Why Is The Country Broke?
Posted: 23 March 2010 Filed under: Economics, Fiscal Policy, Government, Politics, Professor's Classroom, Public Policy, Taxation | Tags: Ecomonic Policy, Entitlements, Revenue, Tax Cuts, Taxes 22 Comments »Professor’s Classroom
Subject: Economics/Public Policy
Budget Deficit #5
In the past year there has been hours upon hours of the threat of the country going broke…surely you are aware of this by now…..Is it broke? Then how does it happen?
Repubs and conserv Dems, which includes everyone in Washington, say that it is the fault of entitlements and the out of control spending that the government has engaged in…..But how did our lack of cash come about?
If we listen to Repubs it is the give a ways from the entitlement programs…you know the services like Social Security, Medicare, etc….they say that these programs are eating up more and more of the revenue of the US and that it must be stopped…and of course, it is all the fault of Baby Boomers and their damn need to retire…
I have given this talk before…..I AGREE…it is all the fault of the give-a-ways….surprised?….Do not be…the give a ways I am referring to is taxes……apparently dipsticks do NOT know that taxes are the sole source of revenue for the country and every tax cut is doing NOTHING but making life worse for the people…..okay, it is a popular issue….everybody thinks that life will be magically better when tax cuts kick in…..my question now is….after 20 years or so of these magical mystery benefits…..how has it worked out?
Look at the states and their problems…..almost every problem that they face is because for a couple of decades they have given away all the state income in tax breaks and such to companies that they want to attract to the state….once again…how has that worked out? If you want states to solve the ills of the society, then that will take money and tax cuts do NOT generate anything but votes….but yet the people still think that tax cuts and breaks and incentives will be a magic pill that will cure all the problems that come to light……it is a LIE! And anyone that believes that is DELUSIONAL!
Everyone can relate…..without income there is NO progress or stability! The use of stats to make the case for tax cuts is another lie…….look at reality…..poverty has risen during the years of the tax cuts….so who benefits from the cuts? Bet it is not YOU!
Glenn Beck called this out at CPAC: The Dems are the party of tax and spend, the GOP is the party of spend.
But I don’t think it’s the tax revenue that’s the problem. Insert your own finance into the equation: What is the first thing you can do to fix your finances… cut spending? We waste so much on our inefficient government. When revenues go down, what do the Einsteins in Washington do? Raise the debt cap (credit limit). Here’s an idea: bring federal salaries in closer line with the private sector. Or consolidate some departments. Or run audits (real ones) on every department, complete with the possibility of lay-offs for underperforming, or redundant people/positions.
We can’t look to the organization that is riddled with liars, cheats, the inept, and corrupt for solutions on how to improve our lives. The better solution is to allow us to have our tax dollars, as I can guarantee I can spend my money better on my welfare than my government can. Can’t you?
Morning…..my problem is that most Americans expect services….but do not want to pay for them….yes I can….but then I have been somewhat trained in economics….the only reason I say that is that ALL Americans need that…moist are not capasble of making such decisions that why stock brokers get rich….
And to LOUDelf’s point…yes we do cut spending but if I need to provide for my family then I will go into debt to do so…..I do like the point of eliminating redundancies….that could save us a bunch…but then those people would be in the job market that is anything but good….
Yeah, but in the open job market they might have to add a dash of realism to their thinking.
Can bureaucrats do that?
I don’t think bureaucrats can do anything useful, but even I realise I’m biased that way
I am still trying to minimize bureaucrats…..a co-coped government is a bitch!
If a government doesn’t control much except what it has REAL business doing, it doesn’t need many bureaucrats, does it?
Nope, but then it would depend on the leadership….remember Fascism depends on bureaucrats….
The quality of the leadership is always paramount, but in a secure democracy, the leadership can be voted out of office – the bureuacrats aren’t – AT THE MOMENT!
So the tune changes but the song remains the same…..
Do I hear some Led Zeppelin coming on?
Exactly. Of course, you COULD employ all but the lowest level of the Civil Service (do you call it the same?) on a fixed trm contract that expires along with the administration.
Hark! I hear squeals of anguish from the UK bureaucrats of our civil Service who virtually have a job for life at present!
“yes we do cut spending but if I need to provide for my family then I will go into debt to do so”
Excellent point, and analogy! Touche.
I do think our government can make some reasonable cuts to both spending and taxes without going into debt. From my experience working on some government projects, they often have so many redundancies, people that really have no business in the job they have, or ridiculous policies and cumbersome paperwork. The only worry I have about government workers in the job search is that most of them would severely struggle in the private sector (especially small businesses who are doing most of the hiring) as they, like the government they are in are more focused on the perception, rather than the actual results.
We look to the USPS, Medicare, and SS as gleaming examples of inept government bumbling. We send our money into the federal pot, so they can redistribute a portion back to our state, who in turn uses some, and sends a portion back to our municipality… not without administrative cost. We can flatten and reduce the tax (while simplifying the code), and allow towns and states to handle more of the burden, all while saving people money on taxes.
The theory of central government is a great one, but in our country with our politicians, it just doesn’t work. So the next best course is to strip them of the funds and the services they provide, and allow people to make more of their own decisions, and save some of their own money.
Thanx…I do have my moments…….I will agree that bureaucracy is one of our problems…what is the old saying, “too many chiefs and not enough indians”…..
