Yes, Virginia, there is a revenue problem

posted at 2:06 pm on July 6, 2011 by Jazz Shaw

David Brooks provoked a significant backlash with what was obviously a rather insulting column regarding the GOP and current debt ceiling negotiations. One problem with throwing stones in such a wide spread is that you tend to turn off the readers who wind up ignoring any portions of your argument which might have made sense. Here’s what Ed Morrissey has to say, in part, about David Brooks’ analysis of the -lack of – a budget deal.

Well, let’s back the train up the tracks just a little bit here. The incoming Republicans who now resist tax hikes weren’t the ones spending the money in the first place. The Democrats in Congress ran deficit spending to absurd new heights over the last four years, and some of the Republicans now in Congress were around for the relatively smaller debt increase from 2001-2006. Neither group “pledged” to pay the money back, and Democrats to this day still aren’t pledging to do so. Tim Geithner just got done explaining that all the current administration wants to do is reduce the amount of borrowing incrementally without having any plan to eliminate deficit spending ever.

If we are net borrowing every year, adding to debt, then we will never be in position to fulfill a “sacred pledge to pay the money back.” That’s a rather large flaw in fiscal policy and in Brooks’ logic, which may be one reason why some of these Republicans don’t pay much attention to “intellectual authorities” like, er, David Brooks.

Errr… no. The first item which Brooks gets right and where I believe my friend Ed misses the point is that there is a very significant and important difference between money you borrow and money you decide not to spend. When the government actually borrows money – issuing paper in exchange for it – it absolutely carries with it a definition of a legal obligation (or a “sacred pledge” if you prefer) to repay it, along with a previously agreed upon amount of interest and/or other fees for borrowing the funds. This is very different from “spending less money” on things you have a choice about, no matter how difficult or painful those choices may be. If – just for an example, not the basis of an actual plan – we slash the reimbursement rates for Medicare, pass legislation to reduce the amount of payments to Social Security beneficiaries, or cut our military budget by not replacing equipment or reducing troop levels drastically, we have not “defaulted” on a debt for money we borrowed. We simply chose not to spend money which we had previously indicated an intention of spending.

In a rare case where I will agree with John Boehner and other Republicans who endlessly chant that we “don’t have a revenue problem,” (we do, but more on that in a minute) the default comes to pass when we fail to make good on scheduled payments for money we have borrowed in any form. We can make those payments this year while leaving roughly 90% of the federal budget on the table.

Second, even if some of the individual members of Congress weren’t around to run up the actual debts (i.e. actual “borrowed money”) from the Bush years, when spending was hardly conservative, (even if it was “relatively smaller”) the people who WERE around didn’t run up that tab on their personal Visa cards. It was a debt incurred by the United States government, and when the new class ran for and were elected to office, they became partial holders of that debt and are therefore responsible for it. Brooks is once again correct on this point, and arguing that the new members aren’t responsible to see that debt repaid is incorrect.

There is no question that the spending by Democrats these past few years has been completely out of control and GOP shortcomings in the Bush years pale by comparison, and that needs to be corrected, probably in a drastic fashion. But, again, the Democrats do still hold not only the White House, but one chamber of the legislative branch. Compromise of some sort is required to get things done, painful though it may be. Elections have consequences, as we are so fond of saying.

Which leads us to the final point, that being the tired meme which has been trotted out by GOP leaders for some time: we “don’t have a revenue problem, we have a spending problem.”

We do have a spending problem. Lots of Americans do. But for every American family, if your debts exceed your income, you have tough choices to make. If you cut out every luxury or optional item in your life, slashing your budget to the bare bones, and you still can’t cover the bills, you’re going to have to get a second job. You have a revenue problem, even if it originated from your longer term spending problem. This is the same situation facing the federal purse today.

And let’s not forget that no proposal floated by either side yet achieves the laudable goal Ed mentions of spending less than you’re taking in. Even the Ryan plan, (which he can’t even sell to his own party) under the most pie in the sky, optimistic forecasts, finds us nearly ten trillion dollars further in debt one decade out from here with spending being an even slightly higher percentage of GDP. Why? Because it tackles Washington’s spending problem in a dramatic, bold fashion, but actually decreases revenue by hundreds of billions at the same time.

It may indeed be time to admit that a deal might be in the offing which will contain a small bitter pill to swallow, but delivers a big old spoonful of sugar to help it go down. Doug Mataconis seems to be arguing this week that, as the old saying goes, we shouldn’t let perfect become the enemy of good.

