Spending

Is the Sky the Limit for the Debt Ceiling?

The best place to start would be a cap on all spending or a strict cut-as-you-go system.

|

Ryan
Tom Williams/CQ Roll Call/Newscom

When the national debt ceiling's suspension was automatically lifted March 15, yet another countdown commenced. Congress will be compelled to raise the government's borrowing limit again before April 28 and fund the government. Meanwhile, the Congressional Budget Office released yet another report showing that our debt crisis may be here sooner than later and be bigger than ever.

Addressing these budget deadlines should be done with the CBO's warning in mind. It goes something like this: The government's overspending has produced a lot of debt, and it's adding debt at a pace faster than the economy is growing—so it will only get worse.

Public debt, or the money that the government owes to domestic and foreign investors, stands at 77 percent of gross domestic product—or roughly $15 trillion. Our gross debt—the money the government owes to foreign and domestic investors, as well as other accounts in the government—is well past 100 percent of GDP and will soon reach $20 trillion. Unlike previous times when our debt spiked, we're not in the middle of a worldwide recession or war. Short of life-changing innovations, there's little hope that these levels will go down or stabilize.

These debt levels may not be a problem now, but that won't last. As spending as a share of GDP grows from 20.7 percent today to 30 percent in 2047, our public debt will reach 150 percent under the current law. That's 5 percent higher than the CBO projected in January.

In the next decade, net interest will go from $270 billion to $768 billion. The CBO also reports that the share of the budget devoted to those payments is growing, from 7 percent today to 21 percent in 2047. Assuming the CBO isn't underestimating how much the government will spend or the interest rate levels (which it probably is), a fifth of the budget is going to be spent on interest payments. That money will be paid by future generations for the past generations' overspending.

So now back to Congress' deadlines. First, all we can hope for is that Congress will meet the April 28 deadline without too much drama. In a perfect world, Republicans will have a great plan for repealing and replacing Obamacare. I'm not hopeful, because like the Democrats, they are focused on finding a way for most Americans to get someone else to foot their health care bill. This wrong goal and misguided approach will only continue to produce high health care costs.

However, before there was Obamacare, there were Medicare, Medicaid and Social Security. According to economist Paul Winfree, the federal government's unsustainability is driven by 2 percent of nearly 1,800 spending accounts funding government activities—mainly public health care programs and Social Security. The spending on those accounts is about 60 percent of gross spending over 10 years. It cannot indefinitely continue to increase faster than gross domestic product as currently projected. There must be reform.

There is a chance that Republicans will actually put in place some needed reforms for Medicaid. Overall spending on the program is exploding while providing a subpar service to its beneficiaries. Shamefully, nobody is serious about reforming Medicare and Social Security. That needs to change, and the next debt ceiling debate provides an opportunity to take the first steps in that direction.

To be sure, Congress will have no choice but to raise the debt ceiling and must not default. However, it would be irresponsible for lawmakers to increase the ability of the government to accumulate more debt without implementing some institutional or budget constraint reform as part of this effort. Budget constraints that have come out of past debt limit fights include the 2011 Budget Control Act and the 1987 changes to the Gramm-Rudman-Hollings reforms.

The best place to start would be a cap on all spending or a strict cut-as-you-go system. It might force reluctant lawmakers to reform Medicare and Social Security rather than subject the programs to arbitrary across-the-board cuts.

However, that would be only a short-term remedy. What needs to happen is a fundamental reform of the programs that are growing out of control and redistributing massive amounts of wealth from the relatively younger and poorer in society to the relatively older and richer. Short of that, we won't address our debt issue and will have to deal with the main consequences—namely, higher taxes and even slower growth.

COPYRIGHT 2017 CREATORS.COM

NEXT: A.M. Links: Gorsuch Fight May Go 'Nuclear' in Senate, U.S. Threatens Unilateral Action Over Syria Chemical Weapons Attack

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Is it just me, or is that face getting more and more punchable?

    1. It’s not just you.

    2. It’s definitely not just you. Many have felt that way about him since he was elected.

    3. We will see if Peak Punchability is a myth or not.

  2. Shamefully, nobody is serious about reforming Medicare and Social Security.

    Because of baby boomers, there’s more voters on medicare than off right now. Until enough boomers die off and enough echo boomers start voting that there are more voters not getting medicare than getting it, no politician is going to do anything about it.

  3. The best place to start would be a cap on all spending or a strict cut-as-you-go system. It might force reluctant lawmakers to reform Medicare and Social Security rather than subject the programs to arbitrary across-the-board cuts.

    There is no way for a current legislature to bind the hands of future legislature. This would fail for the same reason sequestration failed.

    1. Sure there is. Put a sunset clause of 1 year on everything coming out of Congress, reduce Congress to part-time and cut salary by at least 50%.

