[BartSimpson]

This guy boils it all down to something I would expect everyone can grasp:

Quote:

You can't borrow your way out of debt.

Whenever the talking heads on TV start talking about the national economy, most of our eyes start to glaze over. The gigantic numbers that they throw out there are ridiculous; most Americans have no idea what those numbers mean in practical terms. So, I thought it’d be fun to turn those figures into something we can understand a little better—like a household budget.

The federal government will take in $2.173 trillion in 2011. That’s their income, and it sounds pretty good. Until, that is, you factor in that the federal government will spend $3.818 trillion during the year. So, just like many families, the government’s outgo exceeds their income—to the tune of $1.645 trillion in overspending. That’s called the deficit. Altogether, the government has $14.2 trillion in debt.

What would happen if John Q. Public and his wife called my show with these kinds of numbers? Here’s how their financial situation would stack up:

If their household income was $55,000 per year, they’d actually be spending $96,500—$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000!

What’s the first step to get out of debt? Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That’s a tough pill to swallow. Those kinds of spending cuts seriously hurt, but it’s the only way out of debt for John Q. Public.

If I ever got a call from a family that was spending $41,500 more than they made every year, you would definitely expect me to yell at them for their dumb behavior, right? Kids, no more McDonald’s four times a week. Snacks come from the grocery store now. And we’re not going to the movies for a while, so break out the board games and TV Guide. This family has a problem, so it’s time to amputate the lifestyle!

It works the same way for the government. You can’t borrow your way out of debt, whether you’re a typical American family or the entire U.S. government. At some point, you’ve got to say, “Enough is enough!” and make the hard cuts necessary to win over the long haul.

[andyt]

He's right. But he's forgetting the income part of the equation. Raise your income you can pay off your debt. Keep cutting your income, and you'll never pay off your debt or wind up living in a cardboard box.

[BartSimpson]

andyt wrote:

He's right. But he's forgetting the income part of the equation. Raise your income you can pay off your debt. Keep cutting your income, and you'll never pay off your debt or wind up living in a cardboard box.

Raising taxes in a global economy is just a means of telling businesses, people, and capital to move elsewhere. California is bitching about that right now as the census figures from 2010 show that over one million mid-to-high wage earners left California between 2000 and 2010. They went to states like Texas where the total tax loads are far less than California's.

Maryland in 2008 enacted a 6.25% hike on incomes over $1 million dollars and they sold the plan because the 3,000 people it affected didn't have the votes to stop it. The net result? 1,000 of those millionaires packed their bags and moved in just the first few months the tax was in effect. By January of this year Maryland was down to less than 1,000 people with incomes over $1 million and their revenues were down significantly and now, too late, the state is repealing the tax effective in January 2012.

Andy, we just don't live in a world with captive populations or industries anymore. Imposing taxes by fiat is simply not an option for balancing a budget anymore.

It's time for people like yourself to realize that we've got to live within our means and that you just can't keep helping yourself to other people's incomes when it suits you because those people don't have to stay in your country or province if they don't want to. I know you can get bitter and say, "Well screw them! Let them leave!" but then you're ending up like California or Maryland when the people who pay most of your bills pack up and leave.

As one fellow from Maryland said on CBS News about the tax as he was leaving for Florida:

"I'm paying an extra $18,000 a month just to have an address in Maryland when it's cheaper to move to Florida and enjoy better weather."

[andyt]

BartSimpson wrote:

andyt wrote:

He's right. But he's forgetting the income part of the equation. Raise your income you can pay off your debt. Keep cutting your income, and you'll never pay off your debt or wind up living in a cardboard box.

Raising taxes in a global economy is just a means of telling businesses, people, and capital to move elsewhere. California is bitching about that right now as the census figures from 2010 show that over one million mid-to-high wage earners left California between 2000 and 2010. They went to states like Texas where the total tax loads are far less than California's.

