Why do I feel like we are splitting hairs here? This article talks about a 1.5% cut in government spending (or increases of up to 3.8%). Really? That's what I call a rounding error. It's bullshit cuts (or increases) in spending that will do absolutely nothing real to solve our problems.
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TL;DR: We need to cut in the order of 50% from the Federal Budget in order to hope to be debt-free in FIFTY YEARS.
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I decided to go out and finally get a sense of where we stand. We have huge annual deficits and owe a lot of money. Let's fix it.
Two goals:
1- Get back to a balanced annual budget.
2- Erase our national debt in 50 years.
To simplify we are not going to add interest to our debt.
Sensible? I would prefer to get back to zero debt in ten years, but let's go for 50 instead. In other words, our kids are going to be paying off the national debt for most of their adult lives.
How to do it? Tax increases? Spending cuts? Both?
Let's say both.
Now, I am going against my grain here because I don't believe in paying more taxes. In fact, I want to see our tax burden reduced to flat 15% for everyone, corporations included. But, that's a different subject.
For the purpose of this exercise I'll go with the "tax more" crowd. No problem.
OK, how much?
Well, let's say that we really go to the dark side and choose to pay 75% of our national debt and deficit via tax increases and the rest by reducing expenditures (various programs, entitlements, military, whatever). That should make those who believe in higher taxes very happy. Fully two thirds of the money we need will come from higher taxes.
To go with a popular theme, let's tax the rich and leave everyone else alone. I propose that this mathematical exercise only only increase taxes on those earning $200,000 or more per year. Again, this is going against every fiber of my body, but I want to "go with the flow" in the interest of just seeing what these numbers look like.
OK, the very first fact that comes out of this discussion is that our government needs to cut spending by 25%. Simple numbers. Not 1.5%, not 3%. 25%. I don't care where it comes from, this is just math. Someone needs to figure out how to cut an honest 25% in spending. The rest will come from increased taxes.
But, wait, our government is also responsible for paying for 25% of the accumulated national debt by cutting costs. So they have to cut further than just the equivalent of 25% of the annual deficit.
OK, I know a little math and know how to use Excel, let's play with some numbers.
US national debt: $16,000,000,000,000
US annual federal deficit: $1,500,000,000,000
US Federal spending: $4,000,000,000,000
I rounded some of it and extrapolated to the end of the year just to get to play with easy numbers.
As we agreed, we are going to be debt-free in 50 years. What's the total annual amount of money we need to raise, if you will, in order to do accomplish this?
Annual obligation, every year for 50 years: $1,800,000,000,000
How much of this does the Federal Government have to pay?
Federal government contribution via spending reductions (25%): $450,000,000,000
Percentage reduction with respect to total annual Federal spending: 11%
So, the government has to find half a billion dollar in spending cuts for 50 years. We do the rest by increasing taxes on the "rich".
I'll use data from the second link because it is a little more granular. Here are the numbers I'll use. Number of people making more than n, where n is the left column:
What does this mean? If we decide to tax people who make $200K or more, there are about four million of them. If, instead, we decide to tax those who make one million or more, there are 236,883 of them.
We agreed that we are going to cover 75% of the money we need to raise through taxation. Let's see how much each individual would have to pay if we apply this to each group.
Total funds required: $1,800,000,000,000 * 0.75 = $1,350,000,000,000
Per capita cost depending on chosen earning threshold:
This means that if we choose to tax those earning $200K or more, they'll have to pay $343,994 per year, for the next FIFTY YEARS, in order to become debt-free.
If, instead, we set the threshold at one million dollars or more in income, they'll have to pay $5,699,016 per year for the next 50 years.
Clearly this is impossible.
OK, let's go with a progressive system. Each group will share the burden in a progressively increasing proportion. Those who earn more will pay a higher percentage of the money we need to raise.
Well, it looks alright to begin with, doesn't it? Make $200K or more, you get to pay about $4,000 per year for the next fifty years. $500K or more? about $50K per year for the next 50 years. Tough, but, hey, got to pay your "fair share" right?