      If a future Congress had less time and less pay to reconsider everything each year, they would a lot less damage.

      1. If Congress and the voters don’t have the will to cut some piddling % of Meals on Wheels’ budget, then how in hell is your suggestion going to be implemented?

        1. First of all, what the media say voters want is clearly not the truth.

          Secondly, as someone who contacts their two Senators and Representative all the time, Congressmen don’t really give a crap about what you say. They send you a condescending reply to your contact and still vote for the debt ceiling to go up, combat everywhere without a declaration of war, increase spending on the War on Drugs, keep civil forfeiture going, etc.

          Congress is busy with other things besides the federal budget right now and cutting meals on wheels. The media is helpless, so they are focusing on anything that might stick: Russia- Bannon- Pence- Syria- Meals on Wheels…. The media has taken the proposed budget from trump and gone all TDS with it.

          Nothing scares these fuckers like getting voted out of office every term and Americans are just not willing to do that…yet.

          1. “First of all, what the media say voters want is clearly not the truth.”

            Who is going by voter intent based on what the media says? The voters themselves demonstrated that they don’t really give a shit about cutting spending or balancing budgets, because BOTH TRIBES nominated candidates who promised to spend spend spend, and not to touch entitlements one bit.

            Basically, now we have:

            Democrats: More free shit for everyone
            Republicans: More free shit, but only for Real Muricans

            1. With one significant difference

              Democrats: Tax to provide shit
              Republicans: Borrow to provide shit

      2. And the future congress can just reverse that. The only thing preventing them from doing so is public opinion in the future. Nothing the current congress does can prevent congress from doing something the future public isn’t capable of preventing all on their own.

        1. Congress can do an Article V, amending the US Constitution and add the above limitations on Congress. That would limit future Congresses.

          1. No, congress can only submit amendments for consideration. Only the states can limit congress via article V.

            1. Both ways to amend the constitution involve proposed amendments and then 3/4 of the states have to ratify the amendments.

              I guess when asked what Congress could do: “a current legislature to bind the hands of future legislature”, I suggested constitutional Amendment and need to further explain Art. V.

              1. Even better – let’s add a new Constitutional segment to Congress. A third voting body, but one that is dedicated to repealing laws. That’s their job. That’s what they get voted in to do. Their job performance is judged on how many laws they get rid of, not how many they create.

      3. “and cut salary by at least 50%.”

        I don’t understand proposals like this. If you cut salaries of Congresscritters, then it will inevitably lead only to rich people being able to afford serving in Congress. Is this what we want? IMO, serving in Congress is an executive-type job, as far as salaries go, and ought to be compensated commensurately.

        1. reduce Congress to part-time

          They’ll have time for a 2nd job to make ends meet, just like much of their constituency.

          1. But why is this a desirable thing for Congresscritters?

            This sounds like those goofy proposals that are sometimes floated by liberals like “a company’s CEO should make no more than X times the salary of the lowliest janitor” where X is some arbitrary number like 5 or 7 or 10. I mean, why? What is the point? To make the CEO “feel the pain” and share the burden of the employees? What it will mean in practice is that you will get underpaid CEO’s, and/or overpaid janitors.

            1. They’re not executives. They are lawyers (most of them) and politicians. They talk about more and more laws and then vote. That is their job and they get paid $174,000. The Speak gets $223,500 and the minority leader gets $193,400.

              That is NOT commensurate with their jobs. If the Founding Fathers were part-time politicians in Congress, it is good enough for these leeches.

            2. Goofy indeed.

              A CEO’s compensation is tied to the value they produce, in theory if not in practice. I have yet to see any evidence of value from congress.

        2. Frankly the salary isn’t the issue, it’s their ability to purchase stocks with what would normally be considered insider information. Why do you think so many of them get rich while in office, eh? Recall the STOCK Act and how it was immediately gutted? Yeah.

          1. Yeah, the insider trading crap is bullshit.

            1. Exactly. While your everyman might look at a congressional salary and say ‘oh my, that’s big’ the reality of the matter is that it’s a pittance compared to what they can make with trading based on foreknowledge of pending legislation that will directly change the price of stocks.

              If anything, lowering the salary will have no effect but it will change the incentives. Not necessarily in a good direction either.

              It’s not like there’s really anyone in Congress right now that’s ‘poor’ and living paycheck to paycheck on the Federal dime. Consider the cost of running for Congress at all, and you begin to see the problem.

        3. If you cut salaries of Congresscritters, then it will inevitably lead only to rich people being able to afford serving in Congress. Is this what we want?

