How tight is the United States budget, really?


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Reed Young
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Message 1294734 - Posted: 13 Oct 2012, 12:18:49 UTC

This is a continuation of a conversation begun in another thread, where this subject is off-topic.

Every voter knows that we're running a deficit and have been since early in the Bush, Jr. administration. It is also widely believed that the only viable solution is massive spending cuts, supposedly because raising revenue by increasing the top marginal tax rate and/or eliminating exemptions for multi-millionaires, billionaires and corporations would have catastrophic side effects, but that is demonstrably untrue. Below is the first off-topic post on economics and tax policy, from the "heading towards being a secular society?" thread.



I suggest a distribution of wealth somewhere between the status quo, and the ideal Christian society, in which all excess (in fact, all privately held wealth of Christians, if you take Jesus at his word!) would be given to the poor.

When have I said zero out safety nets? How much is enough? Show me the math that is sustainable. (Show me the MATH Guy)



Let's begin with a ballpark estimate.

Economy - overview
The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $48,100.



Notice, that's nearly $200,000 per family of four on average. Of course, most families have much less income than that (and fractionally more children), while a very few have astronomically more.

330,000,000 capita * $48,100/capita = $15,873,000,000,000 ($15.873 Trillion)

So, here is the "math that is sustainable" you requested, with a side ethics of ethics at no additional charge. Half the current United States GDP could be earmarked for safety net programs (Less would be needed for modest but sufficient food, housing, utilities, medical care, transportation and education, I'm sure, but I'm using hyperbole to emphasize that caring adequately for everybody in need is easily sustainable.) and nearly $8 Trillion would still be available for defense and to stimulate competition by rewarding whoever is more productive.

The defense budget is something like $2 Trillion, last I checked. It could be half that or twice that, and it wouldn't really matter. The point stands that the remaining several Trillion dollars are more than enough to motivate such competition as the capitalist model requires, and whoever cannot be motivated to put forth their best effort for their equitable share of that jackpot is too insane to make anything that anybody needs or wants.

Nobody must suffer deprivation in order for all of us to enjoy the benefits of civilized competition. The math is sustainable.


There have been just a couple replies back and forth since then. Hopefully anybody else who's interested can follow this without too much trouble.
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Message 1295015 - Posted: 13 Oct 2012, 23:22:57 UTC
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Message 1295028 - Posted: 14 Oct 2012, 0:04:40 UTC - in response to Message 1295015.

...
I give the government the equivalent of two brand new cars every year these days. ...

You're not really a computer science teacher are you?
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Message 1295031 - Posted: 14 Oct 2012, 0:37:38 UTC - in response to Message 1295028.
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Message 1295033 - Posted: 14 Oct 2012, 1:08:59 UTC - in response to Message 1295015.
Last modified: 14 Oct 2012, 1:13:28 UTC

Guy, get over it trickle down is a failure, the only logical solution is a blend of reduced expenditures and raising revenues. Way too much wealth is being accumulated by too few people. As an aside there are way too many people who have given up and contribute little or nothing. A question I ask is why have they quit and what opportunities do they have to improve?
McDonald's and Wall Mart are pretty poor options for mass upward mobility.
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Message 1295034 - Posted: 14 Oct 2012, 1:09:48 UTC - in response to Message 1295031.

...
I give the government the equivalent of two brand new cars every year these days. ...

You're not really a computer science teacher are you?


And you don't pay any taxes what so ever in the U.S., do you?


How does that answer Es's question? Has Es ever claimed to be a US tax payer?
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I think you'll find it's a bit more complicated than that ...

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Message 1295048 - Posted: 14 Oct 2012, 2:32:52 UTC - in response to Message 1295031.

...
I give the government the equivalent of two brand new cars every year these days. ...

You're not really a computer science teacher are you?


And you don't pay any taxes what so ever in the U.S., do you?

Taxes are much lower in the US than in the UK where, even as a teacher with years of experience I never paid enough taxes in a year to cover the cost of two cars.

Now I pay taxes in Canada on a teacher's salary and I still don't pay enough Tax to cover the cost of two cars.

Either you are an extremely well paid teacher, perhaps a Principal of 30 years experience, but certainly not a Computer Science teacher, or you are lying about how much tax you are paying.

