WSJ: Arthur Laffer - Tax Hikes and the 2011 Economic Collapse

[ziggy29]

I suggest we maybe give priority to functions that are explicitly mentioned in the Constitution as being the responsibility of the federal government. That's not a guide to how much to spend, per se, but it might be a guide to what should be considered "Job 1."

Agreed. And while it would likely cause state taxes to rise, one thing I would do is stop the "federal funding" of so many state and local programs. I think this allows the federal government to get around the 10th Amendment and meddle in state and local affairs by getting states addicted to "federal funds" and then coercing them to pass state by state laws in order to keep receiving them. It also encourages political careerism in Congress by allowing someone to keep "bringing home the bacon" to gain reelection. It's a nice, slick trick to get around the Constitutional limits on federal power in state and local matters and keep entrenched incumbents in office. Sleazy as heck, but slick and creative.

If the federal government has enough money to give back to state and local governments, that's money they shouldn't be collecting in the first place. Let the states decide if they want to raise taxes for the things "federal funds" provide in their states.

 

[ejman]

I suggest we maybe give priority to functions that are explicitly mentioned in the Constitution as being the responsibility of the federal government. That's not a guide to how much to spend, per se, but it might be a guide to what should be considered "Job 1."

You mean as in section 8 (Regarding the powers of Congress) "...provide for the common Defence and general Welfare of the United States". I totally agree

 

[ziggy29]

You mean as in section 8 (Regarding the powers of Congress) "...provide for the common Defence and general Welfare of the United States". I totally agree

Written before the 10th Amendment clarified federal power in state and local matters -- and also so vague as to be useless. You can justify anything by claiming it is "for the general welfare."

 

[misanman]

From the June 2010 AARP Bulletin: "To close the (budget) gap this year would require the entire Department of Defense to shut down - two wars and 150 overseas military operations notwithstanding - and also put a stop to all Social Security payments. Ad do the same thing next year. Put another way, the budget deficit would be closed if the federal government stopped paying veterans benefits, interest on the debt, Medicare, Medicaid, public school costs, foreign aid, and farm subsidies, and stopped financing space flights, the EPA, Congress and the White House."

 

[ziggy29]

From the June 2010 AARP Bulletin: "To close the (budget) gap this year would require the entire Department of Defense to shut down - two wars and 150 overseas military operations notwithstanding - and also put a stop to all Social Security payments. Ad do the same thing next year. Put another way, the budget deficit would be closed if the federal government stopped paying veterans benefits, interest on the debt, Medicare, Medicaid, public school costs, foreign aid, and farm subsidies, and stopped financing space flights, the EPA, Congress and the White House."

Unfortunately, the unstated message here seems to be: "Therefore, the only solution is to keep borrowing from our grandkids and raise their taxes -- but leave us alone."

 

[samclem]

. . . one thing I would do is stop the "federal funding" of so many state and local programs. I think this allows the federal government to get around the 10th Amendment and meddle in state and local affairs by getting states addicted to "federal funds" and then coercing them to pass state by state laws in order to keep receiving them.

Well put. Those "free dollars" are truly some of the most costly ones.

We are far removed from the original intended goal of local control and responsiveness to citizens.

 

[Gone4Good]

Written before the 10th Amendment clarified federal power in state and local matters -- and also so vague as to be useless. You can justify anything by claiming it is "for the general welfare."

Yeah, it's a shame that the Constitution isn't the straight jacket so many seem to want it to be.

I don't know about you, but I'm more in favor of thinking for ourselves and deciding our priorities on their merits rather than deferring to people who lived a couple hundred years before things like health insurance, or child labor laws, or equal rights, or environmental protection, etc. etc. This reactionary call to the Constitution sounds high minded, but it isn't.

 

[ziggy29]

I don't know about you, but I'm more in favor of thinking for ourselves and deciding our priorities on their merits rather than deferring to people who lived a couple hundred years before things like health insurance, or child labor laws, or equal rights, or environmental protection, etc. etc. This reactionary call to the Constitution sounds high minded, but it isn't.

I don't know about you, but I'm more in favor of a Constitution that doesn't mean whatever we want it to mean today regardless of what someone wishes it said. If that were the case, there would be no need to a constitution to put limits on federal power.

Somewhere between extremely strict literalist and extreme belief in the "living document" is the sweet spot, but I think the pendulum is swinging *way* too much toward the latter.

