# The money's got to come from somewhere

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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" [Broken] 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.

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DoggerDan

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
Gold Member
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" [Broken] 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. Last edited by a moderator: Ivan Seeking Staff Emeritus Science Advisor Gold Member 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 [Broken]
Bill Clinton did - those years were under his admin.

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Ivan Seeking
Staff Emeritus
Gold Member
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).

Staff Emeritus
2019 Award
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 Gold Member 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.

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.

Many countries have big debts. Debts with whom? Who is the very rich one?

There is already a wealth tax. It is called inflation (A.K.A quantitative easing). However, the revenue from this tax is disguised as profits by corporations which can borrow cheaper than the expected risk free rate of return on an investment.

FlexGunship
Gold Member
Just for once, I'd like to hear a president say: "I'm afraid we don't have enough money to get involved in that war."

There is already a wealth tax. It is called inflation (A.K.A quantitative easing). However, the revenue from this tax is disguised as profits by corporations which can borrow cheaper than the expected risk free rate of return on an investment.

skippy1729
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!