Starving the Unemployed

During the Bush administration, the federal debt " nearly doubled," going from $5.7 trillion to $10.6 trillion. This was no accident, but rather part of the Republican's "starve the beast" strategy for shrinking government. While this was going on, many of us warned that if big trouble hit, and if we had high deficits at the time, it would limit our ability to respond in the most effective manner. E.g., from January 2006:

We are in a better position with respect to monetary policy now, but for awhile we had very low interest rates coupled with very high budget deficits. In such a case, when you've already thrown your two best punches, what do you do if trouble hits? It's important to reload the policy guns - get deficits and interest rates in order - so when trouble hits you won't have already fired your best shots. I also wonder if we are saving enough for the next rainy day.

We weren't, and as I said, that was intentional. You see, the advocates of starve the beast policies believed that capitalism had entered a new era since Reagan. We had thrown off the limitations imposed by intrusive government making us, unlike Europeans who had not followed suit to anywhere near the same degree, highly resistant to shocks. Much was written about how effectively the relatively government free U.S. economy could absorb shocks relative to Europe (Phelps comes to mind). We could take a licking and keep on ticking. So they saw no real danger in pushing a large deficit, starve the beast type policy. Many denied that government could help, government is always the problem, never the solution, but in any case big shocks - the kind that produce depressions - couldn't happen in a free, capitalist system, and they would point to the Great Moderation and events such as Katrina where the economy hardly lost a breath as evidence for that position.

But they were wrong about that, and what many of us were so worried about has now come to pass. Because of the high levels of government debt, our hands are not as free as they should be to deal with the crisis. Republicans - the very party that created the such a large problem by denying that it could ever occur - are now the ones wringing their hands about increasing the deficit any further. But instead of complaining, they should be apologizing profusely for leaving us in such a bad position. Their belief that capitalist economies, if only freed of government, can absorb any shock almost without blinking, and their conscious decision to try to starve government, particularly social insurance programs so necessary in a downturn like this one, has left us in a bad position. We may not be able to do as much as we need to do because of the objections to increasing the debt as much as will be needed. And if we cannot do what we need to do, it won't be the beast that is starved, it will be families who no longer have jobs, healthcare, etc., and have no place to turn to get the help that they need, at least not in sufficient quantity. "Starving the unemployed" may not have been the goal, but if Republicans get their way and limit the recovery package based upon deficit fears, it could very well be the result.

Comments

[anne]

Well done.

"Much was written about how effectively the relatively government free U.S. economy could absorb shocks relative to Europe (Phelps comes to mind)."

Alan Greenspan lectured several times on the economy growing more resilient from about 1980, and more so than other developed economies, and Greenspan was convincing in terms of the economy actually weathering shocks but what was bothering was the absence of a rationale as to why the economy was seemingly adjusting to shocks ever more quickly. I wonder now, whether the adjustments were often somewhat but in a subtle way superficial.

[Markel]

I remember Krugman writing about dollar devaluation, and coining the phrase "a Wile E. Coyote moment," referring to the way the Wile E. often ran over a cliff, but never fell until he looked down.

Listening to Republicans continuing to push their agenda in the face of the nation they ruined, I am beginning to think the elite may be headed to a "Marie Antoinette moment."

[mmckinl]

Yep ...

Which is why we need to increase taxes, tax everything as ordinary income and eliminate loop holes on high income individuals and corporations.

Maybe then we can pay for the wars we didn't bother to and the infrastructure that slipped our mind and the single payer health care that we need to remain solvent.

[bob mcmanus]

Return of Fiscal Policy ...Tcherneva at the Levy Economics Institute, July 08, pdf

Long;severely wonkish;partly a general introduction to differences (and convergence?) between the New Economic Consensus and Post-Keynesians;but seemed very relevant and maybe even on-topic, deficit spending in a liquidity trap.

