the net profits) directly in his/her own business it wont produce greater job/economic growth then would happen if s/he invests (100% of the profit - taxes) in bonds or stocks?
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Yes. Example: If the business owner decides to buy bonds from another company rather than invest the money back in his own business, it follows that he expects a greater risk/adjusted return. On average, that greater return can only occur if the "other business" puts the capital to work in a more productive manner than he could have. "More productive" = greater job/economic growth.
Efficient capital markets keep money flowing to the businesses expected to use these funds most effectively--to produce more growth (and wealth). In your example, only the part of his profit that was "lost" to taxes escapes this "highest expected utility" market mechanism.
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07-13-2011, 04:53 AM
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#115
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Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
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Reading these posts here is a bit depressing... I may not be able to FIRE in 2012 as planned after all, instead I may need a couple more years to wait and see what's going to happen with SS, Medicare.
__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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07-13-2011, 06:41 AM
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#116
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
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Ideas on how to fix it... from the geniuses that got us here!
Somethin' to be said for that... huh?
Quote:
The Aspen Institute and The Atlantic magazine, many spoke enthusiastically about a list of recommendations for a debt solution hammered together last December by a bipartisan committee chaired by retired Senator Alan Simpson (R-Wyo.) and former Clinton administration economic adviser Erskine Bowles. Those recommendations call not only for tax reform but for fixes to the budget process, Social Security, health care spending in the private and public sectors and an increase in mandatory retirement-savings programs.
Here is an overview of the comments from some of this year's participants, a gathering of what The Aspen Institute calls the world's "most inspired and provocative thinkers, writers, artists, business people, teachers, and other leaders."
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Big thinkers tackle debt solutions at Aspen Festival - Jul. 13, 2011
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07-13-2011, 07:07 AM
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#117
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,304
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Not a bad article, interesting what leaders say when they are not in the election cycle. I've often wondered if Americans were presented with our spending, like the 2010 pie chart, and then told this is how much your taxes would have to increase to balance the budget now (assuming no change in marginal rates). I did the math in an earlier thread, and I think it was something like a 70% increase across the board. You would think folks could get a more creative faced with such a prospect. Have you ever seen a politician or anyone in the media take such a direct approach?
Instead we're allowed to insist that someone else (the rich) should pay more and we're entitled to benefits we haven't fully paid for ('I paid all my life so I am entitled to the same Soc Sec/Medicare as the last generations got - take it out of defense, end the wars'). My other favorite is increasing Corp taxes, as if ultimately that's not passed on to 'us' entirely. All these positions can easily be shown to be unworkable, yet we keep up the charade.
Flame away...
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No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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07-13-2011, 07:44 AM
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#118
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Thinks s/he gets paid by the post
Join Date: Aug 2006
Posts: 1,558
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Do you think there will be any clarity then?
There will always be another election 2 years away.
Quote:
Originally Posted by obgyn65
Reading these posts here is a bit depressing... I may not be able to FIRE in 2012 as planned after all, instead I may need a couple more years to wait and see what's going to happen with SS, Medicare.
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07-13-2011, 08:47 AM
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#119
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Posts: 7,438
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How many people on this forum wants SS or Medicare cut?
Is it possible to keep the current level of benefits without raising taxes?
Quote:
For taxes to remain where they are, Washington would need to end Medicare as we know it, end Social Security as we know it, severely shrink the military — or do some combination of the above.
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http://www.nytimes.com/2011/07/13/bu...t.html?_r=1&hp
To shrink govt. SS, Medicare and the military will have to be cut. Do people who want to RE expect not to count on Medicare at least?
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07-13-2011, 09:00 AM
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#120
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,244
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Quote:
Originally Posted by jdw_fire
10% + 4% + 4% + 4% = 22% (not 42% unless you plan on not paying any of the interest)
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Opps... Looks like I added in the 20% for each area....
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