US gov has become Too Big to Fail!

[Vi-Jay 218]

Weiss, Moody's and Standard & Poor have all made the US credit rating "ground rules" clear.

Raise the debt ceiling and cut the budget deficit or suffer a rating drop.

Why are the rating companies coming after the US gov POWERHOUSE (say that with a booming voice)?

Because the US gov has become TOO BIG TO FAIL!!!

Krauthammer - "The current debt-ceiling showdown, therefore, is an instructive dry run of an actual Greek-like default, which awaits if we don’t solve our debt problem.

With one difference, of course. During today’s debt-ceiling fight, if the markets start to get jittery, interest rates on U.S. debt spike and the economy begins to teeter, the whole thing can be called off with a push of a button — an act of Congress hiking the debt ceiling. When the real crisis comes, however, there is no button. There is no flight-simulator reset. We default and the economy really does crash."

Okay, so we can finally toss the theory that tax cuts stimulate the economy and employment to the garbage bin? Good. Let's not pretend anymore that this theory has any validity.

I read this quote on another thread and think it makes for good discussion...,

Why Supply-side economics?

President Clinton's Council of Economic Advisers in 1994: "It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth."

No. "We" can't toss the theory into the garbage bin.

Previous across the board tax reductions have increased Fed-Rev; "No way!" "WAY!"

Similar across-the-board tax cuts had been implemented in the 1920s as the Mellon tax cuts, and in the 1960s as the Kennedy tax cuts. In both cases the reduction of high marginal tax rates actually increased tax payments by "the rich," also increasing their share of total individual income taxes paid.

What about recently? What about "W"?

TheWSJstates that taxes paid by millionaire households more than doubled from $136 billion in 2003 to $274 billion in 2006 because of the JGTRRA 2003.

The question is which tool fits the need today.

1) Stimulate the economy via gov spending (Keynesian economics) or via tax cut (Supply-side economics).

2) Which one (or both) is best suited for today's need.

We have seen what Keynesian economics has done for the last 3 years. Record deficits and record debt. Granted, gov stimulus probably did stave off a worse crisis but.., now what? The gov quiver is empty. It is time to put the tools into the hands of corporate America. It's time to see if Corporate America can save the US economy and the bloated fat tick sucking the life out of us; our gov.

The US gov has become too big to fail and corporate America is the only way to save it.

Now is the time for Supply-side economics.

(or) Better yet.., let's starve the gov dead to save ourselves!.

Edited June 5, 2011 by Vi-Jay

[Mr. Big Dog 10,747]

We have seen what Keynesian economics has done for the last 3 years. Record deficits and record debt.

That's factually wrong. The largest contributors to the deficit - and hence the rapidly accruing debt - are two unfunded wars (both started w/o funding by the GOP), a defense budget that has doubled over the course of a decade (under the watch of the GOP) and tax cuts that weren't offset by spending reductions (both of those packages enacted by the GOP). None of that is Keynesian economics.

[Obama 2012 1,714]

That's factually wrong. The largest contributors to the deficit - and hence the rapidly accruing debt - are two unfunded wars (both started w/o funding by the GOP), a defense budget that has doubled over the course of a decade (under the watch of the GOP) and tax cuts that weren't offset by spending reductions (both of those packages enacted by the GOP). None of that is Keynesian economics.

now there you again trying to lump in the tax cuts.

Even if taxes had not been cut, we'd still be in the same exact boat if not worse.

The government took in MORE revenue after the tax cuts were put into place and economy was growing.

The problem was the out of control spending.

It's really easy to argue that without the tax cuts in place, the economy would not have grown as good and the revenue stream would have sunk even lower.

It's not the taxes, it is and always has been the spending.

Of course, we can ignore all the Dems that voted for the two stupid wars, right?

[I AM NOT THAT GUY 5,715]

Chart misleading? Of course. Check the source.

[Mr. Big Dog 10,747]

Even if taxes had not been cut, we'd still be in the same exact boat if not worse.

There's no evidence to support that claim. There's plenty contradicting it.

"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that."

Economists at the nonpartisan Congressional Budget Office and in the Treasury Department have reached the same conclusion. An analysis of Treasury data prepared last month by the Congressional Research Service estimates that economic growth fueled by the cuts is likely to generate revenue worth about 7 percent of the total cost of the cuts, a broad package of rate reductions and tax credits that has returned an estimated $1.1 trillion to taxpayers since 2001.

Robert Carroll, deputy assistant Treasury secretary for tax analysis, said neither the president nor anyone else in the administration is claiming that tax cuts alone produced the unexpected surge in revenue. "As a matter of principle, we do not think tax cuts pay for themselves," Carroll said.

