Um, no. Clinton's economic boom was mainly due to the baby boom generation being at their peak earning years. This resulted in higher receipts to the treasury during a period of relatively low debt interest, Social Security, and Medicare obligations. It even resulted in a surplus because Social Security taxes exceeded benefit payouts for a few of those years. But none of that has anything to do with the taxes that Clinton raised - the only change to FICA in the 93 Omnibus was the removal of a cap on taxable earnings pertaining to the Medicare portion. In addition, Clinton signed a major free trade agreement (NAFTA) and happened to preside over the technological and productivity gains that accompanied the commercialization of the Internet. Plus, no wars to act as a drag on the economy. So you're wrong when you state that Clinton's tax increase led to full employment and an economic boom.
It's also incorrect to state that any of the above have anything to do with income inequality. In this case the time period you choose is too short to be meaningful when you try to correspond the signing of the 1993 omnibus spending bill to income growth at the bottom. There are two factors that economists have related to income inequality in the post-war United States. They are the relaxation of immigration restrictions in sixties and the entrance of women into the workplace in significant numbers. Both events drove wages down particularly at the low end.
The budget surplus that occurred in the nineties was entirely the product of Social Security tax revenue exceeded payouts for the same period. That was a happy accident of demographics and one the we have just begun to pay for now. The surplus revenue was simply transferred into the general fund and spent on the discretionary portion of the annual budgets during the surplus years. Congress issued 'special issue bonds' in the amount of the transfers but these are not bonds in any real sense and amount to little more than an IOU. So that money is gone and here we are in 2011 and the baby boomers have begun to retire and collect Social Security. Now we have the opposite problem we don't collect enough in Social Security taxes to meet our benefit obligations.
The first line of attack is to borrow but it appears that our charge card maxes out somewhere around $14 trillion because suddenly politicians are starting the second line of attack: taxes increases and spending cuts. The cuts aren't to popular because everybody loves them some free government moolah so we're going to more and more politicians sniffing around for things to tax when they think nobody is looking. But don't get to excited thinking it'll lead to another boom. It won't. All this is just to keep up with the status quo as entitlements and debt interest eat up more and more revenue. Without serious entitlement reform and debt reduction there is no point thinking about any whizbang government programs. No 'investment' in 'green' energy, no money for schools, no student loans, no free health care: nothing. It'll all go to pay debt interest, Social Security, and Medicare.
And no, you can't just tax 'the rich' to get us out of this. Here's why: the president says that any household earning more than $250,000 a year is 'rich'. Who am I to quibble? That means there are about 2.2 million 'rich' households in America. So let's take 100% of their income above $250,000. I won't bore you with the math but the number is something like $1.4 trillion dollars. That number is astoundingly close to the budget deficit for 2010. It's definitely a lot of money but here's the problem: given the current rate of federal spending ($10 billion a day) that pays for about 140 days. There are still 225 days or $2.25 trillion needed to get us through the year.
But hey, don't worry, Obama is awesome. I'm sure he'll think of something. Anybody that plays that much golf is bound to have a thought or two come to him. And since taxes are the sure path to prosperity, I'm sure there's nothing to worry about. Party on.
This is not a tax to pay for your local fire department. It's a last ditch attempt to live just a bit longer in innumeracy. We are rapidly approaching peak money and our government is $14 trillion in the hole and adding $4 billion a day to the tab. Meantime, without immediate entitlement reform the discretionary portion of the budget will get crowded out by interest payments on the debt, Social Security, and Medicare. We can't borrow our way out of this because our creditors will not continue to stake us $1 trillion a year indefinitely. We can't tax our way out of it because there just isn't enough money to keep up with our spending. We can't cut spending because people LOVE their government freebies.
So here's what will happen. At some point China's central bank gets sick of buying our worthless paper or we can no longer afford the rates they'll charge for yet another trillion. When that happens we might try to inflate our way out of the problem but we can only go to that well once and it really amounts to little more than a con job but whatever. I'm pretty sure our political class -- Democrat or Republican -- will think it's worth a go. The next thing will be to transfer discretionary spending to entitlements. Basically we'll probably start by cutting from the Department of the Interior or Amtrak or whatever and putting that money into paying debt interest, Social Security, and Medicare.
