Third Party & Independents Archives

October 07, 2005

Tax Cut Myth

The great conservative hoodwinks is “cutting taxes increases revenue.” I say hoodwink because increased economic activity does increase tax revenues, but, it has been decades since the amount of increased revenues even closely equaled the amount of lost revenue from tax cuts. Add this hoodwinks to an environment of increased spending, and you have an accurate picture of the economic future resulting from Pres. Bush’s terms with his Republican Congress. A nearly 50% increase in the national debt and almost double the interest on that debt in 5 years.

And it will continue at least another 3 years unless we voters send a resounding No More Spend and Borrow against Tax Cuts message to Republicans in 2006.

Following is a chart clearly showing the result of the President's tax cuts. Look at the tax increases heaped on our children's paychecks as a direct result of our tax cuts today. Chart is fromCBBP:

CBBP Deficit graph

Note that the economic stimulus is not generating tax revenues greater than the lost tax revenues from the tax cuts over the last 4 years. It is time for us to accept reality. Tax cuts do nothing to reduce deficits; they actually increase deficits. The chart and link above cover a 4 year period. Tax cuts in 2001 are not recovered in the 3 following years despite GDP growth in those years. Those are the facts. Republicans can argue an imaginary horizon line 50 years out which will offer the weakest of all possible evidence that tax cuts 49 years before helped increase revenues, but, such an argument is meaningless due to the time span and infinite variables over that time span. Such arguments are deception.

Republicans argue tax cut generated revenues exceeded the amount of the tax cuts in the past as in the Reagan years. They try to argue that spending during the Reagan years accounts for the growth in national debt during the Reagan years. But the data says they are wrong again. Certainly spending adds to deficits, but, tax cuts compound the problem, not solve it.

The proof of this point is found in the following 'Tax cuts in recent history' and OMB figures (Whitehouse Office of Management and Budget) which are mostly excerpted from

Since World War II, federal tax receipts have fluctuated within a few points of 18 percent of the Gross Domestic Product. Because they have been so stable, tax collections have regularly grown with the economy. Almost always, the only drops in tax collections have been during recession years; otherwise, tax collections have expanded in the years that the rest of the economy expanded.

There are a few notable exceptions to the above rule: those periods following large tax cuts. After Reagan's income tax cuts took effect in 1982, real income tax collections took a long fall, despite the fact our economy continued to grow.

For the moment, let's ignore the fact that tax collections could have been expected to grow after 1981. Let's simply use 1981 as a baseline, multiplying its revenues 8 times, and compare that to what was actually collected over the next 8 years. (OMB figures below came from

Individual Income Tax Collections (millions)

Year.....Current.....Constant (87 dollars)
82-89 total: 2,922,691
1981 (times 8) -2,941,536
Net 8-year loss -18,845

Republicans like to massage this data in a host of different ways like ratios to GDP growth to hide the facts. Reality is always reflected by taking the year before tax cuts, multiplying that year's revenues by the number of years of tax cut revenues, and comparing the total to what was actually received in revenues during those years. (And of course, adjusting for inflation).

Further, let's look at the same reality formula applied to Corporate taxes:

Corporate Income Taxes (millions)

Year.....Current.....Constant (87 dollars)
1982..... 49,207.....58,991
1983..... 37,022.....42,544
1984..... 56,893.....62,623
1985..... 61,331.....65,024
1986..... 63,143.....65,015
1987..... 83,926.....83,926
1988..... 94,508.....91,224
1989.....103,291..... 98,092
82-89 total: 567,439
1981 (times 8) -628,984
Net 8-year loss -69,545

Now add the net loss for combined individual and corporate income tax and you get a net loss of $88 billion in tax revenues added to deficits and national debt.

Voodoo Economics didn't work then, and the factual data show they still don't work today. The only circumstance in which tax cuts could yield increased revenues in excess of the taxes cut, is if the GDP growth rate is very high, perhaps 5% or better and inflation is held in check of the majority of the tax cut years.

That is not a set of circumstances that existed then, though it was hoped for, and it is not the set of circumstances today. We don't even have the expectation of growth in excess of 5% in these days of globalized competition, debt, and now oil and medical costs pushing at inflation.

