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is because of reaganomics. Duh. Cutting taxes does not (surprise!) raise revenue and if there is also no political will to cut spending - I'm not even making any value judgments here - teh deficit is going up. I've got some Republican in me. I worry about debt. But Jesus H. Christ on a bicycle, we (and I mean we the people, people I know and care about in my daily life) are just almost overwhelmingly stupid about this.


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Comment Preferences

  •  larri - I am doing this by memory (1+ / 0-)
    Recommended by:

    But as I recall the total federal revenue doubled during Reagan's eight years as POTUS. When we put that against most other eight year periods to compare total US tax revenues my guess is that it looks good. Maybe you could show us some actual facts to prove your point.

    "let's talk about that"

    by VClib on Wed Jan 16, 2013 at 10:28:03 PM PST

    •  VClib - Reagan actually raised taxes (3+ / 0-)
      Recommended by:
      Azazello, VClib, shigeru

      in 1982, 1984, 1985, 1986 and 1987. The fact is that although Reagan cut the tax rates he also broadened the base and effectively increased the basis on which most people were taxed. For example, up to 1984 you could deduct the interests on your car payments and credit cards but that was done away with after 1984 or 86,  I can't remember exactly when but I remember dealing with it as a small business owner. This is just one example and it might seem trivial but it is not. Considering that purchasing a vehicle is the second largest ticket item purchase an average American makes during their lifetimes, loosing that deduction represented a significant tax increase. Lowering the tax rates overall, as Reagan did, were offset by increases on the taxable basis in a rather regressive manner. This affected mostly middle class Americans. The Reagan tax cuts were quite good and true for the wealthy but not so much for the average American. The Reagan "tax cuts" overall were not real tax cuts for most Americans.

      I once had to fire an accountant because he simply could not understand that if you cut tax rates but increase the basis on which you are taxed by a greater amount such that in the end you end up paying more in taxes, it no longer is a tax cut but a tax increase. As I told him, I rather pay 5% on a $100 than 3% on $200, it saves me a buck everything else being the same.

      As a percent of GDP, from this graph and other graphs, you can see that tax revenues remained pretty constant during the Reagan years, averaging 18.3%, but GDP didn't quite double from 1980 to 1988, therefore revenues didn't quite double. In any case, it would be very hard to attribute increases in revenue to any one tax policy if you look at this graph of GDP growth. You can see that between 1975 and 2007 GDP grew at pretty much the same rate of increase under varying tax policies under different administrations. To claim that Reagan's "tax cuts" magically caused revenues to increase is exactly that, magical.

      A much more interesting conversation would be how to return to that kind of growth in GDP and what kind of policies would encourage such growth. It would also be interesting to see what percentage of GDP was derived from government spending during all those periods. We know that in Reagan's era due to the cold war and military expansion under his terms those numbers where big. We also know that the budget deficits under Reagan also skyrocketed. Not hard to have growth in GDP with such deficits. After all, and most people don't realize this, government expenditures get counted as GDP regardless of the source of the money, debt or otherwise.

      The paradigms are changing and in my estimation to argue if Clinton or Reagan or whomever is a waste of time. The issue is we are building a new world and we should focus on what kind of world we want t live in. Just this past Sunday watching the 60 minutes segment on robots and new manufacturing and how this technologies are shaping economies and affecting people and countries, I thought to myself: it's just amazing how far we have advanced technologically but we still operate with 18th century economic ideas and dogmas for the most part. Shouldn't we be focusing on that a little bit more?

      "The great enemy of the truth is very often not the lie -- deliberate, contrived and dishonest, but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought." -John F. Kennedy

      by basquebob on Thu Jan 17, 2013 at 12:11:23 AM PST

      [ Parent ]

  •  One thing's for sure, people in all strata (0+ / 0-)

    seem to be almost paranoid about paying taxes, compared to the way things were back in the days of Clinton. I just can't believe the difference sometimes.

    Moderation in most things.

    by billmosby on Wed Jan 16, 2013 at 11:37:36 PM PST

    •  I can. When you have an overall trend of moving (1+ / 0-)
      Recommended by:

      wealth upwards, then paying more taxes doesn't affect this trend.

      It can only contribute to is.

      Given the size of government, people making under a bunch of money, are paying too high a tax.

      And as basequebob noted, the trend has been to untax FIRE and move them onto labor and industry.

      And Clinton's public sector surplus had to get paid for from the domestic private sector as we also ran a foreign trade deficit:

      Pubic Sector +1  =  Private Sector -1

      If you want both the public and domestic private sector to be in surplus at the same time, foreign trade has to pay for it.

      Instead, households went into debt to pay for Clinton's surplus.

      Jamie Galbraith tried to warn Clinton.

      He was laughed at.

      We're still paying a high price for cheap goods: increasing taxes, lower public spending, lost jobs (and no investment in producing new jobs).

      Using China's labor and resources to produce our goods should have meant taking those savings in labor in resources and re-investing them to produce the resources of the future.

      Money is for corporations, my friend.

      Even if it means burning up our planet.

  •  It's called "Sectoral Balance." (2+ / 0-)
    Recommended by:
    billmosby, basquebob

    It's a macro-economic equation, accounting really. When there's a foreign trade deficit, there has to be an equal domestic one. That means borrowing.The borrowing can be by the public sector, as now, or the private sector, as under Clinton.
    Brief explanation here ☛ Sectoral Balance

    The free market is not the solution, the free market is the problem.

    by Azazello on Thu Jan 17, 2013 at 07:58:48 AM PST

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