Rand Paul

Republicans: We Have to Cut Taxes Because We're Too Cowardly to Cut Spending

Rand Paul squares off against John McCain yet again on military spending, in a fight that could derail both the budget and tax reform.

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You can't unsee. ||| Rand Paul's Twitter feed
Rand Paul's Twitter feed

Today, the United States Senate voted 50-47 on party lines to proceed on what is expected to be a nail-biting attempt beginning Thursday to pass an actual 2018 budget. With Sen. Thad Cochran (R-Miss.) out indefinitely due to medical issues, the GOP can only afford one defection on the final budget vote. That's a problem for the party, because heavy doubts are already surfacing among two notoriously independent-minded senators—Rand Paul (R-Kentucky) and John McCain (R-Arizona). If both bail, the budget is doomed, and with it, tax reform.

Helpfully, and clarifyingly, the two longtime antagonists are squaring off over essentially the same issue—military spending—so the defeated senator could conceivably find himself alone in opposition. But McCain's desire to leave no dollar unspent on defense is broadly popular within the GOP, while Paul's principled objective of cutting the size of government…well, it used to be popular among Republicans, anyway.

Here's the men in their own words, as quoted and paraphrased by Politico:

Paul said he wants to get rid of the $43 billion in overseas war funding that exceeds federal budget caps Congress agreed to in 2011.

"I've told them I'm a 'yes' if they'll not exceed the budget caps," Paul said. "If leadership is unwilling to compromise with somebody who is concerned about the debt, then they deserve to lose." […]

"These are the people who come to our caucus every day and say: 'Oh the budget doesn't matter, it's just a vehicle to get to taxes,'" Paul said. "And yet when I ask for something they aren't willing to do it." […]

McCain made it clear he was still searching for a deal that would raise the spending caps — precisely the opposite of Paul's goal.

"We have to resolve the defense issue," McCain said. "We have to have sufficient spending for defense. More young men and women in the military are dying today because of a lack of readiness, training, equipment and funding. That has got to stop."

And since it's 2017, here's some Twitter-bitchiness:

While the Angry Birds vs. Wacko Birds angle is probably too irresistible, the biggest ongoing story here might be just how isolated Paul's views about actually cutting government have become now that Republicans control the levers of power. In a Politico article about tax reform yesterday, Paul said something that would have been routine for a Republican in 2011-2014, but vanishingly rare in 2017: "I'm a huge deficit hawk. My opinion has always been that you pay for a tax cut with spending cuts….And everybody else up here thinks you should pay for a tax cut by increasing somebody else's taxes."

What are all of those deficit hawks doing now? Vigorously waving the white flag.

No, fuck you, cut spending. ||| Reason
Reason

As mentioned here two weeks ago, Office of Management and Budget Director Mick Mulvaney, who just 30 months ago was excoriating GOP deficit spenders by saying such things as "There is no honest way to justify not paying for spending, no matter how often my fellow Republicans try," has now completely flipped the script, arguing that "We need to have new deficits." In the Politico tax-reform article, Mulvaney was even more clear:

"They simply do not have the political will on the Hill to solve this through the spending side of the equation," he said. "So we have to move to the revenue side."

This is a remarkable admission. The Tea Party wave of legislators came to Washington beginning in 2010 on explicit promises to cut spending and debt, and roll back Obamacare. They did a decent job using their House majority to restrain spending from 2011-2014, but beginning with Republicans re-taking the Senate in November 2014, fiscal conservatism has waned while GOP power has waxed. As Rep. Justin Amash (R-Michigan) complained to me in an early 2016 interview,

They're always promising that next time we'll be better. "We need the House," then "we need the Senate," then "we need the White House," then "we need a supermajority"—it seems like they're never really interested in actually doing anything in the present. The excuse is usually that we don't have the votes or we don't have the right president to sign the bill, but that highlights the problem with their thinking. They're not interested in persuading people. They're interested in waiting.

Another putative fiscal conservative offering shrug emojis to spending cuts is Amash's own close colleague Mark Meadows (R-North Carolina), chair of the House Freedom Caucus. From the Politico article:

Meadows…predicted Republicans will never have the nerve to cut spending, so they have to pass steep tax cuts to spur growth: "What you have to do is you have to mitigate the damage by being as aggressive as you can be on tax rates, which would lessen the damage of our lack of fiscal responsibility over time."

