History of Tax Rates
History of Tax Rates
David Post • April 11, 2016
Pity today’s students. The old math is out. The new math is in.
Under the old math, higher tax rates meant more tax collections.
Under the new math, lower tax rates mean more tax collections.
A hundred years ago, the old math worked. The first income tax in 1913 had a top tax rate of 7 percent, but that was quickly increased to 73 percent to pay for World War I — we paid for wars back then — and tax collections rose dramatically.
During the Roaring Twenties, tax rates were cut to 25 percent (hmm, Romney’s proposed rate). Government revenues declined 70 percent. The nerve of those times.
When revenues dropped by half in the Great Depression, Republican President Herbert Hoover raised the top rate to 63 percent. Revenues doubled over the next four years. After spending massively on stimulus efforts that cut unemployment 23 percent to 17 percent, President Roosevelt, a very wealthy man himself, increased the top rate to 79 percent in 1936, an election year. He still won by a landslide. In 1937, tax collections rose almost 40 percent, but unemployment also inched up to 19 percent.
World War II led to 94 percent rates — remember, we paid for wars back then. Revenues grew more than six-fold from $7 billion to $45 billion. The old math worked. Over the next 40 years, government raised and lowered rates depending on national needs. Even in the 1970s, we increased taxes to pay for the Vietnam War.
President Reagan embraced the new math and said that lowering taxes would increase government revenues. Voters like lower taxes, so they voted for him. He also convinced us that the government is the enemy, but that’s another story.
Reagan cut tax rates and revenues went up. Here’s a dirty little secret: Reagan increased taxes more than a dozen times and doubled the tax on capital gains. Tax collections remained 18 percent of GDP, the same as the Kennedy-Johnson-Nixon-Ford years. Reagan’s deficits – 4.3 percent of GDP – were the highest in US history except World War II.
Reagan deficits crossed $100 billion for the first time ever, then passed $200 billion, and almost reached $300 billion. President George H.W. Bush called the new math “voodoo economics” and courageously lost his presidency with a tax increase he believed necessary to reduce the deficits he inherited from Reagan.
President Clinton raised taxes to 19 percent of GDP, generated the nation’s only four-year streak of surpluses . . . and created 23 million new jobs.
President Bush, the W, cut taxes, increased spending, and didn’t pay for wars. The Great Recession and tax cuts reduced revenues to 15 percent of GDP. Deficits exploded to $450 billion and eventually hit $1.4 trillion in his last year, the highest ever. Bush W’s tax cuts generated one (yes, One!) million new jobs in eight years. That’s the new math.
The Great Recession unemployment rate is half the Great Depression unemployment rate. The Great Depression took 12 years to recover. Today we expect the economy to recover in one year.
Obama believes in the old math. Romney believes in the new math.
I wonder which math will count the votes.
Veep Power: Romney Clears a Future Ryan Presidential Run
David Post • January 16, 2015
Mitt Romney was right when he introduced Paul Ryan as the “next President of the United States” in Norfolk, Va., Aug. 11.
Ryan is not the “next” president, but Romney handed him the keys to the White House in the future. At the very least, Romney likely handed Ryan the Republican nomination for the presidency — unless Ryan doesn’t want it or something totally unpredictable happens. Not all vice presidents become president, but they have the best shot.
Almost one-third – 14 out of 43 U.S. presidents – were vice presidents before they became president.
Vice presidential candidates make little difference in the outcome of an election, but they do make a difference in future elections. For that reason alone, the vice presidential selection is among the most important decisions that all presidential candidates make.
George Washington’s vice president was John Adams, who became the nation’s second president. Adams’ vice president was Thomas Jefferson, the third president. The presidency is like an Olympic relay race.
President Barack Obama, number 44, is the 12th president during my lifetime. There have been 43 individuals who have held the office; the non-consecutive, two-term Grover Cleveland is counted twice. I wasn’t there when Adams and Jefferson rose from vice president to president, but here’s what happened during my life.
