Tuesday, December 07, 2010

One-Eyed Views Of Economics

I swear, the willful ignorance is growing and growing. There are two ways to balance budgets: increase income, and decrease spending. In any responsible person's personal budget, the first thing one does when the income sags is to cut spending. Not borrow and spend. Cut. Then, after stabilizing the budget, look for other sources of income.

Well, I used the word 'responsible'. So, here comes the 'Chart of the Day' from Reuters.
Oh, I love the one-eye blind preaching in the article:
This chart should be ingrained in the mind of anybody who cares about fiscal policy. The main things to note:
  • Federal taxes are the lowest in 60 years, which gives you a pretty good idea of why America’s long-term debt ratios are a big problem. If the taxes reverted to somewhere near their historical mean, the problem would be solved at a stroke.
Here's the foil, because one good chart deserves another, and because I care about policy, without taking the belief that all we're spending on right now is good, necessary, and proper:And, using the above Reuter's paragraph as a building block, here's the other side of the coin:

"Federal taxes are spending is the lowest highest in 60 years, which gives you a pretty good idea of why America’s long-term debt ratios are a big problem. If the taxes spending reverted to somewhere near their historical mean, the problem would be solved at a stroke."

So, let's end with an update to their conclusion:

If you were structuring a tax code budget from scratch, it would look nothing like this. But the problem is that tax hikes budget cuts seem to be politically impossible no matter which party is in power. And since any revamp of the tax code budget would involve tax hikes cuts somewhere, I fear we’re fiscally doomed.

Federal fiscal policy goes like this: We're committed to spending, so let's figure out ways to get the money. Why are we committed to spending what we're spending? Anyone have any interest in that? Why are so many elected officials, and worse, pundits, willing to accept that all spending is good, and must, I mean MUST, be underwritten?

This position is the extreme on one end. I'm not the extreme on the other. I'm not saying 'Cut it all!" I'm saying, "Let's cut to the historical mean." That's a moderate position.


Note to my Democratic friends: Look at the spending as % of GDP chart. Remember the Clinton years? You know, the ones that were so glorious, at least as heard told during the 2008 campaign season? What did federal spending do during that shining era of surplus? Yeah. It went down. Then, it went up sharply in the middle of the Bush years, and continued upward sharply into the Obama Administration. Over to the tax chart, you'll notice that taxes went up during the early Bush years, and then down in the middle and into Obama's term.

4 comments:

Wainstead said...

hard data ftw!

Doug said...

What strikes me is the increased share payroll taxes represent as the total revenue from federal taxes. Corporate and estate taxes have shrunk to just about nothing. Individual income taxes have decreased some, but held somewhat steady. And payroll taxes (applicable currently to the 1st $110k of income or so) have come to represent a bigger and bigger piece of the pie.

Mike Kole said...

And yet, as of 2005, the USA had the second highest corporate tax rate in the world:
http://en.wikipedia.org/wiki/Tax_rates_around_the_world

Payroll taxes are the most regressive. I'm glad reducing them is part of the compromise Obama is promoting.

Parag said...

Personal budgeting is a necessary administrative task that if done well can help keep away debt anxiety, overwhelm as let you know exactly where you are so you know what you need to do to make your balance sheet look more positive.