Why Current Taxation and Current National Debt Is Bad for US Economy (1 Viewer)

[TimmyBoy]

Generally, when people go to work, they go to work for themselves and for their loved ones. They do not go to work because they want to make money for the government. Though some taxation is certainly justified because government needs money to run and pay it's workers to protect personal and property rights of citizens, the current taxation is not justified. Here is why:

1. Politicans at the current time, must now raise taxes or come up with a plan to completely and totally wipe out the national debt. By allowing the national debt to exist, it has the potential to harm economic growth. The national debt should be totally paid off otherwise, the current level or possible higher level of taxation must continue indefinately.

2. The current level of taxation, though it doesn't take away completely the incentive for productive members of society to work it certainly does place an unjust penalty, a burden and has the effect of discouraging the productive members of society to work harder because by working harder it places them in a higher tax bracket which punishes them more for being productive. The current taxation is punishment and not payment of legitimately needed government services. This current level of taxation shouldn't exist because if the political leadership in Washington did it's job properly, their would be no national debt, nor the expansion of government to it's current levels that would require such a high and punishing level of taxation. When you punish the productive members of society with the current high level of taxation, you take away their incentive to be productive, innovative and to take risks because alot of the rewards would go to the government rather than the productive individual. This also has the effect of crushing jobs creation and causing a higher unemployment level for the poor.

3. The current level of taxation and national debt also hurts the poor since it hurts the more productive members of society because it discourages jobs creation. It causes the poor to stay in the state of being poor and much more difficult to move up. It also has the effect of creating more poverty.

A higher level of taxation could be justified IF that higher level were to go to completely and totally pay off the national debt and IF after the national debt was paid off, a dramatic reduction in taxes were imposed in order to encourage productivity. The ideal situation is to find a way to pay off the national debt without harming economic growth if at all possible and once that is accomplish, scale back the size of government and taxation to encourage people to work, since, with much less taxation hypothetically speaking that is lower than today's current level, people would have more incentive to go work and be more productive, plus more money would be available for the economy to invest or to start new businesses with since the government didn't swallow it up through excessive taxation. This would also have the effect of more jobs creation and the poor being able to make more money and move up the class ladder.

What is your take?

 

[Bustabush]

Great post! Rebuttal anyone?

 

[ptsdkid]

Paying off the National debt? Could you explain to me what this National Debt is? Explain to me what this debt includes and who owes who the money? And if you figure who it is that is owed money from who--then tell me why you think it wise for the debtors to pay these mysterious debtees. Is it the government that owes money to someone? You do know that 'we tax payers' are the government. So if it is so important for you to feel somehow more secure or vindicated by paying out huge amounts of money to some unknown source--then you must be advocating for Bush and our Congress to impliment a tax increase to pay this troubling debt. This post is probably as clear to you as paying off this National debt is to the average tax paying American citizen....that is, not very clear or wise at all.

 

[nkgupta80]

Paying off the National debt? Could you explain to me what this National Debt is? Explain to me what this debt includes and who owes who the money? And if you figure who it is that is owed money from who--then tell me why you think it wise for the debtors to pay these mysterious debtees. Is it the government that owes money to someone? You do know that 'we tax payers' are the government. So if it is so important for you to feel somehow more secure or vindicated by paying out huge amounts of money to some unknown source--then you must be advocating for Bush and our Congress to impliment a tax increase to pay this troubling debt. This post is probably as clear to you as paying off this National debt is to the average tax paying American citizen....that is, not very clear or wise at all.

its not an unknown source..its only unknown to you. The debt belongs to foreigners, the public, etc.

Read up the US public debt on wikipedia or something and its implications.

 

[ptsdkid]

its not an unknown source..its only unknown to you. The debt belongs to foreigners, the public, etc.

Read up the US public debt on wikipedia or something and its implications.

I still don't get what you mean by this debt owed to the public. By public you are referring to me and yourself. So am I going to be considered one of these payees? And by foreign debt, does that compare to the unpaid foreign debt owed to us by countries like France and Germany from WWII? They never paid their foreign debt to us, and it didn't seem to affect their financial or worldwide standing one bit. So I repeat, why not just renage on paying this foreign debt? What country do you suppose would punish us if we were to tell them to kiss off--you're not getting one penny?