Funny, I don't remember that particular Tea Party slogan: We're too chicken to cut spending, so at least we'll blow up the debt!

This is a far, far cry from where Meadows was in February 2013, when, just after coming into office, he co-sponsored the Require a PLAN Act, mandating that "if the President's fiscal year 2014 budget does not achieve balance in a fiscal year covered by such budget, the President shall submit a supplemental unified budget by April 1, 2013, which identifies a fiscal year in which balance is achieved." In other words, then-president Barack Obama would be required to explain exactly when and how he would eventually balance the budget.

"It's time for the federal government to do what Americans—hardworking, taxpaying, Americans and small business owners across the country have to do: balance a budget and live within our means," Meadows said on the House floor. "The time is now."

The time for cutting government may have been now then, but it certainly is not now now. As Amash told me last month, fiscal sanity in 2017 is "looking as bad as any time I've seen since I've been in Congress."

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  1. Ironically, this site has come out against spending cuts if it harms one of the sacred cows.

    Yes, cutting spending is a bitch. No spending won’t lead to claims of a Holocaust being done.

    1. Cut taxes and you raise deficits. But cut spending and the tax cuts will follow.

      1. If there will be no spending cuts, I have to figure if it’s better for Republicans to control spending or Democrats. I still tend to think Republicans are more “redeemable”. It just looks less so now than a few years ago. Divided government once again seems the way to go, although the current situation seems pretty divided at times. I have to say that so far Republicans still appear to have done less damage than Democrats.

        1. Repubs market themselves as “conservative”, but that’s a damn lie. I’m all for supporting our troops, I’m just NOT interested in the US having a generational war. Speaking of troops, anyone ever wonder just how much we spend on Military Contractors? Yea, that doesn’t get much coverage on Fox, MSN or CNN. But to avoid a draft that would be political suicide, we employ and pay these contractors an enormous amount of $$

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        2. Because you are a fucking moron to not see how just this century, the Republicans cut taxes, started two unfunded wars, provided an unpaid Medicare expansion Part D

      2. If you cut taxes and increase borrowing, eventually, we run out of people willing to give us money.

      3. Nah, just provide lip service to cutting spending and cut taxes.

        reason.com Republicans posing as libertarians will find pressing issues like some poll chirping about how millennials don’t get it when it comes to government will provide cover.

        The problem is the GOP. They cut taxes, and spend like drunken sailors. Leave a mess, forbid Democrats from raising any taxes even temporarily or marginally, and when the economy does not kick into high gear, rinse, repeat.

        Want to cut spending. Focus on cutting just HALF of the defense budget for starters. Then figure out what to do with the ensuing unemployment.

        $350 billion can be given just to the top 0.01 percent for all I care.

    2. The link in your first sentence is broken.

    3. At least one fugazi libertarian here went absolutely hysterical at the prospect of a government shutdown a couple of years ago, and at least one other fugazi libertarian here thinks we should have a guaranteed universal basic income!

      The fugazis want what all the left-liberals want: to continue with the western European (proven failed) model of continually reducing defense spending in order to increase welfare spending.

      Defense spending should indeed be cut as part of a big, broad-based, across the board spending cut, but the truth is that defense spending as a share of total federal spending and as a share of GDP are both very close to their historical lows going back to the early 20th century. So anyone who implies that defense spending is our biggest problem is just being completely dishonest.

      1. Aww, Mikey learned a new word. Keep it up slugger, and one day you’ll have a triple digit vocabulary.

        1. I think it’s neat that Simple Mikey is a fan of 90s-era DC post-punk.

          1. Do you think he’s into Go-Go as well? I had never heard of it until that episode of the Fifth Column.

          2. He just saw the song title “23 Beats Off” and was down.

        2. The only thing that would make it slightly more pathetic is if he kept multiple accounts and replied to himself in every single thread.

      2. The fugazis want what all the left-liberals want: to continue with the western European (proven failed) model of continually reducing defense spending in order to increase welfare spending.

        Huh. The libertarian arguments for UBI seem to revolve around increasing efficiency and ultimately towards reducing the welfare state, with moral support from Hayek and Milton.

        Compare and contrast to the absolute lack of ground made by the “cut everything and let god sort them out” crowd.

        I never liked Fugazi.

      3. Fuck the UBI. We’re not commies.

        That is all.

        1. We’re not commies.

          Yet.

      4. truth is that defense spending as a share of total federal spending and as a share of GDP are both very close to their historical lows going back to the early 20th century.