"But there may be fiscal regimes that do not behave in this way[non-Ricardian]. In other words,there may be no commitment by the fiscal authority to increase future taxes in order to offset the current rise in nominal government liabilities and balance the above budget constraint...

The resulting boon to demand is only temporary, however, as the accompanying price increase will eventually erode the real value of the new financial assets. This in turn will induce households to either cut demand or increase supply. A new equilibrium condition is established. Debt has risen, spending has increased and so have prices to balance the intertemporal budget constraint above. This is the bond drop theory of inflation (Woodford 1995, p. 22n24; Allsopp and Vines 2005, p. 489): government bond finance produces a wealth effect and induces price increases."

[bob mcmanus]

"Although Woodford does not belabor the point, he argues that there is technically no limit to government spending..."

Interest and Prices ...Amazon

I suppose everyone else here knows Michael Woodford of Princeton, but he was new to me. There are links to a couple key papers at the end of the 5:09 paper.

Not that Romer or Summers will care what he thinks.

[CSP]

It is a bit ironic that the Conservatives are half right.

When our government has been purchased by the wealthy to service only the needs of the wealthy, then government is indeed the problem.

It seems the people have no voice. There is only money now, and what it can buy.

[Winslow R.]

Mark wrote: "Because of the high levels of government debt, our hands are not as free as they should be to deal with the crisis."

With interest rates on Tsy Secs at all time lows? How much lower do they need to be?

[Jon]

The entire topic brings to mind questions regarding what are the barriers restricting the evolution of economic thought. Is it the intrinsic hindsight of our research, the dogmatic nature of joining economic camps Chicago, Austrian, etc?

Great conversation though, I do love reading this blog and appreciate the discussions. Here is another blog I keep up with for vibrant talks: www.economixt.com

[bob mcmanus]

Sorry. Googling the site, Woodford comes up a lot. Woodford is now at Columbia, and has a good webpage with many papers available.

The only constraints on spending are political and ideological.

[kthomas]

"starve the beast"...and loot the treasury! Mission Accomplished.

[Abe, NYC]

Slightly OT: But what about the "beast" itself? It's starved, toothless, and helpless. The government is poised to grow and take an increasingly difficult role, but the prestige of civil service - or whatever collection of state and federal workforces passes for it in this country - is at an (all-time?) low. I guess rising unemployment will improve the attractiveness of the public sector, but without an investment into civil service it will remain inadequate. Republicans wanted an incompetent government just to prove their point, and they got one - Krugman keeps talking about it.

Also, I think now might be a good time for a civil service reform. There is so much duplication and inefficiencies between states, especially in education; there is so much room for improvement. Now that states are begging for federal cash, maybe they will more readily accept a realignment of some functions between the states and the federals. But I don't know the US politics enough to see if there is even a chance for this to go through.

[Chris]

Listening to Republicans continuing to push their agenda in the face of the nation they ruined, I am beginning to think the elite may be headed to a "Marie Antoinette moment."

Well Cheney now says "no one" foresaw the coming economic disaster. No one. Cheney and his buddies didn't see it so no one saw it. Isn't it marvelous how US democracy puts the brightest and most honest people at the top and in charge?

[bob mcmanus]

"The job of policy is to not only be non-Ricardian, but to communicate this regime to the public. If fiscal policy is transparent it too can anchor expectations appropriately." ...Tcherneva, op cit

[eRobin]

"Starving the unemployed" may not have been the goal, but if Republicans get their way and limit the recovery package based upon deficit fears, it could very well be the result.

It's absolutely the goal. Desperate people will do anything to survive. Niall Fergusson talked about the plan approvingly in Colossus:

The point of Colossus is that the United States not only can match Britain's empire but can do empire better. Hence Ferguson's calls for cuts in social spending to make for a more desperate and therefore more martial American citizenry.

[Linda]

Very well said, Prof. Thoma. I can't think of a thing to add to the point, and I couldn't agree more. Those who voted us into this mess will suffer equally with those of us who've been warning of it for years. As for those who did the damage, lacking apologies, I fantasize about revenge, but poetic justice will probably have to do. I am hoping for that, at the least, but it's a bitter pill.