That'll work for a while but sooner or later, actually sooner, we'll have to raise a few taxes. We'll start by closing a few loopholes but in time-honored tradition for every one that gets closed we'll create two more. Then we'll raise some of the more obscure taxes on things like tobacco and alcohol. Maybe add a few fees to things like wireless contracts and airline tickets. After that we'll jack up the estate tax to 70 or 80% just like Warren Buffett would like (bear in mind he owns a bunch of life insurance companies so the estate tax is good for his bottom line). Maybe we'll lay on a few tariffs and luxury taxes for good measure. But it still won't be enough. At this point, the government is going to be looking hard at all those dollars laying around in your 401(k), IRA, or Roth IRA. Still not enough.
Meantime, because no congress can raise taxes all the time - even the little noticed ones -- we'll have to start making some benefits cuts. Nothing big at first, just little things like cutting payments for scooters and that sort thing. No big deal, we all need to make sacrifices after all. But it still won't be enough. So now we look at things like amending Medicare Part D to only pay for generics. We can live with that, after all the active ingredients are the same. But it still won't be enough. So we'll stretch out the time interval between dialysis. Reduce payments for physical therapy. You get the idea.
The problem is peak money. There is not enough wealth to transfer. That's the hard, cold fact. It's not about whether people want to pay for firefighters or roads or high speed rail. Those things aren't even choices. More and more our choice, to the degree we have one, is going to be defined by the iron laws of arithmetic. And it's not about electing unicorns who will spend our taxes with great wisdom. I'm 41 and the parade of jackasses through Washington in my lifetime is good proof that no one is going to come along and save us from ourselves. Politicians are, to a man and woman, cowardly opportunists. They will let you down every time.
Our only choice, if we want to avoid the above scenario is to claw back control (read:money) from our political class. The politicians are not going to stop spending so long as we continue to allow them to borrow and to tax. It is not a revenue problem or a tax problem it is a spending and borrowing problem. We need to live within our means which currently is about $6 billion a day assuming entitlements are reformed. This ain't about roads, or fire departments, or police departments it's about paying interest on the $14 trillion - and growing - debt and Social
Speaking of facts: The fact is that Bush kept the Iraq and Afghanistan wars off of his budget, and didn't fund his Medicaid bill. Obama put those wars on the books, that's why the budget looks so huge now. We're actually counting 2 wars, for once.
Iraq costs ~$70 billion a year and Afghanistan is probably about the same. That's roughly equivalent to one week of current federal spending these days. In other words, you're wrong - it is not a change in war cost accounting that is making the budgets ass look fat. So far Obama has turned in a $1.8 trillion (2009) and a $1.3 trillion budget deficit and 2011 is not looking to good. Plus we just invaded another country in the middle east so I guess we're up to three wars now. But never mind, Obama is awesome.
On the other hand you're right. Bush, or rather congress, didn't fund Medicare Part D -- Medicaid is for the poor not retirees -- and that has added to the structural deficit caused by Social Security and Medicare in general. But the real deficit spike has come from TARP I and II plus the stimulus. TARP I was signed by Bush but was the product of a Democratic congress.
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It's also incorrect to state that any of the above have anything to do with income inequality. In this case the time period you choose is too short to be meaningful when you try to correspond the signing of the 1993 omnibus spending bill to income growth at the bottom. There are two factors that economists have related to income inequality in the post-war United States. They are the relaxation of immigration restrictions in sixties and the entrance of women into the workplace in significant numbers. Both events drove wages down particularly at the low end.
The budget surplus that occurred in the nineties was entirely the product of Social Security tax revenue exceeded payouts for the same period. That was a happy accident of demographics and one the we have just begun to pay for now. The surplus revenue was simply transferred into the general fund and spent on the discretionary portion of the annual budgets during the surplus years. Congress issued 'special issue bonds' in the amount of the transfers but these are not bonds in any real sense and amount to little more than an IOU. So that money is gone and here we are in 2011 and the baby boomers have begun to retire and collect Social Security. Now we have the opposite problem we don't collect enough in Social Security taxes to meet our benefit obligations.
The first line of attack is to borrow but it appears that our charge card maxes out somewhere around $14 trillion because suddenly politicians are starting the second line of attack: taxes increases and spending cuts. The cuts aren't to popular because everybody loves them some free government moolah so we're going to more and more politicians sniffing around for things to tax when they think nobody is looking. But don't get to excited thinking it'll lead to another boom. It won't. All this is just to keep up with the status quo as entitlements and debt interest eat up more and more revenue. Without serious entitlement reform and debt reduction there is no point thinking about any whizbang government programs. No 'investment' in 'green' energy, no money for schools, no student loans, no free health care: nothing. It'll all go to pay debt interest, Social Security, and Medicare.
