The money's got to come from somewhere

[Vanadium 50]

As many of you have read here, I regularly post statistics on taxes and taxation, mostly to counter wishful thinking with cold, hard facts. One theme is that there is large mismatch between federal spending and federal income tax revenues, a mismatch comparable to and often larger than these revenues. That means you won't solve the problem by raising taxes by 10 or 20% - taxes would have to double or more.

Bruce Ackerman and Anne Alstott http://www.latimes.com/news/opinion/commentary/la-oe-ackerman-wealth-tax-20110920,0,7752814.story" that the solution to this dilemma is a wealth tax. They propose a 2% tax on households owning more than $7.2M in net assets, and claim it will generate $70B a year.

 

[Pengwuino]

I would hardly say what they said was an "argument". More like a delusional understanding of reality. They clearly don't have any business talking about remedies for our countries financial situation when they think $70B is going to fix anything. Does anyone really think it's anything more than more class warfare rhetoric?

If they ACTUALLY wanted to propose a solution, they'd get serious and say 10-20% to generate the revenue needed to make a difference. Of course, saying that makes the plan sound as stupid as it actually is.

This part made me laugh:

A wealth tax is the best way to reduce this classical danger to democracy, and it provides the primary motivation for our proposal — though we also believe that it's more than fair for the super-rich to be paying more as we confront our long-term fiscal problems.

Their long term solution is to propose a tax that by definition can't work long-term? That statement makes me think this article, like most LA Times op-eds, is trash.

 

[Vanadium 50]

OK, why not a higher number? That would also increase spending and stimulate the economy.

 

[AlephZero]

The Financial Times "Lex" analysis column today summed up the latest piece of exhortation pretty well IMO.

Criticising Washington for being irrational about tax and spending a year from a presidental election is about as pointless as admonishing a box full of frogs.

To summarize the rest of the FT's comments: In their opinion this is bad politics and bad ecomonics, but if it is a first step torwards sorting out the mess of the US tax code, that at least is a step in the right direction.

 

[Greg Bernhardt]

They propose a 2% tax on households owning more than $7.2M in net assets, and claim it will generate $70B a year.

Only means the next year they will spend $70B more. Since the 60s the gov has spent more than it's earned (except for a couple years). More taxes won't stop that. http://www.heritage.org/budgetchartbook/growth-federal-spending-revenue

 

[turbo]

True, the money has got to come from somewhere, IF we are going to continue spending it. There is a lot of spending that is counter-productive and wasteful, though. Agriculture is a very profitable business, but our government subsidizes agriculture anyway. Why? Because Con Agra and ADM really, really need the money? Our government subsidizes energy companies, despite the fact that they are rolling in cash. It also mandates the use of ethanol in our gasoline and subsidizes the production of same. Why? These are "entitlements" targeted toward corporations. Many in Congress (both sides of the aisle) will be loathe to cut this corporate welfare because they enjoy the campaign money that the big companies and their lobbyists give them. Still, the US can't afford to keep squandering taxpayer money on such boondoggles. Winding down a couple of wars would help a lot, too.

 

[Greg Bernhardt]

Many in Congress (both sides of the aisle) will be loathe to cut this corporate welfare because they enjoy the campaign money that the big companies and their lobbyists give them. Still, the US can't afford to keep squandering taxpayer money on such boondoggles. Winding down a couple of wars would help a lot, too.

I think the corruption really is the biggest hurdle here. Gov waste is so obvious, everyone knows it, but there is no political will to stop it. I have to believe the US has relatively low corruption compared to most other countries (not that that is saying much), but it could still be high enough to massage our downfall.

About winding down wars. Over the past 100 years, what was the longest the US has been without fighting a fairly major war? I feel each decade there is a war. So, we wind one down and wind up the next.

 

[WhoWee]

I think the corruption really is the biggest hurdle here. Gov waste is so obvious, everyone knows it, but there is no political will to stop it. I have to believe the US has relatively low corruption compared to most other countries (not that that is saying much), but it could still be high enough to massage our downfall.

About winding down wars. Over the past 100 years, what was the longest the US has been without fighting a fairly major war? I feel each decade there is a war. So, we wind one down and wind up the next.