 

[Mikkel]

I still don't get what you mean by this debt owed to the public. By public you are referring to me and yourself. So am I going to be considered one of these payees? And by foreign debt, does that compare to the unpaid foreign debt owed to us by countries like France and Germany from WWII? They never paid their foreign debt to us, and it didn't seem to affect their financial or worldwide standing one bit. So I repeat, why not just renage on paying this foreign debt? What country do you suppose would punish us if we were to tell them to kiss off--you're not getting one penny?

I'd imagine that China (one of the bigger, if not the biggest, countries to buy up our national debt) might be a little peeved if we didn't pay them back at some point. Especially since, you know, they're communist and have a lot of nukes and stuff.

American arrogance doesn't solve every problem known to man, unfortunately, so I don't think your plan will work. Believe me when I tell you that the global economy is the biggest factor preventing WW3 right now, and if we shrug off our trading partners like you suggest it will hurt, and it will hurt bad.

 

[Iriemon]

I still don't get what you mean by this debt owed to the public. By public you are referring to me and yourself. So am I going to be considered one of these payees?

The US government debt, often referred to as the "public debt," is the debt owed by the US government because of the cumulative amount it has spent more than it has taken in thru taxes.

When the Govt spends more than it receives in revenues (through taxes) -- has it has except for the year 2000 -- it has to borrow the difference. It does this through debt instruments - T-Bills and Treasury notes and bonds and the like. These are like any loan you take, you promise to repay the debt after a specified amount of time, with interest.

The total debt of the US Govt is now at $8.1 trillion. Most of that debt (all but one trillion) has been generated in the last 25 years, thanks to the huge deficit budgets run up by the Reagan, Bush1 and Bush2 administrations. The debt has increased by $2.3 trillion since 2000.
http://www.publicdebt.treas.gov/opd/opdpdodt.htm

The annual interest expense on the debt last year was $352 billion. That is, in a sense, what it cost the Govt annually for its deficits. There is a real cost to it.

The total debt these days is owed to two primary groups.

The first group is called "debt held by the public." This is debt owed to private individuals, foreign governments, corporations, and anyone or anything who lends the US Govt money. The debt held by the public totals $4.8 trillion. The biggest lenders (and correspondingly, the biggest recipients of annual interest payments) include the governments of Japan, China, Saudi Arabia, and Great Britain.

The rest of the debt is intra-government loans, now at $3.4 trillion. This is debt owed to (mostly) government retirement trust funds, with SS being by far the largest. In 1983 (with amazing foresight) Congress passed a law that increased the SS taxes higher than necessary to pay SS benefits. The purpose was to use the surplus tax revenue to build up a trust fund worth trillions of dollars, so that when the baby boomers retired, their benefit obligations wouldn't overwhelm taxpayers. Because there are so many boomers that will be retiring over the next 15-20 years, there will not be enough workers to pay their benefits without huge tax increases.

However, long ago, Congress also passed a law which allowed the Govt to take these surplus SS tax payments, and the assets of the SS trust fund, and apply them to general Govt revenues. Because of the deficits, the Govt has had to borrow money, and it has helped itself to the $3 trillion or so that should be in the SS and other pension funds. In exchange, the Govt puts its debt (IOUs) in the SS trust fund. It represents a legal obligation for the Govt, but it is in effect stealing the assets that we have been paying extra taxes for over the last two decades. Why? Because the Govt has the obligation to pay SS and other pension benefits anyway. The SS trust fund was supposed to have real assets, but instead it just has an additional Govt debt obligation. Which is why President Bush, when he was arguing that SS was in a crisis, pointed out the SS trust fund was just a bunch of IOUs. Those IOUs -- the Debt of the Govt, won't help the Govt pay for the boomers' SS benefits because they are really an obligation, not an asset.

That is it in a nutshell.