In the current political environment, a 3-for-1 deal that ends up increasing the debt ceiling while also cutting up to $2,000,000,000,000 in spending over ten years, accompanied by a few hundred million dollars in revenue increases that come mostly from closing economically wasteful tax subsidies strikes me as a pretty good deal. Perfect? No, I would also like to see Congress deal with the long term entitlement problems, but there is no political consensus right now regarding entitlement reform. Anyone expecting perfection from government will be eternally disappointed, and anyone willing to play chicken with the economy over a tax pledge isn’t governing responsibly.

The chief problem facing us on the revenue front is not that the published tax rates are too high. (And make no mistake, they are too high.) The problem is that so few of the biggest potential revenue sources pay anywhere near those levels in their effective tax rate. It comes back to those tired examples of how Warren Buffet’s secretary pays a higher effective tax rate than he does. And argue as viciously as you like, but none of the biggest employers in this nation are paying anywhere near 35% and in too many cases actually pay much closer to zero once you take out all of the benefits they receive in return.

Meanwhile, the only people really getting hammered on taxes are at the opposite end of the earnings scale. Why? Because major corporations and the very rich can afford the expensive tax lawyers and lobbyists needed to obtain sweetheart deals from Congress and endless tweaking of a tax code which is probably verging on a million pages in length by now.

But back to “the deal” which may be within reach. Yes, there may be some “revenue enhancers” (which is the new Democratic Speak for more taxes) in the form of closing loopholes. But if it comes with a very long term lock down on spending and the growth of government, then some of the most desired goals of conservatives are suddenly within their grasp. And the dreaded “revenue enhancers” may be the nasty medicine which actually brings us one step closer to the dream of having Washington spend less than it takes in. We simply have no plan today which achieves that goal through only cutting spending.

So yes, Virginia, there is a revenue problem. The poison in this mix is that Democrats are addicted to spending and the Republicans are allergic to increased revenue in any form, which Brooks also correctly notes. The combination of the two is a recipe for a death spiral, and that’s what’s playing out in Washington this month. The Republicans are going to need to cut a deal in some fashion with the Democrats, and they might want to avoid shooting this gift horse dead, say nothing of simply looking in its mouth.

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Jeez this used to be a right wing site.

Now it’s being run by pansies.

fossten on July 6, 2011 at 4:35 PM

The following WSJ commentary makes a strong case for calling O’s bluff:
http://online.wsj.com/article/SB10001424052702304803104576427852199681170.html?mod=WSJ_Opinion_LEADTop

onlineanalyst on July 6, 2011 at 4:37 PM

Just about every day in the local news are reports of various local government programs, parks, police equipment, etc…. all funded by federal grants. It makes me sick to hear it. Where do people think this money is coming from?

Today in the news is the local sheriff and the mayor fighting over a $350K grant from homeland security but that’s not even the big one. The bigger pot of money is a $2million grant from Homeland Security. It has to stop.

We do not have a revenue problem, we have a spending problem.

roux on July 6, 2011 at 4:43 PM

While I agree that the tax code is overly complex and that myriad loopholes are little more than spending by another name, it’s simply incorrect to argue that the richest of the rich are avoiding the taxes that the little guys are paying. The data are overwhelming that the highest income people are paying a far higher share of taxes than is their share of income.

If people want to tax “the rich” more, then argue for higher taxes on them. But let’s not indulge the baseless propaganda about the rich not paying “their fair share,” and so on and so on. The last umpteen major changes to tax law have pretty much all successfully increased the share of federal taxes paid by the highest earners, relying on this bottomless-well argument.

Chuckles3 on July 6, 2011 at 4:48 PM

What a load of drivel!

Yes, I am extremely allergic to ANY form of TAX INCREASE not REVENUE INCREASE. It has been proven time and time again that when you lower the tax rates revenue increases. If they want more revenue simplify the tax rates and lower all of them. If anyone should have their taxes increased, it should be the bottom 50% that pay NO taxes or get credits. Everyone should have to pay something in and if they don’t they shouldn’t get to participate in deciding who our representatives are.

Because they have not worked within the framework of a budget for over two years now, the Dims have been able to roll the Stimulus Package into the baseline spending. Cut that immediately and we save $900 billion dollars this year alone. No, the GOP in charge now does not have the backbone to do even that.