1948: Harry Truman, President Franklin Roosevelt’s vice president, was president when I was born. In fact, in 1948, the year before I was born, another of Roosevelt’s former vice presidents, Henry Wallace, ran for president against Truman.
1952: President Dwight Eisenhower’s vice president, Richard Nixon, later became President.
1956: Candidates appear to feign interest in being a vice presidential nominee. John Kennedy understood the importance, was unapologetic and made no secret of his desire to be Adlai Stevenson’s running mate, even while he knew that Eisenhower was going to crush Adlai Stevenson. Kennedy didn’t get the nomination, but his effort catapulted him onto the national stage. Four years later, he won the nomination and the presidency.
1960: Kennedy’s veep, Lyndon Johnson, became president.
1964: Johnson’s vice-president, Hubert Humphrey, became the Democratic nominee in 1968.
1968: Though Humphrey lost his bid for the presidency, his vice presidential running mate, Ed Muskie, was the original front runner for the Democratic nomination in 1972. President Nixon, a former vice president who lost in the 1960 election, won in 1968.
1972: Nixon’s second vice president, Gerald Ford, became president.
1976: Ford’s running mate, Bob Dole, became the Republican nominee two decades later. Jimmy Carter won in 1976 but lost to Ronald Reagan in 1980.
1980: President Reagan selected George H. W. Bush as his vice president. Bush 41 was elected president in 1988.
1984: Carter’s vice president Mondale was the Democratic nominee.
1988: Like Kennedy, Bill Clinton made known his vice presidential interest known in 1988. He didn’t get it, but also like Kennedy, he won the nomination and the presidency four years later. Lloyd Bentsen, the Democratic vice presidential nominee in 1988, ran and lost in 1992, but did become Treasury Secretary.
1992: President Clinton’s vice president, Al Gore, was the Democratic Party’s nominee in 2000.
1996: Bob Dole, Ford’s running mate, ran against President Clinton and lost.
2000: President Bush’s vice president, Dan Qualye, ran for president though he could not overcome his legacy as a tongue-tripping vice president. George W. Bush (number 43), never a VP, but the son of a president, defeated Al Gore who had been vice president for eight years. Gore’s running mate, Joe Lieberman, ran for president in 2004.
2004: The Democrats’ losing nominee, John Kerry, tapped John Edwards who became a leading candidate in 2008 until his personal life imploded.
2008: John McCain’s vice presidential pick, Sarah Palin, energized the McCain campaign, electrified the nation and breathed life into the Tea Party. Had she run this year, she may have won the nomination. Palin is still drawing larger crowds and has raised more money for statewide races than Romney has. She may continue to do so.
The vice presidency or vice presidential nominee is undoubtedly the best platform from which to launch a presidential campaign.
Ryan is serious, smart, and young. By tapping him, Romney put him on the front row of the national stage. Within the next decade, Ryan will run for president. He will begin that race as the frontrunner, and the presidency will be Ryan’s to win or lose.
Healthcare: Numbers Count
David Post • November 20, 2013
Mark Twain said, “There are lies, damn
lies, and statistics.”
Numbers matter. They tell a story.
Eighteen percent is the amount of national
income spent on healthcare. Almost one of
every five dollars.
With more than 10,000 people reaching age
65 each day and healthcare costs increasing, that
number will reach 20 percent within a few years.
Thirteen percent is the amount of the nation’s
total income we, as a nation, pay in income tax.
$50,000 and $15,000.
$50,000 is the average annual household
income in the country. $15,000 is the annual
cost of health insurance for the average household.
45 percent and declining. 25 percent and
45 percent is the percentage of the population
that is covered by employer provided health
care, even though employer-provided healthcare
is the basis of our national system.
Several years ago, the majority of the population
was covered by employer provided healthcare.
Not only is employer-provided healthcare
declining, but an increasing amount – now 25
percent – of the cost of employer’s cost is now
paid by the employee.
$1 trillion and 26 percent.