My bold.
The reason there is no political will is just as obvious - like them or not - the TEA Party has attempted to step up and look at what has happened to them.

Before anyone chooses to attack me or the TEA Party - please read Greg's post first.

 

[russ_watters]

That's not a reason, it's just a demonstration of the point. The "why" is a much tougher question -- I hope. The simple answer would be that politicians are motivated soley by their next re-election prospects.

 

[Proton Soup]

the wealth disparity is certainly a problem. you can moralize all you want about it, but the fact is that wealth trickles up because the wealthiest have the means to manipulate the system to their advantage. confiscation is one means, but it will be played as unfair. i suggest you just go about it from the bottom up. we tried quantitative easing from the top down and it did nothing, the guys at the top just hold onto their cash and nothing comes down. so rather, just quantitative ease from the bottom. but don't just give out cash, spend a couple of trillion in newly printed greenbacks on some pretty ambitious infrastructure projects. rebuild crumbling bridges and sewers with systems designed to last a century, but also connect the nation with high speed rail the way it is now connected with interstate highways. it will water down the wealth of the leisure class, preserve peoples' dignity, and invest in the long-term health of the nation.

or, do nothing and wait for the next french revolution.

 

[WhoWee]

the wealth disparity is certainly a problem. you can moralize all you want about it, but the fact is that wealth trickles up because the wealthiest have the means to manipulate the system to their advantage. confiscation is one means, but it will be played as unfair. i suggest you just go about it from the bottom up. we tried quantitative easing from the top down and it did nothing, the guys at the top just hold onto their cash and nothing comes down. so rather, just quantitative ease from the bottom. but don't just give out cash, spend a couple of trillion in newly printed greenbacks on some pretty ambitious infrastructure projects. rebuild crumbling bridges and sewers with systems designed to last a century, but also connect the nation with high speed rail the way it is now connected with interstate highways. it will water down the wealth of the leisure class, preserve peoples' dignity, and invest in the long-term health of the nation.

or, do nothing and wait for the next french revolution.

Remember the Stimulus Bill?
http://www.huffingtonpost.com/2009/02/17/obama-signing-stimulus-bi_n_167495.html

When President Obama signed the Bill he said this:
"Because we know we can't build our economic future on the transportation and information networks of the past, we are remaking the American landscape with the largest new investment in our nation's infrastructure since Eisenhower built an interstate highway system in the 1950s. Because of this investment, nearly 400,000 men and women will go to work rebuilding our crumbling roads and bridges, repairing our faulty dams and levees, bringing critical broadband connections to businesses and homes in nearly every community in America, upgrading mass transit, and building high-speed rail lines that will improve travel and commerce throughout the nation."

Type in your zip code and see where the money went in your area.
http://www.recovery.gov/Pages/default.aspx

 

[Proton Soup]

Remember the Stimulus Bill?
http://www.huffingtonpost.com/2009/02/17/obama-signing-stimulus-bi_n_167495.html

When President Obama signed the Bill he said this:
"Because we know we can't build our economic future on the transportation and information networks of the past, we are remaking the American landscape with the largest new investment in our nation's infrastructure since Eisenhower built an interstate highway system in the 1950s. Because of this investment, nearly 400,000 men and women will go to work rebuilding our crumbling roads and bridges, repairing our faulty dams and levees, bringing critical broadband connections to businesses and homes in nearly every community in America, upgrading mass transit, and building high-speed rail lines that will improve travel and commerce throughout the nation."

Type in your zip code and see where the money went in your area.
http://www.recovery.gov/Pages/default.aspx

yeah, that's amazing. in my zip, 0 contracts, 2 grants totaling nearly 8 million and one job per million spent.

and not at all what i was proposing is it?

http://useconomy.about.com/od/candidatesandtheeconomy/a/Obama_Stimulus.htm

this isn't stimulus, it's life support:

$288 billion in tax cuts.
$224 billion in extended unemployment benefits, education and health care.
$275 billion for job creation using federal contracts, grants and loans.

so the real amount on projects is something like $275B spread over a few years, and likely getting porked to death. while increasing the debt.

no, print the money straight out like you did for QE1 and QE2. print a few trillion if need be, and don't just go handing out money. heck, maybe just do one project: build the freaking next-generation rail system. run it as a government works project. the people constructing it can even be government employees. punish any white collar crime like fraud and embezzlement against it with 20-year sentences. don't hand out unemployment checks and patch potholes, actually plan out big projects, print the money, and go do them.

