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Let's say you earned $200,000 a year. You live a lifestyle that costs you $350,000 a year and currently owe $1.5 million. The interest payments on that are prob

by cletus 15y ago

Let's say you earned $200,000 a year. You live a lifestyle that costs you $350,000 a year and currently owe $1.5 million. The interest payments on that are probably $30,000 a year (15% of your income). Your solution? Borrow more? What bank would lend you money? Multiply those numbers by a million and you have the current situation of the US government. Non-discretionary spending is spiraling out of control. I had this discussion at dinner last week where someone suggested it was crazy not to raise taxes. I disagreed. My argument is basically this: 1. People on low incomes currently pay little, no or even negative tax (factoring in government benefits); 2. Such a system creates a disincentive to work with the marginal rate of tax. If you earn $10,000 and get $2,000 from the government but by $20,000 you are paying $2,000 in tax with no benefits, the marginal rate of tax is actually 40%; 3. The problem isn't the top rates of tax, it's all the exemptions and the complexity of the tax system. So how about instead of populist pleas of taxing the rich we simply make everyone pay their fair share? What about 25 cents in every dollar for every dollar you earn each year above $20,000 (and nothing below)? Congress seems beholden to special interests and pork barrel politics. In the 90s Congress tried to surrender their power to the executive branch by passing the line item veto measure. In previous years they were unable to close military bases and had to establish the Base Realignment and Closure Commission. Will it take a similar commission for Congress to distance themselves from similarly hard decisions? The longer this goes on, the harder it's going to get. What I see happening in the coming years: 1. Retirement age being raised to 70 or even higher; 2. Federal sales tax similar to the consumption tax every other OECD nation has. State sales taxes are too complex. Interstate sales tax exemptions are fighting a losing battle to continue to exist; and 3. The US adopting a more isolationist foreign policy, including a continued decline in the US military that is already well underway (compare the size of the US armed forces today to what they were 20-25 years ago).

gfaremil 15y ago
Comparing personal budget with US budget is a gross oversimplification. First, US can (it is already doing via QE) monetarazie all the debt. And one comedian said: US can just start a little bigger war to get us out of the. Also don't forget that 4/5 of all that "government" spending (that is medicare, SS and defense) is actually just tunneling money to other parts of economy (defense contractors) and poor people. Also we have disturbing trend which will, I believe, start making differences: the rich are getting richer and poor are getting poorer. If that trend continues, we will see some Trocky wannabes popping around. What I see happening in the coming years: 1. One more banking crisis: this time it starts from China. They say all depressions have two legs: the second is leg is longer. 2. Thanks for this new banking crisis, we will finally reconstruct the banking sector and make it more efficient. There will be no more 4 banks on each intersection in downtown SF.
JimmyL 15y ago
The US spent $687B on Defense spending in 2010 [http://milexdata.sipri.org/ http://milexdata.sipri.org/], and $502B in 1990 (both numbers in 2009 dollars). China - the next guy down the list - is estimated at $114B. I'm a strong believer in the benefits to society that come from military research, but on a funding basis, don't you think there's some room to decline a bit there? Having said that, I haven't been in the field or done serious writings and research on military readiness. If the US military is declining as bad as you say over the past twenty years, then isn't a larger question what we're spending all that money on?
tzs 15y ago
> So how about instead of populist pleas of taxing the rich we simply make everyone pay their fair share? What about 25 cents in every dollar for every dollar you earn each year above $20,000 (and nothing below)? That kind of misses the point. It's still a progressive rate structure--it just has fewer brackets than the current rate structure. If we are going to have a progressive rate structure, it's hard to make a sensible argument that fewer brackets are better[]. The most logical would be to have an infinite number of brackets, with your tax being the integral of continuous monotonic increasing function that starts at 0 and raises to whatever the highest marginal rate is. [] Some people argue that fewer brackets simplify the tax code. They do, but in a trivial manner. All having fewer brackets does is reduce the number of entries in a table on page 1. All of the complexity in the tax code comes from determining what is income and who owes tax on it.

by cletus 15y ago

gfaremil 15y ago

Comparing personal budget with US budget is a gross oversimplification. First, US can (it is already doing via QE) monetarazie all the debt. And one comedian said: US can just start a little bigger war to get us out of the. Also don't forget that 4/5 of all that "government" spending (that is medicare, SS and defense) is actually just tunneling money to other parts of economy (defense contractors) and poor people. Also we have disturbing trend which will, I believe, start making differences: the rich are getting richer and poor are getting poorer. If that trend continues, we will see some Trocky wannabes popping around. What I see happening in the coming years: 1. One more banking crisis: this time it starts from China. They say all depressions have two legs: the second is leg is longer. 2. Thanks for this new banking crisis, we will finally reconstruct the banking sector and make it more efficient. There will be no more 4 banks on each intersection in downtown SF.

JimmyL 15y ago

The US spent $687B on Defense spending in 2010 [http://milexdata.sipri.org/ http://milexdata.sipri.org/], and $502B in 1990 (both numbers in 2009 dollars). China - the next guy down the list - is estimated at $114B. I'm a strong believer in the benefits to society that come from military research, but on a funding basis, don't you think there's some room to decline a bit there? Having said that, I haven't been in the field or done serious writings and research on military readiness. If the US military is declining as bad as you say over the past twenty years, then isn't a larger question what we're spending all that money on?

tzs 15y ago

> So how about instead of populist pleas of taxing the rich we simply make everyone pay their fair share? What about 25 cents in every dollar for every dollar you earn each year above $20,000 (and nothing below)? That kind of misses the point. It's still a progressive rate structure--it just has fewer brackets than the current rate structure. If we are going to have a progressive rate structure, it's hard to make a sensible argument that fewer brackets are better[]. The most logical would be to have an infinite number of brackets, with your tax being the integral of continuous monotonic increasing function that starts at 0 and raises to whatever the highest marginal rate is. [] Some people argue that fewer brackets simplify the tax code. They do, but in a trivial manner. All having fewer brackets does is reduce the number of entries in a table on page 1. All of the complexity in the tax code comes from determining what is income and who owes tax on it.