Interesting article in Sunday’s NY Times says that because of huge debts caused by the anti-tax movement, the U.S. is sliding into a second class status in the world economy. According to its author, economist Robert Frank, “Our political system must find a way to talk about taxes.”
Excerpts from the article:
- Our national debt has increased by more than $3 trillion since 2002. Once the world’s largest creditor nation, we are now its largest debtor. We are currently borrowing more than $800 billion a year from the Chinese, Japanese, South Koreans and others — loans that will have to be repaid in full with interest. These imbalances have sent the dollar plummeting.
- The situation is set to become worse. On the current trajectory, the national debt will rise an additional $5 trillion over the next decade. The retirement of baby boomers will require additional revenue to cover growing deficits in the Social Security and Medicare programs.
- In short, realistic proposals for solving our budget problems must include higher revenue. But unless political leaders can develop strategies for dealing with the powerful anti-tax rhetoric that has sunk similar proposals in the past, the impasse will continue. Various strategies like a debt consolidation loan and others, to settle debts must be engaged to put a cork on the overarching national debt. Get advice from iva on how to write them off.
- One strategy would be to inform voters that the “it’s your money” argument is incoherent. Taken to its logical conclusion, it implies that it is illegitimate for the government to collect taxes. But if that were true, there could be no government and no army, in which case, the United States would have long ago been conquered by another country. Then we’d be paying compulsory taxes to that country’s government. In the real world, governments not only maintain armies, they also provide a variety of public goods and services that would be impractical for private citizens to provide for themselves. Every government, including our own, has always levied taxes of some sort to pay for these goods and services.
- It’s strongly in our interest to talk about what services the government should provide and how to raise the revenue to pay for them. Politicians need to explain this clearly to their constituents. The argument is simple and would fit easily into a 30-second campaign spot.
- Anti-tax crusaders sometimes brand proposals to make the tax structure more progressive as class warfare based on envy. This tactic has also been rhetorically effective, but, like the “it’s your money” slogan, it stifles an important conversation to everyone’s detriment.
- Progressive taxation is not about envy. Top earners have captured the big share of all income and wealth gains during the last three decades. They’re where the money is. If we’re to pay for public services they and others want, they must carry a disproportionate share of the tax burden.
- FORTUNATELY, there is clear evidence that reframing the discussion often has a big impact on the way voters think about tax policy. In the spring of 2005, for example, I asked the Survey Research Institute at Cornell University to conduct two telephone surveys to investigate public attitudes about the Bush administration’s proposal to eliminate the estate tax. In the first survey, respondents were simply asked whether they favored the proposal. Almost 75 percent said they did. In the second, respondents were first told that lost revenue from eliminating the estate tax would necessitate some combination of raising other taxes, borrowing more money from abroad and further cutbacks in government services. This time, almost 80 percent of respondents favored keeping the estate tax.
- Given the effectiveness of anti-tax rhetoric, presidential candidates are understandably reluctant to tell voters what must be done to put the fiscal house in order. But voters are smarter than many cynics think, and they may be especially receptive to fresh points of view at this stage in the political cycle. The anti-tax rhetoric of recent decades is at the root of many of our current problems. Candidates with the courage to confront it head on may not only contribute to our economic recovery, but may also win additional votes.
From the New York Times, “Reshaping the Debate on Raising Taxes,” written by Robert H. Frank, an economist at Cornell University.
Ahh, the myth of the national debt bogeyman. As long as the GDP grows faster than the debt – more specifically, tax revenue grows faster than the interest payments – the debt is essentially irrelevant as long as the US govt. remains the safest haven for capital. Not even the Chinese are dumb enough (let alone the Brits and Japanese) to take pennies on the dollar to dump our debt or not let it rollover. Remember, debt is saving us from even worse tax rates while stimulating GDP to grow about 3.5 times faster than debt.
It will become relevant, however, if the debt/GDP is too high or too low, either of which can blunt growth. How could those scenarios occur? Protectionist trade policies (increased prices, decreased output, increased unemployment) decreasing GDP/increasing debt ratio; or tax increases decreasing GDP/decreasing debt ratio (productive dollars taken out of the economy). If you must decrease debt below it currently manageable 65% of GDP (of which only 55% is public, divided evenly between Americans and Foreigners; 45% is held by the US govt.), the best way to do it is to stimulate GDP AND slowly decrease debt by cutting spending or at least freezing it at the rate of inflation, which will return productive dollars into the economy – every tax dollar costs the economy $1.40 due to dead-weight loss.
Amateur economists on some website weigh in on the meaning of trade, debt, and the dollar. Movie at 11.
Mr. Greene, there is a reason that economics is called “the dismal science.” Consider it when you discount those web sites.
LOL, Discount Economics Websites. Thanks for the Lulz Mr. Ruddick.
Joe C.
Thanks for you comments. I have to wonder if you aren’t being a little too glib when you use the phrase, “the myth of the national debt bogeyman.” It is not a myth that under the presidency of George W., our national debt has risen over $3 trillion and it is not a myth that every one of those dollars must be re-paid with interest. The debt is a reality, and yes, there are some sophisticated ways to look at it, but there is no way that our huge debt can be considered a positive thing. This huge debt means huge interest payments that will greatly subtract the power of our government to take needed actions. Think of what we could have if the huge payments allocated to interest instead were allocated to education or health care.
I am trying to remember the name of the conservative or neo-con who is quoted as saying that he would like to take the federal government and drown it in a bathtub. And, who was the great thinker who said something to the effect, in speaking of government, “we need to starve the beast.” The fact is our government has been greatly influenced by such nutty thinking since the time of Reagan and this thinking has crescendoed with George W. Bush. The case can be made that this huge increase in debt under George W., has not been accidental or unforeseen, but has been part of a bigger vision of how to strangle the government. The fact is, it appears that some conservatives / neo-cons would rather the government spend money on servicing the debt rather than helping ordinary citizens through improved health and education programs.
What I wonder about — but have not seen analyzed by someone with an economic background — is the impact of putting over $3 trillion of debt in the economy in such a short time. Why should we not conclude that much of the prosperity we see now is a temporary sham? Most anyone can take their credit cards and go on a spending spree and whoop it up for a period of time. Isn’t this what the incompetent Bush administration has done these last seven years? Remember, regardless of his expensive war, his expensive Medicare drug program, Bush never asked for increased revenue and for six years, regardless of a Republican congress earmarking spending spree, he never vetoed one spending bill.
Bush has created such a mess, that, it seems to me, a financial crisis is looming in our near future. You have to think that Republicans strategists might be happy if the Democrats take control. Then the blame game can start in earnest. The thinking you advance — warning against future tax hikes that, you well know, regardless of which party is in power will certainly be inevitable — seems to show the outline of how Republicans will blame Democrats for the weakened state of our economy and the increasingly precarious financial state of ordinary Americans.
Mike, I agree with you that the debt is a bad thing and must be repaid. However, to mention only George Bush and not previous presidents, Republican and Democrat demonstrates a very selective indignation on your part. I have criticized this President for allowing the government to grow and the debt to increase. However, it has grown under other presidents as well. BTW, tax cuts under Presidents Kennedy, Reagan, and George W. Bush initially brought about higher deficits but later did result in higher revenues. Also, we don’t need for “progressive” taxes. The people in the top 50% income brackets pay virtually all income taxes.