 

[Vanadium 50]

Type in your zip code and see where the money went in your area.
http://www.recovery.gov/Pages/default.aspx

Yipes. $1.6M and 0 jobs. The next Zip Code over is better - $37M and 17.5 jobs.

 

[Galron]

the wealth disparity is certainly a problem. you can moralize all you want about it, but the fact is that wealth trickles up because the wealthiest have the means to manipulate the system to their advantage. confiscation is one means, but it will be played as unfair. i suggest you just go about it from the bottom up. we tried quantitative easing from the top down and it did nothing, the guys at the top just hold onto their cash and nothing comes down. so rather, just quantitative ease from the bottom. but don't just give out cash, spend a couple of trillion in newly printed greenbacks on some pretty ambitious infrastructure projects. rebuild crumbling bridges and sewers with systems designed to last a century, but also connect the nation with high speed rail the way it is now connected with interstate highways. it will water down the wealth of the leisure class, preserve peoples' dignity, and invest in the long-term health of the nation.

or, do nothing and wait for the next french revolution.

Indeed social mobility is a problem for most Western countries, although it seems particularly acute in the US, I suspect due to the way the system is set up.

Probably not an accident that in the war of independence, France were allies and sent ships and troops to repel us damned monarchist Brits! Although let's face it it wasn't all about liberté, equalité and Fraternité.

 

[WhoWee]

no, print the money straight out like you did for QE1 and QE2. print a few trillion if need be, and don't just go handing out money. heck, maybe just do one project: build the freaking next-generation rail system. run it as a government works project. the people constructing it can even be government employees. punish any white collar crime like fraud and embezzlement against it with 20-year sentences. don't hand out unemployment checks and patch potholes, actually plan out big projects, print the money, and go do them.

Convince me you can use the highway system as a grid to capture static electric to either lower my electric bill or pay the deficit and I might agree.
http://www.sciencedaily.com/releases/2010/08/100825185121.htm

 

[WhoWee]

Earlier today, Neil Cavuto and Orrin Hatch were discussing Solyndra. Hatch said Solyndra received more tax money (over $500 Million) than 35 of the States received for highway construction.

Btw - why would Solyndra Executives need to "take the 5th"?
http://latimesblogs.latimes.com/mon...ifth-amendment-wont-testify-before-house.html

"Solyndra execs to take 5th, refuse to testify before House panel"

IMO - if they refuse to testify - the IRS and FBI need to make this investigation their number one priority!

 

[Char. Limit]

Yipes. $1.6M and 0 jobs. The next Zip Code over is better - $37M and 17.5 jobs.

I got 13.4 million and zero jobs... looks like all that money went to CVSD though.

 

[Pengwuino]

Yipes. $1.6M and 0 jobs. The next Zip Code over is better - $37M and 17.5 jobs.

Is all of this a joke?

My zip code, $1M, 0 jobs. Next one over $6.7M for 3 jobs. And people want another stimulus?

 

[Proton Soup]

Convince me you can use the highway system as a grid to capture static electric to either lower my electric bill or pay the deficit and I might agree.
http://www.sciencedaily.com/releases/2010/08/100825185121.htm

:uhh: are you John Galt ?

actually, I'm not sure i could convince you of that. i think there have been some experiments to capture lightning in Florida, but the sticky part is few places in the US have the sort of conditions for that much lightning (heat and humidity, apparently). those guys in the article are in Brazil which at least makes some sense. even assuming you could bleed the charge out in clear skies regions, iirc the amount of energy available for harvesting is not gargantuan. plus, it would probably cause "climate change", which could be good or bad depending on whose climate you changed and for what reason.

oh, and since you mentioned the debt. the debt would be devalued, just the same as the accumulated wealth of the oligarchs. so it's a "win-win" as the business people say.

 

[maine75man]

Of course the money has to come from somewhere.

Like all governments the US federal government extracts money from the economy in taxes fee's and what not. It also put money into the economy when it spends. This takes the form of spending on things things like salaries, materials, benefits, and subsidies. Even if you think that some government programs are a complete waste of money that money still goes somewhere when it's spent. It ends up in someone's pocket who then spends it on something.