        WTF are the THREATS to the US now? That is what defense spending is for. To counter threats. Even Jeane Kirkpatrick knew that when she wrote an article (just after the Berlin Wall fell signalling the end of the Cold War) about how the US could now become a ‘normal country in a normal time’. Your obsession is EXACTLY what Eisenhower warned about in his farewell address.

        Since the end of actual threats to the US in 1989, assholes like you have done nothing but create imaginary threats in order to fearmonger defense budgets and perpetuate teat-sucking cronyism in the military/industrial/thinktank complex.

        No – defense spending is not the biggest problem. Social Security and Medicare are. Nothing else beyond those three is even remotely consequential. Good luck tackling SS and Medicare first.

        1. The reason nothing else matters is because ‘interest on the debt’ is currently the 4th biggest item. $230 billion/year simply to service the existing debt (which equals a bit over 1%). Which means the entire defense budget will get squeezed out with a mere 3% increase in interest rates (a return to 2004 or so levels). Everything smaller than the current interest expense item is gonna get squeezed anyway – within a decade. Only the large stuff can involve a choice. And the longer we wait to make that choice, the bigger the debt itself gets and the less choice we will ultimately have.

      5. Cutting defense spending and crying about “endless wars” is the go-to refrain for every leftist, whether they call themselves a libertarian or not.
        It is idiotic to pretend that providing for a credible defense of our security interests doesn’t begin until *after we’ve failed to provide one, ie suffered a direct attack.
        It is idiotic to whine about a military larger than those of x,y, and z when x, y, and z may form an alliance and overpower our own.
        It is idiotic to pretend that the stagnant GDP growth we’ve been gifted with in recent years despite the higher taxes passed under the Obama administration weren’t eclipsed by the GDP growth and revenues under *lower tax rates*.
        It is also idiotic for Amash, Paul, and their fellow flatearth f-ups to whine about the *GOP “failing to persuade” anyone of a policy position *Amash,*Rand, and the f-ups hold.

    4. Ironically, this site has come out against spending cuts if it harms one of the sacred cows.

      Cite?

      1. Ironically, this site has come out against spending cuts if it harms one of the sacred cows.

        Cite?

        Go back to the “transgender soldier ban”, where this specific site cited that the expenses for having tranny soldiers wasn’t too bad and should be done.

        1. Not a fan of Tranny soldiers, bu the cost is microscopic considering there are so few of them!!!

          1. Again, there is no spending that can be cut that won’t be met with bitching, even by “Libertarians”

          2. The libertarian position in a nut shell. Everything except the DOD is too small to worry about. PBS. Planned Parenthood. Solar subsidies. Luxury travel. Foreign aid. Refugee travel and resettlement. Food stamps. 10-fold duplicative job re-training programs that have more administrators than beneficiaries.

            A billion here, a billion there, pretty soon you’re talking about real money.

            1. Not until you get to 700 billion. That is real money. You can cut all of PBS, Planned Parenthood, Solar subsidies…and not get anywhere close to 700 billion.

        2. “Go back to the “transgender soldier ban”, where this specific site cited that the expenses for having tranny soldiers wasn’t too bad and should be done.”

          Therefore Reason is against spending cuts!
          Are you familiar with the phrase “cherry picking”? You should look it up.

          1. But that’s the thing; everyone supports “some” spending cuts. But at the same time, every potential spending cut is opposed by someone. So we never cut.

    5. I think its more what are you getting for the money. I could even see clear to toss a bone to the Keynesians during the Obama years supposing there was something to show for it at the end.

      I am sympathetic to both McCain and Paul inasmuch as the middle east looks like world war waiting to happen, but at the end of the day, the US is broke and broken.

      The next century for the US is looking they will go out in a blaze of glory or quietly retire to soft middle-age. It is unclear still how it will play out.

      1. I am sympathetic to both McCain and Paul inasmuch as the middle east looks like world war waiting to happen

        If people in the Middle East want to blow each other up, that’s their business. It’s not a “world war” if we don’t get involved.

        1. There is a tactical advantage in deciding the terms and degree of engagement instead of just waiting until you are attacked, not to mention obligations of treaty, etc. Even short of playing policeman to the world, there are practical considerations beyond not simply getting involved.

          And if the middle east were content to simply blow themselves up, it would be easier to make the case, but as the the violence often overflows their borders, it isn’t nearly as clear-cut, at least from McCain’s point of view.