Looking at this relationship from the opposite set of circumstances, let's look at the 1990's when taxes were increased. According to Republicans, Clinton's tax increases should have resulted in lower revenues But the actual data shows Clinton's tax increases resulted in tax revenue growth.

Individual Income Taxes (millions)

Year.....Current.....Constant (87 dollars)

Corporate Income Taxes (millions)

Year.....Current.....Constant (87 dollars)
1991..... 98,086 .....83,378

Notes: 1991 was a Recession Year 1993 Clinton Tax hike passes 1994 Clinton Tax hike takes effect "Original data from U.S. Office of Management and Budget, Historical Tables, Budget of the U.S. Government, FY 1996. Dollar conversions made from tables located there."

Thus, voters and the American public in general have been misled by Republican theory which falls apart in the face of actual real world data. Tax cuts do not increase net tax revenues, and tax cuts cannot reduce deficits. In fact, the data shows they increase deficits. America's future depends upon a thriving economy. And that economy depends upon our children consuming, and not overburdened by sprialing taxes from their paychecks.

Yet, Republicans have and continue to set the stage for unprecedented tax increases for our children with their 'borrow and spend' practice in Congress and their fallacious adherence to a tax policy that shifts the burden from this generation to the next. Since, 2000, every working American has incurred an additional federal tax debt of over $16,000 because of Republican policies. That figure comes by dividing the number of workers in the work force into the increase of the national debt since the year 2000 (over 2 Trillion dollars).

We cannot continue selling out our children's earnings future while dodging our responsibility to pay for what we legislate today. President Bush has lost his veto pen and refuses to look for it. We must pony up the taxes today to pay for what we spend today. More, actually, because the national debt is on track to become 10 Trillion dollars before the end of this decade and the interest on that debt will be somewhere in the neighborhood of 2.5 Billion dollars per day. If we do not begin generating revenue surpluses immediately to reduce that debt and interest, our children will face very difficult economic times and taxation that will make today's income taxes appear like a bargain.

The only way to put a halt to this rabid fiscal irresponsibility is to vote Republican incumbents out of office in 2006. I highly recommend voting the Democratic tax and spend incumbents out as well, UNLESS their record demonstrates a commitment to cutting spending. We must give America a future worthy of our children and that won't happen if we keep electing the same tax cutting and spend increasing politicians back into office.

Posted by David R. Remer at October 7, 2005 06:18 PM
Comment #84387


Actually, I think you are looking at the problem wrongly. Tax cuts and tax increases are tools. Tax increases slow the economy by taking money out of the hands of consumers. Tax cuts spur the economy.
In times of recession, (like when Reagan and Bush came to office), tax cuts are the correct choice when used with the fed’s lowering of interest rates. When the economy is strong, tax increases and interest rate hikes are correct because they slow the economy and keep it from over heating and causing inflation.

What causes increases in tax revenue is consistent growth in the economy. Tax rates can and should be used to both “jump start” the economy and to “slow” or “moderate” growth. This worked perfectly in the nineties when Clinton raised taxes and thus kept the economy from overheating in 95-99. Had Clinton had the foresight to lower taxes in 99, the recession of 01 might not have happened.

Right now, we are experiencing something very much like 1994. The difference this year is that the Clinton Tax increases are here in the form of higher energy costs. This should slow or moderate the economy in much the way Clinton’s tax increases did. The sad part about energy prices moderating the economy verses tax increases is that oil prices are a regressive tax and hit the poorest first.

Statistically as long as the federal deficit’s trendline is at 3% of GDP (Below 3% of GDP in good times and above in recession) there is no danger to the economy. There is no evidence that Bush’s deficit spending has harmed the economy. As we move forward into the second term if the economy continues to grow, the deficit picture should move nicely below 3%.

We are growing at a nice pace. Inflation is below historical averages, unemployment is low, interest rates are low, homeownership is at all time highs, productivty gains of our work force are in great shape. Corporations have the best looking balance sheets in decades, with corporate earnings at 6% of market valuation, and American wealth per capita is at an all time high.