The problem becomes very evident as you get past these initial brackets. You'd have to take half a million dollars a year from people earning in the one million bracket. That's not sustainable. Certainly not for 50 years.
One more thing: These are tax INCREASES. In other words, the guy making a million bucks will have to pony-up $500K more than what he (or she) already pays in taxes. That means that the vast majority of the money they earn would have to be handed over to the Federal Government for the next fifty years. Raise your hand if you think that's sustainable.
Now, as you get past the million dollar bracket the situation becomes even worst. The highest earning groups would have to pay MORE than what their income to Uncle Sam for the next fifty years straight. If you happen to earn ten million a year you'll have to hand over over eighty million every year for the next fifty. Right.
This is simply raw data and basic arithmetic. No magic. No funny business. And, yes, I am not even adding-on the interest on our debt. If this doesn't make the "let's tax the rich" crowd reconsider their ideas I don't really know what would. There is no way to pull out of this mess thorough taxation without SEVERE spending cuts. Fire-up Excel and do the math yourself. Unless you create some kind of an alternate reality with different mathematical theories, the results should be pretty darn close to these.
Also note that I was very generous and proposed paying off the debt in half a century. That's a long time.
Well, OK, how can we make this happen?
Easy math:
No tax increases and cut $1,800,000,000,000 in spending
every year, for the next 50 years, from the Federal budget.
Fifty years. In half a century we would be solvent again. If that doesn't make you sick in the stomach you are stronger than I am.
OK, let's just get back to a balanced budget and raise taxes to deal with the rest:
Cut spending by $1,500,000,000,000 every year for the next fifty years.
Pass a balanced budget amendment to force the issue.
How much do we have to raise in annual tax revenues in order to be debt-free in fifty years? $ 300,000,000,000
Annual obligation, every year for 50 years: $300,000,000,000
Now 100% of this will be paid through tax increases.
How much if we tax everyone at or above a certain annual income equally?
It doesn't really work at all, does it? Remember, this is tax money due ABOVE what these people are already paying.
OK, let's go with the same progressive approach as used before:
bracket share of burden corresponding amount per taxpayer,per year percent of total income
$200,000 - $500,000 1% 3,000,000,000 938.96 0.5% 0.2%
$500,000 - $1,000,000 2% 6,000,000,000 12,181.06 2.4% 1.2%
$1,000,000 - $1,500,000 4% 12,000,000,000 111,012.43 11% 7%
$1,500,000 - $2,000,000 8% 24,000,000,000 542,091.12 36% 27%
$2,000,000 - $5,000,000 10% 30,000,000,000 484,511.77 24% 10%
$5,000,000 - $10,000,000 25% 75,000,000,000 5,236,698.79 105% 52%
$10,000,000 or more 50% 150,000,000,000 18,129,079.04 181% 181%
Once again, it looks good in the beginning but falls apart very quickly as you go up the tax brackets. This is not workable.
By this time you should have a solid idea that we've been spending and borrowing money like drunken sailors for a long time. Even with a fifty year timeline we can't fix this problem through taxation. At least not if your goal is to tax the "rich".
When I hear politicians parrot the phrase "fair share" I, to quote Pink Floyd, get filled with the urge to defecate. It sure is a nice phrase to pound into the heads of the masses who, non interested in looking at even simple data and doing some math, seem to swallow this shit up and get behind it.
"Fair share"? What the fuck is that? "Fair share" is when we each pay for what we eat at the restaurant. Would it be fair for me to pay for someone else's meal just because I earn more? Not really. "Fair share" might be that my neighbor and I split the cost of rebuilding our common fence. Each pays half of it. That's fair. "Fair share" could also mean that if I break something I get to pay for it. That's fair. Asking those who make more to hand over 90% (or more) of their income in order to cover our drunken-sailor spending spree isn't "fair" in any measuring system anyone might care to concoct.
It is beyond obvious when one looks at the data and applies just a little basic math that the first thing that needs to go is the spending. And, yes, it will hurt, but it needs to go.