THE GOVERNMENT DOES NOT NEED MORE REVENUES – THEY NEED TO CUT THE SPENDING AND THE GIVE-AWAYS!

PERIOD.

Sporty1946 on July 6, 2011 at 4:51 PM

PS — in terms of the source of the structural budget problem, it is NOT a revenue problem. There might be a political argument for an agreement that includes some tax increases, but purely mathematically there really isn’t one. Under current law BOTH revenues and spending will rise beyond any previous precedent, without any tax increases whatsoever.

Yes, it’s true that Republicans are arguing for an asymmetric solution — all spending restraint, no new taxes. But guess what? The underlying problem isn’t symmetric. It’s ALL spending, and for that matter, pretty much all entitlement spending, at least over the long term. All of this “let’s each meet halfway” would make sense if the budget shortfall were a symmetric phenomenon with equal contributions from revenues and spending — but it’ not.

That’s not ideology, it’s the pure math of it.

Chuckles3 on July 6, 2011 at 4:52 PM

One thing the Jazz misses is that Revenues are always 15-18% of GDP, Always…. I dont care if you tax “the rich” at 100% or 10% you will get a revenue ot 15-18%, been that way for atleast 60 years and wishing on a star for that to change will not help…

So the Dems and the Republicans can raise taxes all they want…. Not going to do a thing for revenues..

the_ancient on July 6, 2011 at 5:01 PM

Revenues are low not because taxes are “too low” but because the economy stinks. Tax increases will hurt the recovery. The only thing we can do right now is tighten the government belt and hope for the best. It’s how we’ve always gotten out of recessions and it is the only thing this administration has not tried. I say we try it.

alwaysfiredup on July 6, 2011 at 5:04 PM

Back when I was studying macroeconomics they taught us that the decline in revenue and natural increase in transfer payments in bad economic times constituted a natural “stimulus” that would cushion the fall and provide the spark needed for growth. In the recent recession spending automatically rose and tax revenues fell as expected, but Congress and the President doubled-down with massive new spending, growth-killing regulation and unwarranted meddling.

There is no reason to believe that the existing tax rates wouldn’t provide sufficient revenues in a good economy to finance a government that does what it needs to do and then some. Reforming the tax code is a great idea, but only to decrease the perverse incentives created by the current system, not to increase government’s share of the economy.

By the way, the large private employers don’t pay any taxes. They only collect them, and those taxes tend to be regressive. To be fair, honest, transparent and to help the poor, eliminate corporate income taxes entirely.

jl on July 6, 2011 at 5:40 PM

Here are the first three steps I would take to change the tax code. The last two would have the added advantage of being good for the economy while making tax preparation simpler.

First, phase out all tax subsidies starting with corporate ones and moving to individual ones. The IRS should collect taxes not run revenue programs.

Second, get rid of capital gains taxes. In a bad economy, this will be offset by no longer allowing capital loss deductions. Why punish people who increase the wealth of the country and reward those who decrease it.

Third, make dividend payments tax deductible to corporations and at the same time treat these as ordinary income to the people who receive them. Treat investment income, other than capital gains, the same as wage income. Tax old money at the same rate as earned income except wrt payroll taxes which are really mandatory premiums,

Laurence on July 6, 2011 at 5:43 PM

Y’all did good. They win the argument Mr. Shaw.

Cindy Munford on July 6, 2011 at 6:08 PM


roaring_repub Roaring Republican
by DLoesch
Ugh MT @Reuters Repubs have agreed to $150b to $200b in increased tax revs as part of budget talks, says Senator Kyl #tcot #teaparty
4 minutes ago

steebo77 on July 6, 2011 at 6:13 PM

BTW, we got the news today that my boss is selling our business. I do not even know if I will have a job in a month..but she just got herself a new jag. I am not saying that I think she does not have the right to buy a jag..
Terrye on July 6, 2011 at 2:58 PM

Your jealous envy is showing.
She built up a company. Now she’s selling it. Good for her.
Evidently, bad for you.
By mentioning her buying a Jag, you show yourself to be angry, bitter, & petty. I imagine by selling her company she can afford to buy a Jag. Sweet!
See-if we sold our ranch & just leased out the land, we’d probably be able to buy something cool, too.
SO!?