Economic growth is what leads to higher tax revenues, not higher taxes or lower taxes. Higher taxes reduce growth which is why Europe is in such a mess.


Posted by: Craig Holmes at October 7, 2005 08:31 PM
Comment #84395


Much of what you said I agree with. What’s missing from your post is the issue of debt. While the deficit may not be hurting the economy now, we are trusting ourselves to the “kindness of strangers”. As we continue to borrow, foreign governments and investors are collecting more and more of our paper. The problem occurs when the “vig” is due. Imagine Japan or China or South Korea all of a sudden deciding to sell their dollars for Euros. What happens. The value of the dollar fals, the debt becomes more unserviceable and inflation begins to raise its head. When this starts, what does the Fed typically do in response? It raises interest rates. By doing so, we compound the problem to an even larger point with the folks that hold the paper. Tax cuts targeted at fueling economic stimulus are not a bad strategy if we are in a revenue neutral or surplus position. Deficit spending is not a good thing as we simply find ourselves deeper in a hole. We’ve been fooled in my opinion regarding the impact deficits because for at least since the end of World War II, the dollar was the standard of value for most of the world’d currencies and we were the strongest economy for the foreseeable future. China and India are rapidly coming online and growth projections for each nation are in the 6-9% range. Soon, (10-20 years) they will be our economic equivalent. As such, they will have the same leverage on us that we have enjoyed over the last 50 years.

To get ourselves fiscally fit, we must focus on deficit reduction. Spending cuts are the first thing to look at most certainly. However, this alone will not do the trick. We have to hold tight on future tax reductions in an effort to pay down our debt. Use tax cuts carefully, as when growth falls below 3% for more than a year. This will help rev the engine back up and get the economy moving again. Political tax cuts (which is what this round is for Bush) are dangerous when not done in a fiscally prudent manner.

Posted by: Dennis at October 7, 2005 09:17 PM
Comment #84396

The shrinking middle-class is gettin’ screwed in a big way.
Absolute power corruptes absoulutely.

Posted by: d.a.n at October 7, 2005 09:30 PM
Comment #84402

Dennis, you are quite correct, IMO. Tax cuts, as you and Craig and I all agree can be used as an economic tool. Republicans are right to acknowledge that tax revenues belong to the people and it is a good thing when government is managed well such that tax cuts become good BOTH for the tax payers and the economy, present and future.

That is not where we are now. Inflation is too much money chasing after two few goods and services. Since inflation is picking up, NOW is the time to increase taxes and buy down the deficit. Reducing disposeable income reduces inflationary pressures. But the Republicans want to make recent tax cuts permanent regardless of economic conditions. That is just plain stupid! As the article points out, making them permanent will grotesquely increase our national debt, which is already committed to 10 plus trillion dollars.

This is insane. Our future economic health directly hinges upon our ability to lower that national debt, not abandon ourselves to allowing it to grow to unsustainable levels, bankrupting our country like some S. American Venezuela or Argentina back in the 70’s or 80’s.

Posted by: David R. Remer at October 7, 2005 10:36 PM
Comment #84449

SEND A MESSAGE TO ALL POLITICIANS. VOTE THE IDIOTS OUT OF OFFICE. And keep doing it until they finially wake uo to the fact that WE THE TAX PAYERS are the bosses and not them.

Posted by: Ron Brown at October 8, 2005 10:40 AM
Comment #84470


The problem occurs when the “vig” is due. Imagine Japan or China or South Korea all of a sudden deciding to sell their dollars for Euros. What happens. The value of the dollar fals, the debt becomes more unserviceable and inflation begins to raise its head.

First of all that would be jumping out of the frying pan into the fire since Europe’s future is far darker than ours. Germany’s deficit is projected to be between 3.7 and 4.0% of GDP. If that were our deficit with our size of economy we would be running be pushing $500 billion, and the germans are not fighting a war or rebuildling after Katrina.


I agree with your conclusion but not your premise.

That is not where we are now. Inflation is too much money chasing after two few goods and services. Since inflation is picking up, NOW is the time to increase taxes and buy down the deficit.

