We Wasted a Record 500bn on Interest Last Year

[nvflash]

federal reserve was worried that America was on track to pay off the 5.7 trillion dollar federal debt.

Have a source for that?

I mean I remember reading once that there was a worry when the budget was balanced under Clinton and Speaker Gingrich that there may not be any bonds to issue, and no one really knew what would happen.

Anyways, Clinton and Gingrich did mange to strike a deal that did in fact reduce the deficit, but the debt still grew every year under them.

No shrinkage fund was ever established, and we never retired any debt, we just rolled it over and added to it.

 

[JohnfrmClevelan]

Have a source for that?

I mean I remember reading once that there was a worry when the budget was balanced under Clinton and Speaker Gingrich that there may not be any bonds to issue, and no one really knew what would happen.

Anyways, Clinton and Gingrich did mange to strike a deal that did in fact reduce the deficit, but the debt still grew every year under them.

No shrinkage fund was ever established, and we never retired any debt, we just rolled it over and added to it.

I can remember a 15-year CBO forecast during the Clinton surplus showing a very steady line of increasing surpluses and decreasing debt, leading right into the complete elimination of federal debt, and (presumably) the Fed buying private debt. Think about that for a minute.

First, all of those federal budget surpluses come mostly from income taxes, which means they come right out of consumption and investment. Without a trade surplus, that is simply unsustainable. It's bad enough that the government's contribution to GDP is lost during a balanced budget, but subtracting from consumption and investment without running a large trade surplus is a recipe for recession. Remember that we went into a recession soon after the Clinton surpluses. It shouldn't be surprising.

Second, Treasury debt brings stability. It's most of what the Fed holds against the reserves and dollars held by the private sector. The fascination with eliminating these instruments just baffles me. Well, it doesn't really baffle me, I know why people think this way, after politicians pound it into their heads that the nation is truly in debt and the end is near, etc. But it does sadden me.

The CBO projections were wildly optimistic, and wrong almost as soon as they made them. That projection is much of the reason why I have zero faith in anything the CBO says anymore.

 

[Tbird19482]

Funny how when Clinton left office the federal reserve was worried that America was on track to pay off the 5.7 trillion dollar federal debt.

Bush and the Republicans have sure fixed that.

and as we can see nobody on the right ever says a word about things like that
all I see is they cry that a DEM President is running up the debt when there has not been a Dem President that had run the debt up OVER 100% in what over 70 years , and there has been TWO Republican Presidents that have
Ragan almost TRIPLED the Debt , G.W. Bush doubled it They cry about Obama but don't say a word when TRUMP ran it up ALMOST as much as Obama did and TRUMP did it in 4 years and it took Obama 8 years
YEP they can ONLY talk about the debt when a Dem is President but NOT ONE WORD when we have a Repuk as President
Have a nice night

 

[jonny5]

first of all a Balanced budget amendment will only stop the debt from going up it will NOT cut the debt
If we ever get a BBA we can keep the debt from going up and IF we have Congress put in to effect a 1% US sales tax , we could pay it off it would take some years to do but we could do it and when it was paid off it should be in the law that put the sales tax into effect that it would be taken off
and I know once we get a tax we never seem to be able to get rid of it that why I said it would have to be put into the original law that it would HAVE to be taken off once the debt was paid off and not kept in effect one day more
Have a nice day

Yeah, but they could just change the law. A debt limit has to be in the constitution. But obviously, the root cause here is the ignorant apathetic people and who they elect.

 

[JohnfrmClevelan]

Yeah, but they could just change the law. A debt limit has to be in the constitution. But obviously, the root cause here is the ignorant apathetic people and who they elect.

Writing questionable economic theory into law is an insanely bad idea.

 

[Bullseye]

How did that work out? As in, how much more economic activity resulted after these tax cuts relative to how much would have been realized in their absence?