Government spending on healthcare, including
Medicare for the elderly, Medicaid for the
poor, and the military and VA, exceeds $1 trillion
and 26 percent of all government spending.
Within ten years, these costs are projected to
$600 billion and 2.9 percent
Medicare costs $600 billion. The 2.9 percent
Medicare payroll tax brings in $225 billion.
Adding the $75 billion in Medicare premiums
charged to seniors and deducted from their social
security checks, only half the cost is covered.
The taxpayer covers the rest.
$400 billion and 11 percent.
Medicaid and military-based health costs
over $400 billion, more than 11 percent of government
spending, all of which is paid by the
Fifty years ago, only 2 percent of government
was on healthcare. Today, it’s 26 percent
and growing. Fifty years ago, less than 5 percent
of the economy was healthcare; today it’s 18
50 million or 16 percent.
50 million people, or 16 percent of the population,
have no health insurance, but receive care
simply by going to a hospital. Taxpayers and
insured people pay more to cover those costs.
Medicare is an example of how insurance
is supposed to work. Everyone pays the 2.9
percent Medicare tax on wages. (The Medicare
tax does not apply to other income.) Everyone,
including the young and healthy, pays over their
lifetime so that all seniors have healthcare.
National healthcare costs can be covered
in one of three ways: The government could
tax and cover everyone like most countries
do. Everyone could be required to have insurance,
the premise behind Obamacare (and
Romneycare). The uninsured and poor could be
45 and zero.
Congressional Republicans have voted 45
times to repeal Obamacare.
None. Zero. Nothing. Nada. Zip. Zilch.
Despite objecting to Obamacare, Republicans
have offered no alternative.
The national healthcare system does not
work and is consuming the economy. Employerprovided
healthcare costs are shifting increasingly
to employees with the taxpayer picking up
increasingly more costs.
Mark Twain was funny, but wrong.
Healthcare statistics are not a lie.
Healthcare costs are consuming more and
more of everyone’s wallet.
To Pay or Not to Pay Taxes
David Post • October 24, 2013
I’m a deadbeat.
Eight years ago, I purchased a two-year old condo in a beautifully manicured gated community with tennis and volleyball courts, swimming pools, clubhouse and gym, and covered parking in Florida across the street from a major league baseball training camp.
A bank offered me one of those ridiculous nothing-down, interest-only loans. I declined, put 20 percent down, and made regular payments. Three years later, Florida real estate crashed, and dragged my condo with it. Two-thirds of its value vanished. It was so far underwater that it could take decades to recover. My bank went broke, the next bank went broke, and the third bank sold my loan to a fourth bank working for Fannie Mae. The banks wouldn’t talk to me, so I couldn’t sell the condo without paying more money in a market gone sour that was not my fault.
Realtors, lawyers, and bankers all gave me the same advice: Default and do a short sale. That took 18 months. During that time I collected $20,000 rent. At closing, I offered it to Fannie Mae, but Fannie Mae told me to keep the money since any payment would cancel the sale.
At the end of the year, it sent IRS Form 1099 on which I had to pay tax. It was the wrong amount – a lot higher and a nice round number. Fannie Mae said if I could prove how much I really owed, it would replace the form.
I knew that defaulting would destroy my personal credit. (Before doing this, I talked with my bank to make sure it wouldn’t hurt my business.) Now, over two years later, I still can’t get a new credit card even though my income is good, my house has no mortgage, my credit cards are paid in full, and I have some savings. Lenders simply don’t trust me.
Last week, most Republicans voted for the U.S. to default on its debt ceiling to prove, somehow, that we are serious about out budget deficits. When countries such as Spain, Russia, and Greece and cities like Detroit defaulted, interest rates and unemployment rates skyrocketed to 25 percent. They still face years of severe financial problems.
The debt ceiling a quirk of history. Before 1917, Congress had to approve all specific types of borrowings. In 1917, the first debt ceiling law was designed to allow the Treasury to issue the types of debt necessary to finance World War I. After Congress passed Budget Control Act in 1974, the debt ceiling was raised simultaneously as Congress passed appropriation bills.
