The Deficit: Why It’s a Spending Problem

You can pick any significant number of consecutive years you want.  Any, say 10-15 years.  And compare the receipts from one year to the prior year.  See what ya get.  For example, I’ll pick the most recent set of years; 2000 through the estimates for 2016.  Look:

There are 16 possible opportunities for receipts to go up or down.  Of those 16, they go up for 12 of ’em.  The time frames when they are going down is after the recession of 2000 and the shock of the 9/11 attacks.  The second time frame is during the most recent recession.  Other than that, the tax receipts increase.  In fact, if you go back further than 2000, the next most recent decrease in revenues comes in the 1982-1983 year.  That’s 17 consecutive years of tax growth.

So, what does this tell us?

It tells us that those who are calling for tax increases in order to satisfy the “increase revenue” meme aren’t looking at the full picture.  Left alone, taxes will deliver year over year growth.

In fact, if you take the historic annual tax receipt increase since after the war and assume that going forward, you can easily balance the budget.  For example, if we allow the budget to GROW, that is no cuts, but only grow by 2%, we have a balanced budget in 2023:

Easy.

Limit spending.  Don’t raise taxes.  Balance the budget in 12 years.

It’s spending people, spending.  W do NOT have a taxing problem.

6 responses to “The Deficit: Why It’s a Spending Problem

  1. That will never happen. No way can you get Congress to just take one side of the argument and ignore the other, compromise is the only way you’ll get a solution.

    I also think it’s naive to think it’s just spending. If we’re really to make a dent in the debt (not just the deficit) we need to increase revenues. Spending needs are real as well. The wealthy pay a very small proportion of their wealth as taxes — some pay hardly anything thanks to loopholes. Yet they get the most benefits from the system — the stability, protections, law enforcement, etc., that allows them to flourish. To have them not pay a part of solving this problem and forcing those hurt by budget cuts to do all the sacrificing seems to me perverse.

    Our disagreement on this reflects a fundamental disagreement in our political culture, one that won’t go away even if one of us convinced the other. That’s why compromise is the only solution, it’s what the founders intended and given the different perspectives and our system of government, we’ll get either compromise or gridlock.

    • If we’re really to make a dent in the debt (not just the deficit) we need to increase revenues.

      Okay, I yield. I point out that we DO increase revenues. To the tune of 7% a year. But, we don’t seem to be making progress.

  2. My guess is that the rich look at taxes the same way that I look at shipping charges. I like the convenience of online shopping, but I try to avoid the shipping charges. Paying an additional $8.95 to ship a $20 item seems so wrong. It feels wasteful.

    Since I have an aversion to paying shipping charges, I need to be willing to accept longer waits for my merchandise. I also need to plan and schedule my purchases more carefully. I need to WORK at ordering. For that work I am rewarded with free shipping. I do not feel guilty for accepting free shipping; I feel that I have earned it.

    Is it possible that the rich are willing to hire lawyers and accountants to search out tax loopholes for the same reason?

    • Is it possible that the rich are willing to hire lawyers and accountants to search out tax loopholes for the same reason?

      There is some of that, sure. However, I also think that, to Scott’s point, the rich are able to craft legislation that gives them tax advantages. I don’t wanna see that either.

  3. 2 percent nominal growth in expenditures represents a substantial real cut. If inflation continues at the low end of its historic trend, you can expect price growth of about 3 percent per year. In addition, the population is expected to grow at about .4 percent per year over the period (more in earlier years, less later). In real terms, you’re actually cutting expenditures by about 1.4% per year, not growing them.

    Given the aging of the population and the demands that will be placed on Medicare, Medicaid and Social Security, cuts of this magnitude seem infeasible.

    A possible alternative would be to cap budget growth at zero in terms of real expenditures. If we did that, we would get to a balanced budget by 2026. I haven’t gone through the figures but suspect this might not be feasible given the growth in the elderly population.

    • A possible alternative would be to cap budget growth at zero in terms of real expenditures.

      My larger overall point is that we don’t need a rise in the tax rate, what we need is a rise in the tax revenue. Most importantly, we need revenues to grow faster than expenditures grow.

      To say that we need to “raise taxes” in order to achieve this is just statist garbage.

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