Thursday, July 28, 2011

Are we a 15 percent society or an 18 percent society?

Over the long term, federal revenues as a share of GDP have averaged around 18 19 percent over the past 20 years.  Currently, federal revenues as a share of GDP are about 15 percent.  Some of the difference arises from lower tax collections because of the recession, but most is the result of the Bush Tax cuts.  Obama cut taxes even more (yes, he has cut taxes--payroll tax reduction, housing tax credit, etc.).

The question is, do we want to be a 15 percent society?  I guess the Teapartiers would say yes.  But this would not just mean that we need to do things like slowly extend the retirement age and bend the cost curve on health care--it would mean that to reach long run sustainability, we would have to cut current benefit levels.

Even Paul Ryan's budget plan presumes revenues would increase to 18 19 percent of GDP--it just doesn't specify how to get there.  Personally, I think we can afford to spend even more on the sick and the elderly (and children), but we need to be willing to pay for it.  For the time being, I would be happy to return to the long-term revenue average.

If we follow the 15 percent path, we will be kicking grandmothers out of their wheelchairs.  We will be allowing children to be malnourished.  This is not demagoguery.  This is the cost of not being willing to tax ourselves at the level we have for many years taxed ourselves.


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Valen said...

Imagine if you lost your good paying job. You had to go bankrupt because there was no work in your field. Four years later you are still working at minimum wage. You have been through a bankruptcy, but your second mortgage is still on the books. You have an adjustable rate mortgage that is at 3% today and ability to apply for no credit checks pay day loans. But you know that in the future the rates will go up. You can not re-finance to a fixed rate, with the second mortgage still on the books. The second mortgage holder will not write off their valueless lien. You are one of the people that receives that letter that your second loan has been written off.