GDP increased by 7.7 % from 2018 until 2021, or 7.7% from 2018 until q4 2019. Either way, you can't call that some sort of miraculous lift, given revenue grew by 3.2% or 4.4% by the same token... meaning that even though the economy grew, tax revenue grew by much less than the economy.

Worked out fine as it has since Kennedy did it back in the 60's. Understand it is a magic wand - not every rate reduction will increase revenue but there is a point - or zone where revenue is maximized. Interesting that you started your chart at 2014 - why?

 

[Kushinator]

Worked out fine

The data says otherwise. Tax revenue grew less than economic growth, which is what has been the norm every time tax cuts have come to pass.

Interesting that you started your chart at 2014 - why?

The index began in 2018. As expected, you have a problem with reading a simple graph and therefore your take on the situation should be ignored.

But for the sake of humor... indulge us all. Why did revenue boom in 2021?

 

[Bullseye]

Growth - and the corresponding increase in tax revenues - happens almost every year, no matter what tax rates are. That is the assumption you should be starting with. Instead, you are crediting lower taxes for what is in all likelihood normal growth.

Correct, because our current rates are working to encourage economic growth.

Why do businesses invest, or increase investment? Because they anticipate demand or increased demand.

And the more money they retain because of lower taxes allows them to do something about those anticipations.

It has nothing to do with their own tax liabilities, which are still in the future.

Nonsense.

So if I manufacture, say, toasters, I don't base my investment decisions on my (future) tax liabilities; I base them on the demand I anticipate.

Again, your plans have to include whether you can afford to grow to accommodate those changes, And paying less taxes allows more money for growth.

I would be far more likely to increase investment if toaster-buying consumers got a tax cut, rather than my company. If my company got a tax cut, I would just decide how to distribute the extra profits - and without extra demand, I would have zero incentive to increase production.

When both consumers and producers have more to spend the economy grows and with that growth tax REVENUE grows as well.

As for the math, Rahl is correct. All else being equal, tax cuts lead to lower tax receipts. And I just explained (above) why your counterargument is incorrect.

Point being "all things" are NOT equal. More cash in producers and consumers hands INCREASES economic activity. Rahi assumes that consumers wouldn't buy more with tax saving nor would producers expand production. That has not been the case.

 

[Bullseye]

The data says otherwise. Tax revenue grew less than economic growth, which is what has been the norm every time tax cuts have come to pass.

The index began in 2018. As expected, you have a problem with reading a simple graph and therefore your take on the situation should be ignored.

But for the sake of humor... indulge us all. Why did revenue boom in 2021?

I have no problem with the chart, I have a problem with you claiming this little slice of time, with a friggin' pandemic in the middle, proves anything other than your ability to copy and paste images.

 

[Kushinator]

Correct, because our current rates are working to encourage economic growth.

But they didn't encourage stronger economic growth when the were enacted? Imagine that!

When both consumers and producers have more to spend the economy grows and with that growth tax REVENUE grows as well.

More of your ignorant bullshit. Economic growth isn't predicated on tax cuts. The data is very clear on this. Instead, it's based on excess demand for goods and services. As we see what transpired from 2021 onward, economic growth boomed and tax revenue followed as a direct result in massive growth in aggregate demand.

More cash in producers and consumers hands INCREASES economic activity.

A blanket statement that is absent of economic rationale.

Rahi assumes that consumers wouldn't buy more with tax saving nor would producers expand production. That has not been the case.

That depends on how tax cuts have boosted aggregate demand. And from the data, we know they didn't result in that much more economic growth than what was already anticipated.

 

[Kushinator]

I have no problem with the chart

Nonsense. You didn't understand what the graph was conveying.

I have a problem

With understanding economic result. That's not necessarily something to be ashamed of, unless of course you jump into these types of conversations spewing foolish rhetoric.

 

[rickc]

Well
Long term graphs prove the fallacy that tax cut promote GDP growth. Huge tax cuts during Reagan's term without this huge jump in economic growth. Fact is we had higher economic growth with higher taxes.