[Linda]

Anne: "I wonder now, whether the adjustments were often somewhat but in a subtle way superficial."

Markel: "Listening to Republicans continuing to push their agenda in the face of the nation they ruined, I am beginning to think the elite may be headed to a "Marie Antoinette moment.""

I've thought that the adjustments were not only superficial but engineered through propagandist pronouncements and a great deal of smoke and mirrors. But hey, I'll confess that there was a moment when I started to wonder if I was wrong. It went on for soooooooo long.

I share Mark's concern about the obstructionist agenda. A "Marie Antoinette moment" doesn't happen on its own and I wonder if there's sufficient support for that. (she said in subtle and massive understatement) After all, we had a congressional leadership, still in place, who resolutely refused the one remedy there was - impeachment. And for all his qualities, maybe because of them, Barack Obama isn't someone whose philosophy is likely to embrace such moments.

And it's not just the obstructionists in the government, but the remaining devoted followers of Bush/Cheney, Palin, Kudlow,and Limbaugh, and their ilk, who won't give up. They are sure to continue what they see as the Ultimate (Holy) War for their point(s) of view, hateful as some of that is.

It remains to be seen how far Obama will go for his consensus. Opinions will vary as to how far makes sense.

[Linda]

Chris: "Well Cheney now says "no one" foresaw the coming economic disaster. No one."

Nouriel Roubini, among others, would beg to differ.
And no one would have thought a bunch of terrorists could use airliners as bombs, right?
If his mouth is moving, he's lying. If it's not, he's thinking lies.

[ken melvin]

Generous to a fault they be. Quick to sacrifice the jobs, healthcare, yea even the lives of the working class. Who could dare ask more from their leaders?

[Doc at the Radar Station]

Bush cared NOTHING of reducing the size of government.

This is true. They were military Keynesians (at BEST) who didn't care how the money was spent as long as their constituents and cronies were enriched. It is time that followers of Keynes seriously start to concern themselves with the gritty details of how money gets spent rather than thinking only in aggregates.

[Peter Schaeffer]

From http://www.commercialpropertynews.com/cpn/content_display/industry-news/e3i2fb2f53173500481e9075b1d7863e2e8

"In any case, Galbraith just flat out doesn’t think that the national debt, at only 40 percent of GDP, is all that high. In fact, he said, “It’s very problematic that it’s so low” in the current situation. And since the national debt will rise no matter what we do, we ought to increase the debt in ways that will stabilize the economy the most. "

I don't think our national debt is "too low". However, Galbraith has at least looked at the numbers.

[evagrius]

Don't forget about what happened after the "Marie-Antoinette moment".

There seems to be a consisten pattern of hubris among the "elites" and a consistent pattern of "Frankenstein" monsters turning round to attack their creators.

"Aside from this, today's mankind is very concerned with the beginning of a severe economic crisis. More frequently than not, it is overlooked that the crisis is not only economic, but rather its nature is more complex and deeper. Is it no wonder that it is manifested first of all among the wealthiest: the most frightened are those who are the most affluent. Their unquenchable greed for money and enjoyment, their over-consumption of natural and material goods, produces an imbalance in human relationships - the relationship towards the deepest mysteries of life and the relationship towards the entire creation. This means that behind the economic crisis is hidden a spiritual and moral crisis, and with that a crisis of all of mankind."

[BJ Feng]

Absolutely wrong analysis. Government will spend up to their "credit limit", that is up to a level where it becomes a political issue. If you raise taxes, all you do is raise the credit limit, THERE IS NO EVIDENCE THAT GOVERNMENT IS WILLING TO SAVE. The Republican Congress of 1994-2000 was a special case because they promised to reduce the growth of government. Without the motivation to reduce spending growth, any and all tax increases will simply be spent on new entitlements and programs. There is no end to all the new ideas and policies that need funding. Someone somewhere will always need something, as long as there is scarcity for any good, there will be "the need" to spend.

