Your Federal Budget, in Pictures

Among the many lessons this provides is that there is no plausible amount of income tax increases that will close the deficit. Even doubling income taxes, which would be insane, doesn’t get you there.

That means the biggest contributor to a balanced budget has to be spending reduction. Which means, in turn, that the progressive agenda of redistributing wealth through “tax and transfer” policies can’t be implemented in a fiscally sound manner. There aren’t enough taxes period, let alone taxes on the wealthy, to cover the existing transfers and the rest of the spending; ergo, any net new transfers wind up being funded by borrowing, either directly or by way of foregoing deficit reduction that tax hikes could have achieved. So the choice is fiscal stabilization vs. progressive agenda. We can’t achieve both.

I can’t stop staring at the 6.3-1 ratio of individual tax revenues to corporate tax revenues. That strikes me as a wee bit out of whack.

Mark says no ammount of tax increases can eliminate the deficit.

But the projected out year deficit is a smaller share of GDP than the Reagan deficit s and Clinton eliminated it with very modest tax increases.

Tell me, shy can that experience not be repeated.

@spencer
The projections already bake in the expiration of all Bush era and stimulus bill tax breaks. As a result, they show combined income taxes rising to 12.7% of GDP – a nearly 50% increase from current year and well above average. The projections also assume a number of other things, including no relief from AMT or bracket creep due to inflation. Even with all that, the 2019 deficit is 3.4% of GDP which means a nearly 30% increase in income taxes in that year would be needed to close its deficit. (All this assumes static and not unfavorably dynamic scoring, btw). And I ignore competing pressures from state and local taxes.
I respectfully suggest all of that getting done is implausible and the CBO suggests the same at page xiii: “if taxes were raised to finance the rising spending, tax rates would have to reach levels never seen in the United States. Some combination of significant changes in benefit programs and other spending and tax policies will be necessary in order to attain long-term fiscal
balance.”

More to the point, it isn’t until 2013 that the income tax hike needed to close the deficit is less than 50% and that is on top of the expirations noted above.

Years ago, I told myself I would have to brace myself for a severe upturn in inflation if Congress ever repealed the indexing feature of the income tax.
That feature not only stopped taxpayers from being inflated into higher brackets it prevented Congress from inflating its way out of the national debt.
Seems to me that the refusal to fix the AMT is a back-door way of allowing inflation to boost tax revenues and pay debt with cheaper dollars.
I need to go buy some TIPS before Congress finds the courage to eliminate them in the name of fiscal stability.

@Bill

I’m not the least bit clueless. I want to cut Social Security and Medicare and Medicaid, in the most humane and just way possible, but recognizing that there is not enough income to be generated by working age people to support their own families, their educational debts and the growing cost of the elderly. There just isn’t. The most difficult moral decisions require us to choose between two good things in a zero sum environment. But the choice has to be made and in my view the long term interests of the nation have to subordinate the elderly baby boomers’ interests to those of future workers, given that the baby boomers had the economic benefits of coming of age in a less competitive world and of being called upon to make a smaller contribution to the care of the elderly before them, given demographics. I think that’s fair. I also note that your defense of Social Security and Medicare is innumerate: it offers no correlation between the amount paid in and the amount paid out, which have grown out of any sustainable relationship.

I am also delighted to cut the defense budget, but not as to veterans whose sacrifice outstrips everybody’s. We need to cut the missions.

@Leonard

No, I think that is a symptom, not a cause, of one of the problems. That problem is globalization, which is like a wave pounding away at a beach, eroding more and more of the earning capacity of American workers. In certain sectors like celebrity and high finance, it hasn’t reached as far so those people still can make a lot of money, but it will inevitably reach them, as China and India develop further. I view distributional issues as second order problems. The other primary problems are political / cultural in that too many in the media and government keep sponsoring a myth that everyone is entitled to a middle class lifestyle for his or her entire life as opposed to the more challenging reality. The final problem is that the demographics are unfavorable for post-retirement programs.

Thank you for your compliment.

Something else to keep in mind: Our defense budget is about equal to the combined value of every other country’s defense budget.

//tinyurl.com/4ucbrl

@KJF

My comment about government vs big business is that no one cares about the corruption, excesses, and waste in business, but any expenditure by government to help those left behind by the tide that lifts the boats with sound hulls is seen as a colossal waste.

The only difference between government services and business services is that a handful of business leaders get a fantastic compensation package while the workers’ wages are a cost to be mitigated by reduction or elimination. Quality? the same. I would rather deal with the DMV than AT&T customer dis-service. It was easier to work with Medicare for my mother than Blue Cross for myself.

I like profit, don’t get me wrong. It is just that with no moral compass, profit crosses the line to unmitigated greed real quick in post 1970 capitalism.

Right now, with the health issue, people know that they are being shafted by the insurance industry, but the legislators that are owned and operated by those business interests, and the entertainment hacks they use as tools have convinced these same people that nothing should change.

Re immigration: there is still a very believable hype about opportunity in this country. Many get here and wish they hadn’t. Others are coming for the political and cultural freedom. Many come and send all they earn back to their family. It is a good country, though individual freedom is being usurped by those who believe in gated Stepford communities, a sameness in everybody’s existence that is enforced so as to not wreck property values. Ever notice how the only people with usable property rights are big corporations? Besides, maybe being here is not all that great, but it is better than being where they were. We know all about that lesser evil stuff, it is all we get every election cycle.

We know that justice is determined by the size of your bankroll. Ask the minorities in this country how well it has worked out for them. Attempted genocide of native people, enslavement of blacks, women as property with no vote until the 20th century, 7 day work week, 14 hour days for adults and kids enforced by state police and national guard. And all of this took blood being spilled to change. The courts represented the interests of a white oligarchy that to this day still is in control.

Only small businesses really fail. Large businesses have protections and laws that befuddle the senses. Microsoft builds a poor fast food equivalent of software, shoves it out in a market dominant method, third parties make it usable and then they buy those third parties or copy them and crush them. Corporations use bankruptcy to erase the sins of the past and those who profited from the sins continue to gain from it. Do you think that we get that kind of slack when we screw up?

Really though, you should read more carefully, most of the European countries are ahead of us on life expectancy, their social safety nets allowed for a faster economic turn around, and everyone worldwide is cracking down on freedoms for the sake of protecting intellectual property as well as nannyism.

You have to realize at some point though, that we do not have capitalism or democracy. We have an oligarchy where we elect the tools that the oligarchs use to keep us divided against ourselves. Real capitalism, a real democracy, would be a threat to these long entrenched interests. So they have the legislators go “Look, gays want to marry! Here’s a stick, go get ’em. Look, blacks are getting out of prison, here’s a stick go get ’em! Look, women are killing babies, here’s a stick, go get ’em!” So we never get past their Machiavellian methods.

I own a condo and have an outstanding balance of $140k, consisting of $104k primary and $36k secondary. I took the home equity to consolidate debts. At the time the property was valued at $163k but now it is valued at $134k. I’m looking to sell because i am engaged and will be moving into my fiancee’s home. //www.obamamortgagerelief.org/.If I have a buyer who offers me within say $5-7k of the outstanding, can i agree to assume a loan on the residual and pay the bank the difference over time with interest? The same bank holds both mortgages.

//www.nytimes.com/interactive/2010/02/01/us/budget.html

Interactive Graphic for budget and mandatory vs discretionary spending