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Thread: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

  1. #151
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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by ReformCollege View Post
    And most importantly, not cutting spending. So we look like we are "raising taxes" but its really just a coverup for NOT CUTTING SPENDING.
    Oh my friend but the deal is cutting spending.
    "The measure also allocates $24 billion in spending cuts and new revenues to defer, for two months, some $109 billion worth of automatic spending cuts that were set to slap the Pentagon and domestic programs starting this week. "
    Fiscal cliff deal heads to House after Senate vote - CBS News


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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by Dickieboy View Post
    I’m having trouble with the bolded above. Say the annual GDP is $16t and a GOOD annual growth rate is 5%. This would equate into an annual GDP increase of $800b. Historic taxation rates have run around 18.5% REGARDLESS of the rates/deductions thus this ‘growth’ would equate to an annual revenue increase of $148b…our annual DEFICIT has been running north of $1t…this wouldn’t cover the latter Bush years when the DEFICIT was running around $400b.
    Well, again you are missing a foundational point. Revenues are not fixed to GDP as we do not have a flat tax but a progressive tax. Change in tax revenue is not a linear function of GDP change. In fact, tax revenue to GDP ratio is quite volatile... varying by 5% points in short-order. With GDP at about $16T, a 5% swing is $800B (on an annual basis). That is huge vis-a-vis the deficit. Given our income tax base is about $1.8T, then you can easily see a ...

    taxes - revenue to GDP.jpg

    As the economy more people are in the tax base and more people pay taxes in higher brackets. Hence revenues actually increase much faster than the rate of GDP growth. A perfect example of this was that the ___ GDP drop from 2008 to 2009 created a 16% drop in tax revenues (from $2.5T to $2.1T) and more importantly, a 22% drop in income tax revenue ($1.865T to $1.450T). That fall off in revenue is the single biggest component of the current deficits.

    Budget - Summary of Receipts, Expenditures and Deficits.jpg

    This FOX/Republican induced cliche that the deficit is a result of a spending problem if fundamentally a lie. Yes, there has been spending growth, but not a $1T worth. We have had a massive revenue falloff caused byt a combination of early century tax cuts and a radical recession. That, in and of itself, is NOT my argument for tax increases. Instead, I am trying to point out that a large part of the deficit will fix itself just with an improving economy; if we don't screw it up.

    The other huge fallacies being passed around is the idea that 1) you can fix the deficit by cutting expenditures and 2) a dollar of spending cuts means a dollar deficit reduction.

    First, there isn't enough spending that can be cut in the short-run. The total of all discretionary spending is $1.3T, with 60% of that defense spending. You could completely shut down the US government, I suppose, but short of that, there are not enough immediate savings. Any savings you get from social programs will be achieved over a very long period of time as these savings can only come from restructuring. Moveover, the idea the if you scrapped any of the social programs than all of the expense would go away is fundamentally unintellectual thinking. Social programs address very real problems (poverty, infirmary, old-age, mental illiness)... those things do not go away simply because there is no social safety... instead the problems go under the rug to resurface in the form of additional stresses on local government as crime, emergency room care and vagrancy.

    Second, the notion that a dollar of expenditure cuts is a dollar of deficit reduction is another false notion held the those uneducated in economics. What seems to be lost on people is that government spending goes into the economy, creating jobs and tax revenue. When a government spends a dollar it buys goods and services, which leads to employment, which leads to employees and business owners paying taxes back to the government. Those employees and business owners also buy goods and services, leading to taxes paid those business owners and employees, etc. (there is a multiplier effect). Conversely, cutting expenditures will reverse the process, leading to some reduction in tax receipts for every dollar of expenditure cut.

    Given the lion's share of the current deficit is the economic slowdown of 2008 with meager recovery; the lion's share of the solution should be in the recovery... and we should do everything we can to protect the recovery. Screwing around with taxes and debt ceilings and sequester are each threats to the recovery. This is NOT time for political hardball; at least for those that love this country.

  3. #153
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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by TurtleDude View Post
    extending the 10 year tax rates permanently would grow the economy far more than any so called deal even if it causes the Clown in Chief to lose face.

    you are right, the best way to solve the deficit is NOT to give the government more money through tax increase but from increased revenue due to the economy growing
    Extending tax rates on the upper income has almost zero economic effect. The very wealthy often export their money out of the country (Romney being a wonderful illustration of this).