If we did that, if we cut $1,500,000,000,000 from the Federal budget every year, we'd still have to come-up with $300,000,000,000 every year for the next 50 years to become debt-free. About 140,000,000 tax returns filed every year. If we all pay the same portion of the $300,000,000,000 we would all have to pay $2,143 per year, every year, for the next fifty years.
Am I driving home just how bad this problem is?
A progressive taxation system could be used to reduce the burden on those earning less, but you can't start at the $200,000 bracket, that simply won't cut it. Everyone has to pay something and, even then, it looks ridiculous:
Remember, you are looking at something we'd have to do for fifty years. To paraphrase Ross Perot, the sound you would hear would be the huge sucking sound of jobs, innovation, investment and people leaving our country. For fifty years.
The solution is painful and obvious: Cut spending and cut it to the bone. In other words, what every family has to do: Live within or below your means. It is high time that we act like adults and do what must be done. We are looking at fifty years of agony no-matter what. We need to tell unions to go pound sand and forget about their luxury pensions and benefits. We need to fire government workers en-masse and compel them to become more useful members of society. We need to end ridiculous government workers pensions, benefits and spending. We need to end entitlement programs as they exist today.
We need to cut, cut, cut and then cut some more.
Above all, we also need to go back to being the most entrepreneurial and business-friendly nation in the world. We need to make it so attractive to do business in the US that we usher-in a new age of technological and entrepreneurial revolution. We do that and we might just be able to deal with our problems in 25 years instead of 50.
There are a million different ways to look at this problem, but I feel that the fundamental numbers are inescapable. Add interest payments and other costs I did not account for and the picture is even worst. So, yes, going back to the article that is the subject of this thread: 1.5% spending reduction? What a joke!
I'd love to see you post the numbers. I think that there are limits to what it reasonable. If tomorrow the government decided that, say, in a year, I need to hand-over half the value of my assets as a new tax I can probably assure you that my assets would evaporate in a year. In other words, they'd get zero.
I'd like to see our government --at all levels-- be far more responsible with our money and our future than they have been in the last fifty years.
Congratulations, you just figured something out that your predecessors didn't in 8 years: war is expensive, and so is letting the banks get so big that we have to bail them out. Alas, we can't play the same game from 2000: 5.6 trillion dollars. That would have been much easier.
I started to type out a big reply, but my startup is more important than correcting you. ;) But the main problem is that we don't have the jobs. Without the jobs, we don't have income to tax. Decreasing wages (business friendly) doesn't increase the tax base. Decreasing environmental regulations punts the problem down the road -- eventually, we have to clean the problems up, and deal with the increased health problems as the companies that caused the problems declare bankruptcy. (Look at the superfund sites history for some of the problems.)
There's a much bigger problem. The world doesn't need more of what we're selling. The more we save, the fewer jobs that are created. The less we save, the more precarious our financial situations are when crises happen like 2008. (Let me remind you that starvation is a root cause for revolution, and civil war is indeed possible in the US.)
Inflation is painful, but it is a key portion of the way out. The second piece is reducing military R&D to 10%, killing all non-naval bases outside the country, accepting that we will have to rebuild the military in the case of crisis and that Israel and Taiwan may have trouble without us. Allow Japan to rebuild its military -- that will help keep China at bay.
Slashing military R&D will release some incredible engineers to innovate outside the military sphere.
We then drastically cut homeland security and accept a few more terrorist events every decade. Keep the water aquifers and nuclear bases safe, but the return on investment is poor.
If everything else stays constant (even accepting an increase in health care costs), we are well on the way to bringing ourselves to paying off our war debts, at the least.
I suggest that this needs to happen when the economy is stronger, not weaker, mind you, else we may cause a larger crisis than we solve.
I read Krugman's articles you posted. I disagree. He is known to be a far left-wing ideolog. I am not discussing this from an ideological perspective but rather a mathematical perspective. I detest both the Democratic and Republican parties for what they've done to us over the last, say, fifty years. They both have blood in their hands.
I recognize that looking at this mathematically takes time that many of us don't have. I couldn't sleep last night and was too mentally tired to program, so I blew an hour playing with numbers in Excel. I don't expect everyone to do this.
