Understanding Congress’s solution to the federal deficit problem, says Philip Greenspun, is easier to understand if we divide everything by 100 million:
We have a family that is spending $38,200 per year. The family’s income is $21,700 per year. The family adds $16,500 in credit card debt every year in order to pay its bills. After a long and difficult debate among family members, keeping in mind that it was not going to be possible to borrow $16,500 every year forever, the parents and children agreed that a $380/year premium cable subscription could be terminated. So now the family will have to borrow only $16,120 per year.
To this useful analogy I would add one additional data point: The family’s credit card debt is currently $142,786. If they were to spend every penny that made each year toward their credit cards it would take 6 and half years to pay off their debt.
(Via: Boing Boing)
April 14th, 2011 | 9:14 am
And the solution for all this is to give more tax cuts for the richest 1% of Americans.
April 14th, 2011 | 9:45 am
No Jeff, the solution is to cut up the credit card and stop charging on it.
And the solution isn’t to raise taxes because you can confiscate the entire wealth of every billionaire in the U.S. and it wouldn’t close the budget deficit for one year. Rich people know how to hide their money (and by the way many more of them give campaign contributions to Democrats than Republicans)
We don’t have a revenue problem, we have a spending problem. Period.
April 14th, 2011 | 9:52 am
Got it, Jeff. And your solution is to tax the producers to a fare thee well, giving more and more revenue to career politicians and government bureaucrats to … put directly toward reducing public debt and responsibly reducing government spending? As if.
April 14th, 2011 | 10:36 am
One problem with this analogy is that a government can adjust both its income and its spending. A family cannot adjust its income as readily. The economics of nation states don’t work the same way as a household budget.
April 14th, 2011 | 11:02 am
. . . you can confiscate the entire wealth of every billionaire in the U.S. and it wouldn’t close the budget deficit for one year.
I am not so sure of that. There are about 400 billionaires in the United States, and the estimated 2011 budget deficit is $1.65 trillion, so if the average billionaire has $4.125 billion, that would be enough to wipe out the 2011 deficit.
April 14th, 2011 | 11:42 am
Stop spending? Stop spending what exactly? Every tea-party person says he wants government spending cut, but never specifies what. What *significant* specific programs are you willing to cut? Medicare? Medicaid? Social Security? Defense? Cutting small programs like NPR isn’t going to do much.
April 14th, 2011 | 11:50 am
Mr. Nickol (and others):
An editorial in today’s WSJ (http://online.wsj.com/article/SB10001424052748703730104576260911986870054.html?mod=WSJ_Opinion_LEADTop) reports that:
“Under the Obama tax plan, the Bush rates would be repealed for the top brackets. Yet the ‘cost’ of extending all the Bush rates in 2011 over 10 years was about $3.7 trillion. Some $3 trillion of that was for everything but the top brackets—and Mr. Obama says he wants to extend those rates forever. According to Internal Revenue Service data, the entire taxable income of everyone earning over $100,000 in 2008 was about $1.582 trillion. Even if all these Americans—most of whom are far from wealthy—were taxed at 100%, it wouldn’t cover Mr. Obama’s deficit for this year.”
April 14th, 2011 | 12:04 pm
This is off topic, but as a new poster I have to praise this blog’s authors for allowing dissent in their comments.
On most hard-line conservative and liberal blogs, comments that disagree with the blog’s author are never approved or frequently dropped. And I’m saying this as a Democrat.
April 14th, 2011 | 12:30 pm
Helpful analogy to an extent, but I must comment that we’re not talking disconnecting cable, or any entertainment luxuries, we’re talking about cutting national security, healthcare for the old and poor and public education. Cuts have to happen, but it’ll hurt more than giving up HBO.
April 14th, 2011 | 12:37 pm
K. S. Wear,
Steve Billingsley spoke of confiscating the entire wealth of every billionaire. That is different from taxing them at 100%. If I am taxed at 100% this year, I have to pay the IRS 100% of my taxable income (unless by taxing at 100% is meant taking a person’s entire income). But if all my wealth is confiscated, I lose not just my income for the year, but everything I own. Of course, taxing at 100% and confiscating all wealth are both unthinkable, but they are different.
April 14th, 2011 | 12:45 pm
@Jeff, Then stick around but be prepared to defend your points. Expect to be questioned. Most importantly, expect to learn. Be open to it.
April 14th, 2011 | 12:55 pm
“so if the average billionaire has $4.125 billion, that would be enough to wipe out the 2011 deficit.”