The focal point should be long term sustainable, real economic growth. Tax increases in a robust economy help sustain an ecnomic growth cycle by slowing it down. A 3% deficit is nuetral in that it allows debt (long term) to grow at roughly the rate of the economy. Just as the Fed is “removing the accomidation” by raising interest rates to “neutral” or about 4% (But really when the California realestate market cools), so Congress and the President should at least move us to “neutral” or 3% of GDP on the deficit. Should the economy accelerate more, then further reductions in the deficit should be made.

I would argue that deficit discussions should be argued indirectly. The discussions should be one fiscal policy the promotes long term economic growth. My arguement is that deficits like interest rates should be adjusted with a permanent policy of promoting long term growth. Since high deficits are inflationary and surpluses can be recessionary, (generally speaking), now like our fiscal policy should be searching for neutral. A reasonable arguement can be made that that is at or near 3% of GDP.



Posted by: Craig Holmes at October 8, 2005 03:09 PM
Comment #84494


The problem occurs when the “vig” is due. Imagine Japan or China or South Korea all of a sudden deciding to sell their dollars for Euros.

I did a little work on this this afternoon. We have a current debt/gdp ratio of about 60%, Europe is even more in debt than we are at about 70%. Europe’s GDP growth rates are very low (in the 2% range). Europe has an aging population that is far more dramatic than our own “age wave”. The chance of a fundamental shift from the dollar to the Euro seems remote to me.

Japan’s debt problem is far far worse than ours. I believe their government is almost twice as far in debt as we are. In addition their “age wave” problem is even worse than Europe’s.

Out debt ratios on a world scale look just fine when compared to our trading partners. Nothing to worry about, just something to manage.


Posted by: Craig Holmes at October 8, 2005 06:27 PM
Comment #84497

Craig, you’ve been very industrious. Thanks for doing the background. I agree, the chances are remote that China or other would “dump” dollars, but I was trying to make a point about leverage. I really am a deficit hawk, and don’t like to be on the books of anyone. It seems to me that we’d be better off with a revenue neutral or surplus situation. There are many things we need to spend money on within the country. Education, Infrastructure, Health Care just to name a few. I don’t mean just throw money at them, but it takes money to seriously focus on addressing some of the internal domestic situations we have. The higher the deficit, the more domestic issues are avoided as we have a tendency to focus what spending can justify on security. I’d like to see us work off a “pay as you go” basis, and get out of the credit card situation…

Good research and information however. I appreciate you taking the time to look at it.

Posted by: Dennis at October 8, 2005 07:12 PM
Comment #84504


I like the way your mind thinks. What is hurting our country is the mixture of politics with taxes verses the deficit. Repubicans are for lower taxes, Democrats are for higher blah blah blah. The focus should be on sustainable economic growth. With that as the focus spending can rise a great deal over a long period of time.

If taxes are raised too much, (over focusing on the deficit to the point of bringing down growth), tax revenues actually decrease. (That is what happened in the depression by the say, Hoover raised taxes as the economy fell, which caused the economy to fall faster, which caused the tax base to crumble even more).

The reverse is what David is worried about. High deficit spending can lead to hyper inflation.

The truth about tax rates as I see it, is that they should not be raised or lowered depending on which party controls the Whitehouse or Congress, but what part of the market cycle we are in.

One of David’s premises is exactly right. The Republican myth that tax decreases always result in higher taxes. If that is the case, then lets eliminate taxes altogether and pay off the deficit!!!

I would also submit that if as a country we could keep the deficit to say 2% of GDP, so that the deficit would shrink on a relative basis to the rest of the economy, then when the age wave starts to hit in 10 years or so, there will be room to increase the deficit to help pay for baby boomer retirement benefits with less danger than current projections suggest.


Posted by: Craig Holmes at October 8, 2005 09:06 PM
Comment #84513

Craig, your argument for a balancing act is dead on. GDP growth must keep pace with inflation, as does wages and employment. It is a 3 legged stool, any one leg of which failing can bring the economy down and harm millions of working Americans.