    I have no problem granting tax credits tied directly to job creation and extending long-term capital gains rates for capital that is truly invested (rather than simply trading stocks). Otherwise, the best thing to shore up our economy would be to raise the top marginal rate to something on the order of 50%... The economy was much stronger and the distribution of income in this country far more efficient when marginal rates were higher. Business owners should be incented to earn their money long-term by re-investing in their business rather than playing the short-term gain of maximizing current profits and paying it out as executive salaries and bonuses. That mentality may be making some individuals rich; but it is raping our economy and threatening US stability.

    Of course, there is no danger in higher taxes of that has no one has the guts to do what is right. We will have to settle for this lame effort.
    Last edited by upsideguy; 01-01-13 at 02:07 PM.

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    Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by Zyphlin View Post
    I want to punch you in the face. You don't want me to punch you in the face. So I punch you in the stomach instead...it's a win for you! Because that logic works great.....
    A political victory, however small, needs to be considered. No one likes to be kicked in the shins, but its a great thing politics isn't like the body.
    Michael J Petrilli-"Is School Choice Enough?"-A response to the recent timidity of American conservatives toward education reform. https://nationalaffairs.com/publicat...-choice-enough

  5. #155
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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Confused again. First you say this:

    Quote Originally Posted by upsideguy View Post
    Well, again you are missing a foundational point. Revenues are not fixed to GDP as we do not have a flat tax but a progressive tax.
    Then you say this:

    Instead, I am trying to point out that a large part of the deficit will fix itself just with an improving economy; if we don't screw it up.
    Seems conflicted. If ‘revenues are not fixed to the GDP’ then how will the problem, reduced revenue you espouse, ‘fix itself just with an improving economy’? Unless you are using some other metric to measure ‘improving economy’…
    "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure" - 2006 Senator Obama...leadership failure indeed!

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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by Dickieboy View Post
    Confused again. First you say this:



    Then you say this:



    Seems conflicted. If ‘revenues are not fixed to the GDP’ then how will the problem, reduced revenue you espouse, ‘fix itself just with an improving economy’? Unless you are using some other metric to measure ‘improving economy’…
    Not conflicted; more likely just not clear.

    I was trying to say that there is not a linear relationship between changes in GDP and changes in tax revenue (which you suggested), but rather there is a multiplier effect. By saying the relationship is not linear I am not saying there is no relationship. In fact, tax revenues do correlate (and are caused) by changes in GDP.

    The fact is that tax revenues grow much faster than GDP growth and fall much faster than GDP decline. This is primarily due to the progressive nature of our income tax system. It is this multiplying power that can be taken advantage of to fix the deficit... grow the economy and the revenues will grow even faster (without raising taxes; just on their own. Raising taxes is another matter)

    Quote Originally Posted by Dickieboy View Post
    I’m having trouble with the bolded above. Say the annual GDP is $16t and a GOOD annual growth rate is 5%. This would equate into an annual GDP increase of $800b. Historic taxation rates have run around 18.5% REGARDLESS of the rates/deductions thus this ‘growth’ would equate to an annual revenue increase of $148b…our annual DEFICIT has been running north of $1t…this wouldn’t cover the latter Bush years when the DEFICIT was running around $400b.
    In your post, you suggested some type of linear relationship suggesting that a tax revenue is 18.5% of GDP... thus the $800B change in GDP amounts to only a $148B change in taxes. I am saying that assumption is wrong.. that tax revenue is NOT a fixed percentage of GDP, but varies radically.

    Historical Source of Revenue as Share of GDP

    The chart actually better isolates income tax revenue, which is what we should be discussing, which is even more volatile than total revenue (which includes SS and Medicare, which do have more of a linear relationship)..

    The point being that magnifying affect of GDP growth means the best thing government can do to fix the deficit to to coddle the fix to the economy. Much (but not all) of the deficit will naturally with a strong economy, just as about 1/2 the deficit problem is attributable to revenue shortfall caused by the economic slowdown.

  7. #157
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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by upsideguy View Post
    Not conflicted; more likely just not clear. I was trying to say that there is not a linear relationship between changes in GDP and changes in tax revenue (which you suggested), …

    The fact is that tax revenues grow much faster than GDP growth and fall much faster than GDP decline. This is primarily due to the progressive nature of our income tax system. It is this multiplying power that can be taken advantage of to fix the deficit... grow the economy and the revenues will grow even faster (without raising taxes; just on their own. Raising taxes is another matter)

    …I am saying that assumption is wrong.. that tax revenue is NOT a fixed percentage of GDP, but varies radically.

