Guest Post by Willis Eschenbach
I don’t usually wander too far off of the climate reservation, but this excellent cartoon by Michael Ramirez deserves wider publication, as it addresses a critical problem. It shows the US Budget for 2011, along with the cuts proposed by the Democrats (liberal) and the Republicans (GOP, conservative).
The US Government is about to shut down because the two sides can’t agree on a budget.
Can the rest of us agree that despite all the posturing, neither side is actually serious about the problem?
w.
PS – Anyone who thinks that CO2 is more important to the US than the above pie chart is fooling themselves badly …
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Janice says:
And more profit means more dividends, a lot of which are going to retired or disabled people…
Excellent point. Our local paper recently complained that California shouldn’t be laying off teachers when Exxon-Mobile is not paying any tax. But STRS (the state teachers’ retirement fund) holds $1,017,688,608 worth of EM stock. (As of 30 June 2010) If the company gets taxed, there are only two sources for the revenue. Either the tax is passed on to the motorists at the pump (Overhead does get added into product cost, you know) or the dividends to the shareholders get reduced. Stick it to the motorists, or stick it to the teachers. Take your pick.
Of course in California, if the STRS investments do not produce enough revenue to reach a specific level of support, current law requires the difference to be made up out of the state’s general budget. So, great, sock it to Exxon-Mobile. If you’re lucky, you can get the motorists, the teachers, and the California taxpayers while you’re at it.
On the topic of military spending in response to Jeremy and Smokey,
The military is spending and national defence budget does not benefit all citizens equally. Let’s be honest here, the military needs to see massive overhauls in the way it does its work. The fact that the United States Military spends more than every other country in the world combined is a very dangerous thing. I’ll give as an example the F-35 JSF. This program is the largest spending program in the military in terms of an individual aircraft/weapon system and it is extremely inefficient. Robert Gates even fired the head of the program (while Obama was in office) because of how inefficient it was being run. Lets be honest now, the JSF is a joke. Its costs have quadroopled and the end quality of the product is not superior to the cheaper European counterparts. In fact the JSF loses out in nearly every category to the Chinese, Russian counterparts and particularly to the Eurofighter, Rafale Dassault and comes close with the JAS-Gripen. In private business this program would have been axed long ago and there needs to be accountability on these issues. We can’t just give a carte blanche to the military to spend whatever they like on whatever they like. Lets think of another example, the F-23 was the superior aircraft to the F-22 in speed, manuverability and stealth capabilities yet the F-22 was chosen. Was this a “doing what’s best for the military type decision?” I don’t think so…
I just personally hate the hypocrisy of people saying we need to cut the government but being unwilling to make big cuts where they are needed the most. Eisenhower warned of the Military Industrial Complex and now we in fact have occurrences where aircraft have parts built in every state so that if the program is cancelled then every senator will get an earful instead of having it built the most efficient way.
Jeremy,
I don’t hate military. I have many friends who are pilots and ones who have been ground soldiers in Afghanistan. I grew up on a military base. But there are no excuses for the wasteful spending programs in the military. There is no reason the United States needs to spend 10 times what the UK spends on military. In fact their Eurofighters will kick our JSF’s ass and yet we’re still paying more for them why?
http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png
http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures
Finally,
Yes I acknowledge that the military designed the GPS and so on. But remember also the military was one of the first organizations to conduct research on climate change and the JASONs came out in support of climate change consensus way back in the 1970s…
R. Gates says:
April 9, 2011 at 3:19 pm
“GE doesn’t pay U.S. taxes.”
GE didn’t pay taxes for ONE year, due to the massive losses in their financial division.
I’m astonished at all the amazing things people say raising taxes to cure a deficit is like.
trying to cure a gambling addict by increasing their credit limit.
having intercourse to service virginity.
I thought it was like taking on another part time job to help pay the bills. No sex and gambling, just a lot of hard work.
Bush Jr. is no more a conservative than his father (remember voodoo economics?). The neocons that egged them into these adventure are just libs in sheep’s clothing.
Don’t forget Barney Frank and friends for what they did to the housing market though their Freddie/Frannie debacle.
How about an income based budget? Start with what you’ve got coming in and add programs till you run out of money. Either stop at that point, cut something before you add something in or find a way to pay for anything extra. Not rocket science.
“Democracy will last until the public realizes that it can vote itself largesse from the public trough”.
As true today as ever. Can we get past the Robin-Hood mentality of unfunded public obligations, or are we doomed to bankrupt ourselves and our government in an idiotic quest for ‘economic justice’? I am honestly not sure.
