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Old 12-23-2017, 11:09 AM
 
4,204 posts, read 1,549,461 times
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Are the new Trump tax cuts really tax cuts, or are they tax subsidies?

The federal government is running a $700 billion deficit. The tax cut will result in an immediate loss of revenue on the order of $140 billion for 2018. That $140 billion must be financed by the selling of Treasury bonds. Interest on those bonds will be paid for by taxpayers for years to come.

In 2017 Bob paid $10,000 in federal taxes. In 2018, his taxes will fall to $8,000 due to the tax cut. Bob thinks, great, I get to keep more of my own money. But in reality he has received a $2,000 subsidy from the government in the form of publicly financed debt. This is exactly what the government is doing: they are using public debt financing to help subsidize people's tax bills.

The only time a tax cut allows you to "keep more of your own money" is when the government has a budget surplus. In that case the tax cut can be granted without the need for public debt financing and no subsidy is involved.
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Old 12-23-2017, 11:16 AM
 
Location: Fairfax County, VA
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We had budget surpluses in this country for four years. Then Bush-43 came along and did away with them. Soon we were running record deficits instead.
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Old 12-23-2017, 11:26 AM
 
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Now that we are going to see some tax cuts, it is indeed time to see some spending cuts. It seems that administration is getting a lot of flack for starting with the EPA. Let me see 15,000 plus employees and a budget that comes out well over a half million dollars per employee and costs of compliance (over what is and needs to be spent for safety) that is estimated at about $350 billion per year. Just cut back the EPA to a more manageable few thousand employees with less nonsense regs and the tax reductions can be more than handled.
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Old 12-23-2017, 11:33 AM
 
Location: Fairfax County, VA
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How many lives have been saved by the EPA since Nixon launched it? How about OSHA?
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Old 12-23-2017, 11:46 AM
 
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Quote:
Originally Posted by jrkliny View Post
Now that we are going to see some tax cuts, it is indeed time to see some spending cuts.
Two thoughts:

1. Ryan said the "spending cuts" will likely mean cutting back on Social Security and Medicare. This will not go over very well.

2. Spending cuts are recessionary. Government spending is about 36% of GDP. Slash spending and GDP goes down as well.
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Old 12-23-2017, 11:49 AM
 
Location: OH>IL>CO>CT
4,763 posts, read 7,532,120 times
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Quote:
Originally Posted by jrkliny View Post
Now that we are going to see some tax cuts, it is indeed time to see some spending cuts. It seems that administration is getting a lot of flack for starting with the EPA. Let me see 15,000 plus employees and a budget that comes out well over a half million dollars per employee and costs of compliance (over what is and needs to be spent for safety) that is estimated at about $350 billion per year. Just cut back the EPA to a more manageable few thousand employees with less nonsense regs and the tax reductions can be more than handled.
How about some cuts in military spending ?

Will another aircraft carrier stop the next Boston Marathon-style bomber ?
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Old 12-23-2017, 12:19 PM
 
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Originally Posted by Elliott_CA View Post
2. Spending cuts are recessionary. Government spending is about 36% of GDP. Slash spending and GDP goes down as well.
Slash spending and take less money from the private sector. This allows the private sector to increase investment which adds jobs and increases payroll taxes collected by the government.

The fallacy of your posts is that you think that the government can use $1 more effectively than the private sector.
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Old 12-23-2017, 12:31 PM
 
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Originally Posted by Teak View Post
Slash spending and take less money from the private sector. This allows the private sector to increase investment which adds jobs and increases payroll taxes collected by the government.

The fallacy of your posts is that you think that the government can use $1 more effectively than the private sector.
Not a fallacy -- it's a fact. Under the current economy, the private sector is awash in excess capital and cash. The "global savings glut" means that total cash resources worldwide exceeds the amount of money needed for investment in production. That's why interest rates are so low, the excess cash is parked in bonds and money markets.

The government is a pass-through. Give them money and it either goes to individuals as direct payments or they hire contractors. Either way those dollars are 100% stimulative because they get spent. All money that goes to government ultimately ends up in the private sector. OTOH, if you give the wealthy money, it just adds to the savings glut and a lot of the money will just sit as dead money.
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Old 12-23-2017, 12:32 PM
 
Location: Fairfax County, VA
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Originally Posted by Teak View Post
The fallacy of your posts is that you think that the government can use $1 more effectively than the private sector.
The private sector is actually a bastion of waste, fraud, abuse, and egregious mismanagement that would never be tolerated in the federal sector at least. State and local governments are meanwhile too numerous, diverse, and obscure for anyone to be certain about them.
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Old 12-23-2017, 12:41 PM
 
Location: Fairfax County, VA
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Quote:
Originally Posted by Elliott_CA View Post
The government is a pass-through. Give them money and it either goes to individuals as direct payments or they hire contractors. Either way those dollars are 100% stimulative because they get spent. All money that goes to government ultimately ends up in the private sector. OTOH, if you give the wealthy money, it just adds to the savings glut and a lot of the money will just sit as dead money.
A key fact that was ignored in 2001-03 as well. GDP equals the supply of money times its velocity. When a redistribution shifts funds from those who spend more quickly to those who spend more slowly, the results can become contractionary, not expansionary.
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