Onward: Someone I see mentioned it at least once here.
We ALL are already paying taxes.
Everything we buy is taxed all the way along the line.
So if you are not paying income tax, which bcs of the available business deductions in agriculture, we do NOT,you & I & everyone else is still paying these other taxes.
I don’t think I have to mention all the taxes & ‘fees’ we’re all paying.
All of this stuff goes toward a bloated government, some federal & some state.
Govt meddling in business affairs makes everything more difficult & unprofitable except for the huge megacorps.
They are growing. It is too hard financially to get into just about any business anymore.
With forced insurance requirements for everything (my farm & ranch liability policy, required by the bank for our business mortgage is over $5,000 per year!!), complying with regulations which makes doing things more costly blah blah blah it’s no wonder this country is falling apart.
Limited regulation (& NO the environment will not ‘die’!), maybe a flat tax or something like it where you’re taxed ONCE! (& not even when you DIE!), get rid of the freebies etc. & we’d be doing a lot.

Badger40 on July 6, 2011 at 6:13 PM

BS: You fail to acknowledge that the Republican House members collectively hold a veto over raising the debt ceiling. They do not have to vote for anything they do not want.

GaltBlvnAtty on July 6, 2011 at 6:15 PM

If the democrats can’t manage the monies being received without moving to bankruptcy, why does raising taxes to give them more money sound like a sane move? Its the Law of the Hole, when you are in over your head, stop digging. Even a small child can understand that principle. Too bad politicians are not that smart.

volsense on July 6, 2011 at 6:16 PM

Republicans agree to “new revenues?” Is that another name for new taxes?

http://www.reuters.com/article/2011/07/06/us-usa-congress-kyl-idUSTRE76572B20110706?feedType=RSS&feedName=topNews&rpc=22&sp=true

JellyToast on July 6, 2011 at 6:16 PM

Yes, that’s right. When your monthly obligations, even after cutting all the fat, are greater than your income, you get another job. But raising taxes is NOT the equivalent of getting another job. Raising taxes is the equivalent of STEALING from the potential employers from whom you could get a job. It may bring in more cash in the short term, but it is not a sustainable flow. If you steal enough from those employers, they’ll go out of business. And not only will you not be able to steal any more, you won’t be able to get a job. Obama has already pushed us a long way down that road. We need to make an abrupt about-face, and not go even one more inch in that direction.

texasentrepreneur on July 6, 2011 at 6:24 PM

I am a 59 year old woman who just found a few hours ago that I might well not have a job in the near future.

There you go. When liberals find themselves backed into a position that even they can’t talk themselves out of they go the irrational emotion and guilt route. And as far as you not being a liberal, everyone who has read these postings for the last several years knows that is exactly what you are. Someone you know needs to intervene and give you some reality.

peacenprosperity on July 6, 2011 at 6:41 PM

Good old Jazz, he could rationalize anything.

Aquateen Hungerforce on July 6, 2011 at 6:43 PM

We will learn much over the next few days. Some of my Tea Party friends claim the fix was in weeks ago with the establishment Republicans, that what we are seeing is all a show; both party’s want tax increases and will get them in the end. Those dang pesky TP candidates put in by the people in 2010 from several states are really mucking up the program for these old establishment wipes.

We’re watching very closely. Not sure what to make of this piece by Jazz.. I’ll be watching this development very closely also. Anybody that agrees with the likes of David Brooks loses cred in a hurry in my world. Brooks is a proven media whore who will side with the establishment bosses or face being a regular folk like the rest of us. Brooks is addicted to the elitist lifestyle he lives and will whore himself out to the establishment bosses no matter the consequences.

Keemo on July 6, 2011 at 6:46 PM

Meanwhile, the only people really getting hammered on taxes are at the opposite end of the earnings scale. Why? Because major corporations and the very rich can afford the expensive tax lawyers and lobbyists needed to obtain sweetheart deals from Congress and endless tweaking of a tax code which is probably verging on a million pages in length by now.

Ummm, no. The people at the opposite end of the earnings scale are the poor, who pay no federal income tax. But thanks for playing.

xblade on July 6, 2011 at 6:47 PM

Just read this piece once again; scratching my head in disbelief.