 

[Gone4Good]

I don't know about you, but I'm more in favor of a Constitution that doesn't mean whatever we want it to mean today regardless of what someone wishes it said. If that were the case, there would be no need to a constitution to put limits on federal power.

What exactly is it that you see as unconstitutional? This was a thread about taxes . . . yup, constitutional. Then it started talking about government spending . . . yup, constitutional.

 

[samclem]

Yeah, it's a shame that the Constitution isn't the straight jacket so many seem to want it to be.

A literal interpretation of the document helps protect us all. The Constitution is the most fundamental protection we have, as individuals, against the immense power of the federal government. So, "general welfare" means "general" not "individual" welfare. The 10th amendment means what it says, exactly.
If an individual doesn't favor police hauling people away without charges ("because the Constitution shouldn't be a straightjacket--we need some flexibility to deal with enemies of the state") then he/she also should oppose other areas where the government exceeds the explicit bounds of the Constitution.

We have a procedure for amending this document. If we want a welfare state or a federal government that takes over more power from the states, it can be accomplished above board and in the open through that means.

 

[REWahoo]

What sam said...

 

[ziggy29]

What exactly is it that you see as unconstitutional? This was a thread about taxes . . . yup, constitutional. Then it started talking about government spending . . . yup, constitutional.

Taxes and spending are constitutional. That doesn't make everything the federal government could possibly want to tax us for in order to spend on automatically constitutional.

You asked a question and I answered it: The first federal spending I would cut is the "federal funds" returned to state and local governments. The people of these states and localities can vote to raise their taxes to pay for these things if it's important enough to them. I shouldn't have to pay for your state's goodies just because you have may have a powerful life-long senator in the majority party, and vice versa.

 

[ejman]

Written before the 10th Amendment clarified federal power in state and local matters -- and also so vague as to be useless. You can justify anything by claiming it is "for the general welfare."

Ah, so we get to pick the words we like out of the constitution now do we?
Let's see on the second amendment I pick "A well regulated Militia, being necessary to the security of a free State".

 

[Gone4Good]

A literal interpretation of the document helps protect us all. The Constitution is the most fundamental protection we have, as individuals, against the immense power of the federal government. So, "general welfare" means "general" not "individual" welfare. The 10th amendment means what it says, exactly.
If an individual doesn't favor police hauling people away without charges ("because the Constitution shouldn't be a straightjacket--we need some flexibility to deal with enemies of the state") then he/she also should oppose other areas where the government exceeds the explicit bounds of the Constitution.

We have a procedure for amending this document. If we want a welfare state or a federal government that takes over more power from the states, it can be accomplished above board and in the open through that means.

Um, yeah, there are explicit rights afforded individuals which should not be infringed (as in "No person shall be held to answer for any capital, or otherwise infamous crime, unless on a presentment or indictment . . . "). But what I'm looking for is the explicit prohibitions against the spending you don't like.

 

[Independent]

Agreed. And while it would likely cause state taxes to rise, one thing I would do is stop the "federal funding" of so many state and local programs. I think this allows the federal government to get around the 10th Amendment and meddle in state and local affairs by getting states addicted to "federal funds" and then coercing them to pass state by state laws in order to keep receiving them. It also encourages political careerism in Congress by allowing someone to keep "bringing home the bacon" to gain reelection. It's a nice, slick trick to get around the Constitutional limits on federal power in state and local matters and keep entrenched incumbents in office. Sleazy as heck, but slick and creative.

If the federal government has enough money to give back to state and local governments, that's money they shouldn't be collecting in the first place. Let the states decide if they want to raise taxes for the things "federal funds" provide in their states.

I agree regarding some funding. It always bugged me that the Federal Gov't made road funds contingent on the states maintaining a 55 mph speed limit, for example.

However, most of the dollars are in programs where the feds are trying to avoid a race to the bottom. Medicaid funds are contingent on the states having a good enough program that poor people do not move out of the state just to get better benefits somewhere else. Maybe there are better ways of dealing with that problem than grants to states, but I think it is a problem. The better approach may be to dial back the funding to only those states that seem to be getting movement into the state, but that is hard to measure.

 

[Hamlet]

I don't think we need to cut the full $1.3 Trillion. A large part of that will come down as we leave recession, and people who are currently on unemployment get jobs and start paying taxes again.

