Size Of Government - What Do We Really Want?

[rescueme]

Supplemental Security Income is a program for the needy. One does not ever have to pay 1 cent into it, in order to receive it.

Folks keep on mixing terms/programs (good catch!).

There are three programs - SS (normal), SSD (Social Security Disability, which you get if you were paying SS but become unable to work), and SSI (which unlike SS/SSD is administered by the individual state, along with different eligibility rules; however it is partially funded by the federal government). As stated, you need no income nor ever have to pay into SS to receive SSI benefits (based upon indivudial state qualification/rules).

My son receives SSD, based upon his SS payments before he was declared totally disabled. However, working in a sheltered workshop, he still pays SS on his (very little) earnings. Sort of like he's "paying himself", but that's the way it is...

 

[Nodak]

To me one good way to reduce the defense budget would be to close all bases outside the US, bring the troops home, use them to guard our own borders, and stop being the world's policeman. Let other nations see what it costs to completely defend themselves.

 

[Hamlet]

The issue is that people didn't really do their part. They chose politicians that funded lower taxes and other government programs with the SS trust fund.

Everyone ate the cake, but people now think that we should still have it.

Though "we (all) did our part, unfortunately we can't just ignore the math and the cash flow is relevant indeed.

 

[MasterBlaster]

The issue is that people didn't really do their part. They chose politicians that funded lower taxes and other government programs with the SS trust fund.

yeah, Where's LockBox AL Gore when we needed him !

 

[Hamlet]

I was never real clear on how that lockbox was supposed to work

Ultimately, people have been expecting a level of government service much higher than they have been willing to pay for for 30+ years.

We can keep the current services government provides, but we will need to start paying the actual cost of them in taxes.

We can choose a much lower level of service and keep our taxes as low as they are now.

Both are relatively rational options. People can argue about which of those paths is better, but ultimately they both can be viable. I'm willing to accept either path, or a compromise inbetween. I'll complain about one of them, but ultimately I will accept it because it is still better than the current path.

What we can't do is continue to pretend that we can get everything our government is currently doing for us at the current tax rates.

We've set our taxes at post-WWII lows (GDP-wise) and are still expecting to be able to fund SS, Medicare, Medicaid, and the defense of the entire world. We are quickly reaching the end of that path.

yeah, Where's LockBox AL Gore when we needed him !

 

[MasterBlaster]

We've set our taxes at post-WWII lows (GDP-wise) and are still expecting to be able to fund SS, Medicare, Medicaid, and the defense of the entire world. We are quickly reaching the end of that path.

if you are referring to federal Income taxes in isolation you may have a point.

But if you look at the all-in taxes (of all kinds) levied at every level of government then you are very much incorrect.

 

[Hamlet]

I've had difficulty finding good data for historical taxes at the state and local levels.

What sources did you use to come to your conclusion?

if you are referring to federal Income taxes in isolation you may have a point.

But if you look at the all-in taxes (of all kinds) levied at every level of government then you are very much incorrect.

 

[samclem]

I've had difficulty finding good data for historical taxes at the state and local levels.

What sources did you use to come to your conclusion?

See table 15.1 (on page 340 and 341) of this US OMB publication .

I couldn't find a cool graphic, so here's a synopsis of the table:

Total Government revenues (Federal, State, Local government) as percent of GDP (rounded to nearest percent):

1950 21
1955 25
1960 25
1965 25
1970 28
1975 28
1980 28
1985 27
1990 28
1995 29
2000 30
2005 28
2010 25

 

[Hamlet]

Thanks!

So when you include the state and local taxes, we are merely at the lowest tax level since 1959.

See table 15.1 (on page 340 and 341) of this US OMB publication .

I couldn't find a cool graphic, so here's a synopsis of the table:

Total Government revenues (Federal, State, Local government) as percent of GDP (rounded to nearest percent):

1950 21
1955 25
1960 25
1965 25
1970 28
1975 28
1980 28
1985 27
1990 28
1995 29
2000 30
2005 28
2010 25

 

[jdw_fire]

if you are referring to federal Income taxes in isolation you may have a point.