          1. not to mention obligations of treaty

            Yes, bad treaties.

            There is a tactical advantage in deciding the terms and degree of engagement instead of just waiting until you are attacked

            There is also a “tactical advantage” to saying “not our problem”.

            And if the middle east were content to simply blow themselves up, it would be easier to make the case, but as the the violence often overflows their borders,

            I couldn’t care less whether “the violence overflows their borders” (borders mostly drawn by European colonial powers), as long as it doesn’t flow our way. And the reason it trickles our way right now is because our military has been responsible for tens of thousands of deaths in those countries.

            Just leave those people alone. Europe messed up the Middle East, let Europe fix it.

  2. My opinion has always been that you pay for a tax cut with spending cuts?

    I don’t like this phrasing. I never have.

    In any event, if defense spending is the one thing that can’t be cut, then cut everything else. Defense is the one thing the states can’t take over, anyway.

    1. And it is actually a legitimate duty of the feds under the constitution.

      1. Nothing in the Constitution says it has to be $660,000,000,000+ dollars.

        1. That’s a different argument. One I happen to agree with, but a different one still.

          1. So the defense budget CAN be cut?!?! Whoa! Someone send a memo to congress!

            1. So the defense budget CAN be cut?!?! Whoa! Someone send a memo to congress!

              It’s the only thing they WILL cut.

              Even useless bullshit like, say, CPB is sacrosanct.

              1. This is stupid.

                Why is it that the ONE PART of the budget that is actually legitimate under the constitution is the FIRST place to cut?

                I agree, let’s cut defense … AFTER the rest of the budget is cut … A LOT.

                If you can’t see that … then you are just another Progressive.

                1. How about we cut all the stuff that the Feds shouldn’t be doing at all … say 20%. THEN I agree we can cut defense 10%. Then let’s do it again. When we get done defense will be “right sized” and the illegitimate stuff will be mostly gone.

                2. Because it stands at 700 billion.

    2. Sure they can. All we really need is the National Guard anyway.

      1. I wish this was true.

    3. It is the hidden assumption that taxes have a direct relationship to revenue as scored by the CBO. That tax rates and structure do not create perverse incentives that decrease the actual revenue (which is the way CBO tends to score taxes).

      1. Indeed. If they wanted to raise revenue tax cuts would appear to be one way to do so even without altering spending. It would be a terrible idea, I’d think, but tax cuts do appear to result in increased revenue fairly consistently.

    4. I don’t believe that he wants to make cuts elsewhere. I think he just rides that because he knows it is a deal killer.

  3. It ain’t that hard.
    Reformed taxes will require many fewer IRS agents and paper pushers.
    Dump the entire department of education. All it does is process student loans and issue “dear colleague” letters. Neither of those is a good idea, or authorized by the constitution. Leave the states to do what the constitution says it left to the states.
    Dump HHS. Same reasons.
    If that isn’t enough, cut legislative staff and travel expenses by 80%. Make the house and senate earn their pay. Maybe go part time, and meet in an un-heated barn in Topeka KS during Jan & Feb. Then in an un-airconditioned Quonset hut in Big Bend TX during July & Aug.

    1. All it does is process student loans and issue “dear colleague” letters.

      Entirely untrue. They intellectually handicap legions American school kids.

    2. Indeed, it would be easy as hell — assuming you weren’t worried about reelection or getting a slice of the graft.

      1. Well, if you are going to get all technical — —

    3. I have a theory that the runaway expansion of the federal government over the last fifty or so years is a direct result of the development of climate control technologies. Washington DC was built in a muggy-ass malarial swamp for a reason – specifically, so that congressmen and their various associated rent seekers would want to spend as little time as possible there. Once air conditioning became a thing, DC was no longer uninhabitable between May and September, and voila.

      1. I can’t say you’re wrong.

        1. I can certainly see that view.

      2. This…is brilliant!

        D.C. is one of, if not the most, centrally planned city in America. Why wouldn’t that include location?

      3. Let’s get an amendment that move DC around every 50 years or so. Never the same place twice.

    4. No reason members of Congress can’t conference electronically from modest offices in their home districts. Staying in D.C. year ’round makes the corruption too easy, and cost too high.

  4. I’d prefer McCain make a rider that all laws,with his vote sunset on his death.

    I find someone of his age and health making these decisions to be vaguely disgusting.