In 1995, after the federal government shutdown, Congress separated the spending authorization process from the debt ceiling. Since then, Congress passed trillions of dollars on spending bills without providing the money to pay those bills.
No other nation has a U.S.-style debt ceiling. No other nation approves spending without making the money available. No other nation is that insane.
My strategic and intentional default did not prove to my creditors that I was a tough negotiator or that I was serious about dealing with my debt. It proved that they don’t trust me, won’t lend me money, and charge extra. It proved that a deadbeat is a deadbeat.
Whatever Happened to Austerity?
David Post • May 9, 2013
What happened to “austerity”?
For the past few years, cutting spending was all the rage.
Now, except for the sequester, Congress shooting itself in the foot—which it didn’t expected to happen and is trying to dismantle—the notion of reduced federal spending has quieted to virtual silence.
The Republicans discovered a mistake in a spreadsheet that showed that its ideas of reduced spending–firing teachers and policemen and firemen–would somehow make the economy grow. Europe tried austerity. Some countries are entering their third recession in six years–only because unemployment dropping from 25 percent to 19 percent counted as a recovery–and are now in more trouble than before they tried budget cuts.
Here at home, we can’t cut. While the Defense Department tries reduce its budget, Congress passes legislation to manufacture weapons DOD doesn’t want. Congress doesn’t want to kill the jobs of defense contractors in their states and districts, even if DOD doesn’t need or want the weapons. Congress can’t even agree to stop giving away money to industries that no longer need it, such as farm subsidies, which cover very few people but a lot of geography and a lot of votes in the midsection of the nation.
Remember the complaint, “The Democratic Senate haven’t passed a budget in four years?” It finally did. Ho, hum.
The Congress Budget Act of 1974 passed during Watergate. Few paid attention to it. It required the President to present a budget in January and for the House and Senate to review it and pass a joint resolution by March directing the Appropriations Committees how to spend the nation’s money. That never happened.
Today, warring budgets stake out political positions and are bludgeons for attack the other party, and, of course, for getting votes. The budget itself has no teeth. It’s a road map, but like any road map, you don’t have to follow any particular route.
This year’s Republican House budget proposed the deficit to zero in ten years, mostly by shifting portions of health care costs to the states and by cutting almost $4 trillion from the safety net. Poor people don’t vote. One commentator questioned why all children should be entitled to a kindergarten. Kindergarteners don’t vote. The Republican budget didn’t touch Social Security or Medicare. Seniors vote.
The Democratic Senate budget didn’t touch Social Security or Medicare, cut defense (mostly by subtracting the cost of the wars in Iraq and Afghanistan), raised taxes, and ended up with a deficit almost half what it is today.
President Obama’s budget actually cut Social Security and Medicare, cut defense, raised taxes. He’s no longer worried about getting votes.
Social Security and Medicare are the pins that are going to prick the budget balloon. With 75 million baby boomers knocking at their gates, they are the largest and fastest growing parts of the budget, and they are on auto-pilot. Even though Obama tossed out an idea–any idea–both the House and Senate rejected the president’s budget immediately.
For years, the country has operated on “continuing resolutions.” In other words, because they can’t compromise, Congress votes to “keep doing what we’re doing.”
Don’t hold your breath. Federal budgets are not spending tools. They are political weapons. Since Congress knows little is going to change, it found one solution: just stop talking about it.
David Post • April 25, 2013
Animal laws are challenging.
Especially when elephants start making new donkey and dog laws.
Elephants are worried that 600,000 donkeys could destroy their neighborhoods even though there are virtually no reported neighborhoods destroyed by donkeys. But the donkey population is growing, and elephants don’t like that.
Certainly, donkeys could cause damage. In my yard, they might eat my tulips and daffodils or the blossoms on my magnolia trees. Maybe a donkey would be frightened by the eye lashes on my little yellow cat and kick it. A herd of donkeys plundering our neighborhoods could change our way of life.