Maryland in 2008 enacted a 6.25% hike on incomes over $1 million dollars and they sold the plan because the 3,000 people it affected didn't have the votes to stop it. The net result? 1,000 of those millionaires packed their bags and moved in just the first few months the tax was in effect. By January of this year Maryland was down to less than 1,000 people with incomes over $1 million and their revenues were down significantly and now, too late, the state is repealing the tax effective in January 2012.

Andy, we just don't live in a world with captive populations or industries anymore. Imposing taxes by fiat is simply not an option for balancing a budget anymore.

It's time for people like yourself to realize that we've got to live within our means and that you just can't keep helping yourself to other people's incomes when it suits you because those people don't have to stay in your country or province if they don't want to. I know you can get bitter and say, "Well screw them! Let them leave!" but then you're ending up like California or Maryland when the people who pay most of your bills pack up and leave.

As one fellow from Maryland said on CBS News about the tax as he was leaving for Florida:

"I'm paying an extra $18,000 a month just to have an address in Maryland when it's cheaper to move to Florida and enjoy better weather."

Way too simplistic, Bart. You always pose everything as an either or. Following your logic is a race to the bottom of no taxes. At some point that will have a dramatic impact on your loved military after you've gotten rid of all social progams. By that time your society will have collapsed anyway. I guarantee you that you have to raise taxes and cut spending to get out of this. If you think you can pay off the debt with just cutting programs you're deluding yourself.

[BartSimpson]

andyt wrote:

Way too simplistic, Bart. You always pose everything as an either or. Following your logic is a race to the bottom of no taxes. At some point that will have a dramatic impact on your loved military after you've gotten rid of all social progams. By that time your society will have collapsed anyway. I guarantee you that you have to raise taxes and cut spending to get out of this. If you think you can pay off the debt with just cutting programs you're deluding yourself.

Again, Andy, the problem is that you're proposing to 'raise taxes' but the PROVEN AND UNDENIABLE EFFECT OF DOING THAT means that in the end, you'll have less revenue than when you started.

It's been proven over and over, but if you want to do it one more time then feel free. Have a go at it.

Florida and Texas will send you a thank you note, I'm sure.

[andyt]

BartSimpson wrote:

andyt wrote:

Way too simplistic, Bart. You always pose everything as an either or. Following your logic is a race to the bottom of no taxes. At some point that will have a dramatic impact on your loved military after you've gotten rid of all social progams. By that time your society will have collapsed anyway. I guarantee you that you have to raise taxes and cut spending to get out of this. If you think you can pay off the debt with just cutting programs you're deluding yourself.

Again, Andy, the problem is that you're proposing to 'raise taxes' but the PROVEN AND UNDENIABLE EFFECT OF DOING THAT means that in the end, you'll have less revenue than when you started.

It's been proven over and over, but if you want to do it one more time then feel free. Have a go at it.

Florida and Texas will send you a thank you note, I'm sure.

Bullshit. Even if you believe in the Laffer curve, there is an optimum point on it for tax revenue. Face it, y'all are going to have to give mo money to the govt if you want to have any hope of getting yourself out of debt. Or create such a shithole that you won't want to live there, and still pay taxes because the debt won't go away just because you stopped spending. I mean how well has tax cutting worked for your country so far?

[BartSimpson]

andyt wrote:

Bullshit. Even if you believe in the Laffer curve, there is an optimum point on it for tax revenue. Face it, y'all are going to have to give mo money to the govt if you want to have any hope of getting yourself out of debt. Or create such a shithole that you won't want to live there, and still pay taxes because the debt won't go away just because you stopped spending. I mean how well has tax cutting worked for your country so far?

Andy, throw whatever tantrum you want, the fact of the matter is that raising taxes in a competitive market will end up reducing revenues.

If everyone in the world raised taxes maybe it'd be different. The problem people like yourself are being confronted with in Canada and in California and other places where it's fashionable to 'sock it the rich!' is that, try as you might, your rich people don't have to put up with your taxes if they don't have to. They have options and they have the resources to exercise those options and there's nothing you can do to stop them.