Keemo on July 6, 2011 at 6:49 PM

Brooks is a proven media whore who will side with the establishment bosses

democrat party operative hoisted to his position as a spokesman for “intellectual’ conservatives by the official propaganda machine of the democrat party, the new york times. He is a fraud.

peacenprosperity on July 6, 2011 at 6:52 PM

peacenprosperity on July 6, 2011 at 6:52 PM

Fraud for sure, but I still like calling him a whore.. In fact, a POS whore fraud who will say anything or write anything for a nugget is just getting one started on what a scumbag this thing called David Brooks is in real life.

Keemo on July 6, 2011 at 6:58 PM

We owe our debts. We don’t “owe” any obligation to incur further debts because of poor choices being made right now. We do NOT have a revenue problem we have a spending problem. Cut spending -> Economy grows -> Tax collections increase -> we start collecting more then we pay out and deficit declines painlessly.

DANEgerus on July 6, 2011 at 7:04 PM

You seem to think if we default the world is going to end. Human sacrifice, dogs and cats living together, mass hysteria.

Here’s the deal, we’re going to default. It’s that simple. Either this year, next year or 20 years down the road. It IS going to happen because our political climate is going to allow it to happen.

Everyone wants something for nothing and our politicians are driven around trying to buy the votes to do that via legislation.

Term limits will fix our fiscal problems. Guaranteed.

Trust me.

ButterflyDragon on July 6, 2011 at 7:05 PM

Do not cave, pubs. The wallet isn’t empty and the govt will still have cash flow every day. They may have to defer spending on things that have been allocated for but not spent as of yet. I keep allocating for a Mercedes but my cash flow is a little short each month so I’m still driving the same old pickup.

Kissmygrits on July 6, 2011 at 7:11 PM

You seem to think if we default the world is going to end. Human sacrifice, dogs and cats living together, mass hysteria.

Here’s the deal, we’re going to default. It’s that simple. Either this year, next year or 20 years down the road. It IS going to happen because our political climate is going to allow it to happen.

Everyone wants something for nothing and our politicians are driven around trying to buy the votes to do that via legislation.

Term limits will fix our fiscal problems. Guaranteed.

Trust me.

ButterflyDragon on July 6, 2011 at 7:05 PM

We aren’t going to default. We would have to choose to not pay the interest rather than not pay for entitlements. One is required by the constitution, the other is not.

Count to 10 on July 6, 2011 at 7:13 PM

Term limits will fix our fiscal problems. Guaranteed.

Trust me.

ButterflyDragon on July 6, 2011 at 7:05 PM

I would add that we need a part time legislature too.

That would make things even better.

Conservative Samizdat on July 6, 2011 at 7:37 PM

Correct. In an average year at least 40% of people pay no taxes at the lower end. That’s a problem, but not the biggest one. I was referring to the mid-range to upper middle class range folks who do get a bill every year and pay pretty much the straight, expected rate because they don’t qualify for the goodies which only the “big boys” can afford. Thanks.

Jazz Shaw on July 6, 2011 at 2:45 PM

I contest that.

When 40% of the people have no stake in their government then they don’t give a hot damn how well it is run and if they are getting bribes and payoffs that they do not earn from that government then they have no incentive, at all, to reign it in. That is the concept that Progressives pushed upon us and it has gotten us into this mess. I agree with the Democrats: it is time to spread the pain around.

A flat tax with no deductions for anything applied to everyone, equally. If you are feeling very nice towards the poor then they can reduce the amount they pay in when they are under the poverty line by 2% for every 1% under but if you earn any money above $1K you still pay $50 to your government as a minimum. As we are all protected by government so should we all pay for it and have a stake in it.

Currently we have $2 trillion in tax money flowing into the US government and if you can’t run a government, any government, on $2 trillion or even $1 trillion per year then you have a spending problem, not a revenue problem. And the only real and committed spending is on paying our debt, paying for the military, paying for the upkeep of the border and the other cats and dogs mentioned in the US Constitution. Those are mandatory spending areas. Everything else, including SSA/Medicare/Medicaid and all other agencies not directly mentioned are voluntary. They can go hang.

ajacksonian on July 6, 2011 at 7:41 PM

Jeez this used to be a right wing site.

Now it’s being run by pansies.

fossten on July 6, 2011 at 4:35 PM

Jazz may be the only person claiming to be a Republican who is to the left of Allah.

bw222 on July 6, 2011 at 7:43 PM

Yawwwwwn.

Could the GOP be about to cave because they are INFESTED with the same Progressive BigGov loving traitors that the Dems have in leadership?