    1. Indeed. Especially when his mind clearly is no longer all there, as his insane questioning of Comey showed.

      If he had any sense of shame or decency whatsoever he would retire and let someone else take over, but he doesn’t.

      1. No. Everyone keeps telling him he’s honorable for doing what he does, which apparently shields him from all moral or practical considerations. When he dies he will be given a hero’s burial. After that, if he can’t be made out to be the sham he is, then I can only hope he is forgotten.

        Him replacing Goldwater is a tremendous black mark on our state.

      2. I can imagine a not-so-distant future where many of our legislators are reduced to their brains in a jar. The only thing you actually see of them is a hologram.

    2. He’s really doing a good job fucking up our country for future generations.

      1. Doing what a “Hero” does. (uncontrollable retching)

    3. I truly believe we need a mandatory retirement age for these assholes. ESPECIALLY senators.

      1. Yes – after one term.

  5. List of cuts that would survive a bipartisan assault.

    Go.

    1. I figured I would be a smart ass and come up with one thing because it cannot be that hard. That was a few minutes ago and I still have nothing…

  6. Jeepers H Cripes! Give the man a bra!

  7. The republican party must be destroyed.

    1. And control handed to the Democrats? Who think California has sensible government?

        1. Just pointing out a potential flaw in your cunning plan.

          1. They seem like one party to me, with two teams in the league.

            No matter who wins, we lose.

    2. Our system needs two parties. The Republican Party (something with that label anyway) will always be around as will the Democratic Party. It’s just a matter of what each will actually consist of.

  8. “You can’t unsee.” what?

    I was noting that it’s a bit bizzaro-esque that two guys known for colorful belts, bad hair, and obnoxious hats look astoundingly reasonable in golf attire.

  9. They’re not interested in persuading people. They’re interested in waiting staying in office forever.

    FTFY Justin.

  10. Spending cuts? LA LA LA LA LA!! McCain can’t hear you!

  11. Trump should call them names on Twitter. That’s how you make deals.

    1. Losers from Losertown gotta lose.

    2. Quick, put that on your tumblr page so all the people who matter will see it.

  12. “We have to resolve the defense issue,” McCain said. “We have to have sufficient spending for defense. More young men and women in the military are dying today because of a lack of readiness, training, equipment and funding. That has got to stop.”

    They also keep dying because you send them to die. McCain is a monster, no wonder the media loves him.

  13. Senator Roy Moore, AL(R) will be happy to have Rand’s back on this. Believe me.

  14. It strikes me that cutting taxes without cutting spending is futile. If the government keeps spending it will take the money out of the economy one way or another.

    1. Current taxes or future taxes, it still ends up being taxes in the end.

      1. Government obligations are not generally adjusted for inflation, so we can always inflate our way out.

        Inflation, of course, functions like a tax, but it’s a tax on people who hold large amounts of dollars, which is mostly banks and governments, and I don’t see why I should really care much about either of those institutions.

    2. It strikes me that cutting taxes without cutting spending is futile.

      Just now?

      So, have you been reading all the other posts that say ‘Fuck You! Cut Spending.’ and thinking, “Huh? I wonder what they mean by that?”

  15. “I’ve told them I’m a ‘yes’ if they’ll not exceed the budget caps,” Paul said. “If leadership is unwilling to compromise with somebody who is concerned about the debt, then they deserve to lose.”

    Do Reason commenters agree with this? I do, personally. We cannot cut taxes without spending. In fact, I’d rather increase taxes if we are going to spend this much and make the middle class realize how much we are spending and maybe then the spending cuts and tax cuts will come down the road.

    Am I and Paul wrong and we should get tax cuts and hope the deficits will force spending to stop?

    1. the deficits will not force spending to stop. The political will is not there. Our electoral system will punish anyone who tries to cut spending drastically.
      Eventually, the USA will have to either default on the debt, or inflate its way out. The only question is when.

    2. Or maybe by raising taxes they’ll just set the new normal for taxes.

      You won’t be the one writing that new tax law, remember. Corrupt social-engineering assholes will. Probably we’d end up with a tax code that is even more “progressive”, and even more impossible to cut, than ever.

      Democrats are more concerned with “fiscal responsibility” only because they are more concerned with the nurturing and growth of the welfare state. Even if the downward pressure on spending that deficits cause is super-weak, I’ll take it.