The problem here, is our rapidly vanishing agility and reserves to stimulate the economy in future dips without knocking one of the legs out. The reason for maintaining a low national debt is so that when Katrina’s, 9/11’s and recessions hit, the nation has the ability to deficit spend without undermining the economy of tomorrow. High national debt places a tax burden on the future which seriously limits the future’s workers and politicians options to stimulate the ecconomy.

There is a limit to how far to how far a nation can burden the future economy, especially if that future economy experiences its own Katrina’s and 9/11’s or asteroids, whatever.

Inflation leads the Fed to tighten money supply, and as you know, tightening money supply curtails entrepreneurial and innovative economic activity, and if gone far enough, to recession and unemployment even as inflation could continue. The models of old are based on domestic economy with consideration of foreign trade. Today’s and tomorrow’s economy are intricately tied to the global economy in commodities, recessionary or expansionary foreign activity, shifts in global investments, and far more dependent and susceptible to foreign import price increases.

This means the future could face intractable stagflation against a backdrop of such high debt, high cost of service on that debt adding to the debt, and the need to tighten money supply creating recessionary pressure on growth. High debt can, and likely will exacerbate the influences of the global marketplace on our economy through the limitations on our ability to stimulate growth in global inflationary environment.

It is a much more complicated economic model these days with far more variables permutations, like the looming pension crisis, real estate devaluation (both of which Greenspan and the Fed have been warning about), rising and sustained high energy costs, medical costs, and cost of personal debt. The bankruptcy reform passed by Republicans has an increasingly potential of coming back to bite our economy in a huge way. You can’t get blood from turnip regardless of what the law says, and if defaults are met with arrests of workers, productivity will drop, poverty will increase, and a rapidly growing black market economy could be in the offing.

Posted by: David R. Remer at October 8, 2005 10:58 PM
Comment #84514


The future is one of low inflation and low interest rates. Wage pressure from India and China and pruductivity gains here in America will keep the CPI in check. Thanks to the flatening of the world through the Internet, there is for all practical purposes an infinite supply of unskilled workers in the world to serve US consumption.

Even today the real return on Tips is 1.84%. Subtract that from the 10 year treasury rate of 4.35% and the “big money” including foreign investors is predicting a US inflation of 2.5% over the next 10 yearss, which is below our historical average.

What I think is very possible is something in our country like Japan has experienced with disinflation. Now there is a debt problem. I think their debt is over 150% of gdp.

You and I have often discussed the coming age wave. America has in our favor that the Japanese and Europeans are ahead of us. We can learn from their mistakes and hopefully avoid many of them.

I noticed only three of us discussing this topic. Nothing like economics to put people to sleep. Any idea of how to add sex to this discussion?


Posted by: Craig Holmes at October 9, 2005 12:29 AM
Comment #84517

Craig, inflation is also prices rising faster than wages. If the hooker is still pulling down $100 a trick, and the John’s real wages are dropping from $17 and hour to $10 and hour, while energy, health care, education and housing are all growing 5% per year, offset by lowering prices for luxury jewelry, art work, and jet liners, guess who gets far more than a love squeeze?

Now the John and Hooker are the consumers who bailed the US out in the 2000 recession. How likely are they now to be able to bail out the country again, given the new circumstances? That is where we are headed and a great deal of data support it, which is what is keeping Greenspan up at night looking forward to turning the mess over to someone else as soon as possible, since he has never been able to get any cooperation on fiscal policy since Bush entered office.

Posted by: David R. Remer at October 9, 2005 02:43 AM
Comment #84523
More, actually, because the national debt is on track to become 10 Trillion dollars before the end of this decade and the interest on that debt will be somewhere in the neighborhood of 2.5 Billion dollars per day. If we do not begin generating revenue surpluses immediately to reduce that debt and interest, our children will face very difficult economic times and taxation that will make today’s income taxes appear like a bargain.

It’s even worse than I previously thought.
It used to be a staggering $1 billion per day for interest on the debt.

I suppose you all know what government is going to do about this debt ? The federal government won’t just sharply raise taxes. They will print more money. That’s their only option, because they will never have the discipline to stop spending. They will continue to be fiscally irresponsible and unaccountable (based on track record).