But if you look at the all-in taxes (of all kinds) levied at every level of government then you are very much incorrect.

but but but, we are talking about the FEDERAL deficit/debt sooooooo it seems that talking about FIT is appropriate.

o and btw if you "fix" SS by lowering benefits and writing off the SS trust fund what we and the federal government will be doing is conceding that FICA was used to pay for other federal programs and not SS (i.e. totally misrepresenting that "tax"). i think that should (and may even) be illegal.

 

[MasterBlaster]

Actual total spending (all levels of government) through 2011, 2011-2016 are projections.

The two spikes are the world Wars I and II.

Where's the big dip ?

And notice the trend.

 

[Hamlet]

You're pointing out that spending has gone up as a share of GDP.

I've pointed out the revenues have gone down as a share of GDP.

We have spending at post-WWII highs, and revenues at the lowest point since 1959.

Doesn't it seem like a combination of spending cuts and tax increases are in order to resolve this situation?

Actual total spending (all levels of government) through 2011, 2011-2016 are projections.

The two spikes are the world Wars I and II.

Where's the big dip ?

And notice the trend.

 

[Purron]

You're pointing out that spending has gone up as a share of GDP.

I've pointed out the revenues have gone down as a share of GDP.

We have spending at post-WWII highs, and revenues at the lowest point since 1959.

Doesn't it seem like a combination of spending cuts and tax increases are in order to resolve this situation?

There is a reasonable balance here somewhere. Unfortunately, our politicians appear incapable of reaching a compromise.

 

[jebmke]

but but but, we are talking about the FEDERAL deficit/debt sooooooo it seems that talking about FIT is appropriate.

o and btw if you "fix" SS by lowering benefits and writing off the SS trust fund what we and the federal government will be doing is conceding that FICA was used to pay for other federal programs and not SS (i.e. totally misrepresenting that "tax"). i think that should (and may even) be illegal.

don't know whether the revenue "transfers" are legal or not but the Supreme Court certainly settled the question of whether benefits are guaranteed (they are not).

 

[Texas Proud]

You're pointing out that spending has gone up as a share of GDP.

I've pointed out the revenues have gone down as a share of GDP.

We have spending at post-WWII highs, and revenues at the lowest point since 1959.

Doesn't it seem like a combination of spending cuts and tax increases are in order to resolve this situation?

I think it begs the question of WHY revenues have gone down... the current problem is there is high unemployment and underemployment... if we get a lot of people working the revenues as a % of GDP will increase... more than likely back to the normal 18%... tax increases by increasing rates or cutting deductions are not the way to go...

Spending (Federal only) has been going up and is projected to be 25% for the future... it should be closer to 20% or even less... getting the economy working will not fix this problem...


That said, I do think that a dollar given out as a farm subsidy is the same as a dollar tax credit or a dollars worth of deductions... I do not have a problem with getting rid of some of the special deductions/credits....

 

[GregLee]

Unfortunately, our politicians appear incapable of reaching a compromise.

I gather from listening to CNN commentary on this issue that the main problem is that many Republicans were elected on the strength of their promise to voters not to raise taxes. If they now refuse to raise taxes, I tend to attribute this to their integrity. They can't compromise, because their constituents told them not to. Our current problem is not due to our honest politicians, but to the stupid voters who elected them.

 

[MasterBlaster]

Just take a look at that chart. Look at the trend and then say we have a tax problem ! Keep in mind the explosion in additional spending we expect as the boomers retire.

 

[samclem]

I gather from listening to CNN commentary on this issue that the main problem is that many Republicans were elected on the strength of their promise to voters not to raise taxes. If they now refuse to raise taxes, I tend to attribute this to their integrity. They can't compromise, because their constituents told them not to. Our current problem is not due to our honest politicians, but to the stupid voters who elected them.

And there's a problem on the left as well, regarding the ability to cut entitlement spending. It appears that, especially on the Republican side but also on the Democrat side, the leadership is more "flexible" than their membership, and believe that if they choose to compromise they won't be able to deliver the votes.

History has many examples of wars between nations that resulted from a string of events that was pretty much unstoppable once they began. Neither side would have chosen the war that resulted, but they had a war anyway. We may be seeing a similar dynamic on a political level.

