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So...In the Macroeconomic View, What Federal Taxes Are Really Wasted? [W:226]

Glen Contrarian

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It's been my contention for some time now that very little in the macroeconomic sense, very little of our federal taxes are truly wasted, that in reality they go towards keeping our economy flowing, and that the only federal tax dollars that are wasted are those that leave our borders. The money that the rich send to tax havens like Switzerland and the Cayman Islands - that money is wasted, and the people who do so should not be getting tax breaks at all.

It is also my contention that when it comes to federal spending, what's important is not so much that it is federal spending, but on what that federal money is spent. I love my aircraft carriers (it's a retired Navy thing), but I'd much prefer to have the tens of billions we spend on them to be spent instead on paying for college tuition for our youth.

But there are many here who think that the majority of our federal tax dollars are wasted, that they're somehow poured down an economic black hole, never to be seen again. To those people, I'd like to ask two questions:

1. What domestic spending is wasteful, and

2. Exactly how is it wasteful? Meaning, tell me what happens to the tax dollars themselves, that they are indeed wasted.
 

jstepp590

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I would say that in economics it isn't really that it is wasted. What I would say is that it is better for our country to not have the expenditure of servicing the debt when there are so many more important things it could be spent on.
 

jstepp590

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As you said though, as long as it stays in this country. How much of our debt is financed by foreign countries?
 

Glen Contrarian

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Military spending beyond the necessary amount. Domestic military spending provides less jobs per dollar compared to spending on infrastructure, tax cuts, and education.
http://costofwar.com/media/uploads/security_spending_primer/employment_impact.pdf
But the taxes are not wasted - they're simply not being used in the best way. You and I agree the money should be spent more productively elsewhere, but as far as the functioning of our economy goes, the taxes were not wasted.
 

Glen Contrarian

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Who and what would you like to tax? Also, how much?
Nice try to flip the question. Personally, we should aggressively go after money sent to overseas tax shelters. Capital gains taxes should be at the same level as regular taxes except for homes - besides, since when should Paris Hilton get to pay only a 15% tax rate for sitting on the beach, whereas a cashier at 7/11 has to pay the regular tax rate? That, and we should put a miniscule tax - like one one-ten-thousandth percent - on each and every transaction on Wall Street.

But the point of this thread, Paul, is to ask what taxes spent domestically are wasted. It's my contention that while a lot of it can be better spent, very little of it is wasted. That's why I want to hear the ideas of others to see if they can think of something that I may be missing.
 

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Things like transportation and education can benefit the economy, but most government spending harms the economy. Things like food stamps harm the economy, but poor people benefit from them, so they aren't a total waste.
 

rabbitcaebannog

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Things like transportation and education can benefit the economy, but most government spending harms the economy. Things like food stamps harm the economy, but poor people benefit from them, so they aren't a total waste.
Wrong, if we are talking macroeconomics, foodstamps do help the economy.
 

rabbitcaebannog

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Only if you ignore the taxes required to pay for them.
So, you're saying anything that is taxed does not go back into the economy? What happens to the money? Does it disintegrate into the atmosphere?
 

FederalRepublic

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So, you're saying anything that is taxed does not go back into the economy? What happens to the money? Does it disintegrate into the atmosphere?
It's a perverse incentive. That particular dollar will still get passed around, but it depresses the drive to make the next one in all levels of society.
 

mpg

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So, you're saying anything that is taxed does not go back into the economy? What happens to the money? Does it disintegrate into the atmosphere?
We could tax person A, and then pay person B 90% of that money to watch paint dry. The other 10% would go to the people who taxed person A and paid person B. Is it difficult to see how this would harm the economy? Is it difficult to see how similar this is to food stamps?

Food stamps aren't intended to help the economy. They're intended to keep people from starving to death, at the expense of the economy.
 

GottaGo

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It's been my contention for some time now that very little in the macroeconomic sense, very little of our federal taxes are truly wasted, that in reality they go towards keeping our economy flowing, and that the only federal tax dollars that are wasted are those that leave our borders. The money that the rich send to tax havens like Switzerland and the Cayman Islands - that money is wasted, and the people who do so should not be getting tax breaks at all.