  16. Cutting spending is the preferred approach to smaller government, but cutting taxes, piling up debt and the government going broke works too.

    1. eventually no one will give you any more money …. so yes.

    2. piling up debt and the government going broke works too.

      Really? Mind pointing to a government that underwent bankruptcy and then effectively implemented and maintained spending cuts/reasonable spending.

      I agree that the government going broke shouldn’t be regarded as the end of the world, but minimizing spending is the goal with or without (with a preference to without) the interceding inflation/collapse cycles.

      1. Argentina and Iceland came out of bankruptcy with better fiscal responsibility than they started.

        1. Don’t forget to mention: both countries are at the epicenter of world power

          1. Trying to be at the epicenter of world power is our problem: it’s enormously costly with little reward except for a tiny elite.

      2. Latvia and Estonia practically invented the hysteria over “austerity”. Very popular topics among leftists during their recession phase. Now that their economies are doing great they have disappeared into the memory hole.

  17. Forget taxes, spending should be cut & cut & cut & cut & cut……


  18. Here’s the men in their own words, as quoted and paraphrased by Politico:

    *scratches his head*

    What the fuck did you just say?

  19. Fuck McCain, cut spending.

  20. I do believe Rand Paul is probably the best Politician in the entire Congress body.

  21. The Republicans always want to balance the budget when the Democrats are in power, but not when they are in power themselves. The Democrats are always ready to add revenue for any new spending; hence, the Democratic Party is the true fiscally responsible party.

  22. No need to worry about spending, actually, there is plenty of ink and paper at the treasury.

    1. Printing money is a tax on powerful organizations that hold lots of money… you know, like banks. That’s why the US government is so anti-inflationary. The rest of us couldn’t care less.

  23. “I don’t pay any attention to Senator Paul. Nor does hardly anybody else.”

    Doesn’t seem like a good strategy if you’re desperate for his support to pass anything.

  24. ‘Republicans: We Have to Cut Taxes Because We’re Too Cowardly to Cut Spending’

    Whining about tax cuts is like your glass getting filled halfway and bitching it’s half empty because you’re an asshole.

  25. Republicans and Democrats alike are “big government” parties. What I used to hear from my Tea Party friends was that we had to use the Republican Party to get budget reform-minded people elected. Well, we did. And we did. And we lost. We wanted to believe we were sending a bunch of Mr Smiths to Washington, instead we sent a bunch of Joe Tynans. That is what a swamp does: it sucks people down (assuming they were on high ground to begin with). So we are stuck with a debt that is now over $20T and a deficit of almost $7T, and the reformers have only just begun. And the sad reality is that the numbers are so astronomical that we proles can’t even begin to grasp them and so most just ignore them and don’t even want to know the answer to the question: who owns all that debt anyway?

    As for the military, there are two facts that are at eternal loggerheads: we need a military capable of doing what we need done in this world of never-ending wars, and the DOD is and always has been an economic sinkhole. Asking the military to respect a budget cap is like me asking my ex-wife to respect her budget for shoes. And nobody, and I mean nobody, has the clout or the cojones to take the on the military on this subject.

    Big wheel keeps on turnin’

  26. The enemy is us. We’re getting the government we deserve, good and hard. The vast majority of voters want to get all the Medicare and Social Security they think they’re “entitled” to, and they want someone else — “the rich” or future generations to bear the burdens, if they consider the burdens at all.

    So, it’s hopeless. The problem will continue to get worse until we’re in a Venezuela- or Rhodesia-like crisis.

  27. Still peddling the same Laffer curve nonsense. While tax cuts may boost the economy it’s never enough to cover the spending by the “don’t worry we’ll grow so fast it won’t matter” crowd. Without cutting entitlements and military spending you can never cut taxes by a significant amount and get a balanced budget. Didn’t work under Reagan or dubya

  28. The U.S. federal government needs or uses no income. To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.

    When the bank does as instructed, new dollars are created. When those instructions are processed, they automatically are cleared by the Fed. No deductions from tax dollars are involved. The federal government has the unlimited ability to pay its bills. (AND the unlimited ability to prevent an unacceptable level of inflation.)

  29. FEDERAL government spending is always more effective than tax cuts because while all of the former gets injected into the economy as income, at least some of the latter will be saved. The average of the latter for the U.S. is around 10%. So, a tax cut of $10 leads to $9 of spending. If we then cut government spending by $10, we’re a dollar short of where we started.

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