          The other end of the spectrum isn’t that great either. You end up with rent-seekers for life like Barry Sanders, who couldn’t otherwise keep the electricity on in their apartment without stealing electricity but, because salaries, look like wealthy, respectable, leadership material.

          Beyond the hobos in charge of billions vs. economically independent legislators, I think the goal is that completely uninformed decisions can be made for the price of a quarter. Less if you flip it more than once.

          1. That quarter is probably good for a couple hundred thousand tosses before the faces are too worn to read. I’m guessing, I couldn’t find a MTBF for flipping-coins.

            1. I’m guessing, I couldn’t find a MTBF for flipping-coins.

              I think fact the hand, one way or another, is the dominant failure mode is the very heart of the issue.

        4. Cuz $87,000.00 isn’t enough for a “public service” job?

  4. Well of course the sky’s the limit. Keynesian stimulus will Make America Great Again. Trump and Bannon told me so! And then once America is Greate again from all the Keynesian stimulus spending, then we can get to the task of repaying the debt. Maybe. At some point.

  5. “TO BE SURE, Congress will have no choice but to raise the debt ceiling and must not default.”

    Uh oh.

    1. Yeah, that whole “Congress will be compelled” bullshit is an example of why most the commentariat bailed for the Glibertarian website.

      1. Reason criticizes people in power. The power switched hands (parties). Reason continues to criticize people in power. A portion of the commentators throw a shit fit. THE REASON EVERYONE LEFT MUST BE BECAUSE SOME COMMENTS BY CERTAIN REASON WRITERS MAY NOT PASS THE PURE LIBERTARIAN TEST.

        Genius.

        1. Reason continues to criticize people in power.

          You left out the part where Reason proceeded to shit all over itself, it’s commentors, it’s donors, and it’s readership.

          Many of the people who left Reason didn’t leave because of 1, 2, or even a handful of writers didn’t pass their personal libertarian purity test with flying colors. Moreover, some of those that left were upset or irate that their criticism shifted from seriously questioning to nagging or just nitpicking.

          It’s gotten modestly better, but acting like we were there and now we’re here and nothing happened in between is exceedingly dismissive in the “Let’s be kind to Reason.” direction.

          1. Yes, Reason “seriously questioned” when they reported that Obama declined to attend Scalia’s funeral. It was also very libertarian for commentators to literally write “Obama is pissing on the country” because of this action. Yes, very unbiased and not related to notpicking or nagging. Go find and read old articles Reason wrote about Obama. Some of it was really really silly.

            You’ve got to be kidding me.

            1. UBI! UBI! UBI!

      2. From reading the posts at the other website, I would say a big reason many of the commenters left was because many of them view themselves as tribal allies with Republicans in the Great War Against The Left(tm). When Reason refused to get sucked into the Team Red/Team Blue tribalism, then they bailed. I think most of them are Anti-Left more than they are Pro-Anything.

        1. ^This

          1. Yup, nothing to do with one of the writers here literally saying that speech compelled violence, nothing to do with much of the criticism of Trump here being the same shallow, vapid bullshit that the MSM is dishing out. Nothing to do with the shitty experience of posting 6 times to get one comment.

            I was often defending individual writers here by pointing out that some articles were straight news, pointing out that interviews with outside people were not blanket acceptance or editorial endorsement of those points of view. Or at least I was when I could actually post.

            Nope. We’re all secret Trumpistas in our MAGA hats. I mean, you can tell I love the guy.

            But, by all means, keep on sniffing each other’s asses and saying it’s perfume.

            1. nothing to do with one of the writers here literally saying that speech compelled violence

              This is if you consider this as some sort of unique or standalone thing.

              So here’s my cri de couer to fellow conservatives: Banish this book from your library. Purge it from your consciousness. This book should never have been admitted into civilized company, but especially not now -Shikha Dalmia

              Gillespie and Swain have had a couple of high-profile and exceedingly anti-libertarian moments as well. Whereby they entertain the notion that we should toss the free market baby out because it might have been touched by Christian bathwater. Which, if I were a Muslim, Buddhist, Atheist, or Agnostic or pretty much anything other than a sort of crypto-socialist libertarian would and should pucker all my orifices.

              And this is if you ignore the low-level, personal choice (like the staff being pretty much in the bag for Hillary), slippy-masky stuff.

              1. Nothing says libertarian like a UBI.

          2. Yup, nothing to do with a Reason writer actually saying that violence was deserved because speech. Nothing to do with H&R repeating vapid MSM claims about Trump while not focusing enough on what was actually wrong with his proposals (they have gotten better on this, IMO). Nothing to do with their site being impossibly crappy to post on (2nd try on this). And this isn’t even a full list.

            Nope, glibertarians are secret Nazi Trumpistas sitting around in MAGA hats bitching about Messicans.