 

[Iriemon]

And by foreign debt, does that compare to the unpaid foreign debt owed to us by countries like France and Germany from WWII? They never paid their foreign debt to us, and it didn't seem to affect their financial or worldwide standing one bit. So I repeat, why not just renage on paying this foreign debt? What country do you suppose would punish us if we were to tell them to kiss off--you're not getting one penny?

The aid given to France and Germany and other European countries after world war II were mostly in the form of aid, not loans, I believe. I do not that these countries owe us a significant amount of money, if any. To the contrary, we owe Japan and Great Britain hundreds of billions of dollars.

Reneging on the debt would have disasterous consequences to the US and world economy. $8 trillion in assets would vanish, the dollar would collapse as a currency internationally, foreign investments would flee the US, and there would probably be a depression unlike we've seen since the 1930s.

 

[ptsdkid]

I'd imagine that China (one of the bigger, if not the biggest, countries to buy up our national debt) might be a little peeved if we didn't pay them back at some point. Especially since, you know, they're communist and have a lot of nukes and stuff.

American arrogance doesn't solve every problem known to man, unfortunately, so I don't think your plan will work. Believe me when I tell you that the global economy is the biggest factor preventing WW3 right now, and if we shrug off our trading partners like you suggest it will hurt, and it will hurt bad.

Excuse me, but I'm lost again...my bad. Are you saying that we owe China the biggest portion of our debt...if not all? Or are you saying that China would be kind enough to pay off our foreign debt just because they're thankful and apreciative for us turning them onto bluejeans and McDonalds restaurants?
The global economy is not the biggest factor in preventing WWIII. We are currently in WWIII as I write. The muslim world has clearly stated that they are going to kill we westerners. The holy war (jihad) is seen daily in the form of worldwide terrorist attacks. The call has already gone out to create a new 21st century Caliphate to assume the leadership role to these modern day Crusades. I don't think they have to look very far to annoint Louis Farrakhan to the position of Caliphate. You hear nothing but hate and destruction for the westerner from dear old Louis.
So back to your insistance to paying off this huge debt that so concerns you. Could you be a little more specific on what foreign entity we owe this money to, and approximately how much money we owe to each entity--and why we owe this money, and why you feel the need to pay up?
I haven't heard anything more on this national debt owed to the public. I just don't get that one either. If I'm the public, and I pay taxes to the government--wouldn't I be paying myself if I were to help pay down this public debt?

 

[Mikkel]

Excuse me, but I'm lost again...my bad. Are you saying that we owe China the biggest portion of our debt...if not all? Or are you saying that China would be kind enough to pay off our foreign debt just because they're thankful and apreciative for us turning them onto bluejeans and McDonalds restaurants?
The global economy is not the biggest factor in preventing WWIII. We are currently in WWIII as I write. The muslim world has clearly stated that they are going to kill we westerners. The holy war (jihad) is seen daily in the form of worldwide terrorist attacks. The call has already gone out to create a new 21st century Caliphate to assume the leadership role to these modern day Crusades. I don't think they have to look very far to annoint Louis Farrakhan to the position of Caliphate. You hear nothing but hate and destruction for the westerner from dear old Louis.
So back to your insistance to paying off this huge debt that so concerns you. Could you be a little more specific on what foreign entity we owe this money to, and approximately how much money we owe to each entity--and why we owe this money, and why you feel the need to pay up?
I haven't heard anything more on this national debt owed to the public. I just don't get that one either. If I'm the public, and I pay taxes to the government--wouldn't I be paying myself if I were to help pay down this public debt?

I believe Iriemon explained it pretty damn well. You must not be very quick if you still don't understand the concept of national debt. Part of our national debt is owed to foreign nations. One of the nations we owe the most money to is China (or, more specifically, the Chinese Government). China is an extremely important trading partner. If we try to short change them, not only do we severly cripple our economy, we risk starting a real war.

You may think we're living in WW3, but we're not. Let me assure you. Saying that the 'Muslim World' has declared war on us is like saying the 'Christian World' declared war on Black people in America during reconstruction. The terrorists aren't made up of your average muslim citizen. These are Islamic Extremists, akin to the type of intolerance of the KKK. I'm not trying to slight the losses that we've taken, but there is a big difference between a world war and global terrorism.