Despite the fact that I have more than likely paid more tax than you I don't care about it because the tax I have paid does not even come to the same amount of money I would have had to pay to educate my children if it were not paid for by government taxes.

It's a bargain if you ask me. Not only that, I get all sorts of other awesome services for a relatively small amount out of my monthly salary, like clean water, roads, police, fire service..and so on. I'm a big fan of civilisation and don't mind paying for it.

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Message 1295247 - Posted: 14 Oct 2012, 16:29:15 UTC
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Message 1295253 - Posted: 14 Oct 2012, 16:54:44 UTC - in response to Message 1295015.
Last modified: 14 Oct 2012, 17:01:28 UTC

That's a lot to consider. Thanks. I'm going to skip over your personal taxes because I'm not interested in raising taxes on teachers. I think they could be lowered, at the same time providing better for the poor, by raising taxes on the truly wealthy to a level commensurate with their debts to society. I have tried to address much of the rest of what you said.

But first, I attempt to succinctly summarize by main premise, which is simply that a safety net which prevents any American from suffering abject destitution is achievable without undermining competitiveness.

I'd appreciate if you'd state succinctly, either why you think the expense is too great, or the effect on competitiveness would be too much (assuming I have inferred correctly that you disagree with me on the above). ;-)

My proposal would put a floor on "need" so competition would be only for luxuries, or better versions of the necessities, so housing with standard carpeting (or maybe linoleum, simple tile or Bella wood floors and the like) would be provided, Persian rugs would require competing successfully for economic reward; education up to and including state college, dormitory or modest apartment housing should be provided, but Harvard, upscale housing and fancier transportation than bus or bicycle would require competing successfully for economic reward, etc. And, as now, we'd all have to choose among such luxuries according to the degree of our success. The only difference is no mother would have to choose between food for her kids, or medicine for her kids, nor any other necessities.

By my rough estimate, a middle class standard of living guaranteed across the boards would really cost more like 25% of GDP, based on per capita income = $48,100 according to CIA, and family size approximately equals 4 (slightly more than 4, iirc). So even if the real cost of the general welfare is twice my guess, there would still be at least half of GDP remaining for us to compete over, and that would be more than enough to motivate me.

You're welcome to choose different figures that you consider more realistic, more reasonable, whatever. Just please specify at least the ballpark figures you're using in your analysis.

And based on the things I see our federal government spending the dollars I give them every year, I think I pay twice as much as I should.


Which specific federal government expenses do you feel are costing you twice as much as they should?

I've worked as a tax professional at H&R Block so I'm well aware of most adjustments, deductions, and credits. I'm a strong advocate of SIMPLIFYING the tax code. I'm a strong advocate of BROADENING the tax base. And I'm a strong advocate of cutting federal spending. Real cuts--not base line budgeting cuts!


Specifically, what would you cut and by how much? And why cut those programs, instead of cutting your contribution to them while raising the amount that billionaires and multi-millionaires contribute?

I've done the math before. And each year I do the math, it's getting worse. And if we don't fix it soon, we will soon go the way of many other countries in the last few decades and suffer through the plight of hyperinflation.

So, are you aware of the current distribution of taxpayers and how much each pays? ... Are you aware of the number of people who either don't pay any income tax what so ever or actually get a negative income tax check?


I know something about that, yes.

I'm going to assume you know that you can raise taxes to what ever you want.... ONE TIME. And I assume you know anything you do to taxes will have an effect on the taxable amount next year.


And different changes to tax policy will have different effects, yes. In the first presidential debate, candidate Romney proposed eliminating exemptions for the wealthy but not for the middle class, proposals I strongly endorse. What do you think would be the effect of that? As far as I know, he did not quantify "wealthy" so you're free to use whatever measure you believe makes a person "wealthy."

Are you aware of how much of the GDP goes to state and local taxes?


No, I don't already know exactly. I could Google it, but I'll let you surprise me. I'm also interested to see what sources you'll cite. How much?

So, can you get a bit more specific than there's a $15.8T pile of money we can take from next year without anybody suffering deprivation?


Sure. Just ask specific questions.

And hold the sarcasm. Thanks in advance.
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Message 1295254 - Posted: 14 Oct 2012, 17:00:05 UTC - in response to Message 1295247.


bobby, she didn't ask me a question. She called me a liar. Not knowing my tax situation isn't justification for calling me a liar. And not paying taxes in the U.S. gives me more reason to believe she's not familiar with the putative tax code in the U.S.