            1. You’ve probably noticed by now that the squirrels have a new trick up their sleeve.

              1. He probably still can’t see his posts, but yeah, eventually.

        2. When Reason refused to get sucked into the Team Red/Team Blue tribalism, then they bailed. I think most of them are Anti-Left more than they are Pro-Anything.

          But so what? People left because they wanted something they thought was better than what they had. And what’s it to you? Why does it have to bother you? Why can’t people just let it fucking go already?

          1. Maybe people should stop bringing it up by saying “people left because of XYZ.” Or maybe you just expect people to not respond to those types of comments?

            1. Yes, both. It happened, it’s time to move on.

          2. And what’s it to you?

            I don’t think it’s the leaving annoys people so much as them coming back all the time to go “SO DO YOU GUYS MISS ME YET?”

            1. Agreed. As I said yesterday, it’s unfortunate that only the assholes keep coming back to harp on it.

              But it’s also stupid for people here to keep offering retarded speculation on why people left.

              1. It’s also stupid for people here to keep offering comments on people speculating. Isn’t that something? You posting is in itself a problem. Stop prolonging this discussion by commenting since you are the one who doesn’t want to talk about it. Ta da, conversation over.

      3. Congress has trouble cutting a single dollar from anywhere in the budget, and yet some people expect $500 billion in cuts overnight (and cutting taxes on top of that, so probably even more). I guess glibertarian is anyone not living in a fantasy land.

        1. “Spending is bad, let’s do Libertopia instead” is the only acceptable answer to any issue. Preferably in all caps.

      4. What’s your objection to that line?

        I think Libertarian’s laughing at the Robbyism.

        1. Bingo. De Rugy is often linked by economist Don Boudreaux. Based on nothing else but that, I have a high opinion of her.

    2. We’ve never seen them in the same room together, have we?

  6. More “proposals” without a chance of being enacted. Where have seen that before?

    1. Well gee, we have to start somewhere.

      IMO, Veronique de Rugy has been really good in beating the drum of the dangers of a high national debt load. Someone has to be singing that song, otherwise we certainly won’t get anywhere.

      1. Well gee, we have to start somewhere.

        Any idea when?

        …really good in beating the drum of the dangers of a high national debt load.

        Along with hundreds of others for the past quarter-century.

        1. “Any idea when?”

          Sadly, not really. But if the fiscal sanity crowd just gives up and goes away, then it’s guaranteed that we will never reach fiscal sanity.

          1. When the populace doesn’t care if they bankrupt the national treasury with free bennies, why the hell would their politicians feel any different?

            This isn’t a government problem so much as it’s a ‘will of the people’ problem. The only fix for that is for them to feel the effects, but since it’s generational the people who support the shitty programs likely won’t feel those effects. Their kids sure will, but it’s obvious not enough people care about that.

            1. When the populace doesn’t care if they bankrupt the national treasury with free bennies,

              Free bennies? Like MASSIVE subsidies to the middle class? The core middle class pays less than half its share of the personal income tax. That’s gross income of $40,000-100,000 per year. Do you fit in that range? With Bill Gates carrying you on his back?

              1. Um, yeah. That’s exactly my point Hihn. ‘Free Bennies’ would indeed include subsidy. Obviously. For anyone.

                I take this to mean that you believe in a flat income tax? I’ve seen that idea floated around a lot. Implementing one would bust the Federal budget overnight unless it was set somewhere around confiscatory levels though, so I’m not holding my breath. They could do it, but again it runs into the ‘free bennies’ problem. Steep cuts in spending would be necessary, and to pay down the debt with such a tax scheme would be…painful…even with the spending cuts. (And it will just continue to become more and more unlikely the larger the debt becomes)

                People want free bennies, but in reality someone must pay and here in the United States it appears we believe Corporations and ‘the rich’ should pay. I’m not saying I agree with it, but it is what it is.

                1. They would hardly be confiscatory but they woild mean that tens of millions would actually start paying federal income tax.

                  1. Simply put, current national debt divided by the populace is somewhere around 62,500 dollars per person. Obviously this is a really rough guess on my part, but it illustrates how much every individual would owe on just the current debt.

                    A flat tax means everyone would pay the same, so really a more accurate measure would be to divide the debt by everyone with a job so the real amount owed would be much higher.

                    So yes, that would be a confiscatory level of taxation using a flat tax unless you string that out over essentially each workers entire life. Even then we’re talking one entire generation to pay off just our current debt.

                    1. Really? So I assume you paid your mortgage off in one year, right? Confusing debt and deficit is basic stuff. Try again.

                    2. For some people it wouldn’t be confiscatory, and for some it would. It’s one of the primary arguments put forward against a flat tax, in that those with lower incomes are disproportionately hurt by them.

