Who Said it?

[Cruella]

I'm not sure what you are getting at. "Brain surgery" is a metaphor for something difficult to do, and I would say that spending 40% less and reducing the debt will be very difficult. Metaphorically I think that is "brain surgery"

How is it difficult? You stop spending what you don't have.

 

[Lagboltz]

How is it difficult? You stop spending what you don't have.

Yes, very simple in principle, but very difficult in practice. How do you get a bickering Congress to agree on exactly how to cut spending by 40%?

 

[BigRob]

I suppose the quote by Kennedy about reducing taxes is supposed to be ironic for a Democrat, but you have to remember that the top marginal tax rate was around 90% at that time. It is easy to believe that he was right.

However today the top marginal rate is the lowest it has been since the 1930's, so the wisdom of Kennedy's statement becomes more questionable in today's economy.

This proposal was first made when the economy was in recession in 1960-61 -- and was not obviously enacted until later. Yes, top marginal tax rates were high at that time -- but that is not the issue -- the proposal was an across the board cut, which included a corporate cut. It was not a "let's cut taxes for X group", it was a "let's cut taxes for everyone."

Following this cut, tax receipts went up, the economy did well.

When tax rate reductions are discussed people often refer to the Laffer Curve --
1) If the tax rate were zero, the government would get no revenue from wages.
2) If the tax rate were 100%, nobody would overtly work and the government would still get no revenue.
3) Somewhere between those extremes the tax revenue curve would reach it's maximum.

The real problem is figuring out the tax rate that gives the maximum. It can only be guessed. Apparently those who want taxes reduced have one idea, and those who want it increased have another. Ordinarily I would ask what tax rate would be best for growing the economy, but since we are deeply in debt, the revenue becomes very important for reducing debt.

I think the focus should be solely GDP growth. Since revenues as a percent of GDP stay relatively similiar, it seems clear the path to more revenue is to grow GDP, and grow it faster.

Tax revenues now are basically back to their 2007 pre recession record highs (according to the CBO) -- it is the dramatic spending increases that are really driving the yearly deficit. Even if Obama gets his tax hike, it will at most amount to $160 billion a year (depending on which plan they have out there you go with), and do nothing for the deficit, and nothing to promote growth.

 

[Dr.Who]

The real problem is figuring out the tax rate that gives the maximum. It can only be guessed.

I had a class in college (linear math) in which we learned that every wise business in America sets prices based on a formula (we also learned the formula itself, not that I remember it) that accurately predicts what price will yield the most revenues. Too low a price and the business will sell all its product but not make any profit, too high a price and the business will make a profit on what is sold but will not sell enough. If the gov cannot figure out what the vast majority of businesses in the country do daily then it is time to fire it.

 

[Lagboltz]

This proposal was first made when the economy was in recession in 1960-61 -- and was not obviously enacted until later. Yes, top marginal tax rates were high at that time -- but that is not the issue -- the proposal was an across the board cut, which included a corporate cut. It was not a "let's cut taxes for X group", it was a "let's cut taxes for everyone."

With the tax rates that high it's hard to see if there were any specific demographics that had the largest effect on the economy. With taxes currently at their lowest, the balance of different tax groups has to be more carefully considered.

Following this cut, tax receipts went up, the economy did well.

I'm not surprised. We were evidently on the far side of the Laffer curve.

I think the focus should be solely GDP growth. Since revenues as a percent of GDP stay relatively similiar, it seems clear the path to more revenue is to grow GDP, and grow it faster.

Tax revenues now are basically back to their 2007 pre recession record highs (according to the CBO) -- it is the dramatic spending increases that are really driving the yearly deficit. Even if Obama gets his tax hike, it will at most amount to $160 billion a year (depending on which plan they have out there you go with), and do nothing for the deficit, and nothing to promote growth.

Growing the economy can take years, and there is no clear path on how to do it. Meanwhile, we will still be out of sync. I think we need all three -- raise taxes, cut spending and increase the GDP. Congress can't quickly do anything about the GDP, but they can affect the other two. Congress is more interested in getting reelected than doing anything.