[Zipperfish]

Quote:

Kids, no more McDonald’s four times a week. Snacks come from the grocery store now. And we’re not going to the movies for a while, so break out the board games and TV Guide. This family has a problem, so it’s time to amputate the lifestyle!

And dad, you're going to have get rid of the champagne alarm system, paying people to spy on the neighbours and the mounted machine guns in the front yard.

[andyt]

Zipperfish wrote:

Quote:

Kids, no more McDonald’s four times a week. Snacks come from the grocery store now. And we’re not going to the movies for a while, so break out the board games and TV Guide. This family has a problem, so it’s time to amputate the lifestyle!

And dad, you're going to have get rid of the champagne alarm system, paying people to spy on the neighbours and the mounted machine guns in the front yard.

Nope, they'll need those things when their society falls apart because they think they can do without social spending. But since dad doesn't have to pay taxes, he'll be able to afford those things, and it will keep him safe for a few weeks anyway. Till somebody with a bigger gun comes along.

[Caelon]

BartSimpson wrote:

[
Andy, throw whatever tantrum you want, the fact of the matter is that raising taxes in a competitive market will end up reducing revenues.

If everyone in the world raised taxes maybe it'd be different. The problem people like yourself are being confronted with in Canada and in California and other places where it's fashionable to 'sock it the rich!' is that, try as you might, your rich people don't have to put up with your taxes if they don't have to. They have options and they have the resources to exercise those options and there's nothing you can do to stop them.

To a degree you are both right. If you are comparing taxes in one state to another then excessive taxation will encourage the mobile to change states. A federal tax catches everyone no matter where they move within the country. It is the federal US debt that is the major issue and so to a degree Andyt is correct too. Yes some will leave the US, but look at all the family owned major corporations in the US. They are not mobile. The entire business exists because of the geographic location serving a defined area. Take for example Love Truck Stops based out of Oklahoma. If federal taxes increase are they going to move to Switzerland? The business model does not transfer that easy. Instead they would endeavour to recoup the increased tax from their consumer base and since all their competitors are under the same taxation scheme the whole market place would tend to go up.

My one off example does not take into account other industries such as manufacturing that can and already have moved production out of the country. It is not a simple problem and so a simplistic answer will only cover a samll aspect of the problem instead of being the cure.

The bottom line is for the good of the nation and future generations the US needs to get its spending in line with its income. It will be painful, but it is necessary.

[martin14]

Caelon wrote:

Take for example Love Truck Stops based out of Oklahoma. If federal taxes increase are they going to move to Switzerland? The business model does not transfer that easy.

It is very easy to create a holding company in a tax friendly area;
Switzerland, Gibraltar, US Virgin Islands.
And even easier to strip profit out of a company in order to transfer it out
of a country.


Better to encourage people to pay a reasonable amount of tax.

[DanSC]

Zipperfish wrote:

And dad, you're going to have get rid of the champagne alarm system, paying people to spy on the neighbours and the mounted machine guns in the front yard.

Not to mention giving out money to other households in the neighborhood that don't like you.

[DanSC]

martin14 wrote:

Better to encourage people to pay a reasonable amount of tax.

Exactly. The 35% corporate tax rate means companies just "officially" move to other countries and the USA receives no corporate taxes. Bring the rate down to, say, Canada's level and the companies might start sending their corporate taxes to the U.S. Treasury.

[BartSimpson]

Caelon wrote:

The bottom line is for the good of the nation and future generations the US needs to get its spending in line with its income. It will be painful, but it is necessary.

Agreed. And since raising taxes 50% across the board would whack the snot out of an economy that's already reeling from several years of recession (depression, really) then the best choice is to cut spending.

[andyt]

The US has been cutting taxes for 30 years now, and all it's done it put them into deep debt. Even during the boom times, the debt increased as taxes decreased. It's madness to think that's they way out for them, and that they could make the kinds of cuts necessary to pay off the debt without raising taxes. They won't have a state left. Madness I tell you.