However, having said that, I would urge you and others not to jump at conclusions before taking the time to quantify them. This is about arithmetic. It's fine to have beliefs, we all have them, but at one point you have to fire-up a spreadsheet and verify --in some form-- if what you believe adds-up.
Yes, I did not include inflation. I also didn't include interest. I also did not include mortality rates. Or the reduction of the workforce. Or the increase in retirees in proportion to working Americans. Or the erosion of the industrial base due to our increasing costs and the reality that manufacturing in the US is nearly impossible today. And so on.
In other words, there are a lot of additional factors that could be added to the model in order to try to get more realistic numbers. Admittedly my calculations are only an approximation of the simplest possible model. The way I look at it is that it provides a first-level sense of proportion of the problem. It's the start of a conversation and the exploration rather than the final solution. I understand this and so should others.
As a first approximation it shows a really grim picture of what we've done to our country in the last fifty years. This is not about this administration or the prior. This is about bad decision making for a long, long time.
Krugman's use of the debt situation after WWII to justify his point of view is plain old bullshit with a cherry on top. The economic expansion we had after WWII is without precedent. The US was the manufacturing capital of the world. We made everything. Countless industries rose and flourished. From aircraft to electronics and beyond. The world went from the "technological dark ages" if you will into a pretty fantastic era of invention, development and expansion. And, as I said, the US was at the center of that.
That is not the situation we have today. China is the center of attention. China is where jobs are going. China is where you manufacture stuff. We can't even attempt to manufacture an iPhone in the US. You could not do it. And, believe me, I know, I owned an electronics manufacturing company for twenty years. Finally said "fuck it", shut it down and focused on the software portion of our business. Eventually you get sick and tired of contracts always going to the Chinese because they come in at half your price and there is no way to compete.
So, Krugman is absolutely wrong and is using typical ideolog spin to create and justify an alternate reality. Words are easy. Numbers are hard and they don't lie. I'd like to see him (and anyone else who wants to propose any kind of a solution) publicly post a spreadsheet with a solution to the problem. Then we can evaluate his ideas from a mathematical perspective, all ideology aside. I'd like to see him start a manufacturing business in the US, hire nothing but unionized workers with ridiculous pay and benefits, comply with all rules and regulations and succeed. He couldn't do it. He wouldn't know how. And he'd quickly discover that his ideology sounds great in NYT articles but is utter bullshit where the tire meets the road. Just nice-sounding words, not reality.
A lot of this talk is analogous to basic physics approximations "let's assume that a cow is a uniform sphere of milk moving in a vacuum". That's all well and fine, but a cow isn't and it certainly does not move in a vacuum, so the real answer will be a little different and far more complex to arrive at.
So is the case for my simple exploration of the numbers. It is useful in that it provides a simple answers to get a rough idea of where we might be. It isn't useful because, well, it's a cow and it isn't moving in a vacuum. Yet, Jedi tricks are not real, so the problem requires a real solution.
As for your proposal to slash military spending and homeland security, etc. That's fine and dandy. I want all of our military bases on foreign soil shut down. All of them. And I want our military to be cut in half. And, of course, no more financial aid to any country --not one.
But, guess what, if you look at the numbers --what an asshole! always wanting to look at real data!-- that would be a good step, but not a solution at all:
If you cut the entire Defense Department in half you are only addressing about 9% of total spending.
Look at the chart. The bulk of our spending is in entitlements and the wonderful "Discretionary" slice. According to my simple spreadsheet model we'd have to cut our spending in HALF for FIFTY YEARS in order to get back to even-Steven. HALF for FIFTY YEARS. Even if I was 100% off you'd have to cut 25% of our budget for the same fifty years. In other words, focusing on military spending will do almost zero to fill the hole we have dug ourselves into.
Finally, there's the assertion that the main problem is that we don't have jobs and that is the key issue. OK, I'll agree. Here's the problem, where do jobs come from? And why are jobs created? I just closed a pretty nice manufacturing operation about two years ago as my large customers started to default on contracts. Guess what, I am not re-opening that venture. No fucking way. I am done with manufacturing. Why? Can't compete. Why? Taxes, costs, unions, regulations, bullshit, lawsuits, etc. Those jobs are not coming back. Not unless we get our shit together and become uber business-friendly. This does not mean going down to third word wages. It does mean getting the government monkey off our backs so we can do what we know how to do best: innovate and produce.
