Cutting the deficit

Discussion in 'Economics' started by Covertibility, Jun 30, 2011.

  1. The right balance

    THERE is a lot of debate, in both America and Britain, about the right way to bring down the deficit. One way of looking at the issue is to see the economy as a loss-making business; what would a new CEO think is the best way to tackle the shortfall? Is the problem that costs are out of control (too much spending) or that the company's prices are too low (not enough taxes).

    Have a look at the two graphs. In the UK, it is pretty clear that Britain's problem relates to a surge in spending; receipts (tax revenues) are higher than they were 18 years ago. The government's scheduled plan is biased towards spending cuts (although the biggest impact so far is probably the VAT increase). In America, spending has also surged since 2001 but one can see that tax receipts are below their peak (this is all layers of government, not just federal). Receipts were highest around the turn of the century when the economy was doing rather well. So it makes sense for an American solution to involve tax rises and spending cuts. But can the politicians agree on such an apparently rational compromise?



    It appears to be very clear but let's hear it from the crazies out there (ie Best Pie Chart people).

    Crazies, your on. (Don't forget to comment on how spending as a percentage of GDP has fallen while the black guy is president!)
  2. Part of the problem is we're still mired in these pointless idealogical debates. The plain fact is that there is no wrong way to do it.

    The historical evidence is crystal clear - both low-tax, low-benefit and high-tax, high-benefit economies do well. If really long term stability is part of the criteria, the preference is clearly for high-tax, high-benefit economies.

    The problems come from low-tax, high-benefit (ie, "USA") and high-tax, low-benefit (ie, "Africa") regimes.
  3. One problem with big spending government departments is that they all worry that their budgets will be cut if they don't spend their yearly allocation of funds. I think we should start financially rewarding government officials for cutting budgets. Instead of rewarding them for spending their full budget.
  4. bone

    bone ET Sponsor

    Well, the Nordic (Sweden) or Western European (German) or Asiatic (Japan) model won't work for the United States because of the heavy entitlement load from existing illegals and an ever-expanding class of citizens who draw benefits to cover every aspect of their living expenses and have no intention of ever paying into the system or seeking employment. There are literally millions of largely fatherless families who have gone through three or four generations existing entirely on public assistance. They will not take a minimum wage job and they cannot or simply will not undertake skill training.

    Case in point: look what the recent immigrant populations have done to high tax / high benefit societies in Europe England and Germany are textbook examples in terms of Eastern European and Muslim immigres.
  5. USA immigration policy needs to be rationalized. Either let "lots" of people in legally, or do something meaningful about the border. Either approach can work just fine - but the long-standing "try, but not too hard" isn't good for anyone except criminals.

    IMO, etc.
  6. Just have an a one month amnesty and allow all illegals to apply for citizenship. Once they are legal Americans, tax them as real citizens.
  7. I don't have a problem with that, but as long as you have people willing to work for sub-minimum-wage, and other people willing to break the law to employ them, making immigrants legal won't solve the underlying issue.

  8. bone

    bone ET Sponsor

    You have to have something to tax, and that is the entire point. If you pay out more in one month in public assistance than a typical Mexican family takes in during an entire calendar year there will be no tax returns. And they don't even have much more than a third grade education and maybe know how to read Spanish - so future employment outside of 'cash under the table' laborer status is not possible. Oh, and if they're citizens they get to bring in the balance of their 'immediate' families from Mexico.
  9. Random and Bone, you both make valid points. It looks like I won't running for president any time soon.

    When you look at the totality of America's problems right now, it really is difficult to find workable solutions to many of these problems.

    Everyone know the issues but many currently seem impossible to fix. They are major fundamental and structural issues for which there is no quick fix and in many cases, not fix at all.

  10. bone

    bone ET Sponsor

    Why not, you have to know about as much as a community organizer. Have you benefited from an affirmative action-induced Ivy League education by chance ? Apparently, you can hide your LSAT score and the grades. Not to mention your birth certificate or certificate of live birth (what's the diff ?).

    Don't underestimate yourself Bear.
    #10     Jun 30, 2011