Is there way to fix Taxes and Spending?

Published on September 5, 2004 By XX In Politics

Source is in link.

He has already catagorically stated that if elected he will raise taxes!

That's not always a bad thing. President Clinton did the same, it was unpopular, but he did really well then.

After all, it's all about balancing the budget. If I was USA government with my current income of $350 a month, ratio-wise not actual, government can't run on just 350 a month! Suppose I spent about $600 dollar per month by borrowing all the banks, and using all the original $350 a month to pay the interest. how long before I get so badly in debt and I have to file bankruptcy? Not very long, I'd say.

There is 3 possible options to get out of that problem:

1. Tax increase. ( My analog continued, Increase my income to more than $600 or so to keep all current expenses PLUS pay back all loans )

That would causes citizens to complain, since that would require over 100% increase of taxes! Even if it's smaller people will still complain.

2. Expenses decrease. ( Decrease my spending to less than $350 so I can pay loans plus whatever expenses I decide to keep )

On the face of it, it seems reasonable, but government may cut critical programs such as education, retirement benefits, solders, and etc.

3. Both. ( I lessen spending as much as possible without hurting too many people, and tax the gap left plus some to pay loans. Let's guess lessen spending to approx $450 and increase taxes so I increase income to about $500. )

This seems to be the best solution. People WILL get tax increases but the pinch will be less than #1 and benefits lost will be less than #2.

#4 No change. ( Keep spending $600 and use $350 to pay interest. )

That's what some people want to do, keep spending but no tax increases to pay for it. Our dollar value is still falling and that is hurting us.

When I consider those possible solutions, it seems to be best to use #3. Everyone feels the pinch but not as bad as first 2. How about #4 you say? It may allow us to stay at where we are, but there's monster called National Debt looming up, and it won't accept money from loans anymore eventually.

Comments

Solitair

on Sep 06, 2004

Always a tough decision.

The biggest problems here are education and responsibility. The public need to understand taht they are responsible for that debt and that they cannot just spend, spend, spend. As an outsider I found it amazing looking at the whole California issue, where despite huge budgetary problems many citizens still have no concept of the fact that they need to do one of your options. Where did the American people lose site of the fact that the national debt is their debt? Where did they gain the feeling that they could just leave the problem for their kids?

And it's not just the US. Thankfully in the EU we have something called a stabiltiy pack which stops EU governments amassing more that 3% GDP debt a year. Both France and Germany however are breaking this figure, because their citizens want that expensive social welfare program but don't want to pay for it. What is it with modern society that makes us so financially unresponsible?

Paul.

Chemicalkinetics

on Sep 06, 2004

It is true that national debt is not a good thing. That said, it is common to run deficit during time of war and during recession. The reason Bill Clinton didn't run a deficit is not really the tax increase as much as there is a large GDP growth and there was some government spending cut in his early years. That said, it is extremely normal for nation to run national deficit during recession.

There are only two wyas to simulate an low growth economy. Either tax cut or increase government spending and both will run into deficit. This is basic economy. I don't care you are supply side economist (tends to be Republicans) or demand side economist (tends to be Democrats).

The usual solution is to borrow money (run up deficit) during recession, and repay the debt during economy bloom. The problem is that Clinton didn't repay much during the bloom year. The spending increases with the tax income.

sandy2

on Sep 06, 2004

Link< Article on the "Horror of our debt".

The national debt needs to be removed, because eventually that will come back and bite us so hard that we will enter a depression and it will be hard to get out of it, because with a depresion comes decreased tax revenue. We need to take care of this situation now. I think we both need to get rid of waste expenses (foreign aid, corporate welfare, missle shield), while also increasing revenue. I think that to increase revenue the US Government should do the following things: Open up the Alaska Reserves, with the federal government taking 50% of the profits from the oil from alaska. Also, the government should raise the oil company tax, charging them a percentage of their profits. They won't be able to pass this along to consumers, because of the highly competitive nature of the business. We could also introduce legislation preventing the oil companies from passing their tax increase along to consumers. Next, the government needs to introduce a 5-10% temporary sales tax. This could potentially generate revenues up to 1 trillion dollars, which would be used SOLELY for paying back the debt. Next, the government should not repeal the estate tax. Lastly, there should be a wealth tax that taxes people 1-5% for holding wealth, because the government after all does protect their money (from robbery, from attack, and from bank failure). This would also stimulate the economy and thus would increase income tax revenue. The last step that would need to be taken would be to pass a constitutional ammendment that phrohibits the government and all state governments from operating at a deficit. The sales tax would be phased out after the debt was paid off, ending when there was a reserve fund of between 500 billion and 1 trillion dollars, creating an expense fund for wars or other major problems. All of the above would cause the dollar to raise significantly, and thus would in fact help the population even though they were paying a higher tax for a temporary period. The 300 billion dollars saved each year from not paying intrest could either be put to a large government surplus fund which would be used in an emergency.

CrispE

on Sep 06, 2004

What some people have missed in the issue is that the U.S. government hasn't done a comprehensive analysis of it's spending in 50 years. Not that cuts don't need to be made (they do) or taxes need to be raised (they might) but we have no idea where much of the spending goes. It's like they took a 100 year subscription to Prodigy (remember them?) and keep paying it year after year even though it stopped existing long ago. My pet peeve is the Rural Electrification Act and Administration that gets funding year after year. No anyplace that doesn't have electricity? (Well, that works, maybe not, but you get my point, hehehe.)

But no one in either party seems the slight bit interested in looking at the details in the budget, much of the spending of which is stuck in sub-sub-sub budgets that aren't ever considered!

Solitair

on Sep 06, 2004

I have no problem with borrowing during times of war. just look at the US national debt over the past 200 years. WW1 and WW2 saw major increases. The problem is not paying it back after the war. It's not enough to reduce your borrowing to zero, you need to repay what you have already borrowed.

The big problem here is politics. Who is going to stand up and say vote for me and I'll increase your taxes by 5%? Maybe 1%, but 5%? the problem is now so large that no-one can even consider doing something about it coming up to an election. What is really needed is an agree system where politicians are responsible for borrowing under their term. Imagine if they had to pay an extra 5% taxes until any borrowing was repaid! They'd be quicker at making those tough decisions for cuts or increased taxes!

Paul.

on Sep 11, 2004

Oops! I thoght my article didn't get replies. Sorry about 5 days late reply!

Anyways..

I have no problem with borrowing during times of war.

I agree. Bush said that the war is over, however. What is it now? Very loud and deadly peacetime at Iraq? Spending at there is getting insane, in both human lives costs and money terms.

Yeah? That's amazing that there was no budge check in last 1/6 of USA goverment's existance! Truly amazing.