What really bothers the elephants is that the donkeys may kick them out of their homes, so they are trying to stop the donkey population growth.
Years ago, donkeys only counted if they could read and pay money. Many neighborhoods didn’t allow donkeys. Those laws were tossed out, but elephants are worried again, and believe the best way to protect us (or them) is to require donkeys to carry government-approved photos. The idea is that it’s better to keep ten thousand good donkeys out than to let one bad donkey in.
This picture law may be tough on many donkeys. There are very few donkey photo shops, and many donkeys will have difficulty getting there. The elephants want the donkeys to pay a fee to have their picture taken, and many donkeys don’t carry much money with them.
Elephants are very pleased with themselves because they hate donkeys. Requiring donkeys to carry photos should keep the donkeys away from them.
At the same time, dogs are running wild everywhere.
Dogs are different than donkeys. They roam in masses, mess up yards, and carry bugs. They also scare cats away, and cats scare mice and other rodents away. Worse, bad dogs bite, and their bites can kill. The dog catcher is constantly chasing bad dogs, and occasionally catches one. If the dog is really bad, the dog catcher may put it down.
Over 80% of people think we should do a better job keeping track of dogs. After all, if soldiers have to wear dog tags, shouldn’t dogs wear them?
Responsible dog owners don’t think that dogs are a problem. They love their dogs and say that they need their good dogs to protect them from bad dogs. They point out that Old Yeller didn’t have a dog tag and protected his family from a bad dog. And Lassie solved a new problem every week for years. No one asked Lassie if she had a dog tag.
Most people believe that if dogs were tagged, fewer bad dogs would bite them. Elephants point out that Old Yeller wasn’t tagged 200 hundred years ago so it would be wrong to tag good dogs now.
These animal laws are so confusing. What is it about elephants that want to protect us from a problem we don’t have and don’t want to protect us from a problem we do have?
Legislating in Jesus’s Name
David Post • April 11, 2013
Where I’m from – Salisbury, Rowan County, North Carolina – is still a mystery location, but it is on a map.
Two weeks ago, a suit was filed against the county commissioners because they open every meeting with a prayer to Jesus. In response, Rowan County’s two state legislators proposed a “Defense of Religion Act.” A dozen legislators joined as co-sponsors.
Within minutes, we were national news. Huffington Post. NPR. Jon Stewart. The BBC. Stephen Colbert. The media said that North Carolina wanted to declare that Christianity was the state religion. One legislator remarked that he didn’t know that he’d be famous by the end of the day.
Our commissioners believe Jesus leads them to the right decisions, regardless of the Constitution. Their solution is to discard the Constitution.
Their resolution begins by suggesting that the First Amendment does not apply to states, municipalities or schools. Sweeping aside the Fourteenth Amendment adopted in 1868, our legislators said that the federal courts had [wrongly] required the states to follow the First Amendment. The resolution also proclaims that the First Amendment doesn’t apply to the states because the Tenth Amendment delegated power to the states.
The resolution flatly states that the Constitution does not grant the federal courts the power to determine what was constitutional or not even though that is exactly what Marbury v. Madison held in 1803 in surely the most famous and important Supreme Court case in history. It’s no secret. It’s in every U.S. history and civics book ever written. Marbury established the role of each of the three branches of government and how they serve as a system of checks and balances on each other.
Having tossed aside the First Amendment and the federal courts, the resolution concludes that government officials can do whatever they want with religion because they are also private citizens.
Hence, it asks the North Carolina General Assembly to assert that the U.S. Constitution does not prohibit the state from establishing a religion and that North Carolina is not subject to federal court rulings.
After a day of howling, the legislators withdrew their resolution as “poorly written . . . and ambiguous.” Meanwhile, gigantic billboards in yellow and red are sprouting up around my county shouting, “Keep Praying Commissioners . . . in Jesus’s Name, Amen.”
16th Amendment Turns 100
David Post • April 10, 2013
Happy Birthday, dear 16th Amendment.
