A better analogy for describing the current tax/spend situation?

[Atman]

Last edited Thu Dec 6, 2012, 03:58 PM - Edit history (1)

I just thought of this while on the road today...an argument I'd be happy to use with my "We don't have a revenue problem, we have a spending problem" friends. It appears to greatly simplify the argument, but I'd welcome some breakdown.

So, lets begin by replacing tax rate percentages with actual dollars. No, not "actual" dollars, just by saying $100 is 100%, $50 is 50%, etc, just for simplicity.

So, you're Uncle Sam. Back in the fifties/sixties you made anywhere from $70,000 to $90,000 a year (70%/90% tax rate). You had a great income. With that income you were able to build a wonderful home and raise lots of children. You gave them great educations and built them playgrounds and a nice library. And your family grew.

But over the years, just like a union worker or an typical American blue-collar worker, your income was reduced. The interest on your savings was reduced. Not by you, but by the "employers" who were cutting your hours and shifting the money around. By the 1990's/2000's, you were making only $30,000/$25,000. But you still had this big family, and the house needed a new roof, and the car had 200,000 miles on it and needed a valve job, and you had medical bills to pay. But your income is HALF, or less, of what it used to be.

Is it a "REVENUE" problem or a "SPENDING" problem? Who is complaining about your spending? The kids? The guy you're trying to get to rebuild the roof for half-price? The mechanic? You're just trying to hang on to every last dime of the diminished salary (revenue) you're taking in.

Now, you could go get your old job back. It's right there, in that office down the street. Just go in and say "I want to be the boss again!" and you'd be making $70,000, just like in the salad days. But you can't do that. You can't get your old job back, because the people that control the company now don't want to give up any of their profits, the profits paying for their roofs and news cars and playgrounds.

IOW, it has nothing to do with "too much spending." You simply can't cut your salary by 2/3, and then complain that you're broke because you're spending too much.

Of course, you could just get a better job (raise revenues).

[unblock]

1. the real problem is that there IS NO deficit/debt problem. we have a still-weak economy

so the problem RIGHT NOW is actually NOT ENOUGH deficit spending.

once the economy is strong, THEN and only then will we have a deficit/debt problem, but of course then we will be in a much better position to deal with it as stronger gdp means naturally higher tax revenues anyway.

ideally, we should hike taxes on the rich, trim military spending, and spend a LOT more, especially for the poor and lower middle class, enough to increase the deficit significantly, and watch the economy boom. THEN we can worry about balancing the budget.


of course, no one in washington willl listen to me....

[Atman]

2. Bingo.

But you're talking about real economics. America doesn't get that, because of years of being fed this "You have to balance YOUR checkbook!" bullshit. I was just trying to put it brain-dead simple terms. You've cut your income by 2/3 and wonder why you can't afford shit anymore.

[unblock]

3. except individual households don't balance their budget

many, many people borrow in order to finance CONSUMPTION, let alone investment.

personally, i have a mortgage and a car loan, and this is hardly unusual. technically these are collateralized, of course, but in reality it's my future paychecks that will return these funds to the banks who lent to me, just as it's future taxes that will pay down the national debt.


so even while the federal budget == household budget analogy is flawed, they still twist it and misrepresent it to suit their agenda.

[Atman]

4. That's the whole point!

Individual households don't do it, either, yet Fox News and the GOP tell them "But if you have to balance your budget, why shouldn't the gubmit?" Of course, this argument is only made by the wealthy, who want everyone else broke-ass, while they live off government subsidies and tax loopholes.