    The point being that magnifying affect of GDP growth means the best thing government can do to fix the deficit to coddle the fix to the economy. Much (but not all) of the deficit will naturally with a strong economy, just as about 1/2 the deficit problem is attributable to revenue shortfall caused by the economic slowdown.
    I believe we are both suffering from clarity issues. My analogy was not meant to be literal as evidenced by my usage of ‘Say’. I was merely using a ‘back of an envelope’ calculation using randomly accurate generous taxation (all) numbers to suggest the ‘volume’ of money from an ‘improving economy’ is way insufficient to address the deficit. You suggest ‘varies radically’ but in fact the revenue/GDP number tracks pretty steadily between 15-20% but GDP growth figures vary MUCH wider high to low. Play with the numbers and see what I mean. Adjust the GDP growth AND the taxation percentage, you’ll see…ie. $16t/ 10% growth/20%tax = $320b…still lower revenue than the average deficits of the 2000’s.
    "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure" - 2006 Senator Obama...leadership failure indeed!

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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by upsideguy View Post
    Extending tax rates on the upper income has almost zero economic effect. The very wealthy often export their money out of the country (Romney being a wonderful illustration of this).

    I have no problem granting tax credits tied directly to job creation and extending long-term capital gains rates for capital that is truly invested (rather than simply trading stocks). Otherwise, the best thing to shore up our economy would be to raise the top marginal rate to something on the order of 50%... The economy was much stronger and the distribution of income in this country far more efficient when marginal rates were higher. Business owners should be incented to earn their money long-term by re-investing in their business rather than playing the short-term gain of maximizing current profits and paying it out as executive salaries and bonuses. That mentality may be making some individuals rich; but it is raping our economy and threatening US stability.

    Of course, there is no danger in higher taxes of that has no one has the guts to do what is right. We will have to settle for this lame effort.
    the only purpose for jacking up taxes on the "very rich" is to pander to class envy. You are right it has no realistic benefits

  9. #159
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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by ChuckBerry View Post
    Perfectly summarized. Thanks.
    You're welcome.

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    Re: Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight

    Quote Originally Posted by apdst View Post
    The only way to control the deficit, is to cut spending. Raising taxes won't work, because the more money the government has, the more it wants to spend. At some point, there won't be anyone to tax.
    Why do you (guys) always project such gloom and doom? Granted, this fiscal cliff bill does have some spending associated with it, i.e., 1-year extension of long-term unemployment benefits, a 5-years extension of some middle-class tax credits designed to help put money back folk's pockets (i.e., college education credits, EITC, CTC) and more revenue to help pay Medicare costs to doctors, but I don't see these as bad things esp'ly since most measures are short-term (1-5 yrs) AND would require tax filers to apply for the credits when they file their federal tax return. In short, not even the long-term unemployment benefit is an automatic give-a-way; one still has to "qualify" for them even when they apply for such.

    So, let's stop pushing the "gloom and doom" status-quo conservative argument. It's old and tired. If you're really concerned for "limited government" as it's truly meant to be AND you want government to spend less, how about focusing more on reducing the "size" of government in conjunction with reforming SS, Medicare and Medicaid (moreso at the state-level since they "manage" the program within their boundaries).

    Creating more tax payers--preferrably through more employment--is the best shot at creating more revenue. The government needs to get it's boot off the throat of private business and let them do what they do best...make money! Money that can be taxed...creating more revenue. Raising taxes on job creators sure as hell isn't going to create more jobs and thus, more taxpayers.
    This, ladies and gentlemen, is how the argument gets so convuluted. Notice what apdst says..."creat more taxpayers through employment is the best [way] to crete more revenue"...while also claiming that "money [profits] from private business [can/should] be taxed to create revenue"...while also stating that "raising taxes on job creators won't create jobs/taxpayers".

    You've created this wildly false circular argument that doesn't make sense. It's been YOUR PARTY that has fought AGAINST raising the corporate tax rate. It's been YOUR PARTY that has fought AGAINST raising the marginal tax rate on individuals/families making over $250K. It has been YOUR PARTY who continues to argue that these wage earners are small business owners who create jobs. Thus, they've argued that the income threshod be raised above the $250K mark which per the current fiscal cliff deal it has been. Yet, it's been YOUR PARTY who has confused the issues to such a degree that most people can't think straight. Those who think as you do just need to get out the way! You're part of the problem, not part of the solution. Sometimes, I think even you forget your own arguments.

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