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Revenue Problem or Spending Problem?


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#1    Yamato

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Posted 04 July 2012 - 04:48 PM

People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what's to blame: too much spending, or too little tax revenue? Economics professor Antony Davies examines the data and concludes that the root cause of the debt is too much government spending.



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#2    Babe Ruth

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Posted 04 July 2012 - 05:06 PM

Whatever is the cause, it is not likely to be remedied by the government.

As long as so many people are involved in the financial dealings of government, then expect budgetary problems, or whatever you want to call it.


#3    questionmark

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Posted 04 July 2012 - 05:10 PM

Now I wonder if these smart people can also tell me where not to spend.

This much is certain, military 24% is sacrosanct, social security and attached (35%) is an entitlement for which the beneficiaries have paid, so it can't be touched. Pensions (23%) can't be touched either. If we then add the interest for the national debt we have almost achieved 100% of the tax revenue. But we are only at 82% of the budget. There are still 18% that needs new debt. And that only if the interest stays at this historical low (which it will not, sooner or later investors will want some return on capital). Because if the interest on the debt should only go up 1% I am afraid that there will be 40% that needs new debt.

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#4    and then

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Posted 04 July 2012 - 05:25 PM

Spending is absolutely the problem.  But if the pols can't buy votes then how would they ever justify being in power?  Sarcasm aside, the system is so broken that if we try to truly reform it there may actually be violence.  Maybe that will be better in the long run.  There are the millions on the low end who can't, won't or are unable to produce and they demand their fix.  On the upper end there are the few thousand who expect to be left alone as they amass their fortunes.  In the middle are the rest who bear the burdens under threat of jail time if they complain too loudly.  But it all falls apart when the debt gets SO high that it cannot be paid.  That's where we are now, I believe.  The emperor's got no clothes and boy is he fat :(

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#5    Yamato

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Posted 04 July 2012 - 06:05 PM

View PostBabe Ruth, on 04 July 2012 - 05:06 PM, said:

Whatever is the cause, it is not likely to be remedied by the government.

As long as so many people are involved in the financial dealings of government, then expect budgetary problems, or whatever you want to call it.
Or, correct our course politically, American by American, and support good leaders like Rand Paul who's proposing good measures to remedy it.  

And you're absolutely right that the government is a terrible arbiter of its own affairs; that's what the Constitution is for.  ;)

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#6    ninjadude

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Posted 04 July 2012 - 08:01 PM

View PostYamato, on 04 July 2012 - 04:48 PM, said:

Every time the government runs a deficit, the government debt increases. So what's to blame: too much spending, or too little tax revenue? Economics professor Antony Davies examines the data and concludes that the root cause of the debt is too much government spending.

Running deficit spending is not a bad thing during a poor economy. So his initial premise is wrong. Government spending during a down economy increases GDP and brings it out of that downturn. One needs only to look at the very real results of the Stimulus from 2009. It wasn't nearly big enough, but it had very concrete results. The real question is when we are out of the downturn, then government spending should be gradually curtailed. Are we out yet?

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#7    Yamato

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Posted 04 July 2012 - 08:36 PM

View Postninjadude, on 04 July 2012 - 08:01 PM, said:

Running deficit spending is not a bad thing during a poor economy. So his initial premise is wrong. Government spending during a down economy increases GDP and brings it out of that downturn. One needs only to look at the very real results of the Stimulus from 2009. It wasn't nearly big enough, but it had very concrete results. The real question is when we are out of the downturn, then government spending should be gradually curtailed. Are we out yet?
And when annual GDPs correspond with election seasons, it's no wonder we have so many busybodies and bandaids.  Thank you, John Maynard.

Here's an exemplary parody of the Keynesian mindset:


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#8    ninjadude

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Posted 04 July 2012 - 08:38 PM

View PostYamato, on 04 July 2012 - 08:36 PM, said:

And when annual GDPs correspond with election seasons,

We only measure GDP during elections? We had an election in 2009? I must have missed it just as you missed with this idea.

