Saturday, April 9, 2011
The National Debt as a Percentage of GDP
On this topic, folks, I have some bad news, good news, and bad news. The first bad news is that the present figure (national debt as a percentage of GDP) of 93% is the highest that it's been since the post WW2 years of 1945, 1946, and 1947 - this, when the percentage of debt to GDP was a staggering 117%, 122%, and 105%. The good news is that, yes, the country showed a overwhelming capacity/will to reverse this trend. This, I'm saying, in that all throughout the 50s, 60s, and 70s, the percentage moved steadily downward (bottoming out at 32% in the late 70s).....................................................................................................The question is (and, yes, here's where the second piece of bad news enters), does this nation still in fact have this capacity? I really do have to wonder. a) We continue to fight in questionable wars overseas. b) We continue to waste massive amounts of money on the domestic front (that recent report from GAO on duplication was chilling). c) We continue to under-tax the country's very wealthy (allowing the Bush tax cuts for the wealthy to continue is costing the treasury up to 70 billion a year). d) The rest of the world is catching up and we just flat-out ain't competing.....................................................................................................Hopefully, folks, the country will end up rallying from this/much more closely resemble Germany (economically, I'm saying) than Greece. The next 20 years or so are critical - obviously.
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...does this nation still in fact have this capacity?
The short answer is hell no!
I'll give Paul Ryan credit at attacking the problem but his particular answer is wrong. Yeah, think of the usual liberal, bleeding heart stuff as to why I write that but the one overwhelming factor in all this is the Defense budget has to be cut and the wars have to end.
All good points, Will. Unfortunately, points a and c hit the power structure hard, and there seems to be little interest in point b.
The 50s, 60s, and 70s saw a high marginal tax rate - upwards of 91% during much of that period. If it had been at current levels, there would have never been the debt reduction (in terms of percent of GDP) that was seen during that period.
Cutting spending, alone, will not get us out of debt. It never has, and it never will.
Back when they first started talking about attacking Iraq, I remember thinking, "O.K., take out the frigging WMD, smack Saddam around a little. I'm totally cool with that." But then they started talking about regime-change and nation-building and, no, it didn't sound quite so cool then. 8 years/a trillion dollars and counting/4,400 dead Americans later, it sounds even less cool now, huh?
I hear you, Jerry. I would only counter by saying that the 91% of the Eisenhower years is quite deceptive. There were a lot more loopholes, shelters, and deductions back then. It was only after the (bipartisan and revenue neutral) Tax Reform Act of 1986 that we got rid of a lot of that shit (at least on the individual level). Getting the top rate back up to 55% would probably be roughly equivalent.
55% is probably a pretty good number.
I agree with the critter that cutting spending alone is not good enough, and is not our way, for that matter. Conservatives get elected begging us to read their lips as they claim they will not raise taxes, but then they get in office and have to finance things. They raise taxes. Bush cut them and the economy was stimulated much in the way an irritable bee is stimulated when you swat at him.
Currently long term capital gains tops out at 15% tax, which is the 34,000.00 per year income tax bracket. This is pathetic.
The fact that top marginal rates are at almost historical lows as the republicans are claiming that the country is headed for bankruptcy so we have to take food from the mouths of children with single mothers, the elderly and the unemployed to cover it is also pathetic.
Not only will it not cover it, but if taking unused money from the rich or taking food from the mouths of the hungry are our options, why do we even have to make a choice?
If supplied side economics actually indirectly generated so much federal revenue, we would have a huge surplus today and be debt free. Corporations don’t pay most of their taxes and the wealthy are no longer taxed as they were in the past. Where are all those crumbs that were supposed to trickle down to the starving, sick, and helpless in America?
Wii I agree with the majority of your points here. Where I differ is the statement with jnder taxing the rich. believe that you cannot help the poor by making the rich poor. There simply ain't enough rich people to make that kind of difference. That statement reminds me of the age old class warfare drum beat.
What is a problem and we ought to focus on is the government subsidies and crony capitalism that this nation has sunk to.
Ayn Rand is turning in her grave. As are this nations founders I am sure.
Taxing the rich at 91% didn't make the rich poor in 50s, 60s, and 70s, and raising the top marginal rate to something above the current 36% and taxing capital gains as income won't now either.
Putting things back the way they were when were not worried about the economy failing will not destroy the economy.