I'm sure you'd recognize that difference when you're on the wrong end of a Chinese nuclear missle.

 

[Iriemon]

Generally, when people go to work, they go to work for themselves and for their loved ones. They do not go to work because they want to make money for the government. Though some taxation is certainly justified because government needs money to run and pay it's workers to protect personal and property rights of citizens, the current taxation is not justified. Here is why:

1. Politicans at the current time, must now raise taxes or come up with a plan to completely and totally wipe out the national debt. By allowing the national debt to exist, it has the potential to harm economic growth. The national debt should be totally paid off otherwise, the current level or possible higher level of taxation must continue indefinately.

Agree completely. This is especially true given the fact that the aging boomers are going to create huge demands for govt pension and health care, and a huge Govt debt on top of that compounds the problem. Not to mention it is immoral, IMO, to fob off the costs of our government on future tax payers.

The borrowing of 1/2 trillion a year cannot continue indefinitely. The Republicans passing further tax cuts at this time is completely irresponsible. It is passing the buck, big time.

2. The current level of taxation, though it doesn't take away completely the incentive for productive members of society to work it certainly does place an unjust penalty, a burden and has the effect of discouraging the productive members of society to work harder because by working harder it places them in a higher tax bracket which punishes them more for being productive. The current taxation is punishment and not payment of legitimately needed government services. This current level of taxation shouldn't exist because if the political leadership in Washington did it's job properly, their would be no national debt, nor the expansion of government to it's current levels that would require such a high and punishing level of taxation. When you punish the productive members of society with the current high level of taxation, you take away their incentive to be productive, innovative and to take risks because alot of the rewards would go to the government rather than the productive individual. This also has the effect of crushing jobs creation and causing a higher unemployment level for the poor.

I think you have a point in principle. As a society, we are willing to have some level of taxation in exchange for social programs. The implicit argument that the current level of taxation hurts economic growth is empirically unsupported. Economic growth was higher in the 90s, when we had higher tax rates, and significantly higher in the 60s, when there was a 70% top marginal rate. Empirically and historically, people have worked to make money, whether for luxury or for survival, at a level of taxation higher than the current rates.

3. The current level of taxation and national debt also hurts the poor since it hurts the more productive members of society because it discourages jobs creation. It causes the poor to stay in the state of being poor and much more difficult to move up. It also has the effect of creating more poverty.

The discouraging effect you speak of has not been been shown to be significantly effected by levels of taxation as it has varied over the past 40 years. Job creation is not a significantly problem, current unemployment rates of 5.5% is historically very good.

A higher level of taxation could be justified IF that higher level were to go to completely and totally pay off the national debt and IF after the national debt was paid off, a dramatic reduction in taxes were imposed in order to encourage productivity. The ideal situation is to find a way to pay off the national debt without harming economic growth if at all possible and once that is accomplish, scale back the size of government and taxation to encourage people to work, since, with much less taxation hypothetically speaking that is lower than today's current level, people would have more incentive to go work and be more productive, plus more money would be available for the economy to invest or to start new businesses with since the government didn't swallow it up through excessive taxation. This would also have the effect of more jobs creation and the poor being able to make more money and move up the class ladder.

I am all for this. That is why the Bush tax cuts have been so disappointing to me. We were poised to do exactly what you propose in 2000. While the slow down in the economy would have decreased the expected surplus, with the tax cuts, federal revenues fell dramatically, and instead of paying off any debt, we are another $2.3 trillion in the hole. Also thanks to increased spending growth.

 

[Iriemon]

Excuse me, but I'm lost again...my bad. Are you saying that we owe China the biggest portion of our debt...if not all? Or are you saying that China would be kind enough to pay off our foreign debt just because they're thankful and apreciative for us turning them onto bluejeans and McDonalds restaurants?

China is one of the largest lenders to the US Govt, last I check we owed them in the neighborhood of $250 billion. Japan is by far the largest lender, we owe them around $650 billion. China and Japan or the others are, IMO, unlikely to forgive US debt regardless of how many McDonalds are built there.