If you examine the last few years, there has been a commitment to slow the growth of spending. The budget deficit was going to come in at below 2% before the crisis hit. Why? Political pressure due to Congress hitting the "credit limit".

Starve the Beast works, without it we would have an even greater debt. Look at the deficits and all the increases in spending, yet you continuously hear people, especially on this board, complain that not enough is being spent on health care, welfare, education, energy, and so on. Do you really think any tax increases would be saved to offset the budget deficit? Or is it infinitely more likely that such increases would be spent?

Unfortunately, there is nothing that can get the government to stop spending and use revenues to pay down the debt or at least decrease the budget deficit to zero. Conservatives are frustrated that the people they elected refused to do what they were elected to do, which was continue the same policies of the Republican Congress from 1994-2000.

Congress is addicted to spending and the rehab only worked for a limited time before they fell off the wagon. I don't know what the solution is, but if you believe that raising taxes will help the deficit, you're living in dreamland. Those increases will be spent as they've always have, the one period not withstanding.

We are in a better situation thanks to the tax cuts. The people now have more money, and so more can be leeched from them by the government. Had taxes not been cut, the patient would have less blood to suck away, and any further tax increases might kill the patient.

[Patrick]

CSP :

I think it IS a shame that the libertarians come packaged with unyielding faith in demonstrably wrong economics because they do make persuasive arguments about the value of individual liberty. The creeping death of due process, civil liberties and privacy in the US is something liberals AND libertarians might otherwise be able to work on together.

Here's hoping Obama et. al. repeal the Patriot Act.

[ken melvin]

Libertarians don't get E Pluribus Unum.

[MattYoung]

I noticed the reference to Woodford and looked him up, thanks for the tip. One of his papers talks about changing credit technology due to information networks.

I liked the article, but need to read it in depth. There is something about IT networks taking over some of the role of central banks. The extreme example is the Open Software system which has literally replaced money with lines of codes.

In the world of web commerce, I can easily see a company hiring workers based on a basket of goods. There would be a great advantage for a large company to contract out, using web technology, for volumes of common goods as desired by their employees, and simply doing away with a big chunk of the monetary salary.

In other words, the company town, done on the Internet with efficient warehouse facilities. Easy to do, simple software, as they say. Under such a scheme, shortages in the basket of goods would result in compensation for employees by promising a larger quantity at a future date (and visa versa), essentially eliminating the credit system as an inventory manager.

[cm]

MattYoung: "Under such a scheme, shortages in the basket of goods would result in compensation for employees by promising a larger quantity at a future date (and visa versa), essentially eliminating the credit system as an inventory manager."

And the difference between a "credit system" and a "promise at a future date" would be what?

[cm]

I see, a mere "promise" is not enforceable.

[BJ Feng]

Patrick, there can be no individual liberty without economic liberty. Hayek, Von Mises, and others have written extensively on this subject. Below is a VERY brief summary of Hayek's points, hundreds of pages condensed into a few paragraphs.

Free market prices of goods and services give us instructions about what society wants.

If government intervenes to stop the market operating, government instructions replace free-market information. This means that instead of individuals deciding what they want, the government decides what they should have.

The extreme case of this is the totally planned economy : As there is no market billions of decisions previously made when individuals decided to buy or sell something now have to be centrally planned. This is economically inefficient, but it also has political consequences. All that power is taken away from individuals and concentrated in the planning authorities. Under such a system, Hayek argues, there cannot be any freedom.

Freedom depends on the market.

Those who argue for a collective don't understand that the market is the collective. It's the sum of what we want and desire. This might not fit your vision of what we SHOULD want, but it is what WE DO want in reality. Someone has a choice between a big screen TV or health care insurance for a year. If he buys the big screen TV, then he's made his choice and believes that the big screen will give him more benefit. If you make the decision for him through imposing taxes and then purchase health care for him, you've taken away his freedom to choose. Now he has less liberty.