 

[BigRob]

With the tax rates that high it's hard to see if there were any specific demographics that had the largest effect on the economy. With taxes currently at their lowest, the balance of different tax groups has to be more carefully considered.

I'm not surprised. We were evidently on the far side of the Laffer curve.

If this is all the evidence it requires -- following the Bush tax cuts -- the economy grew, and tax receipts have gone up. Therefore, we must still be on the far side of the curve.

Growing the economy can take years, and there is no clear path on how to do it. Meanwhile, we will still be out of sync. I think we need all three -- raise taxes, cut spending and increase the GDP. Congress can't quickly do anything about the GDP, but they can affect the other two. Congress is more interested in getting reelected than doing anything.

I see no need for higher taxes -- I'd be happy with cutting spending, and doing everything possible to let the private sector thrive.

 

[PLC1]

Yes, very simple in principle, but very difficult in practice. How do you get a bickering Congress to agree on exactly how to cut spending by 40%?

We'd be ahead of the game if the Congress would do anything but bicker.

 

[Lagboltz]

If this is all the evidence it requires -- following the Bush tax cuts -- the economy grew, and tax receipts have gone up. Therefore, we must still be on the far side of the curve.

But at what cost. We can always grow the economy if we are willing to go into trillions of debt. Politifact claims that Bush went $5 trillion in debt. The debt actually lowered under Kennedy.

I see no need for higher taxes -- I'd be happy with cutting spending, and doing everything possible to let the private sector thrive.

I think it is more complicated than that. To reach a state of equilibrium we need to do include raising taxes in certain sectors, at least temporarily. If you look at historical graphs you will see that the national debt increased when taxes were lowered. I think we are on the low side of the curve.

 

[BigRob]

But at what cost. We can always grow the economy if we are willing to go into trillions of debt. Politifact claims that Bush went $5 trillion in debt. The debt actually lowered under Kennedy.

I think it is more complicated than that. To reach a state of equilibrium we need to do include raising taxes in certain sectors, at least temporarily. If you look at historical graphs you will see that the national debt increased when taxes were lowered. I think we are on the low side of the curve.

Treasury figures do not show a decreasing debt under Kennedy...they also don't show a pattern of lessening debt with higher marginal rates.

Link to Treasury debt figures 1950 - 1999

Going back even further, rates in the late 20's for the highest bracket were around 25%, and then jumped ultimately to 91% -- but debt increased every single year this occured. There is no basis to your claim that in years with higher tax rates the national debt dropped. (from page 1)

Now, perhaps you mean dropped as a percent of GDP? Going back 30 years -- Clinton is the one example we can point to in this regard. In 1993, he raised rates, and the national debt to GDP ratio stood at 68.1%. In 1996 -- when Clinton partnered with the Republican Congress and cut many rates -- the debt to GDP ratio stood at... 68.1%.

After the 1996 cuts, when Clinton left office at the end of 2000, debt to GDP ratio stood at 57.7%. a sizable decrease -- but evidence suggests it had absolutely nothing to do with raising taxes, and everything to do with cutting them.

Now, to be fair -- the debt to GDP ratio usually does go up with a tax cut -- but at the same time, we also typically see a pattern of accelerated GDP growth. If we keep spending in check (something Clinton acutally did after the 1996 cuts), that is when we start to see real progress on the debt. Spending is the issue.

 

[dogtowner]

Yes, spend less too. I agree with you about the GDP. Even though the GDP-to-revenue ratio is relatively constant, note that in years of higher taxes the national debt dropped, and that was my focus. Growing the GDP is OK with me, but that is much more difficult to control in today's international doldrums.

countries embracing. pro growth stance are the ones making the most of whsts there. that large economies like ours have taken the other path drags lesser ones down with themselves

the treasury debt by year at least since 1950 has never gone down. sorry but im too ignorant to post a link from my phone buttreasurydirect.gov has debt by year.