I note some debate above about gold and money. Milton Friedman wrote a fairly short book called “Money Mischief” that is both entertaining and informative. It explains a lot about the role of various forms of money and the problems of a gold standard, a gold/silver standard, and fiat money. It even explains in simple terms just what “money” is.
I strongly recommend it to those who would like a deeper understanding of the subject.
I think some of the people who visit WUWT like time series data. Here it is, US Gov revenue, spending, deficit history for 100 + yrs. You will launch on Debt as % of GDP as a time series table and then you can navigate from there to any data you want.
http://www.usgovernmentdebt.us/downchart_gs.php?year=1900_2016&view=1&expand=&units=p&fy=fy12&chart=G0-fed_G0-total&bar=0&stack=1&size=m&title=&state=US&color=c&local=s
Very good for some historical context …. hint – the last 3 years are anomalous
oops – posted without proof reading – link opens on Deficit as a % of GDP – big difference ….
robert says:
“The military is spending and national defence budget does not benefit all citizens equally.” That’s nonsense. Of course it does. The military defends the country, including all its citizens. Without it we would be speaking another language.
Arguing about one particular defense system like the F-35 is fair game. It is expensive and the bugs haven’t all been worked out. All new weapons systems go through this process. But one thing you failed to mention about the F-35 is its vertical takeoff and landing capability. This immensely improves logistics. If a war should break out, airfields will be primary targets. If/when airfields are destroyed or otherwise made inoperable, having a top-line supersonic stealth fighter able to take off and land like a helicopter is a huge logistical advantage. Control of the skies will not be ceded to the enemy because of the destruction or capture of airfields.
But discussing one weapons system is simply a tactic to argue for a smaller military. A strong military is a tremendous benefit for the U.S. – and the military has already been decimated: President Clinton scrapped 233 warships, including several nuclear attack subs that were just launched, more than 800 war planes, almost the entire logistal air command, and he scrapped 40% of the Army and the Marines.
This country cannot keep slashing the military and remain safe in a very unsafe world. The only reason the corrupt, anti-American UN has not already taken over is because it lacks a strong military. Further reducing our military is completely irresponsible, and gives aid, comfort, and internal support to our many enemies.
You’ve already been told that the military must justify its appropriations to Congress – unlike the more expensive social programs – which, unlike our military, only benefit certain subsets of the population. The military budget has already been drastically cut by Clinton when he spent the “peace dividend” following the fall of the Berlin Wall. It’s past time for the unaccountable, out-of-control social programs to face the budget knife.
In Alabama, we have this wonderful thing for preventing deficit spending. It’s called pro-ration. Everything is cut across the board as necessary to balance the budget. This would work marvelously at the national level. Sure, some government workers, soldiers, and hangers on would have to share in the economic pain with the rest of us. But, it’s about time.
For those of you who believe that higher tax rates – either on the ‘rich’ or on the ‘middle class’ or on ‘everybody’ – do look at the revenue collected data expressed as a percentage of GDP. For as long as the Federal government has been keeping the numbers, that number has not climbed above 21% nor below 17%, no matter what the tax rates were. When the marginal rate is high, high earners move to tax-free securities or to overseas deposits or other non-taxable uses. When the marginal rate is low, the increased economic activity generates a higher overall level of taxable income, which produces as much or more as the higher tax rates. Ideology has nothing to do with it. At the present time, rounded off to the nearest percentage as I’m lazy and growing tired of the increasing degree of economic ignorance in our nation, our federal revenues are at 20% and our federal spending is at 24%. Where does the rest come from? China, which is to say, overseas borrowers who buy U.S. Treasury bills, as the domestic market is saturated and has been for nearly four years. Printing money? Please. Nothing so crass. The Federal Reserve ‘buys’ U.S. Treasury bills or lends money to its member banks – which is to say all of them – with the not so subtle hint that they invest in T-bills. Or the Fed ‘sells’ T-bills to its member banks. One contracts the money supply, one expands it. The theory of fractional banking is that a wonderful and ‘mysterious multiplier’ will appear and that x dollars will become 10x dollars. Of course, since it’s all tax money to begin with, a corresponding 10x dollar contraction has already occurred and, for reason related to the second law of thermodynamics as applied to human interaction, the actual ‘magic multiplier’ is more like 6x, we’ve already lost that battle before the Fed does anything. But, I digress.