Naaaaaah, of course not.

There must be another explanation for the constant go-along philosophy.

PappyD61 on July 6, 2011 at 8:00 PM

Many conservatives have been arguing for a reformed and simplified tax code for a while now. The thing is, any revenue gained is immediately wasted by the spending habits in Washington so the emphasis on spending cuts and curbing back government must be emphasized because a serious culture change is needed in D.C.

Also, in this sound byte era where empty slogans like “Yes we can” and “Hope and Change” get a President elected, it makes perfect sense to chant “We don’t have a revenue problem, we have a spending problem” as it clearly states where the conservatives stand and sticks in people’s heads. I don’t disagree with Jazz, but as long as we have a spending problem we will always have a revenue problem.

Daemonocracy on July 6, 2011 at 8:19 PM

Look, I have no doubt that additional revenue will be required to climb out of this hole. But this issue is much like immigration. When Washington has the border reasonably under control, we’ll talk about what to do with the illegals already here. And when Washington demonstrates it has spending under control, we’ll talk about what we need to do to pay our debt down to an acceptable level. The last thing we should do at this point is give Washington more money. The more they get, the more they spend; they’ve proven that over and over again. And, anyhow, raising taxes during a recession is ill-advised regardless of whatever else is going on.

Furthermore, it’s not just spending that needs to be addressed. Most importantly, we need entitlement reform. We need to repeal ObamaCare and replace it with true market-based health care reform. We need to reform the tax code although I would vote for scrapping it altogether and starting again. For instance, we should establish a reasonably low corporate tax rate (on profits earned both here and abroad) and then eliminate most, if not all, deductions, credits and write-offs. We need to get all Americans back on the income tax rolls and, while we’re at it, eliminate tax code welfare. And we need regulatory reform (and I’m not talking about Dodd-Frank or Sarbanes-Oxley which both should be repealed).

Perhaps if we we’re able to accomplish all that, we won’t need any new sources of revenue.

SukieTawdry on July 6, 2011 at 8:51 PM

The GOP will betray you

True_King on July 6, 2011 at 9:07 PM

Jazz, I’ve never really had a high opinion of your, but I at least though you were a fiscal conservative….

Brooks and Frum? Seriously?! Increasing taxes? Seriously?!

Boy are you at the wrong party.

Pattosensei on July 6, 2011 at 9:28 PM

Yes, Jazz, there is a thinking problem…

PatriotRider on July 6, 2011 at 9:29 PM

Ok, so we need more revenue.

Any ideas how?

We’re getting 18-20% of the GDP in taxes… lets look back when the top rate was 90% and we got 18-20% of the GDP in taxes.

Wait, I think we’re going to need a bigger tax hike.

You can’t do this with the current tax structure, and you probably can’t do this at all; but feel free to propose adding a VAT or extra sales tax and watch the economy go to barter/underground as much as it can to avoid your taxes and still not give you what you project to get.

Do you go confiscate people’s stuff? That might actually get you more revenue; at least for a while… but the problem with saying “we need to tax 40% of the GDP” is that we can’t actually get there.

Might as well claim “we need to find out that the pavement we’ve put on every road is 75% gold”. That would solve the problem too, but it isn’t going to happen.

gekkobear on July 6, 2011 at 9:38 PM

Jazz apparently suffers from historical amnesia. Every time the Republicans “compromise” on tax hikes coupled with promised spending cuts, the tax hikes get implemented and the spending cuts never materialize. At the same time, that increased revenue either never happens because people take steps to avoid having to pay those increased taxes or the Democrats always find new things in which to “invest” those increased revenues so that no reduction in debt occurs. Every. single. time.

No more! Spending cuts first and only spending cuts! We’ve had enough of being lied to and scammed over the past 30 years! It’s time to no kidding cut spending and stop trying to “increase revenue” through direct tax increases or by the more insidious political chicanery of “closing loopholes”.

AZfederalist on July 6, 2011 at 9:51 PM

Michelle Malkin must be rolling over in her Uncle Scrooge-esque stacks of gold coins every time she observes what has become of Hot Air since she sold it off.

steebo77 on July 6, 2011 at 9:53 PM

We do have a spending problem. Lots of Americans do. But for every American family, if your debts exceed your income, you have tough choices to make. If you cut out every luxury or optional item in your life, slashing your budget to the bare bones, and you still can’t cover the bills, you’re going to have to get a second job. You have a revenue problem, even if it originated from your longer term spending problem. This is the same situation facing the federal purse today.