 

[JohnfrmClevelan]

Point being "all things" are NOT equal. More cash in producers and consumers hands INCREASES economic activity.

I see the problem here. You are incapable of considering two things at the same time. Either that, or you don't understand what a baseline is.

 

[rahl]

Point being "all things" are NOT equal. More cash in producers and consumers hands INCREASES economic activity.

And as the data shows, this never happens. All that happens is deficits explode. There is no magical increase in economic output when republicans slash revenues.

Rahi assumes that consumers wouldn't buy more with tax saving nor would producers expand production. That has not been the case.

We know it's been the case. We have decades of data showing you that.

 

[Fearandloathing]

And so far 93bn in the first two months of FY23, just interest paid on the national debt, which is now over 30 trillion. Thats more than we spend on these agencies COMBINED

Department of Homeland Security
Other Defense--Civil Programs
Department of Justice
Department of State
Department of Housing and Urban Development
Department of Energy
National Aeronautics and Space Administration
International Assistance Programs
Other Independent Agencies (On-Budget)
Department of the Interior
Department of Commerce
Judicial Branch
Environmental Protection Agency
Corps of Engineers--Civil Works
National Science Foundation
Legislative Branch
Executive Office of the President

Thats more than the income taxes paid by the top 300,000 tax payers, or the entire bottom 70% of tax payers. Just going to interest on the debt. Thats 25% of every dollar collected in individual income tax, going to just pay interest. We have to cut the debt.

Monthly Budget Review: November 2022 | Congressional Budget Office

www.cbo.gov

It is not 'wasted'.

The money was paid to the lenders, whose profits where passed to shareholders, American's wealthy.

It's like PONZI only legal

 

[JohnfrmClevelan]

It is not 'wasted'.

The money was paid to the lenders, whose profits where passed to shareholders, American's wealthy.

It's like PONZI only legal

Interest is a small price to pay for controlling interest rates and retiring dollars.

 

[bomberfox]

I can remember a 15-year CBO forecast during the Clinton surplus showing a very steady line of increasing surpluses and decreasing debt, leading right into the complete elimination of federal debt, and (presumably) the Fed buying private debt. Think about that for a minute.

First, all of those federal budget surpluses come mostly from income taxes, which means they come right out of consumption and investment. Without a trade surplus, that is simply unsustainable. It's bad enough that the government's contribution to GDP is lost during a balanced budget, but subtracting from consumption and investment without running a large trade surplus is a recipe for recession. Remember that we went into a recession soon after the Clinton surpluses. It shouldn't be surprising.

Second, Treasury debt brings stability. It's most of what the Fed holds against the reserves and dollars held by the private sector. The fascination with eliminating these instruments just baffles me. Well, it doesn't really baffle me, I know why people think this way, after politicians pound it into their heads that the nation is truly in debt and the end is near, etc. But it does sadden me.

The CBO projections were wildly optimistic, and wrong almost as soon as they made them. That projection is much of the reason why I have zero faith in anything the CBO says anymore.

We should be taxing those high speed algorithm based stock trades. Not much real labor is going into most of the time they are used.

I tend to think the .com bubble was doomed either way.

 

[MTAtech]

Lower spending is the key. Lower tax rates have increased revenue.

There is no evidence at all that lowering tax rates increases revenue. The below graph illustrates this.

 

[vegas giants]

And so far 93bn in the first two months of FY23, just interest paid on the national debt, which is now over 30 trillion. Thats more than we spend on these agencies COMBINED

Department of Homeland Security
Other Defense--Civil Programs
Department of Justice
Department of State
Department of Housing and Urban Development
Department of Energy
National Aeronautics and Space Administration
International Assistance Programs
Other Independent Agencies (On-Budget)
Department of the Interior
Department of Commerce
Judicial Branch
Environmental Protection Agency
Corps of Engineers--Civil Works
National Science Foundation
Legislative Branch
Executive Office of the President

Thats more than the income taxes paid by the top 300,000 tax payers, or the entire bottom 70% of tax payers. Just going to interest on the debt. Thats 25% of every dollar collected in individual income tax, going to just pay interest. We have to cut the debt.

