Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Alighieri who wrote (623002)	8/5/2011 1:59:48 PM
From: TimF	Respond to of 1580848

How much the economy is hurt by transfering that money to the feds (actually % of GDP of spending might be a better measure, because if the feds don't tax it, they have to borrow it also pulling it out of the economy, or they have to "print" it pushing harmful inflation). How much was it hurt in the 90s The 90s where a period of relative restraint on spending. The transfers from taxing and borrowing combined where noticeably lower than in the 2000s. The extra taxes hurt, but that was balanced by the lower deficits. The exact balance of those two factors can only be guessed at but the restraint on spending was clearly beneficial, and something that has been abandoned since then. it takes almost 20 years to get back to 1999-2000 revenue 1999-2000 was a peak not the norm. Not just a local peak a post WWII peak. 2000 revenue was 20.35 percent of GDP. The only other years in the history of the US where federal revenue was above 20 percent where 1944, 1945, 1946, and 1952. From 1955 to 1997 revenue was under under 19 percent of GDP every year except 1981. The modern norm is more like sixteen to eighteen and a half percent. (Data from usgovernmentrevenue.com ) Here's a shocker...GDP never shrinks until 2009...and then only a little. So your point doesn't add up. It doesn't shrink for a full year, but it did shrink on shorter time frames, and that's in nominal terms. In real terms, and particularly in real per capita terms there was full year GDP drops. The early 2000s recession was real. The later recession was real and severe. In any case reduction of growth and investment, and in categories of income will reduce lower tax revenue (esp. income tax revenue) even without an actual GDP drop. Recessions reduce revenue. They always have. There is two revenue dips in those charts aligning with two recessions. There wasn't a massive tax cut before 2009, there was a deep recession in 2009. Also once again a stronger economy requires less federal spending not more. A growing economy reduces the need for federal spending, spending should more reasonably keep up with population growth and inflation, than with GDP growth. There is no good reason why federal spending and thus revenue* has to keep up with GDP growth. Military spending has decline greatly as a percentage of GDP and it should have. Other spending might need to keep up with population growth, so perhaps its decline would reasonably be slower, but instead we have federal spending climbing like crazy. We have never sustained revenue above 19% of GDP for any length of time or even over 18 percent for that long. Only in a few individual years has revenue exceeded 20%, but now federal spending is close to 25%. There is no way to cover that much spending with the tax revenue that the government can extract. Even in WWII, with record tax rates, with rationing and the draft suppressing the private sector, with patriotism and practical concerns helped make people more willing to give revenue to the feds, and at the margin less likely to try to avoid or evade tax payments for any given tax rate, you only had two years of revenue above 21 percent. (And in 1942 and 1943 federal revenue was lower as a percentage of GDP than it is today.) * There isn't much need to grab revenue except to support spending, sure we could pay down the national debt a bit, but that really isn't necessary, it might be useful as something to do during boom years, to support deficits in bad recessions, but there really is no need to have a net payback over the years, just rough balance would make the deficit a smaller and smaller concern over time)