Raising the tax rates will not significantly increase revenues and there is some evidence in the literature which suggest that higher rates actually produce lower revenues. Lowering the rates may or may not increase revenues as that depends upon other factors which fortunately are out of reach of the policy makers in Washington. Lowering the rates will have the effect of increasing amount of money generally speaking in the hands of those who produce goods and services and hire other people to work for them. Increasing the rates will decrease that available money for investment and hiring and other productive effort. Whether any of you are aware of it or not and whether any of you like it or not, the government produces nothing. Let me say that again: The Government Produces Nothing. A consequence of that is that the government does not improve our economic situation by its spending. Why? It takes 100x dollars out of the pockets of folks who do produce, wastes around 15 of those dollars in ‘government expenses’, allocates around 30 of those dollars to the family, colleagues, rent-seekers and political supporters of the politicians and bureaucrats, actually misplaces – if it is not actually stolen – nearly another 15 dollars. Then, the remaining 40x dollars is handed out in subsidies, grants, project funding … in short, to other nominal producers for whom the money is too little and too late. Oh, except for the nominal producers who are actually parasites on the government, such as …. well, you might call me names if I named names, but look at the budget and you’ll find them as they have NGO names, not government department names. That is why tax rate increases do not increase revenues and why taxes and government programs, in general, fail to do anything ‘good’ for the economy. Need more details? Read Mises critique of Socialism, in a good English translation of his book by that name (I rather prefer the 1956 London edition myself as it retains the older German technical economics lingo), try more modern Laffer types, Austrian-School economists for the most part. Economics – you may not remember – was once considered a descriptive science rather like astronomy, not a prescriptive science and it’s predictive and analytical utility declined sharply when it became prescriptive, for the same identical reasons that ‘climate science’ has ceased being science when it became prescriptive.
@Steve Fitzpatrick
Don’t worry. If they win, those who support “economic justice” will get justice. The laws of economics (nature) will not be mocked.
Smokey says:
April 9, 2011 at 6:04 pm
The military budget has already been drastically cut by Clinton when he spent the “peace dividend”
Yep, military spend as a % of GDP was higher in the 50s, 60s, 70s & 80s than it is now. Here is the data.
http://www.usgovernmentspending.com/downloadsrs_gs.php?codes=051_053_054_FDE&units=p&group=&fy=fy11
The rest of the world watches the USA with distain as you do what Greece, Portugal and Ireland have done. These ECC countries did stupid with socialist extremism and the USA is doing stupid with Capitalist extremism, the result is the same !! Your military/social expenditures are more than your revenue you will eventually go under, grow up, taxes are necessary to balance your budget.
Blade says:
April 9, 2011 at 1:06
Thank You, Blade! I can’t camp on the web all day, to respond to every veiled socialist or rock thrower. After mowing the lawn and splitting a half cord of wood, I logged back in and found your comments at 1:06pm. Spot ON!
Ike says:
April 9, 2011 at 6:21 pm
Thank You, Ike! I’m heartened to see and hear basic economics being repeatedly injected into discussions like this. We must get this country refocused on financial reforms based on fundamental economics, not wishful thinking. Please continue your education efforts on this topic. They are much appreciated and much needed!
Ike, your booklist isn’t specific enough. Amazon links?
“The timebombs left by FDR (Social Security) and LBJ (Medicare) are still present and on auto-pilot. Either one, like the Blob, will consume the entire budget eventually.”
For 50 years I have been forced by the gov (weekly) to donate to the SS Fund.
The SURPLUS (paid by the boomers) has been placed in a lock box for their retirement. Now we are told that the lock box has been borrowed and spent.
Since there is no longer a surplus for them to borrow, SS is now considered a drain on the budget because those that borrowed will have to start paying some back?
And I’d like to add that, if there are no plans to start paying back the borrowed surplus,
and yet again change the rules, then the lock box had not been borrowed, but stolen.
Ike says:
April 9, 2011 at 6:21 pm
For those of you who believe that higher tax rates – either on the ‘rich’ or on the ‘middle class’ or on ‘everybody’ – do look at the revenue collected data expressed as a percentage of GDP. For as long as the Federal government has been keeping the numbers, that number has not climbed above 21% nor below 17%, no matter what the tax rates were. When the marginal rate is high, high earners move to tax-free securities or to overseas deposits or other non-taxable uses. When the marginal rate is low, the increased economic activity generates a higher overall level of taxable income, which produces as much or more as the higher tax rates.
This is a myth. In fact, higher tax rates have been associated with higher economic growth between recessions and peaks of the business cycle. These have resulted in higher federal tax collections.
http://krugman.blogs.nytimes.com/2008/01/17/reagan-and-revenue/
For the econowonks out there: business cycles are an issue here — revenue growth from trough to peak will look better than the reverse. Unfortunately, business cycles don’t correspond to administrations. But looking at revenue changes peak to peak is still revealing. So here’s the annual rate of growth of real revenue per capita over some cycles:
1973-1979: 2.7%
1979-1990: 1.8%
1990-2000: 3.2%
2000-2007 (probable peak): approximately zero
Do you see the revenue booms from the Reagan and Bush tax cuts? Me neither.