                      It the flat tax is set low enough for those at the lower end of the income scale to easily afford it, lets say it could take several generations to pay it off yes? Maybe 50 or a 100 years? It might be a better idea to look at the interest payments and the principle payments over the overall total though. I’m no tax expert, I just took economics in college.

                      Maybe that’s not what Hihn meant, either way. Most people don’t think a flat tax is a great idea for a variety of reasons so perhaps he doesn’t either. It would be the most ‘fair’ but talking taxes on a libertarian website is already going to be a problem no matter which side of this you fall on. (I.E. Taxation is Theft ^_^)

                    3. Most people don’t think a flat tax is a great idea for a variety of reasons so perhaps he doesn’t either.

                      It’s crazy.

                      (I.E. Taxation is Theft ^_^)

                      Yeah, the authoritarians say that. Even Ayn Rand knew it was bonkers. “Consent of the governed” and all.

                    4. Most ppl think a flat tax is a bad idea because they might come closer to paying for themselves. But actually the flat tax doesn’t poll that badly either.

                    5. But actually the flat tax doesn’t poll that badly either.

                      That’s because so many believe a flat tax would be a middle-class tax CUT — Obama was never really challenged on the INSANE claim that a $50,000 school teacher pays a higher average income tax rate (actually 8.3%) than millionaires and billionaires (actually 27.9%).

                    6. And considering the debt took eight generations (assuming 30 years for each) to accumulate why exactly do you believe it needs to be zeroed out in one?

                    7. I don’t know if my post was eaten while trying to edit it or not…you bring up good points though. I imagine it would take a lot longer than 8 generations to pay off our current debt using a flat tax that’s low enough for the bottom rung of the tax base to afford it, but there are a lot of points I’ve read in the past on how to make such a scheme possible. I think the most common one I’ve seen is exempting incomes below ‘X’ from the tax, but then one could still consider that a subsidy from a certain point of view.

                    8. Explain how a proportionate tax is disproportionate. Yes, I know economists love to call flat taxes and especially consumption taxes “regressive” but that is simply an emotional appeal. They reserve that word only for taxes when exactly the same case applies to any good or service you purchase. Shall we price food based on ability to pay? Housing? Energy?

                      So now we have redefined confiscatory to mean any level which I feel is too high. Seems pretty arbitrary to me.

                      I strongly favor consumption taxes because they generally favor prudence (planning and delayed gratification) over the mindless spending philosophy we have now. They can ne proportional or they can be graduated. I’m fine with either. I can also live with a flat tax because it’s approximately the same but with some extra inefficiencies thrown in.

                    9. I strongly favor consumption taxes because they generally favor prudence (planning and delayed gratification) over the mindless spending philosophy we have now.

                      ANOTHER massive tax increase for the middle class who, as a group, consumes almost their entire income. The rich, of course. consume very little of their income.

                      Forbes had a great analysis, including simple graphs to illustrate the point.

                    10. Assuming debt is 100% of gdp now and assuming 2% average nominal gdp growth and simply balancing the budget every year, then after 100 years (3.3 generations by our definition) the debt would be 13.8% of gdp which is less than the average annual federal revenue for the last 7 or 8 decades. It would take far less than 8 generations.

                    11. Almost three quarters of our current debt (at least the on-the-books debt) was added in just the last 16 years. What’s going to happen in the next 16 if there’s no essential changes?

                  2. but they would mean that tens of millions would actually start paying federal income tax.

                    What are the odds of anyone getting elected on doubling the middle-class income taxes?

                2. I take this to mean that you believe in a flat income tax?

                  Huh? What are the odds of a massive tax increase on the middle class? The huge subsidy is paid by progressive tax rates. This was published 23 years ago.

                  http://libertyissues.com/armey.htm

                  People want free bennies,

                  You at least seem willing to double your own income tax!

                  1. I made that comment because the only tax scheme I could think of off-hand was a flat tax rate that wouldn’t have someone like Bill Gates carrying us, in your own words, ‘on his back’. (And for the record, I agree that this is more or less how taxes work right now.)


                    “You at least seem willing to double your own income tax!”

                    I live in Texas, so not really. We don’t have a state income tax for a reason and it’s one reason I stay here. Moving to, say, Chicago would also ‘double’ (probably not actually double, not sure though) my income tax therefore I don’t live in Chicago.

                    1. And we see the real reason you oppose a reasonable flat tax. If moving to Chicago doubles your taxes, you’re paying less than 10% now. You don’t know the meaning of confiscatory.

                    2. Jesus, you two like to read a lot into what I say that I personally don’t think. I refer to what other people have said about a flat tax and I describe the commonly perceived problems that arise from such a scheme.

