America has a revenue problem. Blame George W. Bush and Donald Trump.

[GMDino]

https://www.msnbc.com/opinion/msnbc-opinion/us-economy-trump-bush-tax-cuts-deficit-rcna122322

Quote:[color=var(--article-body--date-source--color)]Oct. 27, 2023, 1:24 PM EDT[/color]
[color=var(--article-body--byline--color)]By Bobby Kogan[/color]
When jobs are plentiful and business profits soar, that means good news for federal tax revenues. At least, that’s how it’s supposed to work.


For 15 years after the Tax Reform Act of 1986 went into effect, that’s exactly what happened: Changes in the U.S. unemployment rate were a strong predictor of changes in our federal tax revenues as a percent of the GDP; a drop in the unemployment rate caused revenues as a percent of GDP to increase. But since the beginning of the 21st century, a series of tax cuts under presidents George W. Bush and Donald Trump have shattered the link between tax revenues and employment. Revenues as a percent of GDP dropped significantly, and now they no longer grow much when the economy strengthens.

After news that the federal deficit grew despite a strong economy, amid rising interest rates, there are renewed fears about the nation’s fiscal outlook. With these fears typically come calls to reduce spending. But the U.S. doesn’t have a spending problem; it has a revenue problem caused by tax cuts.

Between 1995 and 2000, the unemployment rate fell from 5.6% to 4.0%, and revenues rose from 17.9% to 20.0% of GDP — the equivalent of taking in an additional $600 billion per year after adjusting for the size of the economy. When the unemployment rate fell a similar amount between 2015 and 2019, going from 5.4% to 3.7%, revenues dropped from 17.9% of GDP to 16.3% — the equivalent of taking in $450 billion less per year after adjusting for the size of the economy.
Why did this happen? Because during that same time, the Bush tax cuts, their bipartisan extensions, and later the Trump tax cuts slashed taxes, significantly lowering overall revenue. Importantly, a disproportionate share of the benefits from these cuts accrued to very rich Americans, profitable corporations and wealthy heirs.

[color=var(--inline-video--info--color)][color=var(--inline-video--title-color)]Joe: Republicans screaming about debt ceiling now went along with Trump three times
MAY 31, 202309:24

[color=var(--social-share-inline--share-list--color)][/url][url=https://twitter.com/intent/tweet?text=Joe%3A%20Republicans%20screaming%20about%20debt%20ceiling%20now%20went%20along%20with%20Trump%20three%20times&via=msnbc&url=https://www.msnbc.com/morning-joe/watch/joe-scarborough-republicans-screaming-about-debt-ceiling-now-went-along-with-trump-three-times-178617925547&original_referer=https://www.msnbc.com/morning-joe/watch/joe-scarborough-republicans-screaming-about-debt-ceiling-now-went-along-with-trump-three-times-178617925547][/color][/color]
This newfound pattern of low revenues even in times of high employment has persisted up to the present day. In fiscal year 2023 — which just ended Sept. 30 — the unemployment rate averaged 3.6%, the lowest since 1969. However, because of these large tax cuts, revenues were a paltry 16.5% of GDP.

[/color]
These lower revenues have a profound impact on the finances of the nation. Prior to the tax cuts being enacted, the Congressional Budget Office projected long-term stability of the debt-to-GDP ratio. Yes, the CBO projected rising spending driven by Medicare, Medicaid and Social Security. But the agency also projected that revenues would be able to keep up indefinitely without any additional tax increases, due to real wage gains leading to higher revenues. Now, however, the CBO projects that debt is on track to rise as a percent of GDP indefinitely, with revenues now significantly lower and no longer projected to match primary (noninterest) program costs.

Two points explain this. The first involves a concept called the fiscal gap, which measures how much primary deficit reduction is required to stabilize the debt-to-GDP ratio. The 30-year fiscal gap is smaller than the size of the Bush tax cuts, their extensions and the Trump tax cuts under current law over the next 30 years. Therefore, mathematically and unequivocally, without those tax cuts, the debt ratio would be declining, not rising.

Second, even though the debt ratio is rising, spending can’t be blamed. The CBO’s 2012 long-term budget outlook was the last time debt was projected to decline indefinitely — because that projection was made before the Bush tax cuts were largely permanently extended. And relative to the CBO’s 2012 projection, current projections of program costs are down, not up. In short, if you were trying to explain how we got from the CBO’s 2012 projection of a declining debt ratio to its current projections of a rising debt ratio, changes in spending have lowered the future debt path, but revenues have declined significantly more than spending. Changes in revenues are therefore entirely responsible for going from a declining debt ratio to an ever-growing debt ratio.

