The Numbers Game on Capital Hill

Our boys and girls on Capital Hill all think they are good with numbers. THEY ARE NOT!

Let’s start with the Democrats. Every time they raise taxes to increase revenue, it doesn’t. They invest spend billions on ethanol subsidies to reduce our dependence on foreign oil, it doesn’t. They invest spend nearly a trillion dollars to stimulate the economy, it didn’t.

The Republicans are not any better. They negotiate a deal to reduce spending by a hundred billion. It turns out to be only $53 million. They defend a balanced budget amendment. It doesn’t balance the budget.

It probably wasn’t planned this way; but, because the Democrats chose not to put up a budget for the last 800+ days and because the Republicans didn’t stand their ground on the last Continuing Resolution, everything has come to a head on the current debt ceiling debate. And I think that is probably a good thing over all.  It has forced all of our boys and girls on the Hill, including the President, to focus on the real problem facing America; the debt and the deficits.

So, although none of our boys and girls are good with numbers, they had better learn real fast. The issue of debt/deficits has become the proverbial hot potato that no body wants to hold on to. But folks, it’s not a hot potato. It is more like  a delicate crystal ball filled with a highly unstable explosive.  Dropping this ball is not an option.

As usual, this old man wants to be helpful. I have some numbers that might be useful for our boys and girls to understand.

Let me address the Democrats first. You and your President whine and whine that the rich must be forced to pay their fair share of federal taxes. Well, Pat Slattery, of The Free Market Project, has recently reported on the true tax burden distribution in America  today. All of you Democrats should read this article. But if that is asking too much, here in round numbers are some figures you need to understand:

  • 50% of wage earners pay ZERO federal income tax.
  • The top 1% of wage earners pay 38% of all the federal income tax.
  • The top 5% of wage earners pay 60% of all federal income tax.

Now, my Democrat friends, do you really want to talk about fair share? If that is not enough, maybe a picture (a graph actually) will help you understand that raising taxes does not necessarily raise revenue. I pick this graph of a great post the other day at Questions and Observations:

Tax Revenues as a Percentage of GDP by Year, 1933-2010

 What you Democrats learn from this graph? Let me explain. What you see is that from the time of President Eisenhower to the present; that’s over 60 years, the tax revenues have averaged with very little variance 18% of GDP. Now here is the kicker. In that same time period, top tax rates have varied from a high of 90% to a low of 28%; yet revenues have remained at 18% of GDP.  Why is that you might ask? The answer is when tax rates are higher, the economy slows down and the higher tax rate is applied to a smaller pie and the government ends up with 18% of a smaller GDP. Conversely, when tax rates are lower, there is generally economic growth and the government receives 18% of a bigger pie. So please Democrats, get off this idea that you can raise revenue by increasing taxes. We have over sixty years of data that says it won’t work.

Okay, Republicans, it’s your turn, Please pay attention. i know that you all are much better with numbers than the Democrats. But, I want to direct you to a recent article  at Fox News.Com.  The article has a lot of useful numbers, but for now i want you to focus on just one number. Actually it is a range of numbers.

The author of the afore mentioned article estimates that  80 to 120 House Republicans who will not vote for a debt ceiling increase, no matter what. To those of you who make up this group, I applaud you for standing on your principles. Personally, I too would like to see us bite the bullet now and not raise the debt ceiling. However, my fellow conservative Republicans we need to be pragmatic because we could come out on the losing end of this battle. Let me spell it out for you. If you stand your ground to the bitter end, Boehner and the rest of the RINOs will cave in on a plan that will get 80 to 120 Democrats to side with the Republican majority and we will all be worse off for your efforts.

Now, fortunately, there does seem to be one adult among the Republican ranks on the Hill. I am referring to Senator Coburn. Senator Coburn has come out with a 600 page plan to cut spending by over $9 trillion. Yes, I know his plan calls for eliminating some tax deductions and we conservatives automatically want to reject any such plan. But, come on folks we all know that there are a lot of really stupid tax deductions in our current tax code and Senator Coburn has a good handle on most of them. (For more details on Senator Coburn’s plan, checkout today’s post at Political Realities.)

I don’t think that Senator Coburn expects to get every thing he has included in his plan. But it just might be possible to find within his plan something tha will satisfy both sides. It should be possible to get some serious spending reduction for the next fiscal year, as well as, the out years and by eliminating some tax deductions and loop holes, satisfy the Democrats on their desire for increasing revenues.