I'm saying you are exaggerating on how much tax you are paying on a teacher's salary. If you earn more than a teacher through investments and savings then those things would have taken a huge hit in 2008, just like everyone else's did. So maybe you should show us the math? You haven't shown anyone any math yet. The US budget figures are out there for everyone to see. What you are obviously not aware of is that the average US tax rate is one of the lowest in the world.



Doesn't seem that punitive (putative? Not sure which one you were trying to use there) to me. Perhaps you should move to Russia if it's all about paying less tax.

Es, suppose I were to suggest to you that the current tax code in the U.S. encourages people to borrow money irresponsibly? Suppose I were to suggest to you that I'm an "ant" in the "Ant and the Grasshopper" fable? Suppose I were to suggest to you I was one who has always thought of my future and made decision earlier in my life to prepare for later in life? Suppose I were to suggest to you that because of my sacrifices earlier in life, because I chose to work instead of going out and partying on Friday night, I now have a little more than many? And suppose I were to suggest to you that because of that, I'm now penalized by the U.S. tax code?

You would have to define penalise. None of the US tax rates are punative as you see to claim. I suggest you compare them to rest of the world and you'll realise how undertaxed people in the US are.

Hmmmmm?????

And when have I said I don't want to pay for clean water, roads, police and fire?

How much are clean water, roads, police and fire? Show me the MATH.

Now stop insulting me.

I don't even need to go as far as showing you how much clean water, roads and police and fire are. It costs $20,000 a year to privately educate a child. How much is that for a family with 2 children? 3? Everyone pays taxes. Everyone gets something back for those taxes. You would be paying far more if paid for those things privately.

You may not like all the things that those taxes pay for, but other people are subsidising things for you that they may not be happy about. That is how it works.
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Message 1295292 - Posted: 14 Oct 2012, 18:00:31 UTC - in response to Message 1295254.

Rs, one thing you are not considering is Guy's military pension. With his 27 years of service and the pay grade he last held I would suspect his pension is over 4K per month.
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Message 1295297 - Posted: 14 Oct 2012, 18:26:22 UTC - in response to Message 1295247.
Last modified: 14 Oct 2012, 18:43:21 UTC

And when have I said I don't want to pay for clean water, roads, police and fire?

How much are clean water, roads, police and fire? Show me the MATH.


I would be comfortable with your position in not wanting to pay for water, roads, police and fire. But, there is a quid pro quo for not paying for them ...

1. No access or use for the roads, and full enforcement of that position by society. That means you would be limited to the land you own, and I would make sure that happened.
2. As fresh running water is not paid for, I would see you lived the point you want to. The only access to water would be from springs or wells on your own land.
3. Police would be instructed not to respond to any calls, emergency or otherwise you make.
4. Finally, no fire brigade would respond to your cries for help as your home burnt to the ground. This included any wild fire destruction.

Your position is to opt out of society, so you cannot expect the community to subsidise your use of services like water, police, fire and rescue ad road use.

With a position taken there comes responsibility and repercussions.

How do you stand on the cost of the education for your children? Are you pat of the local community for that service? I would guess so from the taxes you do pay.

I would caveat this by referring to the costs of our opt out services and reduce your tax bill by that much. This would make you one of the most lightly taxed US citizens, or paying tax at the same level as Mit and fellows (about 11%).
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Message 1295300 - Posted: 14 Oct 2012, 18:36:27 UTC - in response to Message 1295247.
Last modified: 14 Oct 2012, 18:37:36 UTC

Guy, get over it trickle down is a failure, the only logical solution is a blend of reduced expenditures and raising revenues.


Yes, the new "trickle down government" has never worked in history.


Tell that to the elderly that are not in poverty as a result of social security.

bobby, she didn't ask me a question. She called me a liar. Not knowing my tax situation isn't justification for calling me a liar. And not paying taxes in the U.S. gives me more reason to believe she's not familiar with the putative tax code in the U.S.


Check again, Es asked whether you were really a computer science teacher. There was a question mark at the end, to indicate that a question was being asked.

You made a statement about giving the government the equivalent of two brand new cars a year, indicating a tax burden in excess of $23,000/year (cheapest new car in the US is $11,750, x2 = $23,500, if I'm doing the math right). This seems rather high if it's on the salary of a teacher, though as betreger suggests, you may have a military pension of about $50K/year.