I think that if we can get cuts that reduce our spending by $500 billion annually we'll be in pretty decent shape. We could put those cuts in place, see how things look in 10 years, and adjust as needed.

I would lean towards reducing Medicare, Medicaid, and Defense spending. SS is really not in that terrible of shape, and given that most of our elderly are not in a good financial position, I think we need the safety net. SS has the advantage of not being a constantly increasing sinkhole like the other three are.

We've had this discussion on this forum before. It went something like this . . .

"We don't need to raise taxes, we should cut spending"
"What specifically would you like to see cut?"
"Waste"
"But what specifically"
"Waste"
"You understand that we have a $1.3 Trillion deficit? That's a lot of waste to cut. Could you identify some specific things. It seems like with that much waste, we should be able to come up with some biggies."
"Cut waste."



That would save about $300B (which is a pretty good start). But we still have about $1 Trillion to go . . .

 

[samclem]

I would lean towards reducing Medicare, Medicaid, and Defense spending. SS is really not in that terrible of shape, and given that most of our elderly are not in a good financial position, I think we need the safety net. SS has the advantage of not being a constantly increasing sinkhole like the other three are.

Medicare gets cut this very week if Congress does nothing (which should come naturally, but I digress). Let's see if that happens, maybe you'll get your wish.

Ref the chart below: Is this the "sinkhole" you're referring to with regard to defense spending? Defense spending is below historic norms, and the world ain't a safe place. The graph doesn't include operational costs for Iraq and Afghanistan--to cut those costs we'd need to stop fighting there, which I think most people would agree is a separate issue from "cutting defense spending"

 

[ziggy29]

Ref the chart below: Is this the "sinkhole" you're referring to with regard to defense spending? Defense spending is below historic norms, and the world ain't a safe place.

Yes, but that says more because of the explosion in spending on entitlement programs and interest on the debt than it does about absolute military spending. I'd think defense spending as a percentage of GDP is more relevant.

 

[samclem]

Yes, but that says more because of the explosion in spending on entitlement programs and interest on the debt than it does about absolute military spending. I'd think defense spending as a percentage of GDP is more relevant.

Yes, I agree. How about this? It's from CATO, but they're not big boosters of defense spending, so I don't suspect it.

That green interest line is a scary one--when interest rates go up, that's gonna hurt a lot. As the article accompanying the article points out, government nondefense spending is now about double what it was in 1970, as a % of GDP. I guess some people believe it's not high enough yet.

 

[FinanceDude]

Yes, I agree. How about this? It's from CATO, but they're not big boosters of defense spending, so I don't suspect it.

That green interest line is a scary one--when interest rates go up, that's gonna hurt a lot. As the article accompanying the article points out, government nondefense spending is now about double what it was in 1970s, as a % of GDP. I guess some people believe it's not high enough yet.

I agree 100%. Don't worry, a couple folks on here will come along shortly and proclaim that CATO is a right wing conspiracy cooked up by Bush and Cheney..........

 

[Independent]

Yes, I agree. How about this? It's from CATO, but they're not big boosters of defense spending, so I don't suspect it.

That green interest line is a scary one--when interest rates go up, that's gonna hurt a lot. As the article accompanying the article points out, government nondefense spending is now about double what it was in 1970, as a % of GDP. I guess some people believe it's not high enough yet.

I think you are saying that defense spending went down "too far" immediately after the end of the cold war, and we are currently at "more appropriate" levels.

But we still need to cut about $700 billion, assuming the economy gets better (I'm using the projected 2014 deficit, which assumes unemployment at 6.5% and 10 year treasuries at 5.3%). http://www.whitehouse.gov/omb/budget/fy2011/assets/econ_analyses.pdf

So which $700 billion would you cut?

 

[samclem]

I think you are saying that defense spending went down "too far" immediately after the end of the cold war, and we are currently at "more appropriate" levels.

But we still need to cut about $700 billion, assuming the economy gets better (I'm using the projected 2014 deficit, which assumes unemployment at 6.5% and 10 year treasuries at 5.3%). http://www.whitehouse.gov/omb/budget/fy2011/assets/econ_analyses.pdf

So which $700 billion would you cut?