We will return to double-digit inflation like in the 1980’s. But, it will be worse this time around, because we will also be facing huge debt, and we live in an era of fiscal and moral bankruptcy.

China and other countries are also investing in the U.$. National Debt. It’s a Catch-22. If those countries get nervous and stop investing in U.$. National Debt, it could hasten a decline. But, if all those countries continue to buy U.$. National Debt, it will inevitably lead to an ugly economic decline. And, how likely is it that the U.S. will ever repay that debt ? It could turn out the largest Ponzi-scheme ever perpetrated on the world. But, that won’t avoid the economic disaster in the U.S. that will follow.
(1) We could quite easily be looking at double-digit inflation and much higher taxes as government continues to print money to reduce the debt.
(2) Or, we could be looking at very high inflation (like Argentina and other countries have learned), and something similar to the Great Depression, where 1 and 4 were unemployed, rampant foreclosures, food lines, and potential civil unrest. Not to mention what effect this will likely have on Social Security, Medicare, Medicaid, income taxes, inflation, welfare for the truly needy, education, an aging population, law enforcement, falling wages, energy vulnerability, health care, property taxes, some fleeing to other countries, failed/plundered pensions, and national security ?

Sure, some are going to say, but look at current inflation rates and unemployment. They’re relatively low at the moment. Sure it is…at the moment. Anyone can look like they’re doing well while they’re spending and borrowing. But, eventually, there will be a price to pay for that fiscal irresponsibility. Especially since we may now be beyond the point of an orderly, painless recovery.

There are things people can do to help better survive the next economic down-turn.
(1) Own your home (free-and-clear); foreclosures rates are high during recessions, much less a severe recession or depression;
(2) invest now while it’s temporarily good;
(3) but be ready to get out early before it’s too late;
(4) reduce your debt and liabilities on assets you don’t want to lose;
(5) low-cost housing could be a good investment (people will still need a place to live); higher cost properties could result in losses;
(6) perhaps, invest in foreign securities in nations that have not heavily invested in the U.$. National debt.

Timing is important. If you’ll recall 1999-to-2000 . Those that bailed just before the recession avoided huge losses. The market is now ramping up again. But, it won’t last long. Within 5 to 8 years, there will most likely be another down-turn, but it will be more painful than the last recession, because our many pressing problems are leaving us little wiggle room, now that we’ve backed ourselves into a very tiny corner, with fewer and fewer options.

Posted by: d.a.n at October 9, 2005 07:57 AM
Comment #84756


If the hooker is still pulling down $100 a trick, and the John’s real wages are dropping from $17 and hour to $10 and hour, while energy, health care, education and housing are all growing 5% per year, offset by lowering prices for luxury jewelry, art work, and jet liners, guess who gets far more than a love squeeze?

Laughing sooo hard.

You failed to include productivity gains. How does viagra fit in to your example??

Love might be cheaper by the dozen??


Posted by: Craig Holmes at October 10, 2005 11:52 PM
Comment #84841

Craig, you should feel pretty special. I don’t normally do requests. But, your favored nemesis status warranted it.

Humor: I think you have hit on something to get folks to pay attention to economics. Everyone has an interest in money or sex, usually both. This should get a bit easier to write about in the future thanks to your suggestion.

Posted by: David R. Remer at October 11, 2005 08:31 AM
Comment #85645


Very well done. Some of what you’ve talked about is a bit over my head and I’ve been digesting what you’ve written. But I wanted to applaud you all for the great conversation and give and take.

Posted by: joebagodonuts at October 13, 2005 03:47 PM
Comment #85678

Thanks JBOD. It is a complex issue, and one, as Craig rightly points out, the majority of Americans are not schooled in understanding. But it is a topic we political writers and pundits must continue to write about in as plain and understandable language as possible, for it is one of the largest of all political issues which voters must become at least aware of.

Posted by: David R. Remer at October 13, 2005 05:39 PM
Comment #85679

Craig, don’t you think productivity gains have already peaked? There is afterall, a ceiling limit on productivity gains. The latter part of this year has seen slight drops in productivity. My conjecture is we hit that ceiling set by technology and psychological disposition of American workers.

