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Why the deficit will raise taxes

Discussion in 'Political Zone' started by Doomsday101, Aug 27, 2009.

  1. Doomsday101

    Doomsday101 Well-Known Member

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    NEW YORK (CNNMoney.com) -- A $9 trillion federal deficit over 10 years may be too hard to comprehend. But this part is easy: Such unwieldy amounts of debt could have an impact on Americans' bottom line one way or the other -- if not tomorrow, then the day after.

    The U.S. government has been spending a great deal more than it has been taking in, and it is on track to do so well beyond the next 10 years. It has been borrowing money to make all that spending possible and it has to pay the money back with interest. How, you ask? By borrowing more.

    The solution is straightforward if unpleasant: Shy of finding a fairy willing to leave trillions under Uncle Sam's pillow, lawmakers will have to raise taxes and cut spending.

    The more the country lives on a credit card, the more it makes itself beholden to the demands of its creditors -- many of which are overseas. The danger is that buyers of U.S. debt could become concerned that the country is running too high a balance. If so, they will demand higher interest rates -- thereby making the country's debt problem worse -- or they'll put their money elsewhere.

    At that point, things would get ugly.

    "Taxes would rise to levels that would make a Scandinavian revolt. And the government would not be able to provide anything but the most basic public services. We would no longer be a great power (or even a mediocre one), and the social safety net would evaporate," tax policy expert and Syracuse University professor Len Burman wrote in a recent op-ed cheerfully titled "Catastrophic Budget Failure."

    That's why acting sooner rather than later makes sense. But acting too soon could cause its own set of problems since the economy is only beginning to lick its wounds from a punishing recession.

    Economists and tax experts, no matter their ideological position, agree raising taxes when the economy is down is self-defeating.

    But as the economy finds a solid footing, the hard choices will have to be made.

    "We need to do this in stages at the right time," said David Walker, former U.S. comptroller general, in a CNNMoney.com video.

    Right now there is a lot of talk, but not a lot of planning, about how to address the situation.

    In fact, President Obama is pledging to keep taxes low for most people.

    For example, Obama has proposed keeping in place the 2001 and 2003 tax cuts for families making less than $250,000 (under $200,000 for individuals). The cuts are scheduled to expire in 2011.

    A number of temporary tax relief measures, including the patch to protect the middle class from the Alternative Minimum Tax, are set to expire even sooner. And Obama has said he would like to keep many of those measures in place as well.

    Experts say that's not going to cut it.

    "Taxes are going up and they're going up for a lot more people than those making more than $250,000. Why? Math. The numbers don't come close to working," Walker said.

    For instance, the president's proposal to raise taxes only on high-income families would raise an additional $600 billion over 10 years, said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center.

    That's not a lot when the government is staring at a 10-year deficit of $9 trillion. A 10-year deficit of that magnitude means the debt held by the public -- the accumulation of all annual deficits over the decades -- would reach 82% of gross domestic product come 2019. That's double the 41% recorded in 2008.

    When lawmakers do decide to act, they will need to do more than just tinker with tax rates, according to Williams.

    Tax experts have been calling for fundamental tax reform to make the system less complex. Plus, Williams said, Congress will likely need to seek out a new source of revenue beyond the income tax. One idea that has been talked about increasingly is a value-added tax, which is a tax on goods and services at every stage of production up to the point of sale.

    A multi-pronged approach may work best because "no piece by itself is enough," Williams said. "There's a really big hole to fill and [lawmakers] are just talking about dollops."

    http://money.cnn.com/2009/08/27/news/economy/deficit_taxes/index.htm?postversion=2009082713
  2. hairic

    hairic Well-Known Member

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    You've already been taxed on them, and kind of heavily too. I think the last data I saw showed that the US has paid about $7 trillion in interest payments on the national debt over the last 20 years. That's interest payments on the debt, not the debt itself. Until the debt goes away, dead presidents will still be asking for that yearly delayed tax.

    BTW, I once had a dream that the US was such a creditor nation that nobody had to pay taxes - the rest of the world's debtor nations paid for our foreign policy and welfare state via interest payments.
  3. arglebargle

    arglebargle Well-Known Member

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    In 1980, America was the #1 Creditor nation in the world; in 1984, America was the #1 Debtor nation in the world.....
  4. CowboyWay

    CowboyWay If Coach would have put me in, we'd a won State

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    Who was president then?
  5. burmafrd

    burmafrd Well-Known Member

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    Who controled the house then?