IKE: you say:
“Raising the tax rates will not significantly increase revenues and there is some evidence in the literature which suggest that higher rates actually produce lower revenues. Lowering the rates may or may not increase revenues as that depends upon other factors which fortunately are out of reach of the policy makers in Washington. Lowering the rates will have the effect of increasing amount of money generally speaking in the hands of those who produce goods and services and hire other people to work for them.”
I agree. That is why Obama extended the tax breaks last Christmas. The million dollar question is how do we expand the economy. The answer seems obvious, namely move to NG as a transportation fuel and build more Nukes and burn less NG for electrical generation.
Assuming this gets passed in the House this summer, and assuming the tax incentives are there to cause capital to flow into investments, the GNP will expand. It is amazing that Obama and his staff have wasted 2 years.(but then they are CAGW believers, hate CO2 and are mezmorized by greenie delusions of wind and solar).
I am curious about your numbers by the way, and would appreciate you posting something to back up your 17%, 21%, etc. Does it include corporate taxes? Do you have data for the 20s through to current?
Tom in Texas says:
April 9, 2011 at 4:21 pm
R. Gates says:
April 9, 2011 at 3:19 pm
“GE doesn’t pay U.S. taxes.”
GE didn’t pay taxes for ONE year, due to the massive losses in their financial division.
_____
Someone else making excuses for a “poor” multi-national company the needs to be given money from the U.S. taxpayer. And those who claim that the shareholders pay GE’s taxes are completely off base. Many of the largest shareholders are not even U.S. citizens or U.S. companies. Foreign ownership of a multinational company like GE is huge. And even though they $14.2 Billion last year in profits, we the American taxpayer had to bail them out by giving them another $3 Billion tax refund, and Rep. Ryan now want to cut their tax rate further. Rob from the poor and give to the rich…
Some of you really really need to read this article:
http://www.nytimes.com/2011/03/25/business/economy/25tax.html
BarryW says:
April 9, 2011 at 4:48 pm
Bush Jr. is no more a conservative than his father (remember voodoo economics?). The neocons that egged them into these adventure are just libs in sheep’s clothing.
Rumsfeld and Cheney are liberals? What planet are you from?
Don’t forget Barney Frank and friends for what they did to the housing market though their Freddie/Frannie debacle.
Freddie and Fanny were not into the subprime market and liars loans, which was the main contributor to unsound mortgage backed securities. Their participation was in Alt A lending which was the top end of sub prime, and they reduced their participation because of their concern with soundness. The private banking system which floated, securitized and sold their loans was the main culprit in creating the financial bust. Fanny and Freddy suffered when the housing market collapsed.
How about an income based budget? Start with what you’ve got coming in and add programs till you run out of money. Either stop at that point, cut something before you add something in or find a way to pay for anything extra. Not rocket science.
Government income is not fixed. It can be altered by raising taxes if the public believes it is necessary.
The right thing to do is balance the budget over the course of a business cycle. When economic times are hard, and people become unemployed and unable to buy food and medical care. If we don’t want people to go hungry and become very sick or die because they lack medical , we have to increase the amounts we spend on this. It has been shown that putting money in the hands of the poor, who spend it right away is the best way to stimulate an economy during a recession.
It is hard to raise tax rates in economic hard times without making the recession worse. When the economy improves is the time to do that. Raising taxes on the wealthy is the least harmful for the economy, because most of what they earn is saved. In times like these where the wealthy are getting wealthier, increasing their savings are a drag on the economy, especially when they are invested abroad. The share of wealth and income going to the top percentage of the wealthy have been improving, while the middle class and poor who spend a larger portion of their income, are losing ground.
According to Fox news the Republicans got a great deal.
Over the next decade the cuts are expected to save hundreds of billions of dollars.
The next battle with consequences begins in a matter of two short weeks when the accumulated U.S. debt will be nearing it’s $14 trillion legal limit. So Congress will have to vote to raise the ceiling so Uncle Sam can borrow still more money.
The administration has said it will need to be raised between April 15 and May 31 or the U.S. could default and create a new fiscal crisis of unknowable magnitude. Fiscal hawks plan to demand strict, enforceable spending caps, triggers for across the board cuts, and austerity measures in exchange for raising the debt limit.
This short-term agreement was just a beginning.
Read more: http://politics.blogs.foxnews.com/2011/04/09/who-won-shutdown-showdown-it-wasnt-even-close#ixzz1J5Tf6OAy
A simple pie chart is a bit misleading is it not?I did note that you are a democratic voter Willis.Maybe cannot admit that your party is mainly responsible for where America is at?