There is goodwill and homework type budgeting which includes doing homework on all the things the government does and understanding the more mental work put in by the top, the more efficient the government will run. Resources are allocated according to need and understanding. Appreciation is given to the necessary stress the government puts on society to ensure we are accountable to each other and the world. It is not the government but human innovation and values that increase the size of government.
There is also emotional budgeting focusing on temptation….giving as much money to convenience (tax cuts), over funding pride, power, and security (military, other security) and defunding vulnerable diplomacy, and accountability and stress (regulators), and cynicism to any force of goodwill (safety net, foreign aid). You score “wins” by taking money from these small entities and avoid large budget items that require courage.
Forward thinking companies make an extra effort to hear all ideas, accept risk and failure, and protect the pride of those that think different, but our congress is an institution of high pride fear with many seeking to take down anyone that may argue for change or resources or tell us what we need to hear.
We are not more or less poor because we under tax ourselves, in fact the economy doesn’t really care as long as the government keeps spending. The economy only knows who is spending not who is acquiring assets and who is acquiring debt. As long as the government spends the same and goes into debt and the rich keep saving the status quo remains. If the rich were to start spending all of their money the economy would try to compensate by devoting more resources to what rich people would buy, prices on other things would go up, the quality of life of everyone else would suffer.
The country actually isn’t going more and more broke if it has more and more money out there it could tax. As our assets grow relative to the size of the economy (work) it puts more of a burden on labor.
Of the National Debt
About 2/3 we owe ourselves
About 1/3 is held by foreign entities
US Individuals also own foreign debt. What’s in your mutual fund?
The net debt or surplus is relatively minor
When we don’t tax ourselves, it is the untaxed getting rich, not the bondholder
Countries get in trouble when they owe other countries on a net basis, especially if they don’t control the currency
All the major governments of the world are in a similar boat (the collective government account owes the individual accounts of the citizens)
All that’s really happened over the last 40 years is we’ve acquired a bunch of debt from the government and given it to the top. If a just tax system was in place much of the wealth accumulation would not have taken place.
Some conservatives call for the federal debt to be forgiven and some rating agencies have called our bonds risky. There is no need for this as the government has the power to tax and the power to print money. It can print money and decrease both wealth and debt or it can tax those that benefited the most.
The problem with just cutting taxes is it’s a slow wealth transfer. It takes time to take the government’s money so they got a little smarter in 2017 with cutting the corporate tax rates. Just like selling a business or some revenue stream you get an instant pay out. Where do rich people put their money? A lot of it in public or private companies. By taking a ~$200 Billion revenue stream away from the treasury companies are able to take home 79 cents on the dollar vs 65 cents, an increase of (79-65)/65 = 21.5% so now your company has 21.5% more profits without doing any work and they are all worth 21.5% more!
Everyone enjoyed the stock market going up over 30% in 2017 leading to Trillions in private profits. Unfortunately, the companies have already appreciated in value, the cake has been eaten and that cut doesn’t help stocks go up in the future. Just a $200 Billion hole in tax revenue remains. Trends in US Unemployment didn’t change after the tax cut.
Unemployment Trends Remained Unchanged After the Tax Cut. The downward trend was mostly because interest rates were set near 0 after the housing crisis.
Donald Trump “I think we can go to 4,5, even 6%” (2017 comment on GDP Growth from the tax bill)
……2 Years Later……
Federal Open Market Committee projects 2% GDP Growth in 2020 and 1.9% in 2021 as of September 2019, below historical averages (before correction for the coronavirus).
It begins with holding America hostage during the last 6 years of a democratic president
Shutdown the government
Use debt ceiling to hold an enemy party president hostage
Convince the public both sides are to blame
Crank government cynacim up to 11
Courage/work to discuss pay fors
Honest discussion of where the debt came from
Then you need to change the congressional rules for taxing by implementing dynamic scoring which says the economy will grow (we will work harder) if corporations get tax cuts.
Then go for the cookie jar once in power
The central item of the tax cuts and jobs act is to take a $200 billion revenue stream (decrease corporate taxes from 35% to 21%) away from the treasury and into corporations (like selling a business you trade a revenue stream for a one time payout), artificially increasing their profits and delivering a massive 1 time bump in stock prices.