Monthly Budget Review: November 2022 | Congressional Budget Office

www.cbo.gov

Money well spent

 

[Bullseye]

There is no evidence at all that lowering tax rates increases revenue. The below graph illustrates this.
View attachment 67435586

Comparing to GDP is misleading, at best.

 

[MTAtech]

Comparing to GDP is misleading, at best.

It's a good metric because revenue tends to increase because of inflation and population growth. Comparing it to the economy normalizes it.

 

[Bullseye]

It's a good metric because revenue tends to increase because of inflation and population growth. Comparing it to the economy normalizes it.

No it's not. IF as I claim tax cuts put more money in circulation of course GDP is going to increase as well; so they move roughly in tandem. Deficits are the result of excess spending, not less tax revenue.

 

[MTAtech]

No it's not. IF as I claim tax cuts put more money in circulation of course GDP is going to increase as well; so they move roughly in tandem. Deficits are the result of excess spending, not less tax revenue.

Arguing that tax rates are irrelevant to revenue fails by inspection. Drop rates to zero and revenue drops to zero.

The Reagan tax cuts reduced government revenue in dollars, not just in comparison to GDP. The Clinton tax increases resulted in enough revenue increase to cause a surplus. The Bush tax cuts erased Clinton’s surplus and caused deficits. Obama allowing those tax cuts to expire increased revenue. The Trump tax cuts lowered revenue from what was projected before the tax cut.

 

[Bullseye]

Arguing that tax rates are irrelevant to revenue fails by inspection. Drop rates to zero and revenue drops to zero.

Well duh. However I wasn't arguing that.

The Reagan tax cuts reduced government revenue in dollars, not just in comparison to GDP. The Clinton tax increases resulted in enough revenue increase to cause a surplus. The Bush tax cuts erased Clinton’s surplus and caused deficits. Obama allowing those tax cuts to expire increased revenue. The Trump tax cuts lowered revenue from what was projected before the tax cutReagan

You conveniently ignore a lot of other events going on at the same time. BTW CBO Shows continual review growth 1981-1988. Same with Clinton 1993-2001. Bush's were a little bouncier but from his 2003 cuts the trends are up

 

[rickc]

No it's not. IF as I claim tax cuts put more money in circulation of course GDP is going to increase as well; so they move roughly in tandem. Deficits are the result of excess spending, not less tax revenue.

Guess you just don't understand the relationship between revenue and expenses.

Want to eliminate deficits then you can either increase revenue or cut spending.

Republicans tried to find those cuts during the Obama years. Their inability to find them led to sequester. Across the board spending cuts. Republicans didn't like that either. They never met the required spending cuts. Always spent more. They killed sequester may 5th 2917.

Sequestration put into place by the Budget Control Act in 2011 (BCA) is still on the books. But Congress, with the acquiescence of the President, has found a way to make that point moot. By invoking another section of budget law, section 251(b)(2)(A)(i) and (ii) of the Balanced Budget and Emergency Deficit Control Act of 1985, Congress circumvented the spending caps by deeming their priorities an emergency.

That action essentially killed the sequester on May 5, 2017. The final blow was felled by President Trump when he signed H.R. 244, the HIRE Vets Act, into law. To be sure, the sequester was mortally wounded the day before when the Senate passed the Consolidated Appropriations Act of 2017, known colloquially as the FY 17 Omnibus.

Now it is quite obvious to anyone who is honest with themselves when this runaway deficit spending started. Why it was when Reagan cut taxes on the rich. Top marginal tax rate dropped from 73% to 28%. Reagan almost tripled the national debt during that period. Republicans have been doubling down on tax cuts and deficit spending ever since. The republican tax plan. Cut taxes for the rich and borrow the money to pay for it.

Pretty obvious it is way past time to raise those taxes. Return the borrowed wealth.