FactCheck.org, Does Washington have a Spending Problem or a Tax Problem?

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    Jul 18, 2011 1:15 PM GMT
    Given that many liberals here have cited factcheck.org, I thought this analysis was interesting. I think the answer is that it has something of a combination of both though with a strong bias towards having a spending problem.

    http://factcheck.org/2011/07/fiscal-factcheck/

    Washington's spending has recently been higher as a percentage of the nation's economic output than at any time since World War II. But by the same measure, Washington's revenues are the lowest in more than 60 years.

    So does the U.S. have "a spending problem," as Republicans keep repeating in the current debate over how to reduce the nation's record deficits? Or is the problem that taxes are not high enough? Those questions frame a long-running partisan debate, and as usual we won't offer an opinion one way or the other. But for those seeking their own answers, we can offer some fiscal history and factual context.

    Some key facts we think are worth considering:
    - Federal spending ("outlays" in budget jargon) is expected to equal 24.1 percent of the nation's gross domestic product in the current fiscal year, which ends Sept. 30. The figure was 25 percent in fiscal year 2009, highest since 1945.
    - On the other hand, federal revenues are expected to drop to 14.8 percent of GDP this year, lower even than the 14.9 percent attained in both 2009 and 2010. There has been only one year since World War II when revenues have been as low as in any of these years: 1950, when the figure was 14.4 percent.
    - These historically high rates of spending and low rates of taxation have combined to produce a chain of deficits that are also the highest since WWII. The deficit was 10.0 percent of GDP in fiscal 2009. It declined to 8.9 percent last year as the economy started to recover, but is projected to go up to over 9 percent this year. Each of these deficits is larger than in any year since 1945, measured as a percentage of GDP.
    - The U.S. is borrowing about 36 cents of every dollar spent so far this year. It borrowed 37 cents on the dollar last year, and 40 cents in fiscal 2009.
    - The largest components of federal spending are Social Security and Medicare programs for the elderly (33.5 percent of total outlays in 2010) and national defense (20.1 percent). Interest payments on the federal debt alone accounted for 5.7 percent of all federal spending, and that percentage is rising.
    - The federal income tax accounted for 41.5 percent of federal receipts in 2010 (down from 49.6 percent prior to the Bush tax cuts of 2001 – 2003). Corporate taxes brought in only 8.9 percent, also down sharply since the recent recession. Payroll taxes and other "social insurance" payments accounted for 40 percent of total receipts in 2010.

    It's easy to argue one side or the other by just citing facts that support a particular view, and omitting others. In the Analysis that follows, we offer some graphics, details and documentation in an attempt to give our readers a quick look at the entire picture — both where the money goes, and where it comes from.

    Outlays%20vs%20Revenues%20Since%201930%2

    2010%20Federal%20Revenues%20Pie.png


    What is clear however is that the current level of spending is not only unsustainable but if entitlement spending is not soon reformed, it will not only become increasingly difficult to do so but the costs are anticipated to rise dramatically.
  • rnch

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    Jul 18, 2011 1:30 PM GMT
    the above illustrates why it's high time for the rich to pay more taxes!
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    Jul 18, 2011 1:32 PM GMT
    rnch saidthe above illustrates why it's high time for the rich to pay more taxes!


    I'd agree only marginally to this point - but given how much higher spending is relative to historical levels, it is high time to reduce the size of governments (not just in the US).
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    Jul 18, 2011 4:11 PM GMT
    southbeach1500 said
    rnch saidthe above illustrates why it's high time for the rich to pay more taxes!


    By raising the tax rates on "the rich" how much revenue will that bring into the Federal government?


    More than it has now.
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    Jul 18, 2011 4:29 PM GMT
    Both. False dichotomy in the question.
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    Jul 18, 2011 5:10 PM GMT
    southbeach1500 said
    Christian73 said
    southbeach1500 said
    rnch saidthe above illustrates why it's high time for the rich to pay more taxes!


    By raising the tax rates on "the rich" how much revenue will that bring into the Federal government?


    More than it has now.


    Another liberal shot in the dark. How much?


    Explained in the other thread.