 

[Hamlet]

Your chart shows nothing about taxes. Taxes have been going down at the same time spending has been going up

The gap is twice as hard to close when one side has ruled out revenue increases entirely.

Just take a look at that chart. Look at the trend and then say we have a tax problem ! Keep in mind the explosion in additional spending we expect as the boomers retire.

 

[Hamlet]

Revenues are lower because of the recession, but they are also lower because we've cut taxes at every opportunity in the last 10 years.

The economy was good, so Bush and the Republicans said we could afford tax cuts. (2001)
The economy got bad, so Bush and the Republicans said we needed tax cuts to improve the economy. (2003)
The economy got really bad, so Obama and the Republicans passed a stimulus package with yet more tax cuts
The economy stayed bad, so Obama and the Republicans decided we needed to extend the existing tax cuts and pass -- wait for it -- more tax cuts.

We've been cutting taxes for ten years straight. That may have a little to to with why we have a revenue problem.

I think it begs the question of WHY revenues have gone down... the current problem is there is high unemployment and underemployment... if we get a lot of people working the revenues as a % of GDP will increase... more than likely back to the normal 18%... tax increases by increasing rates or cutting deductions are not the way to go...

Spending (Federal only) has been going up and is projected to be 25% for the future... it should be closer to 20% or even less... getting the economy working will not fix this problem...


That said, I do think that a dollar given out as a farm subsidy is the same as a dollar tax credit or a dollars worth of deductions... I do not have a problem with getting rid of some of the special deductions/credits....

 

[MasterBlaster]

Your chart shows nothing about taxes. Taxes have been going down at the same time spending has been going up

The gap is twice as hard to close when one side has ruled out revenue increases entirely.

Well Exactly when do we have enough government ? At 60 % of GDP at 90% ? When does it all collapse ?

We are headed in that direction.

 

[Hamlet]

My point is that taxes have been decoupled from the size of government for 30+ years. We've been growing government while cutting taxes.

We need to both raise taxes and cut the size of government.

Well Exactly when do we have enough government ? At 60 % of GDP at 90% ? When does it all collapse ?

We are headed in that direction.

 

[Gatordoc50]

Well Exactly when do we have enough government ? At 60 % of GDP at 90% ? When does it all collapse ?

We are headed in that direction.

We have enough government when sitting at home watching Oprah is as financially rewarding as going to medical school. This recession is over when a million dollars is a lot of money and the risk of obtaining an education or starting a business is rewarded. It's not over until we reach that point. Debt and deficits and unemployment are only symptoms of the destruction of the risk/ reward paradigm.

 

[FinanceDude]

I gather from listening to CNN commentary on this issue that the main problem is that many Republicans were elected on the strength of their promise to voters not to raise taxes. If they now refuse to raise taxes, I tend to attribute this to their integrity. They can't compromise, because their constituents told them not to. Our current problem is not due to our honest politicians, but to the stupid voters who elected them.

You are expecting politicians not to flip-flop. While admirable, it is not reality. However, this seems to be a new reality. A lot of Republican freshmen in the House are going to need new jobs after the 2012 elections if they let Boehner cave in on the budget battle..........

 

[Texas Proud]

Revenues are lower because of the recession, but they are also lower because we've cut taxes at every opportunity in the last 10 years.

The economy was good, so Bush and the Republicans said we could afford tax cuts. (2001)
The economy got bad, so Bush and the Republicans said we needed tax cuts to improve the economy. (2003)
The economy got really bad, so Obama and the Republicans passed a stimulus package with yet more tax cuts
The economy stayed bad, so Obama and the Republicans decided we needed to extend the existing tax cuts and pass -- wait for it -- more tax cuts.

We've been cutting taxes for ten years straight. That may have a little to to with why we have a revenue problem.

I think the chart below shows that the trend in taxes was the same as spending....

And you can see that the projections forward to 2015 increase the percentage back closer to 20% without any changes to the current tax code...

It looks like 2000 was the highest total as the states have also been increasing is size... having them cut back is also a plus...