    Reagan agreed to tax cuts if spending cuts were also done. Tip O neil went back on the promise and the spending cuts never happened. We also built up our Defense and won the cold war/and Obama has already put us on track to rack up more debt in his first two years then Reagan did in 8.
  6. arglebargle

    arglebargle Well-Known Member

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    Funny, when it's your guy, all the excuses are valid, but when it's someone you don't like, all the excuses are BS.

    And when it's your guy, the reasons given are enough to justify overspending at unprecedented levels. When it's some other guy, then no reasons could possibly justify overspending for anything.

    And I think Bush managed to rack up way more debt than Reagan did too, but all his cronies were talking about how this was actually good.

    Anyway, doesn't the Grover Norquist party line say that bankrupting the federal government is good for us? Shouldn't this actually be a benefit then?
  7. vta

    vta The Proletariat

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    Funny, when it's your guy, your excuse is crap from over 20 years ago.

    I can recognize that Reagan is the Republican poster child for the model President, just as I can recognize that that leads to referencing him as a way of insulting Republicans and an easy way of avoiding the criticism of the current President and possibly detouring into an unrelated argument of the merits of a long dead administration.

    If you have something to counter the assertion that the current admin isn't full of **** or is on the right path, by all means offer it.

    BS excuses indeed.
  8. arglebargle

    arglebargle Well-Known Member

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    People who think that nothing that didn't happen in the last 3 months is important, are clueless fools. But I suspect you know that.

    I am not actually that comfortable with this level of deficit spending. However, a lot of mainstream economists thought it was the way to go. Not that they that makes it right, just that it's not some off the wall idea. Also, I note, it was the same response as that of the previous Republican administration. The scale of it is unprecedented, but it did not happen in a vacuum.

    And really the Republican financial profligacy was more shocking to me, as I had bought the line of them being actual fiscal conservatives. I don't believe that any more. All the new found dudgeon just smacks of political posing and strategy. I see claims of being gung ho for free enterprise, but that actually stands more for monopolistic big businesses.

    We've lived on the credit card for decades, with both political parties at the trough, but sometime the bill will come due. So I do not disagree with parts of the article at all.

    I just don't see a huge difference in the parties involved.
  9. burmafrd

    burmafrd Well-Known Member

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    Once Newt and Trent Lott were forced out of the leadership roles by the media and scandal mongers and the gut less Republican sheep, all fiscal conservatism went with them.

    You might do a little research on 1981 and 1982 when this all happened argle. Ronnie believed Tip O'Neil when Tip promised to make hard cuts in spending. Mistake. But he believed it was more important to stimulate the economy and build the defense. And he was right.
  10. Doomsday101

    Doomsday101 Well-Known Member

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    Why because Obama said they were main stream? There were many economists who disagreed and were summarily dismissed from the discussion all together. If you find a group willing to say this is the right way and shut out all opposing views I'm sure it is easy to sit there and say they all agreed.
  11. sbark

    sbark Well-Known Member Zone Supporter

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    The way to measure the govt spending, debt & deficit is as a percentage of GNP.......much like measureing one's personal spending, deficit and debt as a percent of your personal total income.....

    Since World War II, federal spending has generally remained between 18 and 22 percent of GDP. During the Bush Administration, spending increased from 18 to 21 percent of GDP. This year, President Obama will spend a peacetime-record 26 percent of GDP. Even by 2019, spending would still be 23 percent of GDP--not even counting the President's proposed health plan.

    Since World War II, the largest budget deficit recorded was 6.0 percent of GDP in 1983. The Bush Administration oversaw budget deficits averaging 2.0 percent of GDP. The projected 2009 budget deficit of 11.2 percent of GDP would nearly double the post-war record.

    The coming tsunami of Social Security, Medicare, and Medicaid costs are projected to push the federal public debt to 320 percent of GDP by 2050 and over 750 percent by 2083
    ........our biggest problem is the breakup of the Liberal world started by FDR

    We are sitting here watching the free mkt & capitalism destroyed on purpose....actual unemploy @ 16.4%, and CBO projects another 2.3 million in the next year.......