You are now 100 years old. And, what a 100 years it’s been.
Before Roe v. Wade, you were aborted twice. During the Civil War, the country needed revenues, so Congress passed the first income tax. Today, war is no reason for a tax, but the Civil War tax expired after ten years, birthing the idea of temporary tax provisions.
During the 1800s, government raised revenues from excise taxes and tariffs. In 1894, thinking that those taxes caused inflation, Congress reduced tariffs by adding an income tax. The Supreme Court held that income from property such as rents and dividends could not be taxed while income from labor could be taxed. The entire law was tossed out.
Your birth was a long and difficult. In 1909, Republican President Taft proposed amending the constitution to allow an income tax. It took the states four years to ratify the 16th Amendment granting Congress the “power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the . . . states.”
Once born, you grew quickly. That single sentence of the 16th Amendment has grown to a tax code of five or six million words, most dedicated to defining the word “income.” What counts? What doesn’t? What reduces it? And, at what rate? True to the Supreme Court 125 years ago, the tax code today taxes income from property at a lower rate than income from labor.
The tax code is flawed, for sure. It has become a hodgepodge of incentives that encourage certain economic behavior in exchange for lower taxes. The result is that many rich taxpayers pay lower rates than middle and lower class taxpayers. Similarly, many corporations – Exxon, Apple, and GE to name a few – report billions in profits and pay little or no tax in the US.
Over the past dozen years ago, Steve Forbes and Herman Cain have run for president proposing a flat tax, while Mitt Romney proposed lower rates. Their fundamental ideas were to eliminate incentives (loopholes) and reduce rates. The idea seems simple, but defining “income” remains exceedingly complex.
The best tax is one that neither alters taxpayer behavior nor allows taxpayers to manipulate the tax base. Taxpayers rarely make “what to do” decisions based on sales or consumption taxes or property tax. Sometimes, consumption taxes affect behavior if a lower cost option is easily available. For example, cigarette taxes of $4.25 per pack in New York encourage a black market in Virginia cigarettes with its $0.30 tax.
The proposed Fair Tax is a consumption tax-based system. “Fair” is a good marketing word, but it hits lower income taxpayers harder because they spend a higher percentage of their income on consumption – meaning they would pay more tax proportionally – than do higher income taxpayers. Instead of “income,” the code would have to define a “sale?” Would it include the sale of stocks or bonds? A house? Medical services or education? Soon, the Fair Tax would be a few million words long, and have a zillion lobbyists.
Taxes are complicated. My daughter is a CPA. She will never starve.
Anyway, Happy Birthday, Income Tax. When you blow out the candles on your cake, here’s hoping you don’t get your wish.?
Possible Austerity Poses Threat to Slow-Moving Recovery
David Post • February 28, 2013
A glimpse, by definition, is a brief preview of what lies ahead.
The last quarter of 2012, last October through December, provided a glimpse of what happens when federal spending is cut.
The economy shrunk. Not much – only 0.1% – but it shrunk. When the economy shrinks for two straight quarters, a recession is declared. That doesn’t have to happen unless we make it happen.
During the third quarter of 2012 (last July, August, and September), the economy grew at 3.1%, almost the nation’s average of 3.2% since the end of World War II.
Over the past three months, the private sec- tor did pretty well. Consumer spending went up. Durable goods like appliances and furniture al- most doubled. Investment in equipment and soft- ware increased six times. Even housing invest- ment increased.
What went down? Federal government spending declined at a 15% rate due to a drop in defense spending. In fact, government spending has declined in 10 of the last 12 quarters slowing the country’s overall economic growth.
Government spending has kept the economy out of recession since 2009. The United States is the only economy on earth, of any size, that has grown in the past three years. Austerity – reductions in government spending – hasn’t worked anywhere in the world except arguably in two small countries.
Greece and Spain are getting a great deal of attention for their economic woes. Their budget cuts have led to downward spirals and 25% un- employment. Great Britain adopted an austerity plan last year and just entered its THIRD recession in five years.