Of course I've used an extreme example, but people make choices everyday and every time they purchase something. They are exercising their liberty, if you forbid them from making the choice that pleases them most, then you've taken away their freedom to act and to enjoy life.

That's why it makes no sense to say that we're consuming stuff we don't want or don't need. If we didn't want or need it, we wouldn't buy it in the first place! How many of you have solar panels on your roof? You can purchase them, but the fact that you haven't, likely because they are too expensive, indicates that you'd rather have the stuff you did buy instead of the solar panels. It's your choice because you know better than anyone else what pleases you more. This argument will be grating to some because it's not the image they want of themselves or others. But it's the truth, this is humanity and humanity wants TVs, cable TV, SUVs, and whatever else we consume. And a great many would rather enjoy themselves now than delay gratification which is why they borrow. Let's not kid ourselves or dream up some alternate reality where humans behave totally differently than we've behaved through all of history.

To tie into the topic, let's not pretend that the Bush tax cuts would have been saved or gone into deficit reduction. Politicians have lots of incentives to spend because they get to claim that THEY've provided X (it's the taxpayers who've provided of course). Saving gets them nothing tangible that they can show they've done. Only intense grassroots pressure NOT to spend will get them to save tax dollars.

[reason]

BJ Feng
besides being a straw man argument (most people here want to see a mixed economy) - this:
This is economically inefficient, but it also has political consequences. All that power is taken away from individuals and concentrated in the planning authorities. Under such a system, Hayek argues, there cannot be any freedom.
assumes implicitly that only economic freedom is important and that there are no other freedoms. As an intellectually inclined individual, well aware of what happens to intellectuals in many parts of the world that is clearly nonsense.

[Gegner]

Excellent piece Dr. T! What I find most disturbing about 'unfettered capitalism' is the fact that money is a social construct.

If the thing they're trying to destroy is the same thing that gives money its validity...

Commerce that only enriches its owners isn't viable, what are your workers supposed to live on?

Yet commerce that only enriches its owners is the 'goal' of unfettered capitalism.

If this sounds nuts it's because it IS nuts!

[Anarcho]

"Patrick, there can be no individual liberty without economic liberty. Hayek, Von Mises, and others have written extensively on this subject."

But, apparently, you can have economic "liberty" without individual liberty. After all, Hayek (like Milton Friedman) was quite willing to think that Pinochet's dictatorship practised "economic liberty" -- although how much "economic liberty" there is in a regime where the secret police can disappear you if you join a union or strike is not explained.

As Hayek once put it (in Chile, under Pinochet): "Personally I prefer a liberal dictator to democratic government lacking liberalism." Hans-Hermann Hoppe, another right-wing "libertarian", has said that he considers monarchy a lesser evil than democracy. Which makes sense, as right-"libertarianism" is all about justifying private property and so really not concerned about liberty at all.

And, I should note, that genuine libertarians (i.e., anarchists in the tradition of Proudhon, Bakunin, Kropotkin, Chomsky) have all written extensively on how there is no real economic liberty if the majority of people have to sell their liberty to a boss in order to live. As Proudhon put it, property was both theft and despotism. We have noted that liberty should not stop at the doors of the workplace and so have advocated workers' self-management.

[Gegner]

Here here Anarcho! Well said.

[ken melvin]

No nation can be libertarian.

[robertdfeinman]

"Starve the beast" was a construct of Grover Norquist. He is either a completely blind ideologue along with those who believe in the Laffer Curve and other fairy tales, or the world's greatest hypocrite.

Whichever, the starve the beast theme was never implemented. Once the GOP got into power they starting stealing everything that wasn't nailed down, and ripping up those things that were. A core group of ideologues now complains that this behavior wasn't the true intent of the Norquist type of economic reform. Perhaps so, but none of these people have ever been in office; Kristol, Brooks, etc. can maintain their ideological purity since it doesn't cost them anything.