Well, first of all, that assumption strikes me as dubious. But even assuming the average is over 4 billion, most of that wealth for most of those people is theoretical, based on market value as of today. Target it for confiscation, and you can watch it evaporate.
April 14th, 2011 | 1:32 pm
I am not so sure of that. There are about 400 billionaires in the United States
There won’t be if you start waving your pitchforks at them.
The sad reality is that a negotiating position can be no stronger than what is sometimes called one’s “best alternative to a negotiated agreement”. Their best alternative to a negotiated agreement is to relocate to another nation (there are many nations that are ready to welcome them and their wonderful job-creating money).
Our best alternative to a negotiated agreement? What do we do if they pick up their assets and head for some friendlier country?
April 14th, 2011 | 1:47 pm
pentamom and Blake,
You seem to actually believe I would approve of confiscating the wealth of all the billionaires in the country to pay off this year’s deficit! Did you miss the part where I said, “Of course, taxing at 100% and confiscating all wealth are both unthinkable, but they are different.”
Nobody, including Obama, is advocating the confiscation of the wealth of billionaires or taxing them at 100%. What is being proposed is returning to the levels of taxation during the Clinton years, before the Bush tax cuts. Billionaires (and all the rest of us) did rather well during the Clinton presidency. Would that the economy had performed as well during the Bush years.
April 14th, 2011 | 1:58 pm
“What do we do if they pick up their assets and head for some friendlier country?”
I don’t know what we do, but then we would know that money trumps patriotism.
Higher tax rates for the rich worked in previous decades, and managed to crush the Soviet economy (80′s) build the Great Society (60′s) and even fund a World War or two.
What happens with this mythical family? Maybe they declare bankruptcy. Then they literally have to live off their income. Funny how we never got much of a whiff of this under the 43rd president.
I suspect that the hoohah over the deficit is mostly about the 44th president, and defanging the imperial presidency as engineered by Mr Cheney and others. When the GOP is on the outs, it’s rather convenient to want to defund a president’s initiatives.
I take everything I read and hear from both parties with a salt mine these days. This is about power, not deficits. It’s about privilege of the wealthy, not jobs. Trust me: the GOP hasn’t suddenly come to some conversion experience they were blind to under the 40th and 43rd presidents.
April 14th, 2011 | 3:02 pm
Higher tax rates for the rich worked in previous decades, and managed to crush the Soviet economy (80′s) build the Great Society (60′s) and even fund a World War or two.
Legitimacy makes a difference.
Blaming the rich just because people are feeling resentful and bitter is not a just policy.
April 14th, 2011 | 3:51 pm
Todd, I definitely agree that a great deal of Republican fervor over spending reduction is due to personal opposition to Obama — rather like a great deal of Democratic opposition to the war in Iraq was due to personal opposition to Bush.
That doesn’t mean, of course, that cutting the deficit isn’t necessary, any more than it meant that the Iraq war was a good idea.
I wish the parties were capable of being consistent even when their own guy is in charge, but that doesn’t seem of be the case.
If we’re lucky, knee-jerk party opposition and knee-jerk party loyalty cancel each other out and we get some semblance of rational policy from the compromises. If we’re unlucky, the only things that get compromised on are trivially unimportant issues, and everything else grinds to a halt.
April 14th, 2011 | 4:11 pm
“What is being proposed is returning to the levels of taxation during the Clinton years, before the Bush tax cuts. Billionaires (and all the rest of us) did rather well during the Clinton presidency. Would that the economy had performed as well during the Bush years.”
So obviously this means that the government was just the right size in about the year 2000, right? So, we can just pass the year 2000 budget ($1.8 Trillion), maybe bump it up by ~10% or so for population gain, and voila–a $2 Trillion budget! AND, you get a surplus! Winning! How many Democrats in Congress would vote for that? A big fat zero, that’s how many, considering that the current budget is more like $3.7 Trillion, and they were whining a month ago that every penny was absolutely critical and would lead to the unleashing of the four horsemen of the apocalypse.
Granted, not a single GOPer would vote for that either. But if they had any brains, this is how they would react to “Let’s go back to the taxation levels under Clinton!” pseudo-arguments, but they’re not call the Stupid Party for nothing.
April 14th, 2011 | 4:57 pm
Granted, not a single GOPer would vote for that either. But if they had any brains, this is how they would react to “Let’s go back to the taxation levels under Clinton!” pseudo-arguments, but they’re not call the Stupid Party for nothing.
Who calls them the Stupid Party?
