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Politics : Mainstream Politics and Economics
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To: RMF who wrote (53460)9/15/2013 7:15:29 PM
From: TimF1 Recommendation

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i-node

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When the deficit "first" got out of hand, which I consider during the Reagan Administration, it suddenly became VERY difficult to correct especially since the Republicans suddenly got the idea that taxes should always be cut and never be raised.

Its not so much that as the idea that spending can never really be cut. Sure it gets "cut" from an expanding baseline but rarely actual cuts and never for the biggest part of spending, entitlements. Higher tax rates have diminishing returns esp. over the longer run, esp. if your increasing taxes on investments. The tax take did go down as a percentage of GDP but mostly that's from the recession. If no changes are made in the tax laws it will go up again, esp. if the economy picks up steam (and if it doesn't then you have bigger problems, and also even more reason to think tax increases will have diminishing returns).

"Spending cuts" typically mean your still spending more. Tax cuts don't always mean that your taxing less, in terms of how much of the economy the government gets. If you don't have tax cuts of some form periodically (or full indexing for the larger of inflation or mean income) you get higher taxes over time.

Meanwhile the spending portion is out of the normal historical bounds. Other than for a short time during WWII the US federal government has never had enough revenue as a percentage of GDP to cover the spending levels we have today, much less the higher future levels implied by the retiring of the baby boomers.

In any case we've already had tax increases.
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