The US government also spends more money than it makes. This is bad in the long term because it's borrowing money from the future. In the short term it does mean that more money is going into the economy then is coming out of it. Any attempt to shrink the disparity is IMO going to end up shrinking the current economy along with it.

 

[Gokul43201]

I got 13.4 million and zero jobs... looks like all that money went to CVSD though.

Is it more likely that zero jobs were created or that there was a lack of communication?

 

[turbo]

Is it more likely that zero jobs were created or that there was a lack of communication?

It is more likely that a project was targeted at a range of Zip codes, but that the actual jobs produced were not so targeted. Not a real hard tactic to dismiss. In Maine, if a bridge project was approved and funded, it would be pretty tough to tack that money to any created jobs, because if an infrastructure project is approved to provide hundreds of jobs for months or years they employ people from hundreds of miles away and they never impact those lame sites. My neighbor is a skilled crane operator. For the last two years he has been working on a local bridge project. For the previous 2-3 years he worked on a bridge project that kept him away from home and living in an RV. I doubt that the GOP has presented the real information at a level that approaches reality.

 

[WhoWee]

It is more likely that a project was targeted at a range of Zip codes, but that the actual jobs produced were not so targeted. Not a real hard tactic to dismiss. In Maine, if a bridge project was approved and funded, it would be pretty tough to tack that money to any created jobs, because if an infrastructure project is approved to provide hundreds of jobs for months or years they employ people from hundreds of miles away and they never impact those lame sites. My neighbor is a skilled crane operator. For the last two years he has been working on a local bridge project. For the previous 2-3 years he worked on a bridge project that kept him away from home and living in an RV. I doubt that the GOP has presented the real information at a level that approaches reality.

my bold
I didn't realize www.recovery.gov[/URL] was a GOP controlled site? Perhaps you can explain how the GOP was able to exert such influence over the information?

The website cites the following (Inspector General) sources:
[PLAIN]http://www.recovery.gov/FAQ/QuickLinks/Pages/OIGRecoverySites.aspx

"Many OIGs have created websites specifically for the Recovery Act.

Agency for International Development
Amtrak
Corporation for National and Community Service
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health & Human Services
Department of Homeland Security
Department of Housing and Urban Development
Department of Justice
Department of Labor
Department of the Interior
Department of Transportation
Department of Veteran Affairs
Environmental Protection Agency
Federal Communications Commission
General Services Administration
NASA
National Endowment for the Arts
National Science Foundation
Small Business Administration
Smithsonian Institute
Social Security Administration
Treasury Inspector General for Tax Administration"

 

[WhoWee]

Is it more likely that zero jobs were created or that there was a lack of communication?

If you search by Congressional district, county or state (rather than zip code) - it provides a better view of distributions.

 

[DoggerDan]

Only means the next year they will spend $70B more. Since the 60s the gov has spent more than it's earned (except for a couple years). More taxes won't stop that. http://www.heritage.org/budgetchartbook/growth-federal-spending-revenue

Good graph!

Two comments:

1. Balanced Budget Amendment

2. Revenue Cap Amendment

We're not electing these guys to figure out ways to skirt the issues while earning 10x what the average American makes + lifelong pensions. We're electing them to solve the problem, and your graph, Greg, highlights the problem: They're spending more than what's available to spend.

We all know what a balanced budget means. A revenue cap should be something so easy a child can calculate it, like 10%.

I think if we had some really smart guys running our country, they could get things done with just 3%.

 

[ThomasT]

As many of you have read here, I regularly post statistics on taxes and taxation, mostly to counter wishful thinking with cold, hard facts. One theme is that there is large mismatch between federal spending and federal income tax revenues, a mismatch comparable to and often larger than these revenues. That means you won't solve the problem by raising taxes by 10 or 20% - taxes would have to double or more.

Bruce Ackerman and Anne Alstott http://www.latimes.com/news/opinion/commentary/la-oe-ackerman-wealth-tax-20110920,0,7752814.story" that the solution to this dilemma is a wealth tax. They propose a 2% tax on households owning more than $7.2M in net assets, and claim it will generate $70B a year.