April 14th, 2011 | 11:11 pm
“You seem to actually believe I would approve of confiscating the wealth of all the billionaires in the country to pay off this year’s deficit! ”
No, I didn’t think that at all or mean to imply it. I just meant that your suggestion that it would work (in theory) probably didn’t even hold up as far as it went. I was just continuing to play with the numbers, the way you did.
April 14th, 2011 | 11:13 pm
“I don’t know what we do, but then we would know that money trumps patriotism.”
How patriotic *should* someone feel toward a country that proposes to confiscate his last dime?
Remember, no one’s seriously proposing this, but are you suggesting that there’s a moral problem with being unhappy with, and fleeing from, a government that confiscates your *every last dollar?*
April 14th, 2011 | 11:14 pm
And can anyone remind me of what happened at the end of the Clinton years? Wasn’t there something about a “bubble”?
April 14th, 2011 | 11:50 pm
D. Nickols misses the point. He suggests we tax “the rich” at the same rates at which they were taxed in the 1990s. As many have pointed out, that would, at best, eliminate 1% of the current deficit. At worst, it would drive the wealth-holders out of the country. The top wealth-holders already pay far more than their “share” of income taxes. 50% pay virtually nothing. What share is “fair”? The Nickols of the world are far more interested in redistributing wealth than creating it.
April 16th, 2011 | 9:08 am
“How patriotic *should* someone feel toward a country that proposes to confiscate his last dime?”
Funny you should phrase it that way. The US has confiscated the last dime of several thousand people–the men and women it has sent overseas to defend the rich at home. And abroad, too.
It seems simple, but the GOP certainly didn’t find it easy. When a family wants an extra (like a war or two) you find a way to add income, like getting a second job.
I happen to think foreign adventurism and profiteering under the 43rd president were bad ideas, but they were compounded by the general unwillingness to expand and share the sacrifice by raising taxes.
Every responsible homeowner knows that family income needs to be invested in infrastructure: replacing old appliances, fixing the roof, painting, and attending to damage from vermin.
The problem with Joe’s post and Mr Greenspun’s analogy isn’t that it’s not apt, it’s that they themselves don’t take it seriously enough.
April 16th, 2011 | 11:26 am
“The US has confiscated the last dime of several thousand people–the men and women it has sent overseas to defend the rich at home. And abroad, too.”
Huh? They seized their assets? When? When was the last time people were sent overseas involuntarily to “defend the rich?” And when were their assets seized as a result?
April 16th, 2011 | 2:38 pm
“When was the last time people were sent overseas involuntarily to “defend the rich?” And when were their assets seized as a result?”
Mr Bush told the US military they were defending their nation. It would seem that Americans were the main shock troops sent to enhance the war profiteers who suddenly whine about having to pay taxes.
Ask a family suffering through a third deployment abroad if their sacrifice is worth a comfy profit margin for oil companies. Or those whose lives were given for higher stock dividends. That the soldiers volunteered to join a military is irrelevant. No child has volunteered his mother or father to serve overseas and die. Have some respect and show some support for the troops, will you?
A whole lot of money was made and swindled over the past decade. Deficits are irrelevant if we’ve become a country of lawlessness.
April 16th, 2011 | 4:58 pm
The top wealth-holders already pay far more than their “share” of income taxes. 50% pay virtually nothing. What share is “fair”?
BobG,
Well, what is the answer to your question? What is a fair income tax? Is it unfair to give a deduction for dependents? Is it unfair to give a blind person a higher standard deduction than a sighted person? If everyone pays a flat rate of, say 15%, is it fair for someone working for the minimum wage, who isn’t making enough to support his family above the poverty level, to pay the same 15% rate as a CEO earning $15 million?
A lot of people have been arguing about unfairness, but when it comes to taxes, I haven’t seen anybody making a case for what precisely is fair.
April 16th, 2011 | 8:09 pm
I have a lot of respect for the military. Someone I care a great deal about is in Afghanistan right now. I think a lot of our recent military adventures were misguided.
And I think that has less than nothing to do with whether it is reasonable to expect someone to maintain patriotism toward a country that seizes 100% of your assets. Are you seriously trying to argue that because the government does some things that you think are very bad, it doesn’t matter if they forcibly steal everything someone owns? Would you feel that way if it was you?
But there, I’m arguing with an obvious troll.
April 16th, 2011 | 8:12 pm
BTW, the fact that they joined up voluntarily has a *great deal* to do with their *own* attitudes. Please show a little respect for their choices, instead of treating them like children who somehow blundered into the military because Mommy wasn’t watching.
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