Here's a quick gauge to tell us this is possible: $700 billion is 5% of GDP. From a rapid glance at the graph I see that, coincidentally, nondefense government spending in 2006 was, as portion of GDP, 5% lower than it is in the 2011 budget. Now, I know we've had a lot of hope and change and huge societal evolution since 2006, but I can remember back to those days of 0.4 decades ago. What the gummint spent, in toto, seemed to be somehow, unbelievably, enough. I don't recall hungry mobs, I don't think we had societal breakdown. We had a space program and we had foreign aid programs. School lunches, tax money for obscene art--all the things that some people now believe the Constitution requires. In addition, as combat ops and expenditures are now winding down in Iraq, that should help us get the number down.

So, if we can't think of any better idea, I'd suggest we just re-run the budget from 2006. As it happens, our Congress, for the first time in many years, doesn't seem inclined to actually produce a budget this year (one of its primary responsibilities) so this fills the vacuum well--just turn in the same budget "term paper" that the congressional class of 2006 turned in. Sure, we can tweak it, but the very fact that it was "good enough" in 2006 is a sign that this is not an impossible exercise. And, we shouldn't have any of the gnashing of teeth caused by program cuts. "Oh, no!! We can't cut ________ (insert sacred program here)!! That's an essential program!!" Darlin, we ain't cuttin' it, we're just 'resetting' it to '06 levels.

We'll call this initiative the ""Aught Six Reboot."

Next problem: Mideast peace.

 

[Hamlet]

Given that we are involved in major wars every 10-15 years like clockwork, I think that we need to count them in our "defense" costs.

We've been in Iraq for 7 years and Afganistan for 9. We're probably about due to get involved in another one within 5-10 years, so I'm thinking that we either need to re-think our foreign policy or start treating these expenses as normal ongoing operations and stop pretending that they aren't part of the budget.

It's like when companies that have aquisitions every year treat them as non-recurring expenses. They aren't. They have become a normal cost of doing business and the financials should reflect that.

The graph doesn't include operational costs for Iraq and Afghanistan--to cut those costs we'd need to stop fighting there, which I think most people would agree is a separate issue from "cutting defense spending"

 

[samclem]

Given that we are involved in major wars every 10-15 years like clockwork, I think that we need to count them in our "defense" costs.

We've been in Iraq for 7 years and Afganistan for 9. We're probably about due to get involved in another one within 5-10 years, so I'm thinking that we either need to re-think our foreign policy or start treating these expenses as normal ongoing operations and stop pretending that they aren't part of the budget.

It's like when companies that have aquisitions every year treat them as non-recurring expenses. They aren't. They have become a normal cost of doing business and the financials should reflect that.

Going to war (or largescale combat operations not formally declared a war) should be hard. It should require a no-kidding demonstration that the public, or the representatives elected by the public, are behind it and that there's public willingness to sacrifice for whatever is being proposed. Forcing them to vote for a special appropriation is the very least we should do. Calling up the Reserves is better yet. Instituting the draft certainly shows that we are in it for the long haul. I don't want a bunch of money confiscated from taxpayers without clearly defined purpose just so it can build up in a tempting war fund for some ambitious pol to use. No, thanks.

 

[Hamlet]

Then you should be in favor of much lower defense spending, since current US policy is to be prepared for two of these ongoing regional conflicts to crop up at once.

Our "defense" budget has very little to do with protecting our citizens from aggression. We maintain this high level of spending to allow us to engage in these regional conflicts at very short notice.

Why we do that is not entirely clear to me, since I don't see the real benefit to America in engaging in most of these conflicts. Did the Korean War, Vietnam, Iraq I, Iraq II, and Afganistan improve the lives or safety of the average American? Were they worth the blood and treasure expended? I have a hard time seeing a reason to say yes.

How much money do you think it would really take to maintain a military that was interested mainly in protecting our borders from outside attack (including an anti-terrorism focus)? It would be a fraction of what we spend now.

Going to war (or largescale combat operations not formally declared a war) should be hard. It should require a no-kidding demonstration that the public, or the representatives elected by the public, are behind it and that there's public willingness to sacrifice for whatever is being proposed. Forcing them to vote for a special appropriation is the very least we should do. Calling up the Reserves is better yet. Instituting the draft certainly shows that we are in it for the long haul. I don't want a bunch of money confiscated from taxpayers without clearly defined purpose just so it can build up in a tempting war fund for some ambitious pol to use. No, thanks.