Wednesday, 28 July 2010

Putting the US deficit into perspective

Need to raise revenue for the government?

That's easy, simply tax the rich.

The United States, like the majority of Western nations, is spending itself into oblivion at worst and massive civil strife at best.
There is some good economic news. The red ink the US is swimming in is not as bad as projected in February. Yes, at $1.471 trillion, it's still huge – 10 percent of the nation's gross domestic product – but an improvement of $84 billion from earlier estimates.

But bad news still looms large. In the next fiscal year, according to the mid-season review released by the White House Office of Management and Budget (OMB) Friday, the US deficit will be $150 billion more than earlier projections. It is expected to come in at $1.416 trillion, or 9.2 percent of GDP.

The White House, which released the change in budget estimates, was careful not to overplay the changing numbers.

“These are not substantial changes and nothing we want to make too big a deal about,” said Peter Orszag, director of the OMB in a press call with reporters. “The economy remains weaker than we would like and the unemployment rate higher than we would like.”
So, how the heck much is 1.4 trillion dollars?

Is it actually possible to increase taxes on the rich and deal with the debt (assuming that there's no impact on employment or investment)?

I thought, why not simply confiscate
all of the wealth that the rich have? That ought to solve all of the problems. Right?

I looked up the Forbes
list of world's billionaires that are domiciled in the United States and are doing business and paying taxes there.

The richest person on the 395 name list is Bill Gates with $53B, followed by Warren Buffett with $47B and a gap back to Larry Ellinson at $28B.

Now, here's the kicker - and the sobering reality check for the soak-the-rich left - if you confiscated ALL of the wealth of these 395 people in order to fund the debt (which means it would need to be sold to overseas interests, of course, as there'd be nobody rich enough in the US to buy it anymore) then how much would you raise?

Ready?

1.328 trillion dollars.

You'd still need to find another $143B to break even for the year! And your wealth creators have now got nothing! Good luck with that...

Here's another way of looking at that $1.471 trillion deficit.

Consider the following: there are 113,146,000 households in the US, which means that in just one year each household now has an extra $13,000 added to its debt. No wonder the Congressional Budget Office describes the debt situation as unsustainable.

Competition from emerging economies in China, India and Brazil, coupled with declining birth rates, undermine the modern Western (immoral) indulgence of giving people money who haven't earned it while putting the bill onto the next generation...and the one after that...in a gigantic, populate or perish, Ponzi scheme.

2010 is a momentous year in world history, I believe, as history will mark it down as the year that the welfare state, in its current form, ended.

(Nothing Follows)

3 comments:

Anonymous said...

Is it actually possible to increase taxes on the rich and deal with the debt (assuming that there's no impact on employment or investment)?

Or domestic output?

Here is a very interesting 2007 paper from Dear Leader's chief economic advisor (who is apparently being ignored), Christine Romer and her husband, both from Berkeley.

It is remarkable reading if you put aside that it is a highly technical paper on economics. But there are some extraordinarily clear findings when you figure that it's the work product of a couple of looselugnut libruls from ground zero of most of the librul mold spores released into the atmosphere.

1) For the most part, a tax increase equal to 1% of GDP will produce a 3% reduction in GDP

2) That same tax increase will only momentarily increase tax revenues and then will flatten out.

3) The hit caused by the tax increase on GDP falls demonstrably on reduced incentives to invest rather than a reduction in consumer spending

4) A tax increase also increases unemployment.

5) While not specifically stated in the text of the paper, the charts of their calculations show unequivocally that tax cuts have a short term negative impact on treasury revenues which is more than made up later in a multiplier effect of 3 improvement in GDP and a remarkable increase of tax revenues.

There is one instance in which....inexplicably....a tax increase purports to have a mild positive effect on GDP. The Romers describe those as exogenous tax hikes to correct an inherited deficit.

I'm assuming this was their political purpose in publishing this paper since in the US, increasing taxes is the central animating ingredient of mother's milk in leftieland. However, they expressly disclaim those findings in the case of exogenous tax hikes accompanied by massive increases in spending.

I guess in 2007, it wasn't yet clear that there would be the opportunity not to "waste a good crisis".

http://elsa.berkeley.edu/~dromer/papers/RomerandRomerAERJune2010.pdf

Since you mention the exalted Nobel Laureate Krugman who just can't stop himself from looking sillier and sillier by the week, you might enjoy this discussion from the American Thinker which is where I found the Romer paper.

http://www.americanthinker.com/2010/08/paul_krugman_gives_up_1.html


--Krumhorn

.......

Anonymous said...

Is it actually possible to increase taxes on the rich and deal with the debt (assuming that there's no impact on employment or investment)?

Or domestic output?

Here is a very interesting 2007 paper from Dear Leader's chief economic advisor (who is apparently being ignored), Christine Romer and her husband, both from Berkeley.

It is remarkable reading if you put aside that it is a highly technical paper on economics. But there are some extraordinarily clear findings when you figure that it's the work product of a couple of looselugnut libruls from ground zero of most of the librul mold spores released into the atmosphere.

1) For the most part, a tax increase equal to 1% of GDP will produce a 3% reduction in GDP

2) That same tax increase will only momentarily increase tax revenues and then will flatten out.

3) The hit caused by the tax increase on GDP falls demonstrably on reduced incentives to invest rather than a reduction in consumer spending

4) A tax increase also increases unemployment.

5) While not specifically stated in the text of the paper, the charts of their calculations show unequivocally that tax cuts have a short term negative impact on treasury revenues which is more than made up later in a multiplier effect of 3 improvement in GDP and a remarkable increase of tax revenues.

There is one instance in which....inexplicably....a tax increase purports to have a mild positive effect on GDP. The Romers describe those as exogenous tax hikes to correct an inherited deficit.

I'm assuming this was their political purpose in publishing this paper since in the US, increasing taxes is the central animating ingredient of mother's milk in leftieland. However, they expressly disclaim those findings in the case of exogenous tax hikes accompanied by massive increases in spending.

I guess in 2007, it wasn't yet clear that there would be the opportunity not to "waste a good crisis".

http://tinyurl.com/24km77c

Since you mention the exalted Nobel Laureate Krugman who just can't stop himself from looking sillier and sillier by the week, you might enjoy this discussion from the American Thinker which is where I found the Romer paper.

http://tinyurl.com/27fvobg


--Krumhorn

.......

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