                      To Skippy, it’s disproportionate impact. Duh. I shouldn’t need to even point that out to you, and it is in fact a regressive tax by definition. I didn’t say that necessarily made it bad, it’s just what it is. I also said that you brought up decent points, and to add to that if spending was brought under control for a hundred years or so maybe it would work. Lets just say I’m not optimistic that this is possible. Ok?

                      As for the ‘confiscatory’ comment, I said that with the premise of dividing the national debt per worker with a flat tax along with the assumption, intending to illustrate the scale of the problem, that it would take an entire generations income to pay it down with such a scheme in place. (Recalling that, while yes the debt was accumulated over ‘8 generations’ the vast, vast majority of it has been in this century or even just the last 30 years. So even assuming 30 years per generation it would be more like 4 reasonably speaking.)

                      To Hihn, no shit the Federal tax is the same in every state. What’s your point? Moving to Chicago would still increase my taxes, as would a flat tax. Those are facts. So what?

                    3. And to add to the confiscatory comment, it was also made in reference to the fact that if the tax scheme was changed to a flat tax than it would need to be confiscatory to cover current federal expenditures or else the deficit would explode like a nuclear device.

                      Am I wrong there?

                    4. With an implicit endorsement of those criticisms. Why do economists reserve the word regressive only for taxes? The free market by definition is disproportionate. Who the fuck cares? Why do they argue that government “services” deserve their own special (and emotionally charged) language?

                      And your premise to get you to confiscatory was absurd enough to be contrived. The federal gov’t takes in about 19% of gdp. That includes fica/oasdi, income taxes, etc. To first order that’s what a flat tax would have to be plus about 2-3% to balance with no additional cuts. And that would replace your payroll and income taxes. You’re telling me you don’t pay close to that now in combined taxes?

                    5. . The federal gov’t takes in about 19% of gdp.

                      21%

                      To first order that’s what a flat tax would have to be plus about 2-3% to balance with no additional cuts. And that would replace your payroll and income taxes. You’re telling me you don’t pay close to that now in combined taxes?

                      The average tax rate at $40-100k is 8.8% + FICA. Federal takes 21%. Yours is the only consumption tax that would be collected on 100% of GDP.


                    6. With an implicit endorsement of those criticisms.

                      Yes, because they are logical criticisms. That doesn’t mean a flat tax wouldn’t work, merely that you’re going to need to have a plan to both slash an amazing amount from spending while also selling higher taxes to most of the citizens of the United States. It could even be a good idea, (and as a concept it is) and it will never work because of that alone. Hence my original premise of:

                      “This isn’t a government problem so much as it’s a ‘will of the people’ problem.”

                      And your premise to get you to confiscatory was absurd enough to be contrived. The federal gov’t takes in about 19% of gdp. That includes fica/oasdi, income taxes, etc. To first order that’s what a flat tax would have to be plus about 2-3% to balance with no additional cuts. And that would replace your payroll and income taxes. You’re telling me you don’t pay close to that now in combined taxes?

                      What might be a confiscatory rate for someone making $15,600 a year isn’t going to be the same percentage, functionally, as someone making $100,000 a year. If you take 20% from the low end of the scale, it’s going to be a larger percentage of their functional buying power than the person at the higher end of the scale. This is literally economics 101 material.

                      Perhaps ‘confiscatory’ isn’t the right word, but I imagine if you’re someone at the low end of the scale that’s going to be your perception regardless of the definition.

                    7. To Hihn, no shit the Federal tax is the same in every state. What’s your point? Moving to Chicago would still increase my taxes, as would a flat tax. Those are facts. So what?

                      Umm, the issue was you’d have to double your federal income tax, just to pay your own way. That’s what I said, and that’s what you quoted from.

                      Does this mean you would no longer give up your huge subsidies? (which you said are included in “free bennies.”

                    8. And we see the real reason you oppose a reasonable flat tax.

                      One more time: “What are the odds of a massive tax increase on the middle class?”
                      (You only added “reasonable” now.)

                      If moving to Chicago doubles your taxes, you’re paying less than 10% now.

                      What does that have to do with a federal flat tax?

                      You don’t know the meaning of confiscatory.

                      I did say ” a massive tax increase on the middle class.” And I do knew the difference between state and federal taxes.

                    9. “You at least seem willing to double your own income tax!”

                      I live in Texas, so not really.

                      Federal taxes are the same in every state.

          2. But if the fiscal sanity crowd just gives up and goes away, then it’s guaranteed that we will never reach fiscal sanity..

            The “fiscal sanity crowd” gave up decades ago. Both parties keep looting the treasury to buy middle-class votes.