    With treas. receipts dropping .......taxation is the only recourse for the Liberals....and tell you what....there are not enough "rich" people to pay the tab........get ready all the way down to very low "middle class"...

    as Lenin said the best way to crush Capitalism is between the rocks of taxation and inflation......and its right on schedule
  12. Rackat

    Rackat Active Member

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    Some people don't see it. Not because it isn't there, but because they don't want to.
  13. sbark

    sbark Well-Known Member Zone Supporter

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    debt was low enough........but economy totally in the tank with double digit inflation and double digit int. rates.........

    When Reagan came in it was salvagable:...because debt was low enough GNP could recover and % debt came into line

    Obama is driving the debt to levels, along with unfunded SS, Medicare mandates of 55 trillion........that it will be impossible for GNP to recover to a level that is sustainable as % of debt Obama placed on our economy..

    Obama is trying the old Keyen's theory of getting the people to belive that inflation is coming, but hopeing the Chinese dont think its gonna hit......

    the whole theory behind Keyeism is too cause inflation,which effictivly reduces the cost of labor to business. In todays world, politics prevents wages from falling --but in a correction: if wages dont fall--no recovery.
    Obama needs to pull this wool over the unions' eyes---reducing their wages via inflation so business can afford to hire them again
  14. JBond

    JBond Well-Known Member

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    It's a shame that the democrat party led by a pair of alcoholics reneged on their promises regarding spending.
  15. theogt

    theogt Surrealist Zone Supporter

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    $9 trillion in deficits over the next ten years represents only a little over 5% of GDP over those years. That's a little higher than average for America, but not to the point where you'd say raising taxes is an absolute necessity.

    Obviously the goal is to have lower deficits, but I'm not sure raising taxes is the best way to do that.
  16. Doomsday101

    Doomsday101 Well-Known Member

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    I would agree with a recession going on. However big Government ran projects that are very expensive is also not the way to go right now
  17. sbark

    sbark Well-Known Member Zone Supporter

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    ........but that is on top of the exisiting GNP/deficit ratio already in place

    ........Obama is presuming int. rate will stay historically low....impossible with the govt's demand and consumption of debt....China will want to be paid for the inflation risk...which lowers the value of their usa bonds...

    Tax revenues have historically remained between 17 and 19 percent of GDP. This year, the recession has reduced them to 14.7 percent of GDP. The CBO has estimated that once the recession ends, maintaining current tax policies would keep revenues at around 17.6 percent of GDP (slightly below the 18.3 historical average). President Obama's proposed tax increases would push revenues up to 19.2 percent of GDP by 2019 (not counting his proposed tax increases to finance health care reform).

    The White House underestimates future budget deficits by trillions of dollars by (1) assuming that discretionary spending will be frozen to inflation for the next decade, (2) assuming that cap-and-trade revenues will be available to finance a Make Work Pay credit (the House-passed bill allocates those revenues elsewhere), (3) assuming health care reform will be deficit-neutral, and (4) assuming certain tax increases that are unlikely to be enacted.
    The White House also likely overestimates long-term economic growth. Its forecast for real GDP growth in 2010 and 2011 is reasonable but exceedingly optimistic after the economic recovery. The Administration forecast exceeds that of the CBO every year by as much as 0.9 percentage points as late as 2015 and by a cumulative 3.9 percentage points over the 2012-2019 period. In effect, the Administration is assuming a full year's additional growth over those eight years. The effect is to boost revenues significantly in each year and by as much as $160 billion in the 10th year and a cumulative amount of almost $680 billion.

    all facts needed at Heritage.org
    http://www.heritage.org/Research/Budget/wm2595.cfm
  18. JBond

    JBond Well-Known Member

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    I wish they would come clean and include the liabilities that the president and congress refuse to show on the books. Not just this Pres and congress, but all of them for the last 80 years.
  19. CanadianCowboysFan

    CanadianCowboysFan Lightning Rod

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    are you sure you really want to know?

    that reminds me of the wife who searches high and low on her husband's email for proof he is having an affair and then is devastated when she finds out. sometimes it is better not knowing
  20. zrinkill

    zrinkill Diamond surrounded by trash

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    Dangit ...... thought this guy was banned.

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