You say that you are part of a startup. Presumably a software startup. Rest assured that what you are doing is a hundred, no, a million times easier and cheaper than playing with physical product. There's a reason why companies like YC don't touch hardware startups: the probability for failure is far greater and the cost to achieve critical mass is at least a thousand times higher than for software. Most people who have only touched software as a means to earn a living don't develop a sense of just how tough things can be in other segments of the economy, and, in particular, in the industrial and consumer manufacturing segments. Software is great. I am focusing on that 100% today. However, a typical software business doesn't employ the numbers of people that industrial and manufacturing enterprises employ. And, frankly, it is far easier to outsource and find great talent around the world. You have industrial companies like GE who employ some 300,000 people. And there are many examples like that. I could go on, but I have to get back to coding.
Bottom line: Government should only spend the absolute minimum required to run our affairs and nothing more. They should be out of social programs, healthcare and other crap. They are the managers of our store, and that's all they should be spending money on. We have given them too much leash and now we are paying the consequences of our inattention.
Any discussion of this topic really needs to be backed-up by an accompanying economic model showing that the conclusions are mathematically possible. I went through a rough first approximation. I'd love to see someone smarter than me show me what a more refined model looks like and how the problem can be solved in half the time and with half the cuts. Mathematically, not ideologically.
the problem is that you can't have our current levels of unemployment without a welfare state or serious social unrest (and usually both.)
We need the jobs. Now, my understanding is that in terms of dollars, our manufacturing sector is growing, not quickly, but it is growing; but in terms of jobs, it's shrinking. Technology marches on. Chinese labor doesn't usually compete with American labor. Chinese labor competes with American machines.
China isn't the problem; the fact that we've automated away manufacturing the way we've automated away agriculture is. 200 years ago, nearly everyone was involved in some sort of agriculture or agriculture-support position. Now? that's less than 2% of the economy. We found things for people to do when we automated away nearly all the agriculture work. We need to do the same thing now that we've automated away nearly all the manufacturing work.
It's not the tax rate that stops people from hiring. You could argue that it's the tax complexity; I mean, the complexity does cause problems and increase risk. but I don't think that's the real problem. I think the real problem is that nobody has come up with a new business model to employ the masses and turn a good profit while paying a reasonable wage.
China is doing it by having humans do work that Machines could do better. Essentially turning back the clock on automation of manufacturing. Personally, I think that's a bad idea. For the things that Machines can do, they are usually way better than humans. And I don't think it would work for us, either, because the humans involved create less value, and thus can't be paid what we'd consider a reasonable wage. It works for China because they have so many people that are so poor that what we'd call an unreasonably small wage is a step up. That's not where we should go with this. We should come up with a new class of jobs; start new businesses that do new things that turn the labor of the masses into more value than having them poorly mimic the work of machines.
so yeah. what I'm saying is that living in a state with no debt but where only one person out of five can get a job? that's worse than living in a state with near full employment and a bunch of debt. Even if you don't care about human suffering, think of the crime rate and how much effort you'd need to put into keeping your stuff safe.
The jobs problem needs to be solved first. I mean, I'm not saying that the government is the solution to the jobs problem (maybe they have a part to play and maybe they don't) - just that the jobs problem is a much bigger deal than the debt problem. And as the previous poster pointed out, it's easier to solve the debt problem once we have more people working and paying taxes.
This is very complicated because we (and the world) allowed it to get to this point. Yes, China is the problem and, at the same time, it isn't.
China is automating (and can automate further) just as much as we can.
I have manufactured in China. And the work I did was not done in sweat shops full of people doing mindless work. No, we are talking about reasonably skilled workers running very nice high-tech CNC machines to produced machined metal parts, injection molded plastics as well as electronic assemblies. In some cases the end product cost just as much as it could cost in the US if we could do the same job. Of course, in other cases it cost significantly less. In all cases quality was beyond good.