            1. That’s… That’s actually correct.

  7. “What needs to happen is a fundamental reform of the programs that are growing out of control and redistributing massive amounts of wealth from the relatively younger and poorer in society to the relatively older and richer.”

    AMEN. It continues to amaze me how many Democrats, who claim to be the party representing the young cool hip kids, just refuse to recognize what a giant rip-off Social Security is for the current 20-somethings.

    1. I’m pretty sure they DO recognize that fact. They just don’t give a shit.

    2. Medicaid is not a wealth transfer from young poor to rich old. It is a transfer from ‘rich’ to ‘poor’ and it’s almost as large as the dreaded military industrial complex.

      1. Which is why she specifically cited a couple sentences earlier Medicare and Social Security, which are indeed transfers from the poor to the rich.

        1. And she’s still wring but it’s a neat half-truth to use to badger ppl with. High income earners get back a much lower percentage of their earnings from SS than low income earners. And if they have other earnjngs in their retirement then they even lose a significant fraction of ghe feaction they get. And Medicare has no income caps so a disproportionate share of funds comes, again, from higher earners. They’re both welfare programs and the sooner we get eceryone thinking that way the closer we will be to reforming them.

          1. I fucking hate touch keyboards.

          2. I’m talking relative wealth between generations – any transfer from the young to the old is by definition a transfer from the poor to the rich. It is not a “half truth”, it’s an empirical fact.

            1. It is definitely a half truth. What truly matters is lifetime earnings. If you only focus on immediate assets and liabilities yoi get the bullshit statements like bill gates has more wealth than half of all of america (i don’t know the precise percentage but it’s well into the double digits). That is strictly true but it also includes an awful lot of young people who are just at the beginning of their earning potential.

              Would you say a cardiologist with 300k in student loan debt pulling down 300k is poor compared to a 22 yr old diesel mechanic with no debt pulling down 50k a yr? It’s a cheap trick and the problem is much messier than that.

              More importantly why does the direction of transfer matter? The provlem is that it’s compelled. Trying to out-left the left is always a losing game. Hell, that’s what gave us the graduated income tax to begin with.

  8. I don’t understand the hate on making proposals for reducing spending and enacting entitlement reform. At the very least, making those proposals steers the conversation, and hopefully action, in a better direction. If nobody ever talked about reducing spending, then the focus and actions would be tilted even more towards increasing spending.

    1. Because reducing gov’t spending is racist.


  9. “To be sure, Congress will have no choice but to raise the debt ceiling and must not default.”

    Why? It’s inevitable with the current trajectory. Not tomorrow, certainly, but eventually.


    “The best place to start would be a cap on all spending or a strict cut-as-you-go system.”

    Why would this work, when the current ceiling is ignored? How would they be appreciably different in form?

  10. Anyone who even tried to touch the programs would probably be found dead in a ditch

  11. The budget can be balanced with a simple tripling of taxes.
    Quadruple them and the debt goes away in a generation.
    Sadly, this is more likely than spending cuts that actually stick.

    1. “The budget can be balanced with a simple tripling of taxes.”

      Actually, no. Check out Hauser’s Law.

      https://en.wikipedia.org/wiki/Hauser‘s_law

      Congress can triple the tax rates, but then people will just find ways to avoid the taxes.

      Balancing the budget really does have to come from cutting spending.

      1. Unless I’m gravely mistaken, when tax rates go down revenue actually goes up. I’m not sure if that’s an ‘iron law’ or not, I’m sure this isn’t always the case, but it has happened before.

        It might be worth a try, anyway.

        1. Unless I’m gravely mistaken, when tax rates go down revenue actually goes up

          Depends what kind of tax. After Reagan’s tax cuts, revenues increased by only $5 billion per year (average) by the end of the 80s, and ALL of that came from capital gains taxes as the stock market recovered from a staggering 70% loss. Capitals gains “behaves” like a sales tax, but on the seller.

        2. I’ve read about this, and IIRC we’re already below the level where that effect would happen. It worked, sort of, for Reagon because the top tax brackets were so high (he still blew a giant hole in the budget). Where we are now though? Taxes are too low.

          It makes more intuitive sense when the current availability of capital is factored in. Money is sloshing around in the market right now, looking for a place to go. The problem is NOT a lack of available loans for new businesses or projects or what have you.

          1. Interesting, I’ll read up on it a bit more, but at face value that explanation makes sense. Even from Hihn. ^_^

        3. You’re thinking the Laffer Curve. The theory behind it is that there is a tax rate that maximises revenue. If the tax rate is over that, then reducing the rate increases revenue. Problem is, there’s nothing in theory or practice that can be used to determine what that rate is in advance so it can’t be used predictively.