I wonder, what is the source of that $50K pension? Presumably that would be a government expenditure you and others (myself included) here would not argue to cut.
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Message 1295308 - Posted: 14 Oct 2012, 18:46:48 UTC - in response to Message 1295300.

I wonder, what is the source of that $50K pension? Presumably that would be a government expenditure you and others (myself included) here would not argue to cut.


The fact that he contributed to that pension every weekly/monthly payday for 27 years.
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Message 1295320 - Posted: 14 Oct 2012, 19:08:11 UTC - in response to Message 1295308.

I wonder, what is the source of that $50K pension? Presumably that would be a government expenditure you and others (myself included) here would not argue to cut.


The fact that he contributed to that pension every weekly/monthly payday for 27 years.

I've put a lot into pensions over the years, state pensions, civil service pensions, teacher's pensions. I fully expect to get nothing back by the time I retire the way things are going. I'll probably be told I'm some sort of freeloader expecting entitlements.

So I hope all those people claiming pensions while complaining about paying high taxes enjoy themselves because it's my generation that are going to get screwed.
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Message 1295328 - Posted: 14 Oct 2012, 19:53:06 UTC - in response to Message 1295308.

I wonder, what is the source of that $50K pension? Presumably that would be a government expenditure you and others (myself included) here would not argue to cut.


The fact that he contributed to that pension every weekly/monthly payday for 27 years.


Quite, at 4% of military earnings.

So let's do some math (as another poster he requested we do) with that, to make things simple, assume a constant earning of $100,000/year, and a return on investments (ROI) of 10%, and 0 administrative costs.

At the end of year one the retirement fund would have $4,400, year two $9,240, etc, at the end of year 27 there'd be $532,840 in the fund, which could maintain a payout of $50K/year should ROI remain at 10%.

Of course, if the ROI is less than 10%, or the initial investments are less than $4,000/year, then the fund would not have about $.5M by the end of year 27.

The math of a US Military Pension is not overly complex, for 27 years service the rate is (40 + 7 x 3.5) * "Average of the Highest 36 Months Basic Pay", thus we can get an approximation from betreger's figure of about $50K/year for the "Average of the Highest 36 Months Basic Pay" (it's $50K/64.5%, or about $77,500). Plugging that number in the math instead of $100,000, and the pension fund only has $412,950 after 27 years. Taking $50,000/year from that, though keeping the ROI at 10% and admin costs to 0, the fund will be exhausted in less than 19 years.

This math is obviously artificially simple, let's make it a little more realistic by assuming an average annual pay increase of 5%, the starting basic pay would have been about $21,800. Maintaining the 10% ROI and 0 admin costs, the fund at the end would have about $180,000 at 27 years. Such a fund would be exhausted in less than 4 years.

So, I ask again, what is the source of that $50K pension?
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Message 1295329 - Posted: 14 Oct 2012, 20:01:05 UTC - in response to Message 1295328.

Does those figures take in the Life Expectancy loading? As well as any other loadings, i.e., occupation?

You'd be surprised at what loadings there are - at least here in the UK & I wouldn't be surprised if the same applies in the States.
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Message 1295330 - Posted: 14 Oct 2012, 20:03:33 UTC
Last modified: 21 Mar 2014, 16:17:46 UTC

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Message 1295335 - Posted: 14 Oct 2012, 20:23:52 UTC - in response to Message 1295330.


Serius B, you're getting warmer.


I know & can get hotter, but I don't want the heat that you've taken in the past.

To show how small a world it really is. Back in the late 70's at a Pensions company I spent several years working, I worked on an individual's PRP (Personal Retirement Plan = Self Employed pension) I also had to request from that gentleman documentation of change of name so that he could continue to contribute to that pension.

The name change? Yusif Islam.

For those of my generation, they would recognise the name as Cat Stevens. Pensions both state & private are loaded towards the state/company, just like gambling is loaded towards the bookies.
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Message 1295348 - Posted: 14 Oct 2012, 21:35:07 UTC - in response to Message 1295330.

But you do know that despite being called "the income tax," that is not the only tax levied directly on personal income and withheld from paychecks, right?