It is also my contention that when it comes to federal spending, what's important is not so much that it is federal spending, but on what that federal money is spent. I love my aircraft carriers (it's a retired Navy thing), but I'd much prefer to have the tens of billions we spend on them to be spent instead on paying for college tuition for our youth.

But there are many here who think that the majority of our federal tax dollars are wasted, that they're somehow poured down an economic black hole, never to be seen again. To those people, I'd like to ask two questions:

1. What domestic spending is wasteful, and

2. Exactly how is it wasteful? Meaning, tell me what happens to the tax dollars themselves, that they are indeed wasted.
If you've ever seen a GSA contract, you'd know the answer to the question.

Grossly overpaying for goods and services, regardless of the country of origin.
Purchasing excess goods and services that are not used, paying more than market price for them, and selling the excess at a fraction of the price paid.

And all with the taxpayer's dollar.
 

Glen Contrarian

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If you've ever seen a GSA contract, you'd know the answer to the question.

Grossly overpaying for goods and services, regardless of the country of origin.
Purchasing excess goods and services that are not used, paying more than market price for them, and selling the excess at a fraction of the price paid.

And all with the taxpayer's dollar.
Okay, and where did those taxpayer dollars go in those gross-overpaid contracts?

Don't get me wrong - there's plenty of examples of the government being grossly overcharged, and there's countless examples of how taxes could have been better spent...but that doesn't address my question. Describe to me what happened to those dollars that the government paid, say, when they paid $600 for a hammer back in the day (either late '80s or early '90s). The dollars didn't get dropped into a trash can or flushed down a toilet, so what happened to them?
 

Gonzo Rodeo

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Taxes remove money from the economy. Government spending injects money into the economy.

If a dollar is spent by a private citizen, that dollar gets taxed and then used by another citizen, where it is taxed again and passed to another citizen. The taxes levied from each change of hands makes that specific dollar a little less valuable in terms of raw value (because a portion of it is leaving the economy), but increases its value through an increase in scarcity. Assuming every dollar taken in by the government gets spent, then there is no change in the value of money through scarcity, so the government levying a tax is simply removing money from an economy where it was doing just fine, making its rounds and enabling people to purchase goods and services. This leaves only the deflationary pressure, until that levy is put back into the economy. However, when it does get put back, it is not magically in the hands of those who enable the goods or services in every case. Sometimes that money goes right into the hands of consumers who literally make (manufacture) nothing.

There are entirely too many people with a 200-level college econ class under their belts with the misguided assumption that consumers are by nature good for an economy. It's fantastic when people buy stuff, because that transfers resources into the hands of those who create things - people who dig minerals out of the ground, people who grow our food, people who build our machines - but what are these people doing themselves? Just buying stuff? That alone is NOT good, because if these consumers aren't also providing some kind of good or service through their labor, they are simply taking resources. Why feed them, if they aren't filling a niche in the economy? Why support them? Why make it so they can increase demand for things like food and utilities, but not help reduce demand (and prices) on something else through their labor?
 

washunut

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Okay, and where did those taxpayer dollars go in those gross-overpaid contracts?

Don't get me wrong - there's plenty of examples of the government being grossly overcharged, and there's countless examples of how taxes could have been better spent...but that doesn't address my question. Describe to me what happened to those dollars that the government paid, say, when they paid $600 for a hammer back in the day (either late '80s or early '90s). The dollars didn't get dropped into a trash can or flushed down a toilet, so what happened to them?
The basic answer to your question is that the money gets paid to some corporation. How the company uses the money depends on the company.

Perhaps you would be making more sense if the question posed was does the government spend money in ways that best help society or more narrowly the economy.
 

FederalRepublic

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LOL....prove it.
I don't know what's funny about taking money from somebody who earned it and giving it to somebody who didn't. I also don't know what's so hard to understand about human nature. If you had a road crew and you reduced all their pay so you could hire a guy to sit on his ass all day, will your crew be more or less productive?
 
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