 

[Lagboltz]

Now, perhaps you mean dropped as a percent of GDP? Going back 30 years -- Clinton is the one example we can point to in this regard. In 1993, he raised rates, and the national debt to GDP ratio stood at 68.1%. In 1996 -- when Clinton partnered with the Republican Congress and cut many rates -- the debt to GDP ratio stood at... 68.1%.

I rechecked my source and yes, it was a percent of GDP. Of course that is a measure that makes more sense than the actual debt. Is your source normalized to 1999 dollars? It didn't say.

After the 1996 cuts, when Clinton left office at the end of 2000, debt to GDP ratio stood at 57.7%. a sizable decrease -- but evidence suggests it had absolutely nothing to do with raising taxes, and everything to do with cutting them.

Now, to be fair -- the debt to GDP ratio usually does go up with a tax cut -- but at the same time, we also typically see a pattern of accelerated GDP growth. If we keep spending in check (something Clinton acutally did after the 1996 cuts), that is when we start to see real progress on the debt. Spending is the issue.

In reviewing the graphs, it looks apparent that the rate of decrease of the debt-to-GDP-ratio has a dependence on the top marginal tax rate.

Looking at the debt to GDP ratio, the debt was quite large after WWII. During the period of 90% top marginal rate, the debt/GDP was decreasing rapidly. It still decreased but not as rapidly at 70% marginal rate. At a rate of 40% and below, the debt/GDP starts rising rapidly.

Of course this doesn't prove too much of anything because fluctuating periods of war, recessions, baby boomers, financial mayhem, etc. contribute an arcane complexity. However I think it does say that you cannot make a case that a lower top marginal rate will reduce national debt.

 

[Dr.Who]

We'd be ahead of the game if the Congress would do anything but bicker.

The bickering seeems to be the only thing that stops them from passing even more bad laws.

 

[Gipper]

Growing the economy can take years, and there is no clear path on how to do it. Meanwhile, we will still be out of sync. I think we need all three -- raise taxes, cut spending and increase the GDP. Congress can't quickly do anything about the GDP, but they can affect the other two. Congress is more interested in getting reelected than doing anything.

I do not believe your statement is accurate in an historical sense. History shows that economic growth can come quickly. If you look at what Coolidge, JFK, and Reagan did, you see that economic growth during their terms was very good. And conversely, economic growth was poor during Hoover, FDR and BO's presidencies.

Below is a comparison of GDP growth rates between Reagan's first term and BO's.

We had GDP growth averaging 7% by Reagan's fourth year. I think that rather quick. If we had that rate today, instead of 2.5%, revenues would be flowing into the Treasury and things would not be so bleak.

It comes down to the policies of the administration. The burdensome policies of BO will NOT generate significant economic growth no matter what tax and spend policies are implemented. However, BO policies while not helpful, can be very damaging very quickly. BO is following in the footsteps of FDR...he admits doing so. Yet history shows FDR a complete economic failure who caused great harm.

Why has BO chosen to impose harmful economic policies? I think the answer is simple. He is a collectivist first and foremost who knows little about economics just like FDR.

BO intends to impose EVEN MORE regulations on the private sector...and 2700 pages of new regulations in Obamacare has yet to kick in....the consequences of collectivist economic policies will be a continued weak economy, low GDP growth, and high unemployment.

 

[Dr.Who]

Why has BO chosen to impose harmful economic policies? I think the answer is simple. He is a collectivist first and foremost who knows little about economics just like FDR.

I was listening to Michael Medved the other day whose opinion was that BO is not a socialists because he does not even have a coherent philosophy let alone a socialistic one. What he has is a mish mash of policies that he has assembled over the years through hanging around with "all the right" crowd - communists, and tree huggers... I think I would agree that he is technically not a socialists even though he ascribes to much the same policy. On the other hand just as a person does not need to lie in every instance of speech to be a liar he does not need to engage in collectivism in every instance to be a collectivist.

 

[Cruella]

Obama is worse than a socialist. He's anti-American, just like his mother was, and all his Marxist professors and anarchist friends.