Posted by: David R. Remer at October 13, 2005 05:42 PM
Comment #85682

d.a.n, said: “If those countries get nervous and stop investing in U.$. National Debt, it could hasten a decline.”

You are right to point to a future adversity by foreign investors to the risk of investing further in American debt, especially if equal or better returns are to be found in less risky nations. If China and India are able in 10 years to establish policies (which they are now working on) which create a low risk environment in their nations for offering debt instruments at competitive rates of return, there is no question money invested in American debt will U-Turn and flow to China and/or India.

Such an event could very, very, likely trigger hyper-inflationary stagnation in our economy as a result of the loss of all that capital and a government hamstrung by debt preventing it from stimulating the economy any further.

Posted by: David R. Remer at October 13, 2005 05:50 PM
Comment #85870

It’s going to happen.
Today, it was reported that inflation jumped more than any time since 1982.
The hurricanes have something to do with that, but our energy problems, and the high cost of fuel are creating inflation, not to mention the federal government continuing to borrow, spend, and print money. What’s amazing sort of is how much abuse the economy can take before the consequences of such fiscal irresponsibility finally catches up with U$.

Posted by: d.a.n at October 14, 2005 07:56 PM
Comment #85900

Cost of Imports jumped too contributing to the inflation data. That, should it become a trend, is the biggest threat of all in the short term along side energy costs.

Posted by: David R. Remer at October 15, 2005 01:23 AM
Comment #86018

Yes, it seems we are becoming a nation of consumers, while running up huge debt, and there are now more jobs in government than all manufacturing jobs in the U.S. This condition also poses a national security risk. Where will we be if we later need to manufacture things ourselves?

And there’s a sad irony of so many jobs in government when that govenment is so irresponsible and unaccountable.

Still, it takes a long, long time before the consequences of what government does now, will be felt later (usually, many decades). We’ve now been on this path of fiscal irresponsibility for decades now (since the 1980’s). The signs of impending consequnces are starting to show now in: (a)education, (b)heatlh-care, (c)the economy, (d)corruption in government, (e)legal plunder of entitlements & property (i.e. abuse of eminent domain laws), plundered pensions, and perversion of other laws, (f)continued deficits, (g)unfair taxation, (h)alienation of allies, (i)government for sale, (j)corporatism, corpocrisy, investor & stock fraud, (k)election fraud, (l)crumbling infrastructure, (m)and the atitude of the people.

Yes, the import/export (trade) imbalance is another sign of the times.
But, you once wrote an article about American suffering from affluence. Corporations are moving abroad, because Americans won’t do those same jobs for as litte as those abroad. But, now, many are running up huge debt. Nation-wide personal debt is a staggering $30 trillion (maybe more).

The only consolation (maybe) is that these looming consequences and hardship will yield a next generation that with courage, strength, and a sense of responsibility and accountability.

Posted by: d.a.n at October 16, 2005 10:16 AM
Comment #87089

The real fraud in the Republican claim that tax reduction will fuel the economy is the fact that tax cuts without spending cuts are not tax reduction; they are tax deferment. The resulting debt is an even greater drain on the economy than the same amount of immediate tax.

And inflation, caused by simply printing more money, amounts to a hidden tax. Government gets the immediate benefit of spending the money, then the citizens have to pay more of that devalued money to get a constant value of goods or services.

Our nation’s monetary policies are actually unconstitutional. Article 1, Section 8 lists those powers which “we the people” allow congress to exercise, including “To coin money, regulate the value thereof, and of foreign coin, and fix the standards of weights and measures;”. Section 10 lists things which the states are forbidden to do, including “coin money; emit bills of credit; make anything but gold and silver coin a legal tender in payment of debts;”

Originally, our paper money was explicitly exchangeable for hard cash. Then, government backed off that promise and even made it illegal to own gold. Legality of gold ownership was restored under Nixon, but now all government-issued gold coins have face values dramaticly below their metal value, making it illegal to use them as real money. As far as I can tell, this is a world-wide policy.

Posted by: Vince at October 21, 2005 05:29 PM