Get it? The Bush administration said that growth generated from the tax cuts will produce $0.07 on the dollar in additional revenues. That means that the cost to treasury for these tax cuts is $0.93 for every tax dollar cut out of the baseline. That's hardly supporting the claim that "tax cuts pay for themselves". They pay for a small fraction. A very small fraction. The rest - those $0.93 - would have to be offset by spending cuts to make tax cuts deficit neutral. And that's the math of those that have pushed the 2001/2003 tax cut packages. It's their math, not mine.

Chart misleading? Of course. Check the source.

The numbers are from the CBO. Dig a little deeper old man.

Edited June 5, 2011 by Mr. Big Dog

[I AM NOT THAT GUY 5,715]

There's no evidence to support that claim. There's plenty contradicting it.

Get it? The Bush administration said that growth generated from the tax cuts will produce $0.07 on the dollar in additional revenues. That means that the cost to treasury for these tax cuts is $0.93 for every tax dollar cut out of the baseline. That's hardly supporting the claim that "tax cuts pay for themselves". They pay for a small fraction. A very small fraction. The rest - those $0.93 - would have to be offset by spending cuts to make tax cuts deficit neutral. And that's the math of those that have pushed the 2001/2003 tax cut packages. It's their math, not mine.

The numbers are from the CBO. Dig a little deeper old man.

Numbers yes. But the chart is pure CBPP fallacy.

[luckytxn 2,264]

Here is what needs to be done. Take the budget and slash it till we have no deficit. Make a call to the Pentagon and say they are to have the troops march out of anyplace they are stationed that is not North America and bring them home. Then go on TV and tell the sheep that if there are any Social programs at all then Taxes will be levied to pay for the programs and to add extra to pay for the huge Federal bureaucracy to administer the programs.

Problem solved.

[Mr. Big Dog 10,747]

Numbers yes. But the chart is pure CBPP fallacy.

The chart is a reflection of the numbers. Like to see it from CBO directly? Here you go - pg. 18 of the presentation.

[Ban Hammer 13,345]

so it's all about .2 trillion.

[I AM NOT THAT GUY 5,715]

so it's all about .2 trillion.

Only 4.1 trillion more to go.

[Vi-Jay 218]

I'm not seeing how tax cuts hurt employment. In fact, unemployment dropped under Reagan and after Bush cut taxes. Reagan took over with high unemployment. US suffered a recession during Bush's first term and Greenspan lobbied Supply-side to help pull out. It worked.

I'm not seeing how tax cuts decreased Fed-rev. In fact, Fed-rev went up.

Edited June 5, 2011 by Vi-Jay

[Mr. Big Dog 10,747]

so it's all about .2 trillion.

Your math is amazing. What's presented here is the projection for 2020 with or without the tax cut package and AMT adjustments. The difference in the deficit is $700BN in a single year. Over the course of a decade, that would be $7 trillion. There's a reason why the CBO put a $4 trillion price tag on the extension of the Bush era tax cuts. That's what it adds to the debt over a decade.

[Vi-Jay 218]

I'm not seeing how tax cuts hurt employment. In fact, unemployment dropped after Reagan tax cuts and again, after Bush cut taxes. Reagan took over with high unemployment. US suffered a recession during Bush's first term and Greenspan lobbied Supply-side to help pull out. It worked.

I'm not seeing how tax cuts decreased Fed-rev. In fact, Fed-rev went up.

EDIT: 2nd sentence. (I was too late to edit)

[Mr. Big Dog 10,747]

I'm not seeing how tax cuts hurt employment.

Nor do you see how tax increases - such as the huge increases signed off by Reagan in 1983 and 1984 or those signed off by Clinton in 1993 - hurt employment. In fact, when you look at that chart of yours, you will notice that the large decrease in unemployment rates under Reagan starts in 1983 and under Clinton in 1993. In both cases, tax increases were passed just before the unemployment rate went down. Damn!

Edited June 5, 2011 by Mr. Big Dog

[Vi-Jay 218]

Nor do you see how tax increases - such as the huge increases signed off by Reagan in 1983 and 1984 or those signed off by Clinton in 1993 - hurt employment. In fact, when you look at that chart of yours, you will notice that the large decrease in unemployment rates under Reagan starts in 1983 and under Clinton in 1993. In both cases, tax increases were passed just before the unemployment rate went down. Damn!

OK. Please source that.

and, Let me ask you.., Do you think a tax hike now will hurt or help, job growth?

Edited June 5, 2011 by Vi-Jay