And no, you can't just tax 'the rich' to get us out of this. Here's why: the president says that any household earning more than $250,000 a year is 'rich'. Who am I to quibble? That means there are about 2.2 million 'rich' households in America. So let's take 100% of their income above $250,000. I won't bore you with the math but the number is something like $1.4 trillion dollars. That number is astoundingly close to the budget deficit for 2010. It's definitely a lot of money but here's the problem: given the current rate of federal spending ($10 billion a day) that pays for about 140 days. There are still 225 days or $2.25 trillion needed to get us through the year.
But hey, don't worry, Obama is awesome. I'm sure he'll think of something. Anybody that plays that much golf is bound to have a thought or two come to him. And since taxes are the sure path to prosperity, I'm sure there's nothing to worry about. Party on.
So here's what will happen. At some point China's central bank gets sick of buying our worthless paper or we can no longer afford the rates they'll charge for yet another trillion. When that happens we might try to inflate our way out of the problem but we can only go to that well once and it really amounts to little more than a con job but whatever. I'm pretty sure our political class -- Democrat or Republican -- will think it's worth a go. The next thing will be to transfer discretionary spending to entitlements. Basically we'll probably start by cutting from the Department of the Interior or Amtrak or whatever and putting that money into paying debt interest, Social Security, and Medicare.
That'll work for a while but sooner or later, actually sooner, we'll have to raise a few taxes. We'll start by closing a few loopholes but in time-honored tradition for every one that gets closed we'll create two more. Then we'll raise some of the more obscure taxes on things like tobacco and alcohol. Maybe add a few fees to things like wireless contracts and airline tickets. After that we'll jack up the estate tax to 70 or 80% just like Warren Buffett would like (bear in mind he owns a bunch of life insurance companies so the estate tax is good for his bottom line). Maybe we'll lay on a few tariffs and luxury taxes for good measure. But it still won't be enough. At this point, the government is going to be looking hard at all those dollars laying around in your 401(k), IRA, or Roth IRA. Still not enough.
Meantime, because no congress can raise taxes all the time - even the little noticed ones -- we'll have to start making some benefits cuts. Nothing big at first, just little things like cutting payments for scooters and that sort thing. No big deal, we all need to make sacrifices after all. But it still won't be enough. So now we look at things like amending Medicare Part D to only pay for generics. We can live with that, after all the active ingredients are the same. But it still won't be enough. So we'll stretch out the time interval between dialysis. Reduce payments for physical therapy. You get the idea.
The problem is peak money. There is not enough wealth to transfer. That's the hard, cold fact. It's not about whether people want to pay for firefighters or roads or high speed rail. Those things aren't even choices. More and more our choice, to the degree we have one, is going to be defined by the iron laws of arithmetic. And it's not about electing unicorns who will spend our taxes with great wisdom. I'm 41 and the parade of jackasses through Washington in my lifetime is good proof that no one is going to come along and save us from ourselves. Politicians are, to a man and woman, cowardly opportunists. They will let you down every time.
Our only choice, if we want to avoid the above scenario is to claw back control (read:money) from our political class. The politicians are not going to stop spending so long as we continue to allow them to borrow and to tax. It is not a revenue problem or a tax problem it is a spending and borrowing problem. We need to live within our means which currently is about $6 billion a day assuming entitlements are reformed. This ain't about roads, or fire departments, or police departments it's about paying interest on the $14 trillion - and growing - debt and Social
Speaking of facts: The fact is that Bush kept the Iraq and Afghanistan wars off of his budget, and didn't fund his Medicaid bill. Obama put those wars on the books, that's why the budget looks so huge now. We're actually counting 2 wars, for once.
Iraq costs ~$70 billion a year and Afghanistan is probably about the same. That's roughly equivalent to one week of current federal spending these days. In other words, you're wrong - it is not a change in war cost accounting that is making the budgets ass look fat. So far Obama has turned in a $1.8 trillion (2009) and a $1.3 trillion budget deficit and 2011 is not looking to good. Plus we just invaded another country in the middle east so I guess we're up to three wars now. But never mind, Obama is awesome.
On the other hand you're right. Bush, or rather congress, didn't fund Medicare Part D -- Medicaid is for the poor not retirees -- and that has added to the structural deficit caused by Social Security and Medicare in general. But the real deficit spike has come from TARP I and II plus the stimulus. TARP I was signed by Bush but was the product of a Democratic congress.