Corporate executive pay and buybacks skyrocket. Economic growth not so much. The federal open market committee predicted 2% GDP growth for 2020 and 1.9% for 2021 in the fall of 2019 (before correction for the coronavirus).
Try to pay for it by going after healthcare
The American Health Care Act Fails to Pass by One Vote (2017)
Don’t share anything with your base
Individual tax cuts fade out and become tax increases by 2027
Corporate tax cuts are permanent
Spite the blue states if possible
State and Local tax deduction capped at 10k hurting high tax (dense population) states
What do you do after raking in trillions you didn’t lift a finger for? Complain on the taxes on these gains of course
After your stocks/bonds/real estate go up from corporate tax cuts you pay capital gains tax on them when you sell them.
“To Keep the Economy Growing, Index Capital Gains to Inflation” – Article by Ted Cruz, Grover Norquist
“There is a sore spot” on capital gains – Ryan Ellis
“Tax Cuts 2.0”
Over 80% of capital gains tax cuts go to the 1%.
Try to get rid of estate taxes to ensure rich estates rule for generations to come
The Tax Cuts and Jobs Act doubled the exemption for large estates to over $20 million in untaxed estate income for couples
Put millionaires on the honor system for taxes
Audits of millionaires are down 80% since 2011 (tea party takes over congress) and in line with the audit rate of the poor
(from ProPublica analysis of IRS data)
The tax gap (uncollected taxes) is estimated to be over $500 Billion per year
(According the IRS analysis of 2008-2010 tax receipts in 2019 dollars)
Give mega corporations tax breaks on overseas cash hordes
“The Tax Cuts and Jobs Act creates a historic opportunity for American companies to bring capital back home from overseas to invest in our domestic economy and create jobs for hardworking Americans” – Steven Mnuchin (Treasury Secretary)
Tax on overseas earnings decreased to 15.5% on cash or cash equivalents and 8% on the remainder
In 2004 President George W. Bush allowed corporate cash hordes back with a low tax rate of around 5.25%
Corporations are well trained now to horde overseas cash and wait for the next republican takeover to cash out
Relish in the positive asset “Business News”
(For a year anyway)
Then decide you are going to grade yourself based on how the stock market does as a result of taking money from the treasury
Steve Mnuchin: We “absolutely” view the stock market as a report card (US Treasury Secretary)
Long Term Thinking
Middle Class Incomes
Increase Economic Output
Short term asset pumps ü
Take credit for existing unemployment trends ü
If you lose in 2020 Rinse and Repeat
U.S. Bureau of Labor Statistics. Databases, Tables & Calculators by Subject. (SEAS) Unemployment Rate. More Formatting Options. All years, All time periods. https://data.bls.gov/timeseries/LNS14000000. Accessed June 20, 2020. (Numbered 3 in figure above)
Since the end of WWII the debt decreased relative to the size of the economy until President Reagan was elected because of economic growth and inflation. Before President Reagan there was less divide in the parties on spending and taxes. The failure of conservative hands-off economics in the 1920s led to the great depression. Successes were had in many federal spending initiatives like the new deal, labor regulations like the 40-hour week, social security, the successes of Medicare and Medicaid, progressive taxation, and the debt continued to decline after the war. Even president Nixon raised taxes and the Nixon/Ford administrations presided over the heyday of the EPA with the Clean Air Act, Clean Water Act, Ocean dumping prevention, lead removed from gasoline, and wastewater permitting.
But in time past lessons are forgotten. President Reagan’s message and political identity was the government was too big, it wasted money, and taxes were too high and he was going to do something about the debt. Since then this message has been conservative dogma. It’s a message of achieving moral high ground and simultaneously giving citizens more money and relieving us of authority and change anxiety. It’s also unappreciative of the countless good deeds the government has done, high in cynicism, low in vulnerability, and short on details/intellectual work.
The predictable result is all 3 republican takeovers since then (Reagan 1981, Bush (43) 2001, Trump 2017) have led to deficit exploding tax cuts and democratic presidents trying to reign them in when things switch back. When conservatives are in control fiscal responsibility is ignored and spines are cast aside. When democrats come back the republicans shift to moral high ground, extortion, ride or die, cut the baby in half etc.