Please do not get me wrong…..I think we can cut taxes and help the economy…..put it needs to be cuts that will create demand……the cuts need to be given to the people that will keep the country going on an even keel instead of the boom and bust cycle it has been on for a generation…
Small business is the heart of our economy…..and in that the heart of the Middle Class……but the very people that are yelling the loudest in Washington have the worst record on Middle Class issues……
That, of course, is all true. But then the aim of bureaucracy these days, for reasons we have already agreed, is to make everyone as much the same as is possible. The “middle class” is indeed the strength of yours, mine and most other nations – it is also the vast (largely UN-vocal) majority – but the middle class is almost entirely made up of entrepreneurial, hard working INDIVIDUALS who don’t WANT to all be the same.
Bureaucracy cannot deal with variation and so it automatically hates individuality – i.e. the middle classes!
You are, of course entirely right on all counts, but not I suspect for exactly the reasons you had in mind…
Taxes are evil, but they are necessary to run a country – they are after all, as you say, the administration’s only source of revenue. Income tax and hidden “stealthy” levies are the least desirable of all taxes and the UK at least has a HUGE number of those – fuel at the equivalent of nearly $10 a gallon for instance!
It should be a relatively simple matter to list the things a government is charged with (and therefore must) do. It would also be a simple matter to list the things it would like to do because the people would prefer it to do them and to cost all of that.
The most difficult of all problems to deal with are those associated with the poor and society has a duty to do some things at least to protect them – hence some of the “give-aways” you mention.
However, the poor are by far the biggest problem any society has to deal with and almost NO normal country has found any way to deal with that which is acceptable either to the poor themselves, or the people at large – nor has any ordinary country found a way to really stop the poor from being poor, even in a small way.
There are many reasons for that including the poor themselves and their lack of education, drive, ability, honesty, and sometimes even their willingness to take any even limited responsibility for their own situation or failings…
The reason why it’s so EXPENSIVE though is entirely different. This is simply an example and demonstartion of my point, but IMAGINE if you and a group of friends agree between you to help someone whom you KNOW who is poor, you can each regularly donate a few dollars to that person and it will make little difference to you whilst improving the poor person’s life immeasurably and perhaps helping them to get better educated or what ever they need to move forward – and you can all monitor that person and say things like, “Look, Martha, I love you to bits and I don’t mind helping you, but if you slip back into the drinking, we’re done here and you can go live back in the gutter – okay?” … well, you know the sort of thing I mean.
HOWEVER, if the fictional Martha gets her money from wefare, YOU’VE all paid your share, PLUS the HUGE cost of the associated bureaucracy (which is likely to more than DOUBLE the cost to you) AND Martha, because of some stupid rule that was designed in good faith but doesn’t fit her circumstances gets absolutely damn all whilst the crook don’t the road who is dealing crack gets well taken care of and helped to build his “business” which at the same time creates even more drug addicts who become additional helpless poor.
State run things are socially necessary, but don’t EVER dream they are a good solution – they are usually the very WORST of all solutions, but it is sometimes the only practical one!
I admit I have few answers, but you can’t even look for one unless you honestly determine the problem first, can you?
Good mornbing Quin…..check out land value taxation (LVT)……I would not have a problem with this sort of taxation…it seems to be a very good idea…at least to me…
Yes LVT (particularly as opposed to property tax) does have merits in as much as it does not generally produce inflation and it does also appear on the face of it to be a fair and sensible tax.
However, there are anomalies and oddities associated with it. For instance, take the situation of an old lady of eighty something who has lived in the same house that her parents built 100 years ago. She has little money or income, but it’s enough to see her through to the end of her days. The land value will have increased with inflation over the years, of course, but she has coped. BUT if something beyond her control changes – such as the land is re-zoned, or land prices soar for some other external reason – she could find herself with a considerable, if not huge, increase in her tax liability whilst her circumstances have not otherwise changed.
That’s an extreme example, I grant, but there are lots of similar examples where the tax can be unfair. VAT (or alternatively purchase tax, if you must) on the other hand, whilst it can cause inflation at times, is NOT greatly affected by changes beyond the control of the person paying it, or experienced by others, so we are at least all in the same boat.
Most important, if a person is even temporarily hard up, they can reduce what they spend on non-essential goods and not only save money, but (with VAT) they are automatically contributing less tax because they don’t have the money to spend and so are not buying as many taxed goods. THAT is also a powerful encouragement for the government to keep the economy healthy!
Providing that essentials like food, water, domestic power, medical services and supplies, children’s clothes and similar things are exempt from it, VAT basically automatically taxes the rich far more than the poor and yet requires a MINIMAL amount of bureaucracy to manage it, which is why bureaucrats hate it in its basic form and always try to complicate it if they possibly can.
In fact, VAT is a very fair and effective tax – IF it is applied simply and you don’t allow the said bureaucrats to start their silly games of demanding that when “x” is used for this or that purpose it turns into “y” and is no longer exempt – or that you can only reclaim this or that part of it as a business – and all the rest of that sort of nonsensical crap, which frequently extracts less money from the populace than it costs to operate and confuses everyone – something else that bureaucrats love to accomlish!
When we elkimnate as much as possible, speculation then all pay their taxes…..granma will have less of a burden her…that is if everyone pays their taxes…it would cheaper in the long run and if done properly it could very eliminate all other taxes….
I agree up to a point, but someone who owns a lot of (perhaps once very cheap) land isn’t necessarily wealthy, whereas someone who buys a lot of expensive stuff is either very stupid, or pretty well heeled – either way, they deserve to pay a good wack in taxes.
I do agree that, with very minor exceptions, there should only be ONE type of tax.
That would probably make VAT or LVT quite high, but if the government didn’t waste so much money poking its nose in where it didn’t belong, it could be enough and still affordable too.
I agree….I just like the idea or LVT…as well as a flat tax or VAT…..