I agree with Greg B. and others who seem to be saying that more money isn't the answer.

I think it's probable that the federal budget deficits and the national debt will continue to increase.

There are fewer jobs in manufacturing primarily because of increases in manufacturing efficiency. There are fewer jobs in general because the buying power of the population is steadily decreasing. I also expect this trend to continue.

Then there's the contribution of outsourcing and offshoring, which I expect to continue.

And the influx of hundreds of thousands of indigent unskilled immigrants each year, which will continue.

There are approximately 20 million unemployed people in the US who are capable of persisting in some sort of gainful employment but for whom there are no jobs. This will increase. Even vast government funded infrastructure projects will only affect a small percentage of the potential labor force.

No significant changes will be made wrt corporate welfare, medicare, medicaid, social security, welfare to the poor, or the defense budget.

You can talk all you want about what needs to be done. There might be some relatively straightforward fixes to various economic-related problems in the US. But the politicians aren't going to do any of those things because they don't have to.

There's no encompassing, compelling vision of what's best for America. There's no 'big picture'. There's no common goal. There's no plan that all Americans might cooperate on. There's lots of different, more or less competing, groups going in somewhat different directions.

Given current trends with few or no significant changes being introduced, then I would guess that most people's situations won't become dire for a rather long time, if ever. So the general political attitude is to be not overly concerned, and to maintain the status quo.

Just my current opinion.

 

[DoggerDan]

The problem about one's mindset.

I'd add that concerning the thought that "the money has to come from somewhere," no, it does not, but only if you cut spending to below revenue levels.

As it is with the "tyranny of the urgent," there's the "tyranny of the need" aka "tyranny of the must have."

Driven, somewhat obsessive over-controllers tend to be the kind of successful people who go into politics. The problem is, their approach is "we need this so how are we going to pay for it?" when a better approach might be "here's our budget, so let's spend what we have in a wise manner."

The fallacy is that they think they actually need something when often they only think they need it.

Corporations start with the basic goal of making money, and divide that into both short and long-term goals based on their core competencies and market opportunities. Successful corporations will remain within budget, borrowing money only if absolutely necessary, but with the goal of paying it off soon. Very successful companies like Apple don't borrow funds at all. They don't fall into the trap of thinking they "have" to borrow in order to make money. Instead, they're patient, avoiding tyrannies of the urgent and must-haves, and instead say, "here's what we have coming in from our revenue. Let's spend what we do have, wisely."

Case in point: When I retired, I thought I "had" to have a two-bedroom apartment. I'd use the second bedroom as the office and a guest room. Instead, I bit the bullet and settled for a decent-sized one-bedroom apartment. I have a guest bed and dresser in the dining room, and guests are happy with that! Beats sleeping on the couch.

My point is that I had to find a place that was within my budget. Had I gone for the two bedroom, I'd be spending $200 more a month for something I thought I needed, but did not actually need.

Our government is just about the most wasteful government on planet Earth! People at all levels from the fed to the private citizen have convinced themselves that something is needed when it's really not needed. It's simply wanted.

Heck, I want to live here! http://www.luxuryestatereviews.com/2011/05/29/beautiful-homes-3/

But I'm wise enough to know that it's a desire, not a need. I thought I needed a two-BR apt, but I was wrong. A 1-BR apt suits my needs very well, and that extra $200 a month goes a long way towards meeting other, genuine needs.

I'd still like to build my own home some day, but if I do, it'll only be because doing so is both affordable and would make better long-term financial sense than staying here in an apartment. My apartment has a lot of amenities that would drive up the price of a home considerably, including a nice pool, exercise room, and jacuzzi.

 

[mheslep]

As many of you have read here, I regularly post statistics on taxes and taxation, mostly to counter wishful thinking with cold, hard facts. One theme is that there is large mismatch between federal spending and federal income tax revenues, a mismatch comparable to and often larger than these revenues. That means you won't solve the problem by raising taxes by 10 or 20% - taxes would have to double or more.

Bruce Ackerman and Anne Alstott http://www.latimes.com/news/opinion/commentary/la-oe-ackerman-wealth-tax-20110920,0,7752814.story" that the solution to this dilemma is a wealth tax. They propose a 2% tax on households owning more than $7.2M in net assets, and claim it will generate $70B a year.

