This article was published in the Wall Street Journal on Saturday, May 30, 2020 “Democrats Stick With Tax-Rise Policies as They Make Plans for 2021 Majority.”
The article is specific about how some Democrats want to solve income inequality issues, both old and new, by raising taxes on corporations and rich persons.
It makes me wonder if this is an earnest effort to help those harmed by the impacts of Covid or just another excuse to accomplish what they always want to do politically.
In this piece today I do not want to argue what sorts of economic policy we need today to heal the many harms to the economy. I wish I knew. But I do want to remind us about where we were before Covid destroyed our economy.
Below is a table I extracted and modified from the Congressional Budget Office. The CBO periodically projects the government budget into the future using requirements from enacted legislation and assumptions about the economy. This projection was done in early 2020 before anything was known about Covid.
The point of the table is to show you the incredible irresponsibility of our leaders.
Despite decades of talk about the potential harm done by government deficits (spending more than we take in taxes), the one-year deficit in 2019 goes from a little less than $900 billion to about $1.3 trillion in 2025. That's an increase of 33 percent. Clearly there is no intent to reduce annual deficits.
This reluctance to do what is responsible, leads to a total debt increase from $17 trillion in 2019 to about $24 trillion in 2025. That's a 41 percent increase. Hmm. Our debt was too large in 2019 so we raised it by 41%. Wow.
Was this because they expected the economy to tank? It sometimes makes sense for the government to have larger deficits to offset a weak economy. Nope, Gross Domestic Product was expected to rise by 26% in those 6 years.
Was the larger government deficit and debt the result of big tax cuts? I don't think so. Tax revenues were expected to rise by 32 percent. Corporate taxes expected to rise by 68%.
Did it have anything to do with paying interest on the past accumulated debt? Maybe. Notice interest on the national debt is expected to rise by 50 percent.
What about overall government spending? It appears it rose no faster than tax revenues. But here the percentages are misleading. Since spending is much larger than taxes, notice that spending increases by $1.4 trillion while revenues rise by $1.1 trillion. This difference contributed to the larger deficits and debt.
So what? The table is all about what was expected before the Covid tornado hit us. It's water under the bridge. Maybe. What is not water under the bridge is an incessant desire by some Democrats to reduce income inequality by demanding that rich persons and corporations always pay more...and more. How much is enough?
Is Covid an excuse to continue this bent and legislate what will become even more burdensome permanent taxes on the rich and corporations -- or is it a sincere effort to undertake the right policies to get us through Covid?
The CBO believes that Covid will reduce the rate of growth of the US economy for 10 years. They believe we will lose over $7.9 trillion in output. Thus the next decade could see even larger deficits and debt as Congress taxes and spends more and more.
Does this look like a train wreck coming? How many decades will it take after 2030 to pay down the debt? Or will the US government declare bankruptcy? Is there no way out of this mess? Is there no other way to promote output, jobs, and incomes?
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Table 1. |
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CBO’s March 2020 Baseline Budget Projections, by Category
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That assumes corporate income tax collections will conform to the model. There are many reasons why not ...basically lower income for the working public...I hope we do not have a burst of inflation.
ReplyDeleteAs bad as that looks the reason the US dollar is the reserve currency of the world is no other country's currency is as good as the US dollar; and available in quantity. Kinda like being the tallest midget in the circus.
ReplyDeleteDear Unknown, I get your drift and understand that having a strong universally held currency helps. But at some point even that won't be enough when we don't look tall enough. As for your use of the word midgets, you must be an older person who doesn't understand that we don't say things like that anymore. Insensitive you know. I used to say "the second ugliest girl at the dance" but clearly I don't say that anymore.
DeleteWhat if all of the billionaires in the US gave all of their assest to the US Treasury. I'll bet that would help...oops I think maybe I'm dreaming.
ReplyDeleteSeems kinda wasteful to me. The US government doesn't seem to be too good with money. One year later we would probably have an even larger deficit.
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