The Myth That the Bush Tax Cuts Are Causing the Deficit…

I’ve said it time and time again:

  • Deficit == Spending – Revenue
  • Revenue == f(GDP); Revenue =/= f(tax rates)
  • Therefore, the federal deficit is a problem with spending, not with too-low tax rates.

And here I have yet another graph to beautifully illustrate this point.

See that? Tax receipts drop with recessions, and actually rise after the passage of the Bush tax cuts. We can’t ever match the current spending trajectory in revenue by raising tax rates, because tax receipts in the US max out around 20% (Hauser’s Law).

I know I probably sound pedantic, but at this point, it’s just absurd that people keep clinging to the ignorant notion that tax cuts “add cost,” when in fact they simply don’t. Counter-intuitively, tax cuts can even reduce the deficit if they allow the GDP to grow more rapidly. It’s called the Laffer Curve, and the evidence clearly demonstrates that we are still at the high end of it.

Game over. Tax cuts and spending cuts win. Either you agree, or you’re ignoring the MOUNTAINS AND MOUNTAINS of counterexamples against whatever pseudoeconomic philosophy you claim to follow.


Dan Mitchell vs. Austan Goolsbee on Taxes

If you want to see what a debate between a Cato economist and a White House economist looks like, now’s your chance.

Judge for yourself: is Dan Mitchell being fair? Is Goolsbee representing the situation accurately? Who has a better grasp on the effects of tax hikes? Whose message do you buy into more? Is there anything you disagree with that isn’t addressed in this video?

The U.S.A. Is 13 Years Away from Economic Collapse

The current administration is spending 50% of our GDP per year, and that percentage is expected to increase. Our deficit every year is well over the 3% of GDP value considered to be the upper limit on long-term sustainability. The CBO estimates that the President’s budget will bring the national debt to 90% of the nation’s GDP by 2020. The Greek debt at the time of the country’s economic collapse was around 120% of that country’s GDP.

The numbers don’t lie. Even without adding any more of the spending bills that the Democrats in Congress have lined up, we are already less than 13 years away from an economic crisis that we can’t tax our way out of. The largest economy in the world cannot support even its current welfare state, let alone the one that the Democrats want.

It is mathematically impossible to sustain our massive government much longer. It’s time to start slashing down the welfare state. If we don’t, in a little over a decade we will be where Greece is now, except we won’t have anyone to bail us out.

The Cost of Health Care

In my debates, I come across quite a few people who are under the impression that more government-controlled health care would save the US money. The reason health care premiums are so high is because greedy CEOs are taking it all in the form of salaries, right? The belief that government-controlled health care would be more efficient is a horrible misconception.

The thing is, the country could save over $200 billion every year just from cleaning out the waste and abuse in Medicare and Medicaid. Barack Obama himself admitted as much. And then government regulation of the private industry adds an additional $300 billion in waste. Elimination of those costs alone could pay for health insurance for 40 million families.

On the other hand, I’ve quite often heard the suggestion that elimination of the for-profit aspect of the health care industry would save enough money to pay for public insurance. What most people don’t seem to realize is that the annual profit margins for private health care insurers hovers around 4%. The total profit of the health insurance industry last year was a mere $13 billion.

Take a minute to let those figures sink in. Private industry costs us $13 billion a year so they can profit, while the federal government costs us $500 billion per year in waste alone. And the solution is to add more wasteful government programs and regulation?

To further drive the point home, let’s take a look at the bigger picture. We are currently spending $2.2 trillion per year on healthcare in this country. $850 billion of that is spent on Medicare and Medicaid to cover 103 million people, and another $184 billion is spent on other government health programs. That means that the government spends 47% of total health costs to cover 34% of the people. Private industry spends 53% of the total costs to cover 51% of the people (pg. 12). Private industry clearly does a far better job of providing efficient health insurance services. And they’d do an even better job (39% of current costs to cover the same 51% chunk of people) if we passed tort reform and cut some of the regulations that raise costs so much.

Why would anyone replace private industry with the inefficient government and expect costs to decrease?