Well hopefully we all know from reading those regular posting of taxes and spending statistics that the shortfall between spending and revenues is some $1600B per year. Thus this wealth tax fixes nothing either, though I imagine it would create vast numbers of tax accountant jobs in the process of assessing wealth.

 

[Ivan Seeking]

Only means the next year they will spend $70B more. Since the 60s the gov has spent more than it's earned (except for a couple years). More taxes won't stop that. http://www.heritage.org/budgetchartbook/growth-federal-spending-revenue

Bill Clinton did - those years were under his admin.

 

[Ivan Seeking]

The jobs are only indicated for prime recipients. That says nothing about how the money filtered out through the community.

We have had a lot of road improvements around here, but if a city gets the money, they likely contract out the work. The don't hire people directly.

 

[CAC1001]

Bill Clinton did - those years were under his admin.

Yes, but that was because of a combination of a fiscally conservative Republican Congress, defense spending cuts as the Cold War was over, the Dot Com bubble, and so forth. The 2000 stock market crash sent the budget back into deficit. IMO, what we need, once the economy gets going again, is some tax increases with guaranteed controls on spending so as to fix the budget deficit.

Also make debt management something discussed regularly in government (that's how it used to be decades ago, but no more).

 

[Vanadium 50]

Well hopefully we all know from reading those regular posting of taxes and spending statistics that the shortfall between spending and revenues is some $1600B per year. Thus this wealth tax fixes nothing either,

OK, raise it from 2% to 100%. Make it illegal for someone to own more than $7.2M in assets. Now that's $3.5T. That would pay off one year's deficit and allow us to reduce the debt by 10%.

 

[mheslep]

OK, raise it from 2% to 100%. Make it illegal for someone to own more than $7.2M in assets. Now that's $3.5T. That would pay off one year's deficit and allow us to reduce the debt by 10%.

Well then confiscate Iraq's oil, ala the great statesmen Donald Trump, 100% of it. Whoops, that's only ~$100B/year, about two weeks of current federal spending. Maybe confiscate Iraqi corporate jets?

 

[DoggerDan]

OK, raise it from 2% to 100%. Make it illegal for someone to own more than $7.2M in assets. Now that's $3.5T. That would pay off one year's deficit and allow us to reduce the debt by 10%.

Might work for a year and that first 10%. Afterwards, all the rich folks would have fled the country to protect what they have left, at which point you wouldn't get another drop out of them and would be in a worse position than leaving them well enough alone.

The problem is spending. We have all these wonderful-sounding do-little programs that any business with half a brain would never throw money at because it doesn't do a thing for the bottom line.

We're not finding our way out of this paper bag until we start measuring performance against the amount of money thrown at a problem. Dept of Education gets billions yet are school children are further behind than every. Is the solution more money? No. The solution is found among those kids who rise to the top regardless of how much money their school district gets. Government money can't fix families who don't read to their kids, who don't encourage their kids to go the extra mile, and who don't even stay together as families. Divorce has a huge effect on kids. Government money can't fix changes in culture where dumbing down is considered "cool." It can't fix the negative effects of Hollywood who's characters all seem to be able to magically rise from the dregs of life into dreamland in 90 minutes. "If they can do it, I can do it" think our youth. No, they can't.

The path to riches is not just years of hard work, it's knowing where to invest your time, and where to cut it. The government is one of the poorest examples, as they throw money at everything, often with much hope, not to mention a clue, as to what effect it'll have in the long run. They're more concerned about greasing the squeaky wheel so it won't effect next year's elections.

 

[MrNerd]

OK, raise it from 2% to 100%. Make it illegal for someone to own more than $7.2M in assets. Now that's $3.5T. That would pay off one year's deficit and allow us to reduce the debt by 10%.

Are you mad?! That would DESTROY the economy. No one would have any incentive to bring in more than $7.2M. Businesses would stop expanding. The people who were still motivated enough to obtain more than $7.2M would flee the country faster than a typical American gives up on a math problem(!). We would drain the country of the people who could succeed spectacularly in business. Additionally, as stated above, the amount of money obtained would indeed be a one time thing, and not last very long in government budgets.

A basic economics book might be able to help you with things like this if you wish to learn more about it.