Just a reminder: this is a spending crisis, not a revenue crisis

Discussion in 'Politics' started by Doc91678, Dec 6, 2012.

  1. Doc91678
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    Just a reminder: this is a spending crisis, not a revenue crisis​




    December 6, 2012 by Ed Morrissey


    We’re hearing a lot of nostalgia for the Clinton era in this debate over the upcoming fiscal cliff. Democrats argue that we need to return to the Clinton-era tax rates in order to get back to Clinton-era budget stability, but that argument utterly founders on the facts — and I’m not the only one to notice that. Michael Barone points out a few inconvenient truths in today’s New York Post about revenues and tax rates from the Clinton era to show that the current fiscal crisis comes from the other side of the ledger:


    Over that period of nearly three-quarters of a century, federal receipts have never exceeded 20.9 percent of gross domestic product. That was the number for the war year 1944.

    The highest number since was the 20.6 percent of GDP in 2000, the climax of the dotcom boom. In the Obama years, federal receipts have hovered at 15 percent of GDP.

    That’s just because tax rates are too low, Obama backers reply. Just raise the rates on high earners, and the problem will be solved.

    Actually, high earners don’t make enough money to close the current budget deficit. You’d need to raise taxes on middle-income earners too.

    But we have had higher income tax rates in most of the years since World War II. What history and Table B-79 show is that even much higher rates — like the 91 percent marginal rate on top earners imposed from the 1940s to the 1960s — have never produced federal receipts higher than 20 percent of GDP.

    Why is that? As the late Jack Kemp liked to say, when you tax something, you get less of it. When the government took 91 percent of what the law defined as adjusted gross income over a certain amount, not many people had adjusted gross income over that amount.​

    Let’s say, though, that a return to Clinton-era tax rates would produce 20.6% of GDP in federal revenue. We’d still have massive deficits, because we’re spending twenty-five percent of GDP at the federal level. In order to return to the Clinton era, I argue in my column for The Fiscal Times, we’d have to undo the spending spree that took place in both the Bush and Obama presidencies:


    In his eight years as President, Clinton reduced federal spending to 18.2 percent of GDP from 22.1 percent, thanks in large part to a Republican-controlled Congress that forced the issue. Defense spending as a portion of GDP declined by 1.8 points, but non-defense spending dropped by 2.2 points. Clinton and the Republicans in Congress cut spending on domestic discretionary programs as well as entitlement spending through welfare reform.

    What followed afterward is instructive to the real problem of our current trillion-dollar trajectory of deficit spending. George Bush increased federal spending as a share of GDP by 2.6 points in two terms, and it wasn’t just spent on defense; the increase was split evenly between defense and non-defense spending, a remarkable statistic considering the two wars waged in those eight years.

    Barack Obama managed to hike it 3.5 points in just one term, with 3.2 points going to non-defense spending. Under Obama, federal spending now exceeds 25 percent of GDP, and his has been the biggest increase of any of his predecessors over the last 60 years – even for two-term Presidents.

    The real debate over deficits isn’t over whether to go back to Clinton-era tax rates. It’s how to get back to Clinton-era spending levels, and then create a tax system that will adequately fund it. The 18.2 percent level of federal spending is one piece of Clinton-era nostalgia worth recalling – as well as the bipartisanship that eventually produced it.​

    The column should have included a link to the analysis provided by Cato’s Steve Hanke in his fact-check of the roundtable on Meet the Press this week. Professor Hanke (Johns Hopkins University) developed this table from OMB source data, which clearly shows how, when, and where we dug ourselves into this debt and deficit trap. Here’s a hint — it didn’t come from defense spending on wars:

    [​IMG]

    Just a reminder: this is a spending crisis, not a revenue crisis « Hot Air
     
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    Last edited: Dec 6, 2012
  2. g5000
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    g5000 Diamond Member

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    Whatever you do, just don't take away my deductions, loopholes, and credits.

    I think it is totally fair to tax people for not owning a house, for not having kids, for not buying the right kind of refrigerator, and for not being heterosexual.

    These subsidies are given to me by all the other taxpayers who pay extra taxes because I am special, and you damn well better let me keep more of my own money and make the other guy pay more to make up the difference! :mad:

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  3. g5000
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    g5000 Diamond Member

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    And don't even think about cutting defense spending. Just because the two wars are over does not mean we can't keep spending at war levels, you know!

    After all, when we ran up defense spending to prosecute WWII, you don't think we cut defense spending after the war ended, do you? Huh?

    Oh...wait.

    Defense spending in 1945 was $962.7 billion in 1996 dollars. By 1948, that dropped to $94.7 billion.


    Hmmm...

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  4. waltky
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    waltky Wise ol' monkey Supporting Member

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    Granny says, "Dat's right - people not spendin' as much anymore `cause o' the Obama economy...
    :tongue:
    Obama: ‘I Cut Spending by Over a Trillion Dollars in 2011’
    December 30, 2012 - Appearing on NBCs “Meet the Press” on Sunday, President Barack Obama said that he cut spending by more than $1 trillion in 2011. However, the White House Office of Management and Budget says that federal spending increased by $147 billion from fiscal 2010 to fiscal 2011.
    See also:

    Shoppers Disappoint Retailers This Holiday Season
    December 26, 2012 WASHINGTON (AP) — U.S. shoppers spent cautiously this holiday season, a disappointment for retailers who slashed prices to lure people into stores and now must hope for a post-Christmas burst of spending.
     
  5. oreo
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    oreo Gold Member Supporting Member

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    If we go back to Clinton era taxes--then we must also go back to Clinton era spending which was around 160 million per day. Today we're spending 4 billion dollars a day.

    Good luck with that one---:razz:

    [​IMG]
     
  6. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    From all accounts, the fiscal cliff deal is not going to have much in the way of spending cuts, and future Congresses can ignore whatever the spending cuts agreed to anyway. I think we're looking a recession in 2013 and trillion dollar deficits as long as a democrat is in the WH.
     

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