They can do the same things we do and adopt the same manufacturing technologies we adopt. The world is pretty flat in that respect.
What's the difference then?
Well, labor cost is one piece of the puzzle. And, depending on discipline, not necessarily the largest element in the equation.
The problem is multi-faceted: taxes, regulations, environmental restrictions, OSHA, unions, pensions, lawsuits, etc.
And the other factor is that they have a government and business leaders who's sole focus in in winning. They want to win this in the world stage. And they are executing a strategy as flawlessly as they possibly can. In the mean time we are making and continue to make all the wrong decisions. It's like watching a bad chess game: One bad move after the other.
Take industries such as the light aircraft industry. It has been all but killed-off by lawsuits, regulations and other issues. You'd be crazy trying to spin-up a light aircraft operation in the US, even if you have great ideas.
When I was manufacturing there were components (lots of them) that you simply could not buy in the US (meaning, US-made) at any price. We just don't make the stuff any more. This spans from chips to even certain types of glass. We have managed to kill-off whole layers of the supply chain.
And that's the other factor: The supply chain. China has been outstanding at developing manufacturing regions where the entire supply chain exists within a concentrated geographic area. This, from a product development and manufacturing standpoint is the equivalent of the software "killer app". We can't compete because our supply chain is horribly fragmented in so many places that it saps competitiveness out of the system.
When statistics get thrown around about the manufacturing sector growing you have to dig deeper and be very, very critical of the data. Are manufacturers growing in terms of dollar amounts while, at the same time, being forced to outsource more of their supply chain and subassemblies to places like China? I don't know. I'm not in that game any more and I am glad. But I can tell you with absolute certainty that, at a certain point in the life of my manufacturing business it became exceedingly obvious that the ONLY way to compete was to start to insert more and more Chinese-made components and subassemblies into our products. No choice. We are far too far down the slippery slope.
This is something that happened over many decades. As such it will take decades to fix --if that's even possible. Sorry to be too negative but I've been in the trenches and have had skin in the game for far too long. I am not a casual observer but rather someone who invested very sizable amounts of my own money to be in the game and have the scars to prove it.
And, he was absolutely on the money on that one. I suspect that if you could ask for clarification he would bring up such things are taxes, laws, lawsuits, unions, regulation, environmental laws, supply chain structure and other factors.
It would require a very solid and decisive cultural, financial and political shift to bump us over into a different path that could lead to a serious and solid recovery at all levels.
And that's the problem. While we are preoccupied with bullshit here in the US some around the world are making the right decisions on a daily basis. They are investing in a future that we will not be ready to face without massive challenges. That's the truth.
We can choose to look the other way and pretend this can be fixed by raising taxes on a few people who make a little more money, gain votes and move on, or we can take this shit seriously and transform our country into a business powerhouse at all levels.
eh, but if china is automating as much as we are, then there aren't going to be a lot of jobs in manufacturing even if we can compete with them. My understanding is that manufacturing just isn't as labor intensive as it was. Go back to the agriculture example. If a sector is automated away... then we need to find something else for the masses of workers to do, just like we did after Agriculture was automated away.
My point is that the fact that we haven't found new things for these people to do is the biggest problem. A far larger problem than owing paper money. (I'm not saying that debt isn't a problem; it certainly is. I'm just saying unemployment is a bigger problem.)
Are you suggesting that I'm wrong, that manufacturing jobs aren't being automated away? (It sounds like you would know better than I would.) I mean, if there are enough manufacturing jobs to go around, and China is just taking them, then that's a different problem. But my understanding is that the days of having large number of labor jobs in the manufacturing sector are gone; it's now mostly machines, with Engineers making new designs and technicians to keep the machines running.
The thing is, you need something for the masses to do. That used to be manufacturing, but not anymore. Until we figure out the answer to that, nothing else we change matters.
Sensible? I would prefer to get back to zero debt in ten years, but let's go for 50 instead. In other words, our kids are going to be paying off the national debt for most of their adult lives.