If people are really concerned about the size of the deficit there are many sources of tax revenue which are not being tapped. Just today we see that one of these, secret bank accounts with UBS, is being shutdown. Besides this we have the tax haven "countries" that are shielding an estimated $100 billion in corporate earnings.

Then there are the distortions in the tax code that we have been talking about recently: capital gains, dividends, etc.

There is no reason to let these revenue sources continue to escape taxation because of a macro economic belief that any tax increases while the government is trying to re-inflate the economy would be counter-productive. We aren't getting any benefit out of foregone taxes sent to Jersey, so this is a pointless concern.

Tax those with the money. Give money through income support programs (unemployment insurance, health insurance, etc) to those without and put people to work.

I suggested encouraging volunteerism among those who are currently unemployed, but receiving benefits, as a way to get things done that aren't. We have untapped manpower let's use it.

[ken melvin]

Bon dit - rdf. Funny how the logic applied workers doesn't apply to the investor class. I say taxing the piss out ot them would inspire them to more investing as that be their only avenue.

[evagrius]

"Someone has a choice between a big screen TV or health care insurance for a year. If he buys the big screen TV, then he's made his choice and believes that the big screen will give him more benefit. If you make the decision for him through imposing taxes and then purchase health care for him, you've taken away his freedom to choose. Now he has less liberty."

Yes. If he had liberty, he could lie deathly ill in front of his big screen TV.

Your notion of freedom resembles that of a child's notion.

After all, do children really want to eat vegetables rather than candy?

There is no "absolute freedom", which is what libertarians seem to advocate.

Freedom is always contingent on the needs of oneself and others being in equitable balance as much as possible.

Such a realization is known sometimes as maturity.

Libertarians are Cartesians in extremis.

[lonesome moderate]

B.J. Feng: We are in a better situation thanks to the tax cuts. The people now have more money [...]

Which people are that? Not anybody I know.

[Icarus]

Evagrius,

So, in this anecdote regarding a big screen tv vs. healthcare...I have a question.

Let's assume that the citizen actually chooses a big screen tv, and then claims they don't have money for healthcare, and hence wants/expects subsidies. What can society do? Can we prevent people from spending unwisely? Are they children?

People waste countless dollars on unnecessary goods/services, and then claim they can't afford the basics (like lunch for their school children).

If we provide handouts for healthcare, food, shelter, etc...how do we monitor waste? Does everyone deserve the 'right' to spend their money on flat screen tvs (and other unnecessary goods/services), and yet also deserve the basics of living?

[Patricia ShannonP]

The advocates of starve the beast don't care about the people who do the work they depend on. They don't care if children starve. Making slavery illegal didn't suddenly change the nature of people who view others, at least those not in their own class, as things for the benefit of those who have power.

[Patricia ShannonP]

Icarus, you are very optimistic about your own future. Why do you think it is so terrible for other people to be very optimistic about their own future?

[eRobin]

Re: spending on tvs - oh, I'm sorry big screen tvs, a term which has joined the ranks of "Cadillac-driving Welfare Queen":

We'd be thrilled if a few more millions of us were buying stuff like big screen tvs right about now, which was part of the point of the bubble economic theory we've been suffering under for the last fifteen years. If we made some sustainable investments in job creation, universal and affordable health care and education, maybe people would be able to buy their big screen tvs and stuff again. Maybe some of it could be made in America. Capitalism!

But I know we'd have to get over the painful hurdle of knowing that somewhere out there someone was getting help they didn't deserve. I suppose we should just scrap the whole idea then - we wouldn't want people getting anything they didn't give up their full pound of flesh to receive. It's not like that's ever happened before in America.