The important measure of federal debt is its size in relation to our economy, which is why we get away with ever increasing debt as the economy is increasing with growth and inflation as well. Here is how our debt has changed since the 1920s. Notice the inflection points. That is where something changed.
Because the government borrows money at about the rate of economic growth the debt just kind of sits there once borrowed like a 0% interest loan. So if the government borrows $100 and then the economy doubles and also the interest doubles that debt to $200 we can now say the action that led to borrowing $100 at year X is responsible for $200 in debt at year Y.
We can attribute our debt to past activity by multiplying the percent of the debt relative to the economy by today’s economic size (GDP). This is important in telling the story of our debt and not letting convenience dictate fact.
Presidents Ronald Reagan (R) (40) and George H.W. Bush (R) (41) – Conservative Revolution
President Reagan inherited a stable debt at 31%. The Reagan administration cut taxes in 1981 and 1986 which were in place until 1993. The debt climbed to 64% (a 33% increase). The tax policy was in place for 21T GDP x 33% = $7.1 Trillion of today’s debt.
Inherited a flat debt/GDP trend
Left debt increasing 3% per year compared to GDP
“We don’t have a trillion dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much”
(Spending would go up during his administration, the debt would go to $4 trillion by the time the democrats took over the white house again)
“Government isn’t the solution to our problem, government is the problem”
“It just isn’t going to work, and it’s very interesting that the man who invested this type of what I call a voodoo economic policy” (about Reagan’s tax policies)
George H.W. Bush
-George H.W. Bush (later said he was kidding after becoming Reagan’s running mate)
President Bill Clinton (D) (42)
President Clinton was able to enact his tax policy in 1993. He left office with a budget surplus and debt at 55% of the economy and the debt in decline. The 2000 election debate between Bush and Gore was what to do with all the money. His tax policy was in place for a 9% reduction in the debt. 21T GDP x -9% is -1.9 Trillion.
Inherited debt increasing 3% per year compared to GDP
Left with debt decreasing 3% per year compared to GDP
President George W. Bush (R) (43)
President George W. Bush inherited a budget surplus. He cut taxes in the beginning of his term before entering the War on Terror and Iraq War. The housing bubble occurred at the end of his term and he left the office with the country in recession. The Bush tax cuts were in place until 2013 where debt stabilized at 99% of GDP. The tax policy was in place during a 44% debt increase, 21T x 44% is 9.2 Trillion.
Inherited debt decreasing 3% per year compared to GDP
Left with debt increasing 6% per year compared to GDP
President Barrack Obama (D) (44)
President Obama inherited the recession. His early years were spent on the recession and healthcare. The economy wasn’t stabilized until republicans took over the house in part by blaming him for the debt. He was able to pull back the Bush tax cuts in 2013 for wealthy Americans. The debt stabilized at that point at 99%. At the end of 2017, before the Trump Tax cuts, the deficit was 103%. An increase of 4% or $0.8 Trillion.
Inherited debt increasing 6% per year compared to GDP
Left with debt decreasing 1% per year compared to GDP
President Donald Trump (R) (45)
President Trump inherited a stable debt picture that actually decreased in 2017 before he could implement the corporate tax cuts. The debt to GDP ratio is estimated to increase another 66% by 2050 according to the Congressional Budget Office after the corporate tax cuts are in affect (as of 2019).
Inherited debt decreasing at 1% per year compared to GDP
2018 debt increased 2% per year
Temptation Narrative – it doesn’t really matter what the facts are, the temptation narrative for the powerful is the same. Giving the top tax cuts helps everyone because they are in charge and responsible for jobs. Be as cynical as possible toward the poor and the government, and do little or no work to show for it. It gives rich circles a common enemy to unite around, shows no vulnerability, giving themselves tax cuts is the moral high ground. It uses the cynicism tool (you are fool if you think the answer is hard work and buying in) effectively.
Was there an economic boom in the 1980s? – conservatives will often talk about the Reagan recovery and try to justify how great cutting taxes is. What’s the truth?
Average Real GDP Growth 
The heart of the economy (producing goods and services) doesn’t care what the taxes are.