And when your second job begins to affect your performance on your first job, you run the risk of losing that job, forcing you to accept a lower paying job (in a recession, such as we are); now, you’re working two jobs, and your total revenue goes down, but your debt outlays do not. In a short time, you default and can be forced into bankruptcy.

In effect, higher taxes take cash from the earners leaving them with less cash to participate in economic activity. This reduces the size of the economy (OMG..thats a recession!), and further deflates tax revenue. Under your plan, this would require even higher taxes, and then the cycle repeats. There is no logic that supports raising taxes in a recession.

Back to the analogy: what happens to a family’s finances when hubby is busting his butt to earn enough to pay the minimum credit card bills each month and the living expenses of the family, and wifey continues to use the credit cards (the CC company keeps raising the limit ‘cuz hubby always makes the payment on time)? Soon enough, one of several things will happen:

1. Hubby takes his job and splits (Divorce)
2. Family files for bankruptcy, then for divorce
3. They take the “smartest guys in the room” strategy, and continue to borrow from wherever they can get it, pretending its okay because hubby will just demand a raise next year. Why not spend the raise now? It works for the government.

BobMbx on July 6, 2011 at 10:02 PM

Oh, and this is a question I like to ask taxers:

If raising taxes to X% is needed, why not just raise it to 100%?

Wouldn’t that provide the government with enough money to pay the bills, plus a little extra? Since they’re getting it all, we won’t have to worry, ‘cuz they’ll pay for the things we need.

Right?

BobMbx on July 6, 2011 at 10:06 PM

Jazz, it’s a GDP problem. Government spending figures into total GDP, so if it spends tax money then those dollars aren’t spent by the taxpayer and there’s no net increase in spending. If it borrows, and lets the taxpayer keep his money to spend, then there is a net increase in spending.

The $1.6 Trillion+ deficit is over 11 percent of GDP. To replace borrowing with taxes – this is a key point – is to shrink GDP. To cut government spending in lieu of borrowing to maintain current spending is also a net decrease in GDP.

Our economy for several decades has expanded upon an ever-increasing debt pyramid; ever taller and wider. When we hit the wall in ’08 the federal government became the borrower of last resort, so to keep GDP from printing in Great Depression territory it immediately began spending a trillion more dollars. It matters not what they spent it on, they just wanted to spend it.

shuzilla on July 6, 2011 at 10:17 PM

Basically, enough of Jazz Shaw. I try to read what is passing for argument on the other side of the line. And we all know there is an endless stream of Frumm, Brooks, Politico, NYT, etc. on links. But do we really need to hear this from inside the hallowed halls?

maninthemiddle on July 6, 2011 at 10:27 PM

Someone correct me if I’m wrong, but didn’t Bush41 fall for the 3-for-1 deal?

As I recall, two things happened as a result…..

1) Taxes went up but there were never any of the promised cuts.

2) Bush41 got booted out of office.

Fool me once, shame on you. Fool me twice….

.

GT on July 6, 2011 at 10:34 PM

And, Jazz, despite what Francis Church wrote to Virginia, there is no Santa Claus.

SukieTawdry on July 6, 2011 at 10:48 PM

Moreover, the 1990s saw an explosion in stock-based compensation schemes–stock options, restricted stock, etc. Employees were scrambling to cash in on a rising stock market. They did so, and a gusher of tax revenue resulted.

BuckeyeSam on July 6, 2011 at 2:47 PM

This explosion was due also (mostly?) to Section 162(m) of the Internal Revenue Code which disallows a deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for the CEO and four other most highly compensated executive officers. It was part of Clinton’s OBRA of 1993.

SukieTawdry on July 6, 2011 at 11:25 PM

It was a debt incurred by the United States government, and when the new class ran for and were elected to office, they became partial holders of that debt and are therefore responsible for it. Brooks is once again correct on this point, and arguing that the new members aren’t responsible to see that debt repaid is incorrect.

This is a strawman the likes of which even Obama would be embarrassed to set up. Who is arguing that we aren’t responsible for the debt?! No one! That. Is. The. Problem! If we could just explain it away as not our problem, then nobody would care!

besser tot als rot on July 7, 2011 at 12:42 AM

You have a revenue problem, even if it originated from your longer term spending problem.