The first step in effecting change is proper diagnosis. Those who look to blame spending to close the primary deficit are looking in the wrong place. If not for the regressive tax cuts initiated under presidents Bush and Trump, we would have been looking at a stable debt-to-GDP ratio. Any discussion of how to change our fiscal path should focus first on generating additional revenue lost to these tax cuts.

[GMDino]

I guess thinking about this it should have been in the other part of the forum.  Sorry.

[*pally*]

plus there is around $600 billion in uncollected taxes but hey lets defund the IRS so the rich donors can avoid audits

[basballguy]

This is why people are in poverty. Ridiculous thinking like this.

I saw a reel the other day that was like “my husband asked me to curb my spending, so I told him to make more money”

If people think the solution is “well make more money” in this case, increase taxes, they can’t be helped.

[Belsnickel]

(10-28-2023, 08:22 PM)basballguy Wrote: This is why people are in poverty. Ridiculous thinking like this.

I saw a reel the other day that was like “my husband asked me to curb my spending, so I told him to make more money”

If people think the solution is “well make more money” in this case, increase taxes, they can’t be helped.

We need cuts as well as increases to revenue. We have the lowest tax rates in this country since income taxes really came about. We decreased outlays in FY23 by 2% overall. We could eliminate 100% of non-defense discretionary spending and still be in a deficit. So, we need to look at cutting both defense spending and entitlements, which is not politically popular.

We have to increase revenues and we need to look at strategic spending cuts to programs most people don't want to see cut. Those are the facts of the situation. No analyst worth anything sees it any other way.

[JustWinBaby]

It's actually pretty in line with where it's been historically, outside the brief period cited in the article (cherry-picking and oversimplification at it's finest). And people love to talk about taxes - pretty sure those same people aren't talking about taxes like in Europe where they have a 30% VAT(?) and a FICA equivalent over 50% higher than in the US.

https://fred.stlouisfed.org/series/FYFRGDA188S


Now do spending....

[guyofthetiger]

To the OP. There is nothing stopping you from giving more money to the treasury. So do it without making others pay.

[Goalpost]

I really don't like the idea of telling people who have put into social security their whole life that their benefit has to be adjusted downward. I do think though you can start with the multi millionaires who I have heard many times say that.... social security is not really a need to them and something they would give up.

[Belsnickel]

(10-28-2023, 09:23 PM)JustWinBaby Wrote: It's actually pretty in line with where it's been historically, outside the brief period cited in the article (cherry-picking and oversimplification at it's finest). And people love to talk about taxes - pretty sure those same people aren't talking about taxes like in Europe where they have a 30% VAT(?) and a FICA equivalent over 50% higher than in the US.

https://fred.stlouisfed.org/series/FYFRGDA188S


Now do spending....

Well, they do. And you can see that other than bumps for some things (like the pandemic or wars) it has pretty much stayed on even keeled.

https://fred.stlouisfed.org/series/FYONGDA188S

Of course, the paycheck comparisons are off because with that higher FICA comes a more robust social retirement fund and publicly funded healthcare, which we pay for with insurance premiums and 401ks. But that is a long running discussion.

[Belsnickel]

(10-28-2023, 11:35 PM)Goalpost Wrote: I really don't like the idea of telling people who have put into social security their whole life that their benefit has to be adjusted downward. I do think though you can start with the multi millionaires who I have heard many times say that.... social security is not really a need to them and something they would give up.

The sad reality is that the system as it is just isn't sustainable. Nobody likes the idea, but if people refuse to increase revenues then we have to make serious cuts to those programs. Entitlements and defense spending will have to be carved up.

[*Nately120*]

(10-28-2023, 08:35 PM)Belsnickel Wrote: So, we need to look at cutting both defense spending and entitlements, which is not politically popular.

Referring to them as entitlements is a good start towards getting people to want them cut.

[*TheLeonardLeap*]

(10-29-2023, 11:24 AM)Belsnickel Wrote: The sad reality is that the system as it is just isn't sustainable. Nobody likes the idea, but if people refuse to increase revenues then we have to make serious cuts to those programs. Entitlements and defense spending will have to be carved up.