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#9    Yamato

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Posted 04 July 2012 - 08:46 PM

View Postninjadude, on 04 July 2012 - 08:38 PM, said:

We only measure GDP during elections? We had an election in 2009? I must have missed it just as you missed with this idea.
There's nothing wrong with measuring it.  Our politicians are constantly jibbing and jabbing about increasing our GDP, and these days election season never ends.   International trade shouldn't require 22,000 pages of bureaucratic code to execute.  Government is a terrible steward of money, a wasteful mess with its own economic spending, and it has no business dictating the economy to the free market.

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#10    Bama13

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Posted 05 July 2012 - 12:31 PM

View PostYamato, on 04 July 2012 - 08:46 PM, said:

There's nothing wrong with measuring it.  Our politicians are constantly jibbing and jabbing about increasing our GDP, and these days election season never ends.   International trade shouldn't require 22,000 pages of bureaucratic code to execute.  Government is a terrible steward of money, a wasteful mess with its own economic spending, and it has no business dictating the economy to the free market.

NinjaDude is a dyed-in-the-wool big government type. Wasting your time arguing with him for a small, non-intrusive, fiscally responsible government.

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#11    Mr. Smith

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Posted 10 July 2012 - 02:29 AM

We have always had a spending problem but no one complained as long as they had a job and were told to look the other way. Now we have a revenue problem from the worst economic collapse since the great depression but the bills and govt agencies and wars still need to be paid for. We can't be deadbeats, so we go into debt, even when our president has froze so many fiscal expenditures. This would happen no matter who's party is in control. The republicans always say they're for smaller govt and lowering the budget so they can lower taxes but they never do it. Ever. In the words of Sandra Bullock "Iiieeeee! Hold on, we're gonna crash!"


#12    Likely Guy

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Posted 10 July 2012 - 05:13 AM

Revenue Problem or Spending Problem?

Both.

Edited by Likely Guy, 10 July 2012 - 05:23 AM.


#13    Rafterman

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Posted 10 July 2012 - 01:03 PM

View Postninjadude, on 04 July 2012 - 08:01 PM, said:

Running deficit spending is not a bad thing during a poor economy. So his initial premise is wrong. Government spending during a down economy increases GDP and brings it out of that downturn. One needs only to look at the very real results of the Stimulus from 2009. It wasn't nearly big enough, but it had very concrete results. The real question is when we are out of the downturn, then government spending should be gradually curtailed. Are we out yet?

Did Whitehouse.gov tell you that?

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#14    Rafterman

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Posted 10 July 2012 - 01:06 PM

View Postquestionmark, on 04 July 2012 - 05:10 PM, said:

Now I wonder if these smart people can also tell me where not to spend.

This much is certain, military 24% is sacrosanct, social security and attached (35%) is an entitlement for which the beneficiaries have paid, so it can't be touched. Pensions (23%) can't be touched either. If we then add the interest for the national debt we have almost achieved 100% of the tax revenue. But we are only at 82% of the budget. There are still 18% that needs new debt. And that only if the interest stays at this historical low (which it will not, sooner or later investors will want some return on capital). Because if the interest on the debt should only go up 1% I am afraid that there will be 40% that needs new debt.

It can be done, but very few politicians have the balls to stand up and say, "folks, it's going to get worse before it gets better."

It's just like Europe.  No one had the fortitude to endure the short term pain a decade ago and now they're looking at austerity and, may in fact, bring the rest of us down with them.

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#15    questionmark

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Posted 10 July 2012 - 01:10 PM

View PostRafterman, on 10 July 2012 - 01:06 PM, said:

It can be done, but very few politicians have the balls to stand up and say, "folks, it's going to get worse before it gets better."

It's just like Europe.  No one had the fortitude to endure the short term pain a decade ago and now they're looking at austerity and, may in fact, bring the rest of us down with them.

Do you seriously think that the US is not looking at austerity mid-term? What has kept the US alive for the last 8 years is the revolving door lending by the FED, or in plain terms: Banks lend money at 0.5% from the FED and put US debt bonds as security, then turn around and buy more bonds yielding 1-2%. Else Greece would be child's play in comparison, at least Greece got the rest of Europe bailing them out.

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