Also, republicans are always bragging about the percentage of total tax paid by the rich right now. That boasting is incongruent with the notion that raising taxes on the rich will not generate that much revenue.
Also, we are currently talking about generating 38 billion in revenue, are we not? Obviously a small increase in tax on the rich would do that.
The idea that America's poor impoverished and homeless are what keeps this nation afloat is a little creative.
Thank God RN is here to look out for the poor rich people. Just think how bad all those benevolent hedge fund manager and ceo's that shut factories and moved jobs to our good friends the Chinese would have it if weren't for guys like RN looking out for them.
The Koch brothers should send you a nice thank you card RN.
Now that I have the sarcasm out of the way, a republican name dBrian Munzlinger ran for Mo. state senate last year and won. He said provide tax incentives to businesses that create jobs. if they don't create jobs make them pay the money back.
Naturally this joker would never propose and see legislation like this come to fruition. His only real concern is making sure anyone who wants a gun can have one without big government asking questions, but it was neat hearing a republican say something that made sense.
Why give it back if he doesn't create jobs. Let he create the jobs FIRST, then get the tax incentives. Anyway, sounds like the guy was just feeding the usual republican BS.
Take a look at the state of Maryland...a few year ago the attached an added tax on people making over say 300,000 per yer,they forcast a sizable rise in revenue what they got in fact was lower revenue because most of these people had homes in other states so they just changed their residency.I'd dear say the same thing would happen on a federal level.
Just use a 14% flat tax on everyone....no deductions for interest,property tax,medical expenses,charitable deductions...none no deductions.
If you make 10,000 a year you pay 1,400,if you make 75,000 you pay 10,500,if you make 5,000,000 you pay 700,000.Your 1040 would be one sheet of paper.
Let the states do what they want with sales tax.
Rusty, that is about the sickest thing I have heard in a while. Basically, make the burden on the poor enormous and the on the rich non existent. Go to the single mothers, the homeless and the elderly to finance our spending.
How the hell does a flat tax put the burden on the poor and reward the rich?
I think if you libs really had your way you'd tax anyone making over 300 grand a year at 80% and teachers,social workers,SIEU and AFL-CIO members pay zero tax.
In my opinion, gents, we're going to have to cut spending AND raise taxes. That's what the recent deficit commission said and I agree with them.......As for raising taxes on the wealthy, I've never really considered myself a "soak the rich" kind of guy. But with mushrooming deficits and 3 wars currently on the credit card, I don't think that it's unreasonable for the top rates (levied at somewhere between $250-500,000 a year) to go back up to 39.6% (personally, I'd round it up to 40%).
John, I agree with you that long-term capital gains should be taxed at the same rate as regular income. I might, however, be prepared to index it for inflation. A compromise of sorts.
Rusty,
How the hell does a flat tax put the burden on the poor and reward the rich?
We libs do not think that. We are not talking about rewarding anyone or punishing anyone. We need revenue. Austerity measures is tantamount to “charging” the poorest of Americans to pay for our deficit. They simply cannot afford it if they are to survive. The wealthy pay historical lows in taxes currently. I am not saying that they should pay 80%, nor do I believe it. I am also not saying that the wealthy should pay a higher percentage of tax on their first 20,000.00 or the first 40,000.00 or their first 60,000.00. I am saying everyone should have the first 20,000.00 not taxed, the next 20,000.00 taxed low, the next 20,000.00 taxed a little higher. If a rich person earn 5 million and 60,000.00 dollars, his first 60,000.00 should be taxed at the same rate as my first 60,000.00. His next five million should be taxed much higher, but still at the same rate as my next five million. It so happens that for me there is no next five million currently, so nothing to tax. His first 60,000.00 is taxed at the same rate as my first 60,000.00. It is completely just.
I am saying that as one earns more and can contribute more, they should be called upon to do it, not as a form of punishment, but because the country needs the funds and taxation is how it gets them. When given the choice of taking the beans and rice from the mouths of 100,000 single mothers children and telling them they have to starve today or taxing the extra 5 million a wealthy man makes at a higher rate (not at 80%. It is currently taxed at 15% - 35%, depending on if it is long term capital gains or other income. The top marginal tax rate used to be 91% and was over 70% for many years. The effective tax rate for all of one’s income is always less than the top marginal rate, as I am sure you realize). I am saying the extra income of a rich man should be taxed somewhere in the middle of the above extremes. This tax is not punishment. We have to take the earnings from starving sick people or from very comfortable rich people whose standard of living will be unaffected. Given that choice, why do you choose to take the funds from the hungry and sick?