The poster children for “austerity works” are Estonia and Latvia, two Baltic states tucked be- tween Russia, Poland, and Scandinavia and together about the size of Ohio. Their combined population is about 3 million, a little more than half the D.C. metro area. Though their economies are now growing, they are still suffering with unemployment rates of 12-15%.
Government spending matters. Reductions in unemployment benefits, food stamps, and social security hurt small businesses and grocery stores. When housing assistance is reduced, the pain is felt by both landlords with more vacancies and lower rents and by local governments with lower property values and reduced tax collections. Reduced highway construction today puts construction workers out of work and reduces economic growth tomorrow.
Nonetheless, Congress is currently focused only on cutting spending with several deadlines quickly approaching. In two weeks, the “sequester” – automatic across-the-board spending cuts that Congress imposed on the nation when it couldn’t agree on what to cut – take effect. In late March, the nation hits the debt limit – like a credit card limit – that would not allow the government to pay the bills it promised to pay a few months ago. That’s like buying a car and then telling the bank you’re not going to make the payments.
By disagreeing on budget priorities, Congress has kicked the can down the road for three years. Oddly, that’s probably been best for the economy.
The last few months both in the U.S. and Great Britain provide a glimpse into the future. What do we really want? Austerity or more can- kicking? ?
Hit the Pause Button, But Get Ready to Hit Play
David Post • February 22, 2013
President Obama and the Republicans avoided the fiscal cliff. Taxes were raised on the wealthiest 1 percent and spending cuts were delayed for another two months.
Was the tax cut fair? Every worker faces higher taxes because the social security tax holiday is over. Corporations got $20 billion a year in tax breaks. You decide.
Republicans have one talking point: “Spending is out of control.”
What is out of control is aging and healthcare, and no one knows how to deal with that.
More than 75 million baby boomers are waiting in line for government healthcare. In the 1960s, healthcare was 2 percent of government spending and people lived to age 70. Today, healthcare is almost 30 percent of government spending and people are living to almost 80.
No one has offered a solution to that problem. Even Paul Ryan’s plan to shift more healthcare costs to seniors didn’t begin for ten years. After all, he wanted his 78-year-old mother to vote for him.
Here’s the real problem: Americans like what government does. They just don’t like to pay for it, especially since borrowing has, thus far, been painless.
Government spending in the U.S. is different than in other countries. The U.S. doesn’t own airlines and factories. The government buys from the private sector.
If the defense department buys fewer airplanes or battleships, will airline companies and cruise lines buy more?
Highways are built by private sector companies with government contracts. Do we want more crowded highways with more potholes?
Eliminate Fannie Mae? Will banks make mortgage loans without government support and guarantees?
Eliminate the Education Department? Will banks make student loans without federal guarantees? Can local school systems compete with Japan and Germany? Do we want our great universities to rely even more on foreign students if Americans can’t afford tuition?
Eliminate the Department of Commerce (and save less than 1 percent of government spending)? That means eliminating the Census (which determines how many dollars and votes each state gets) and the Patent and Trademark Office.
Eliminate the SBA? Will banks make loans to small businesses without government guarantees?
Stop protecting our water and air? Close the national parks? (Or charge admission and watch them fall into disarray like the Transportation Museum in Spencer?)
Eliminate any national energy policy or the Environmental Protection Agency? Just tear up the environment with no regulation?
Eliminate welfare? That would save about $250 billion which, of course, the poor use to buy food, housing, and heathcare in the private market. And there would be other costly repercussions.
Eliminate foreign aid and save 1 percent of federal spending? Will Americans buy more tractors and food since those countries are required to use those dollars to buy American goods?
Eliminate the Congress and the Presidency? That would save 1/10 of 1 percent of federal spending. Not much, but perhaps what we really want.
Costs won’t disappear. If government pays less, Americans pay more. Sounds like a tax.
Times up. Release the Play button. Let’s get on with the show.