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The US is Broke -- Not!

By       Message Richmond Shreve       (Page 2 of 3 pages) Become a premium member to see this article and all articles as one long page.     Permalink

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Sometimes, there is elegant simplicity that allows a complex point to be made, but in the case of the Federal Budget, I think your source has missed some key elements.

 

Blessings, Marguerite


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How Scary is US Debt?

I suspect the accountant's video is being circulated for political reasons, even though it is not obvious that it is political.  The GOP has a platform of "returning to fiscal responsibility" and economic fears and alarms serve to forward their agenda -- unless one looks more deeply at the facts about where the deficit spending came from.(These are the charts that Marguerite refers to above.)



Source: Talking Points Memo


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Romney is fond of saying in his stump speech that Obama has delivered four consecutive trillion dollar deficits, implying that he created the problem.  This is not correct in fact or interpretation.  As I write this on Sept 10, 2012 Obama is concluding his third budget year. That first trillion dollar deficit was one of the GOP years. The GOP and George Bush delivered an economic collapse and initiated huge spending to bail out the banks. Even the conservative Cato institute agrees that the mess was initiated on Bush's watch and left for Obama to fix. Clinton was paying down the debt with budgets that produced a surplus. Had Bush not ... well that's spilt milk. We have those deficits deficits because we don't collect enough revenue to cover the costs of our government.

GOP apologists make haste to point out that there is plenty of blame to go around, often mentioning Harry Reid and Nancy Pelosi in derogatory ways.  No pass.  If they blame Obama for the last four years they can't in the next breath claim that all must share equally in the blame for the prior eight.


Source: Business Insider


Our tax revenue, as a percent of the gross domestic product is small compared to other nations.  This suggests that we can afford to pay more taxes even though we don't want to. 

At the same time, our debt is three and a half times our present low revenue, a number that rivals the ratio that burdens Greece. But in Greece taxes are already at 37% of GDP and as their economy sinks deeper into recession, that percentage rises.  The difference is this: at 37% they do not have much capacity to raise taxes further, at only 15% the US economy can absorb more tax burden.

Most all taxes are levied as a percentage of economic activity: they are computed on profit, income, sales or value added -- all of which decline as the economy contracts.  So the fix for deficit spending is a very tricky balancing act where you raise taxes, cut spending, borrow when you must to keep meeting public payroll and to pay current bills. 

Too much austerity is self-defeating because the revenue shrinks as the reduction in spending causes economic shrinkage.  Hard times in business force management to walk a tight rope of keeping productive capacity while whittling costs to remain viable.  The US is nowhere near not being viable. But the GOP would have us act like we were Greece and at the limit of what our economy can bear in taxation.

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We can afford higher taxes and we can and should revoke the Bush tax cuts. We could and should run publicly funded health care more efficiently (Obama Care is a start), we could cut subsidies (oil, corn, etc.); but instead the GOP wants to slash social programs that protect our most vulnerable elderly and poor.

What is really scary to me is the GOP leadership that is operating on a a radical belief system and not on knowledge and real world experience. Ayn Rand made it sound like "you're on your own" would work in her novels, but novels are fantasy and fiction, not hard data. 

Today's GOP is a patchwork of opportunist groups, each of whom has a dominant single-issue agenda: "clean" coal, lower taxes, anti-abortion, anti-populist, cheap energy, guns, agribusiness subsidies, oil drilling rights, gas fracking rights, etc. These groups are not interested in what is best for the commonwealth of the US, they seek advantage over others in their narrow special interests.  Even GOP leaders who want to do the right thing will feel huge pressure from these groups that comprise their political base.  

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Richmond Shreve is a retired business executive whose careers began in electronics (USN) and broadcasting in the 1960s. Over the years he has maintained a hobby interest in amateur radio, and the audio-visual arts while working in sales and (more...)
 

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