A flat tax would tax the wealthy even less than they are being taxed now. The tax burden would be even greater on those who are barely surviving (and in some cases not surviving) now. Some of those in the lowest taxable class would perish, and for what? So the rich man can have more of the money that is currently not using, so he can count it as he estimates his worth as a person by the number of bills he has in the bank.
I hope this answers your question, sir. If it does not, then the divide between your thinking and mine is too distant and you cannot know the answer.
John,I dont think we are that far apart on our tax views.
Its totally inaccurate to even mention the old 70-90% rates.There were more tax dodges available to Americans then there are to corporations now.The wind farms now operating in Altamont Ca.were initially dodges,half the plastic surgeons in LA owned wineries in Napa Vally as dodges...hell owning a race horse was a tax dodge,as long as the nag did'nt start winning a bunch of money.The people in those high rates back then were more then likely paying less federal tax then in todays brackets.
I honestly do believe in a national flat tax with absoultly no deductions.
I just have a problem with the lefts constant salivating at the thought of wealth redistribution.
My memory does not serve and I have not confirmed, but I was "told" that the tax dodges were mostly abolished in 1986.
I find the concept of a national flat tax to be abhorrent. I have no interest in wealth redistribution, as I have no interest in making any wealthy person not wealthy or any poor person wealthy. My only interest is in making sure we do not pay for revenue needs with hungry children’s’ and elderly people's food and medicine.
This is not wealth redistribution. Most people on the right seem to think that if the upper portion of a wealthy person’s income is taxed at a higher rate, the goal is to equalize everyone's pay. That is not the goal.
A flat tax would take money that would have been spent on food and medicine from the poor and would take money that would have been saved and spent on nothing, or that would have been used solely to make more money from the wealthy. It would have taken something from the wealthy that they are not using and most likely will never use and take food and medicine from the poor. That is not a fair taxation plan in my opinion.
I think we both agree about the theoretical philosophy, but disagree about the means of getting there or what it means to get there. I am not rich by any means, but I think I should be taxed more heavily than I am, if we are going to tax those less wealthy than I am at their current rate or if we are going to impose austerity measures on the helpless and weak as a solution to our deficit problem.
Taxes should never become a means of destruction in someone’s life. If our taxation destroys the lives and livelihood of any demographic, our tax policy is wrong. The current republican idea that cuts in spending and “austerity” measures should solve the deficit problem is immoral (I think). Cutting programs for the poorest or the most helpless in America is a pay cut for that weakest group. A tax hike for the strongest group is far more ethical.
Taxation and spending cuts, which is the inverse of taxation, should never be oppressive and should never compromise the rights of individuals to live the American dream and to pursue wealth. Neither should it compromise the rights of the weak and helpless to survive.
Using the last 80 years of economic data, it has been shown that a top marginal tax rate of about 60% maximizes the growth of GDP as discussed here, here, and here.
You said here three times! You are stuttering with uncertainty! :).
That is good. 60% would be a huge unacceptable jump right now and I am not sure it is the best answer. I accept the data on faith, though, as I know you would not lie to me three times.
There are more important concerns, perhaps, than just maximizing GDP. I don't want American to be all business. I want it to try to squeeze some fair in there.
To this end, I want it to be utterly aware that the poor are hurting and we should make sure we do nothing to worsen their plight and perhaps significantly more to improve it, even if the haves have to have not as much in the process.
I agree, it would be too much of a jump in one stage. Let's start raising it with 60% as a goal.
Excellent discussion, gentlemen (and, yes, I'm extremely proud that your having it here). Let me just echo what John said about the '86 tax reform bill. This bill (which was fully bipartisan) reduced the top rates from 50% to 28%. BUT it did so in a revenue neutral manner by eliminating humongous numbers of tax loopholes and shelters. Using this same ratio, a top rate of 40% (which is what I advocate) would roughly equate to a 71% rate during the Eisenhower administration. Hopefully that (rate), coupled with some prudent spending cuts/an infinitely more humble foreign policy/sensible entitlement reform/etc. would in fact start to get on the path to deficit reduction. Remember here, folks, the debt doesn't have to go zero necessarily. We just have to reduce the debt to GDP ratio.
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