[jamzo]

this seems simplistic but

during the cold war, communism was a threat and capitalists (monied class) believed that they had to encourge middle and working class people to believe in the capitalist cause

when communism fell, the threat was gone and the need to placate the masses was gone, the capitalists (monied class) no longer had to kowtow to the middle and lower classes - they had a monopoly, no more competition

[Beezer]

RobertFeinman
"Whichever, the starve the beast theme was never implemented. Once the GOP got into power they starting stealing everything that wasn't nailed down, and ripping up those things that were."

Oh Yeah. Rule No.1 pay labor first. Obama has said many times he wants to reward labor because it is labor that produces, that actually create the wealth.

[ken melvin]

"...because it is labor that produces, that actually creates the wealth.

Damn, and I thought it was finance.

[evagrius]

Let's assume that the citizen actually chooses a big screen tv, and then claims they don't have money for healthcare, and hence wants/expects subsidies. What can society do? Can we prevent people from spending unwisely? Are they children?

Well, if the citizen has TB, cholera, bubonic plague or some other communicable disease, it wouldn't be wise to leave them alone, would it?

Can we prevent people from spending unwisely?

Why yes! That's one of the purposes of taxes, don't you know? After all, why should someone without a car be taxed for roads and someone with a car be taxed for public transportation? Why should someone with an education be taxed to provide others with an education?

Your social immaturity is astounding.

[TK]

I think "starve the beast" was a Norquist/Phil Gramm construct. It is worng though to treat it as a sincere if misguided beleif system, at least for the professional Republican political class.

The real idea of "starve the beast" was to make government function badly so that Democratic constituencies would cease to be motivated by Democratic programs, undermining support for the Democratic party. The apex of this program was Bush/Rove's effort to undermine Social Security. The meme "Social Security won't be there for me" was Norquist/Rove propaganda intended to drive young voters away from the Democratic party and complete Rove's plan for a "realignment." At the same time Rove was not above protectionism in steel for West Virginia, which hurt Detroit (Democratic), and giving Big Pharma and the HMOs a fantastically complex and expensive "prescription drug benefit" program to drive a wedge in pro-Social Security older voters.

The conservative momement undoubtedly includes many sincere true believers. But the Republican political class -- the Norquist/Gramm/Rove crowd -- understands better than the often obtuse Democratic political class that Democrats always remained ahead of Republicans in party identification because Democrats actually try to design programs and run the government in the interest of the citizenry. It will be interesting to see if Obama, Pelosi and Reid understand this too and govern accordingly.

[Steve Roth]

Mark, it's time for you to say it out loud.

Loudly.

We need to raise taxes.

We've been at 28% of GDP for a long time. Among prosperous countries only Japan and (barely) Korea tax less. The EU 15 has been taxing 40%--and growing at the same rate as us--for decades.

What say we go to, oh, Ireland's level: 32% of GDP?

The only way this will happen is via a popular groundswell. Not likely, I know, but what are the odds of politicians leading the charge?

Maybe it could start with prominent, respected econobloggers?

[Icarus]

Raise Taxes? Jeez. Is that all we can pontificate about here?

How about requiring most of society to actually PAY some federal income tax. Right now, over half our citizens pay basically nothing.

[Julio]

eRobin:

Re: spending on tvs - oh, I'm sorry big screen tvs, a term which has joined the ranks of "Cadillac-driving Welfare Queen":
...
But I know we'd have to get over the painful hurdle of knowing that somewhere out there someone was getting help they didn't deserve.

[Excellent comments].

[Julio]

"People waste countless dollars on unnecessary goods/services, and then claim they can't afford the basics (like lunch for their school children capital reserves)."

[evagrius]

"How about requiring most of society to actually PAY some federal income tax. Right now, over half our citizens pay basically nothing."

That's because they earn practically nothing.

[Icarus]

Evagrius,

If they even earn $10/hour, they can pay some federal income tax. It will improve participation and representation.

As well, instead of getting into the tiresome battle for further income redistribution, it'll force society to pay for the public goods they need, and respect the costs thereof.