      2. You could balance the budget with tax increases if they were raised across the board. Other countries collect a lot more in taxes as % of GDP, and it’s because they have VATs and their high income tax rates kick in at much lower levels. However, no one in Washington wants to propose that instead of promising free shit financed by deficit spending and maybe tax increases on the rich that will never be enough to cover the gap.

        1. So, you want to double the federal income tax paid by our middle class?
          Keep in mind those high foreign tax rates are for their political healthcare — almost none of which is paid by their employers.

  12. Are we gonna threaten global financial stability over some cousin-fucking rubes’ failure to understand what the debt ceiling is again?!? Why not!

    1. Oh give it a rest Tony. You aren’t helping.

      1. You aren’t helping

        Neither are you!

    2. Question for Tony:

      Why didn’t global markets implode the other dozens of times the government shut down over the debt ceiling? Are you implying the world was destroyed during Jimmy Carters administration and never recovered?

      I know you’re just kidding and playing the part of the typical leftist, but I’m curious what trolling you come up with to answer the above.

    3. What the “debt ceiling” is, is a fucking scam. I don’t know how ceilings work in your world, but in mine they’re solid. They don’t float away from you every time you get close to them. Calling this shit a “ceiling” is a flat-out lie.

  13. Yes, the sky is the limit for Federal debt. Trimming around the edge of the pie won’t have any material effect on this progression. Politicians cater to those that get them elected and, with rare exception, don’t really care what happens 30 years from now. By then, they will be dead or long retired, working for a large bank or just living off their cushy retirement income. They are of the ilk, ‘I’ve got mine, so everyone else can go f… themselves’. They have no underlying guiding principles either in their lives in general and, certainly, not in their jobs.

    Yes, Veronique, we should default on our debt now. Delaying will only make life even more difficult for the next generation. Those of us that made this mess should suffer the consequences and let the next generation rebuild.

    What ever happened to the libertarian principle of ‘Don’t use force, or the threat of force, to achieve personal, social or political goals.’ I rarely hear commentators on Reason talk of these 1st principles. We have ceded the philosophical argument to the ubiquitous Khans of the world.

    1. Those of us that made this mess should suffer the consequences and let the next generation rebuild.

      I didn’t make this mess. I’m not interested in sacrificing my life for the future.

      1. Well said.

    2. Instead of defaulting, the government should simply live below its means. I would be fine actually if tax rates didn’t change, as long as spending was cut.

      1. Defaulting now would just get this disaster over with. Americans will clean house, water the Tree of Liberty and we start over with our Constitution and limited government. The big spending thieving traitors will be gone, so the USA might have a chance after that.

        1. Keep dreaming

      2. As per my comments above: there is no incentive for politicians to cut spending. Their constituents will get gored, and they will be voted out of office at the very next opportunity. Getting ‘something for nothing’ is an almost impossible addiction to overcome. However, ‘tanstafl’ applies. Ultimately, your ox will be gored.

        1. The best course of action is to zero out the deficit and keep it there. Time will inflate away the 20TT if you just do that and you don’t unfairly hit any particular generation which followed the fuckers who got us into this mess: FDR and LBJ contemporaries.

        2. Getting ‘something for nothing’ is an almost impossible addiction to overcome.

          Especially for the middle class, whose federal income tax is 50% subsidized by the rich. (average subsidy for $40,000-100,000 AGI)

          However, ‘tanstafl’ applies. Ultimately, your ox will be gored.

          The entire middle class. It will be VERY ugly.

      3. Says the guy whi didn’t “give” 40% of his income to the government this year (exclusive of FICA)

        1. Says the guy whi didn’t “give” 40% of his income to the government this year (exclusive of FICA)

          Nobody did. The average rate for millionaires and billionaires is less than 28%.

  14. This is probably the easiest of prognostications. Debt will continue to rise every year regardless of which party dominates any of the branches of government. Elected government is organized crime. Organized crime, like most enterprises, thrives on money. If government can’t suck more money out of the people, they just print it. Debt will rise until the inevitable collapse of the economy.

  15. Our friend’s sister-in-law makes $71 /hr on the internet . She has been out of a job for 6 months but last month her pay check was $16542 just working on the internet for a few hours.open This Link.. http://www.cash-review.com

  16. Our friend’s sister-in-law makes $71 /hr on the internet . She has been out of a job for 6 months but last month her pay check was $16542 just working on the internet for a few hours.open This Link.. http://www.cash-review.com

  17. My best friend’s ex-wife makes Bucks75/hr on the laptop. She has been unemployed for eight months but last month her income with big fat bonus was over Bucks9000 just working on the laptop for a few hours. Read more on this site…..
    ==================== http://www.net.pro70.com

  18. The Republicans are in charge of the WH and Congress.

    The correct question is “What debt ceiling?”

Please to post comments

Comments are closed.