How to do it? Tax increases? Spending cuts? Both?
Let's say both.
Now, I am going against my grain here because I don't believe in paying more taxes. In fact, I want to see our tax burden reduced to flat 15% for everyone, corporations included. But, that's a different subject.
For the purpose of this exercise I'll go with the "tax more" crowd. No problem.
OK, how much?
Well, let's say that we really go to the dark side and choose to pay 75% of our national debt and deficit via tax increases and the rest by reducing expenditures (various programs, entitlements, military, whatever). That should make those who believe in higher taxes very happy. Fully two thirds of the money we need will come from higher taxes.
To go with a popular theme, let's tax the rich and leave everyone else alone. I propose that this mathematical exercise only only increase taxes on those earning $200,000 or more per year. Again, this is going against every fiber of my body, but I want to "go with the flow" in the interest of just seeing what these numbers look like.
OK, the very first fact that comes out of this discussion is that our government needs to cut spending by 25%. Simple numbers. Not 1.5%, not 3%. 25%. I don't care where it comes from, this is just math. Someone needs to figure out how to cut an honest 25% in spending. The rest will come from increased taxes.
But, wait, our government is also responsible for paying for 25% of the accumulated national debt by cutting costs. So they have to cut further than just the equivalent of 25% of the annual deficit.
OK, I know a little math and know how to use Excel, let's play with some numbers.
How much do we owe?
http://www.usdebtclock.org/
Here are the numbers I'll use for this exercise:
I rounded some of it and extrapolated to the end of the year just to get to play with easy numbers.As we agreed, we are going to be debt-free in 50 years. What's the total annual amount of money we need to raise, if you will, in order to do accomplish this?
How much of this does the Federal Government have to pay? So, the government has to find half a billion dollar in spending cuts for 50 years. We do the rest by increasing taxes on the "rich".Here we go:
How many people make $200K or more?
http://en.wikipedia.org/wiki/Household_income_in_the_United_...
http://www.lazymanandmoney.com/how-many-people-make-more-tha...
I'll use data from the second link because it is a little more granular. Here are the numbers I'll use. Number of people making more than n, where n is the left column:
What does this mean? If we decide to tax people who make $200K or more, there are about four million of them. If, instead, we decide to tax those who make one million or more, there are 236,883 of them.We agreed that we are going to cover 75% of the money we need to raise through taxation. Let's see how much each individual would have to pay if we apply this to each group.
Per capita cost depending on chosen earning threshold: This means that if we choose to tax those earning $200K or more, they'll have to pay $343,994 per year, for the next FIFTY YEARS, in order to become debt-free.If, instead, we set the threshold at one million dollars or more in income, they'll have to pay $5,699,016 per year for the next 50 years.
Clearly this is impossible.
OK, let's go with a progressive system. Each group will share the burden in a progressively increasing proportion. Those who earn more will pay a higher percentage of the money we need to raise.
How many people in each sub-group?
Unlike the prior count, this table simply shows how many people are found within the given brackets.Let's have them carry the burden in the following proportions:
How much would individuals in each group have to pay then? Well, it looks alright to begin with, doesn't it? Make $200K or more, you get to pay about $4,000 per year for the next fifty years. $500K or more? about $50K per year for the next 50 years. Tough, but, hey, got to pay your "fair share" right?The problem becomes very evident as you get past these initial brackets. You'd have to take half a million dollars a year from people earning in the one million bracket. That's not sustainable. Certainly not for 50 years.
One more thing: These are tax INCREASES. In other words, the guy making a million bucks will have to pony-up $500K more than what he (or she) already pays in taxes. That means that the vast majority of the money they earn would have to be handed over to the Federal Government for the next fifty years. Raise your hand if you think that's sustainable.
Now, as you get past the million dollar bracket the situation becomes even worst. The highest earning groups would have to pay MORE than what their income to Uncle Sam for the next fifty years straight. If you happen to earn ten million a year you'll have to hand over over eighty million every year for the next fifty. Right.
...continued on next post due to HN length limitations here: http://news.ycombinator.com/item?id=4333013