In my opinion, the last thing we need is some kind of stop gap measure. we need to put and end to the debt ceiling debate for the rest of Obama’s present term in office. We need our House Republicans and all Republicans to focus defeating the Obama in 2012. we need our House Republicans to focus on using the purse string that they control to stop Obama and his Czars from strangling the last bit of life out of our ailing economy. Also, our House republicans need to throw more support behind Darrel Issa’s oversight investigations.

Well, that’s what I’m thinking. What are your thoughts?

23 thoughts on “The Numbers Game on Capital Hill

  1. A time or two ago I did a post from Carpe diem—

    The U.S. has the most progressive tax system in the world. We always think of European Socialism, Interestingly, countries with top personal income tax rates that are higher than in the U.S., such as Germany, France, or Sweden, have ratios that are closer to 1 to 1. Meaning, the share of the tax burden paid by the richest decile in those countries is roughly equal to their share of the nation’s income. By contrast, we prefer to have the wealthiest households in this country pay a share of the tax burden that is one-third greater than their share of the nation’s income.”

  2. I think that I am getting very depressed. I hope 2012 is a change for the better, if not, I may just turn everything off and hibernate!

  3. To be fair, payroll taxes hit the poor and middle class at around 13% of income when “employer contributions” are taken into account. I point that out because I think the argument that 50% of Americans pay no income taxes as you accurately pointed out is often inaccurately simplified to “50% of Americans pay no taxes.”

    The graph you know essentially shows Hauser’s Law. Professor Hauser uses a different accounting system than the federal government, and it shows an even flatter line.

    I know you’re not a fan of the BBA, and the WSJ had a great editorial about it today titled GOP Balancing Act (you can search it and access it – a link usually doesn’t work). One of my biggest concerns is that CBO scoring tends to favor taxing and new spending and disfavor tax cuts.

      1. FreedomFest was amazing. Those of us who are awake may be outnumbered, but we will prevail. It was a good break from all the cynicism, of which I have had my moments.

  4. The top 5% of wage earners pay 60% of all federal income tax.

    Meaning, of course, that the rest of us are paying the remainder of 40%.

    The household has a very limited income and nulls a lot of our income via medical and other deductions to the point that our taxable income is around $10,000 a year. Yet, we pay taxes through the nose — particularly FICA and SE. In sum, our discretionary spending is almost zero.

    If taxes on our pathetic income go up, we are screwed.

    Personally, I think that we are missing out on some kind of wonderful tax shelter that others are taking advantage of.

    1. You are right, of course. I purposely talked only of federal income tax because that is what Obama wants to raise. But if we talk about all taxes, including FICA , state and local income taxes, sales taxes, property taxes and, all the hidden taxes like gasoline tax and the corporate taxes and regulatory compliance cost that get passed on to the consumers, everybody pays a lot of taxes.
      If you find that wonderful tax shelter, please let us all know.

  5. The sad this is that so many people will simply ignore this information. I had a conservation with a co-worker today that was astounding. They simply believe a re-written version of history, where Reagan’s tax cuts caused higher unemployment, and Clinton’s tax increases led to surpluses. No matter what true information I provided, she wouldn’t budge. It was amazing, as well as scary.

    1. There are a lot of people like you described. I have some relatives like that. But I don’t worry much about those types. Those are the ones who would for the devil if he ran on the Democrat ticket. All we need is to win over 5% more of the electorate than we did in 2008. With Obama’s record that shouldn’t be all that hard. We have to work up to the last possible minute to get the vote out for our side. We do that and we win it all.

  6. Thanks for sharing the link to the article on Coburn’s plan. We must make hard choices. Folks are screaming about the mortgage deduction cut, but Coburn’s plan affects 2nd homes and those with mortgages over $500k (although that would affect a lot of middle class folks in expensive RE areas). I agree we have to stop the partial plans that push the debate down the road. I don’t believe we will be able to secure a long-term plan until this prez is ousted in 2012.

    1. Hi, Freedom. Colburn may be the only adult in the room. His plan isn’t perfect and he knows that. But it offers plenty of options to choose from to arrive at a meaningful spending reduction plan.

  7. Thanks for linking to my article about Coburn’s plan. I like how you described him, as the adult in the Senate. I think he is just that and the rest of the folks up there would do well to pay attention to what he is saying.

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