Posted 598 days ago: (2008 numbers straight from the IRS...)

http://www.irs.gov/pub/irs-soi/08in11si.xls

Consolidated from Column A (income group), Column C (% of returns) and Column R (Total tax)

Income group - % of returns - % of total tax
$0 - $25K-------41.3%-----------1.2%
$25K - $50K-----24.1%-----------6.4%
$50K - $100K----21.7%----------17.9%
$100K - $500K---12.1%----------41.3%
> %500K----------0.6%----------33.3%


What about state and local taxes? Aren't those largely regressive sales taxes which constitute a much larger share of the income of the poor than of the wealthy?

Posted 632 days ago:

You defend it all? Well, how the heck are we going to continue to pay for it all? The quick answer I always hear is to raise taxes on the rich, control private corporations more, and increase wealth transfer to the poor. This endless cycle of government taking more, keeping more, and handing out more is the downward spiral of our nation. We can't continue to raise taxes and expect to get more in revenue. If you tax more, you'll get less business. With less business, you'll get less tax revenue.

In D.C. speak, my VA benefits have been cut two years in a row already, and I'm looking at a bigger cut next year. You don't hear me whining. And you won't hear me whine. When word gets out about the bigger cut next year, you'll see all the veteran lobbyists start to walk back and forth with signs. But I won't be part of it. I'm willing to take these cuts. But I'll be darned if I'll be happy with my benefits being the *only* thing cut in order to be able to continue paying for things like:

-National Endowment for the Arts. $167.5 million/year
-National Endowment for the Humanities. $167.5 million/year
-Woodrow Wilson Center Subsidy. $20 million/year
-John C. Stennis Center Subsidy. $430,000year
-Beach Replenishment. $95 million/year
-Exchange Programs for Alaska, Native Hawaiians, and Historical Trading Partners in Massachusetts. $9 million/year
-Economic Assistance to Egypt. $250 million/year
-General Assistance to District of Columbia. $210 million/year
-Presidential Campaign Fund. $775 million/year
-Taxpayer funded union activities by federal employees. $1.2 billion over ten years.
-Mohair Subsidies. $1 million/year


How about the Trillions paid to private military contractors, for high-tech weapons the Defense Department has never wanted, and has told Congress for decades to stop buying? After you've mentioned cuts to your VA benefits, it makes no sense to me that such naked graft in the guise of "defense" is not at the very top of your list, particularly since the military is the single largest expenditure and therefore the simplest place to realize big savings by cutting.

My proposal would put a floor on "need" so competition would be only for luxuries, or better versions of the necessities, so housing with standard carpeting (or maybe linoleum, simple tile or Bella wood floors and the like) would be provided, Persian rugs would require competing successfully for economic reward...


As for this statement, it smells too much of communism for me.


Then your nose is malfunctioning, because it isn't even socialism and I have said nothing whatsoever that a reasonable person could construe as endorsement of a centralized command economy. Recall that in my very first comment here, I made sure to acknowledge the importance of not spending so much on the safety net that competitiveness would be undermined, and to budget for it.

I somewhat like your proposed income tax scale, but why should anybody under the median income pay anything? That just makes the climb harder, reducing upward mobility for everybody able and industrious who was born poor, as well as reducing downward mobility for the lucky, lazy and frivolous. Both are detrimental to society, and until the poor stop being charged more than their share via sales taxes, their exemption from federal income tax is appropriate.

With each percentage being marginal rates, my counteroffer:

Annual income Tax rate
0 < 48,100 0%
48,100 < 100,000 5%
100,000 < 250K 10%
250K < 2M 25%
2M < 10M 50%
10M < 100M 75%
100M < 1B 90%
> 1B 100%

Because after $1B, there's no point having even more except for bragging rights.

I think something like this would make a lot of people happy. It would annoy those currently at the top who not only don't pay anything, but still get checks, called "refunds" and "corporate subsidies." But something like this would be much fairer.

I'm glad to see some numbers, and happy to show you whatever math is applicable, but I'm quickly getting the impression that our difference of opinion has a lot more to do with psychology than with mathematics. My understanding of human nature is that if the necessities are absolutely guaranteed -- not extras, not any luxuries, just the necessities -- then people still want to get ahead. For me, ambition is human nature, not something which must be coerced out of people by deprivation or the threat of it. You seem to hold the opposite premise. Why?
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