Really? Not to be patronizing or anything, but if you cut spending to match revenues, do you have a revenue problem? If not, then you can have either a spending problem, a revenue problem, or a spending and revenue problem, depending on what you think the problem is.

Thus, if you’re a big government pinko like Obama, Jazz or Brooks, you have a revenue problem because you can’t pay for all of those goodies that the bottom 55% voted for themselves by sticking a gun to the heads of the top 45%. But if you think that government is too bloated and should be limited, then you think that you have a spending problem. Which is, obviously, what the whole debate is about.

besser tot als rot on July 7, 2011 at 12:48 AM

How about this.

The Dems agree to an immediate 15% reduction in current federal spending. Not NEW spending but a 15% decrease in today’s spending. Then an additional 3% a year reduction in spending over the next 5 years. In addition there must be a constitutional ‘balanced budget’ amendment. Then after 5 years the GOP promises to raise taxes if and only if there hasn’t been a significant reduction of the debt in those 5 years….. and by significant I’m talking 20% or so.

They would never agree to it but I’d like to see some names next to ‘nay’ votes so I could walk the rotunda of the Capitol Building a crotch kick a few of these people……

StompUDead on July 7, 2011 at 6:37 AM

Even the Ryan plan, (which he can’t even sell to his own party)…

The Ryan plan passed the House in April. Only four GOP reps voted against it. So by “can’t sell to his own party” I guess Jazz means “can’t get the Democrats in the Senate to take up.”

SD on July 7, 2011 at 10:03 AM

But if it comes with a very long term lock down on spending and the growth of government

Pie in the sky, no congress will ever be bound by the promises of a previous congress.

We need a blance budget amendment, only then will congress be forced to obey the law of the land.

E9RET on July 7, 2011 at 1:35 PM

Spectacular quote on this very subject from Ron Johnson today:

Johnson said there’s no chance that Republicans will agree to tax increases as part of a deal. “When the Democrats had a supermajority in Congress, when they controlled all levers of power here in Washington, they didn’t increase taxes. They couldn’t get that passed. So now they want republicans to do that for them?” he said. “That’s just not going to happen.”

Exactly – No F’in chance

deadrody on July 7, 2011 at 1:50 PM

It was a debt incurred by the United States government, and when the new class ran for and were elected to office, they became partial holders of that debt and are therefore responsible for it. Brooks is once again correct on this point, and arguing that the new members aren’t responsible to see that debt repaid is incorrect.

Jazz Shaw

Where did Ed say any such thing? What he said was the newest members didn’t run the bills up, not that they aren’t responsible for the repayment. EVERY member of congress is responsible for that, as the public at large has no control over it beyond the ballot box.

The poison in this mix is that Democrats are addicted to spending and the Republicans are allergic to increased revenue in any form, which Brooks also correctly notes.

Jazz Shaw again

Republicans have made it clear that increased revenue can be realized as the result of a growing economy. In fact, during actual growth of the economy, revenue always goes up. To state it the way you do is to conveniently ignore the plain words of some Republicans with respect to this point. This is exactly the thing Brooks did in the first place, and why Ed called him out on it. Using the same lie-by-omission tactics don’t help your argument at all.

They have also correctly pointed out that the economy is not growing, and increasing debt is one reason for that. Agree or disagree with this all you like, but until we actually try reducing spending and deficits and debt, which we’ve never tried before in modern times, you have no logical leg to stand on.

runawayyyy on July 7, 2011 at 1:57 PM

Thar’s gold them thar hills! Revenue a-plenty, just a-waitin’ to be had. Piles and stacks of it. But it can’t be taken until it is earned.

You can’t tax and spend your way out of financial trouble any more than you can borrow your way out of it. Government needs a bigger slice of the pie, but it keeps shrinking the pie. Sorry, any economic growth we’re showing after some $2 trillion in paper flooding the market quantitative easing is just an inflation effect. The federales have devastated the construction industry with their disastrous housing and mortgage policies from 1999-date, a major and necessary player in all recoveries.

There’s not much that can be done to stimulate the economy until the housing inventory is worked down and consumer confidence comes back – and then it won’t need stimulation.

But some revenue-neutral elimination of special interest deductions is not a bad thing at any time, and we should also eliminate all tax credits in excess of tax liability – no one should get a check if they paid no taxes.

Adjoran on July 8, 2011 at 1:53 AM

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