There's a pretty bad track record of the sustainability of programs where it relies on an ever-larger number of people joining and giving their money to pay for a smaller number of people at the top who paid for an even smaller number of people above them. Shaped almost like some kind of triangle.  


- - - - -
Jokes aside, defense spending hasn't been keeping up with our growing economy for decades now. It hasn't been above 5% of GDP since 1990, and been below 3.5% in 6 of the 7 years from 2015 to 2021 with 2020 being the only exception which had a lot of weird things happen then. We've been looking at already spending the lowest amount of our GDP on defense over the last decade or so since like 1800 if I had to guess when our country's navy was essentially nonexistant. Certainly far less than any decade since 1960.

There's still fat on the pork that can be cut, but it's already been shrinking over the years and if you carve it up significantly you're doing more harm than good because at a certain point we are losing the ability to protect our trade interests which then would cut into our revenue more than we'd save from cutting defending spending.

[Belsnickel]

(10-29-2023, 12:46 PM)Nately120 Wrote: Referring to them as entitlements is a good start towards getting people to want them cut.

Well, that's what they are. Of course, most people think of that word in a different way than what it is actually referring to. They are called entitlements because we, as the American people who have paid into these programs, are entitled to those funds by law. I know, though, many people tend to think of them in a different way but the reality is that we are entitled to it because it is our money.

(10-29-2023, 02:28 PM)TheLeonardLeap Wrote: Jokes aside, defense spending hasn't been keeping up with our growing economy for decades now. It hasn't been above 5% of GDP since 1990, and been below 3.5% in 6 of the 7 years from 2015 to 2021 with 2020 being the only exception which had a lot of weird things happen then. We've been looking at already spending the lowest amount of our GDP on defense over the last decade or so since like 1800 if I had to guess when our country's navy was essentially nonexistant. Certainly far less than any decade since 1960.

There's still fat on the pork that can be cut, but it's already been shrinking over the years and if you carve it up significantly you're doing more harm than good because at a certain point we are losing the ability to protect our trade interests which then would cut into our revenue more than we'd save from cutting defending spending.

The problem is that we have nothing left to cut. Like I said, we can cut the entirety of our non-defense discretionary budget and still be in a deficit. We're talking about no national park upkeep, no federal disaster aid, no infrastructure upkeep funding, none of that, and we would still need to cut more spending at our current revenue levels to balance the budget, which isn't sustainable because really we need to be looking to create a surplus. And, with all of those cuts, we would create an unemployment crisis in this country that would create a whole other set of problems.

Politicians on both sides of this are not being realistic about what needs to happen and they are selling the voters a bad bill of goods. It's all because the reality of the situation is not what voters want to hear so it won't get them elected.

[basballguy]

(10-28-2023, 08:22 PM)basballguy Wrote: This is why people are in poverty. Ridiculous thinking like this.

I saw a reel the other day that was like “my husband asked me to curb my spending, so I told him to make more money”

If people think the solution is “well make more money” in this case, increase taxes, they can’t be helped.

Here’s another one

https://www.instagram.com/reel/CvsCdSgtXp4/?igshid=MzRlODBiNWFlZA==

[Fan_in_Kettering]

Give me numbers then. What do you consider “rich” and how much money should they pay in taxes?

[JustWinBaby]

(10-29-2023, 11:21 AM)Belsnickel Wrote: Well, they do. And you can see that other than bumps for some things (like the pandemic or wars) it has pretty much stayed on even keeled.

https://fred.stlouisfed.org/series/FYONGDA188S

Of course, the paycheck comparisons are off because with that higher FICA comes a more robust social retirement fund and publicly funded healthcare, which we pay for with insurance premiums and 401ks. But that is a long running discussion.

But the US also has very high transfer payments, among the highest in the world, because it's income tax is among the most progressive in the world.   Social spending as a % of GDP in the US is 18.7%, vs. OECD average of 20.0% of GDP.  And that is relatively in line with the tax burden on workers

Although not sure how receiving more benefits along with their higher FICA refutes my point that they're paying for it.  If you want more benefits, you're going to have to raise taxes on EVERYONE, and my guess is only the bottom 20-30% will see a net benefit.  This is fairly well understood outside of the typical class warfare gaslighting where all our problems are solved simply by raising taxes on the 1%.