17 November 2010

On the Bush Tax Cuts and the Deficit

From the Center on Budget and Policy Priorities:

Note that by 2050, the debt from the Bush tax cuts alone will equal 100% of GDP.  100% of GDP. Say that to yourself slowly a few times and savor it.

Two take-homes from this:

Any Republican who claims to be worried about the deficit but wants to extend the tax cuts (which is basically all of them) is a liar or an idiot or both.

It's profoundly depressing and irresponsible that Obama is willing to even consider making the middle class tax cuts permanent. IIRC, the ten year cost of the tax cuts is about $4 Trillion (with a T), of the which the cost of the upper-class tax cuts are $700Bn. So Obama making the correct argument that we can't afford the tax cuts for the rich, but ignoring the much more pressing fact that we can't afford the rest of the cuts either. Not that it matters, since Dems have so backed themselves into a corner that they'll all be made permanent anyway.

We are governed by idiots, truly.

9 comments:

  1. Tax cuts don't help at all unless spending is also cut. Which is one of the other things Republicans favor.

    But, yes, we are governed by idiots.

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  2. Far be it from me to disagree that we are governed by idiots, because indeed we are, but also note that without the tax cut extensions, we're still 200% over GDP, so the damage is profound with or without.

    ancenow

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  3. But what's the point in talking about 2050 when ten years ago there were surpluses? Economies change, technologies change, adminstrations change, even voters change. Look at all the changes since 1970. You get more impressive numbers over longer intervals, but the uncertainty on those numbers is huge.

    In the short term, it looks like the Bush cuts are just a sliver. I realize they constitute huge amounts of money, but I don't think talking about 2050, when a good portion of those alive today making decisions will be dead, is a good idea.

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  4. I don't understand. I thought we were going to unfund public broadcasting. Is that cost cutting measure included in this graph? What if we shifted the tax structure so that everyone paid more taxes on the first $250,000 of income and less on their income above $250,000? Wouldn't that help with the deficit?

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  5. I don't understand. I thought we were going to unfund public broadcasting. Is that cost cutting measure included in this graph? What if we shifted the tax structure so that everyone paid more taxes on the first $250,000 of income and less on their income above $250,000? Wouldn't that help with the deficit?

    Are you joking? Unfunding public broadcasting would do essentially nothing.

    It really all comes down to 2 things. Military R&D and healthcare costs.

    Luckily people seem to be realizing we don't need billion dollar stealth aircraft to fight terrorist (and what we currently have is more than good enough to take on Iran or North Korea). Plus future aircraft should benefit from the cost savings associated with being drones (the technology is almost there).


    Healthcare not only costs us a lot in Medicare and Medicaid, but all facets of the federal government are currently more expensive due to providing health coverage for employees. The easiest way to do this is to stand up to drug companies and negotiate prices and stop paying for drugs that are still patented, but have plenty of generic alternatives (for example generic flonase is like 1/2 the price of nasonex). Unfortunately with the current campaign finance laws the pharma companies have waaay too much power.

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  6. PharmNerd: tax cuts never help the deficit. They always hurt it (well, assuming the top rates are not at confiscatory levels, which they haven't been at for 30+ years).

    Yes, spending does need to be cut (more precisely, the runaway growth in Medicare spending need to be restrained -- see subsequent post). Both are required.

    Timmyson: we had surpluses until the Bush tax cuts were enacted and turned them into deficits. Also, the deficit-financed Medicare part D. I remember when Saint Alan greenspan solemnly warned Congress about how dangerous it would be if we paid off all the national debt too quickly. Boy, we sure dodged a bullet there, didn't we?

    Dave: JimII was joking. There were conservative calls to defund NPR (which doesn't recieve any direct federal funding) after they fired Juan Williams.

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  7. Your post begs the question whether tax, tax, tax is really the only way to balance the budget. When you were a poor resident, did you enact a bank tax and enforce it through armed robbery, or did you adjust your spending to your available funds?

    Cheers,
    Felix.

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  8. So, if medicare needs to be cut, but at the same time physicians all over the blogosphere are saying that they aren't paid enough, where do we cut medicare? is there really that much bureaucracy? Are hospitals making a boatload of profit on medicare patients?

    (I'm sorry, but it seems like those are really at odds, and I'm not seeing a way out.)

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  9. Is it possible we need to raise taxes to fund medicare/medicaid? Why do we pay so much more for health care in the United States than the rest of the industrialized world? I wonder if that is part of the problem.

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