Posted by: Jeff | November 25, 2009

A Very Large Number

That would be the United States federal deficit. Joe and I dig into the details, the history, the causes, and a few ideas for how America might get out of the hole.

A Very Large Number

References for this podcast:

Music used in this podcast:

CORRECTION – I stated that the American middle class now has the highest levels of personal debt in the world. Actually, the way it works is that America has the highest level of personal debt, in raw dollars, in comparison to other wealthy nations. Can’t speak for the world as a whole. And the American middle class has the highest personal-debt-to-income ratio of any portion of the populace.

UPDATE I – I’ve posted a primer with all the relevant numbers for the 2010 budget, and our projected future deficits, here. Just in case anyone wants a visual reference while they listen. Enjoy! (Hehe.)

UPDATE II – I’ve posted some further elaboration and another correction here. (Lot of corrections for this one. Ugh)

PSEUDO-CORRECTION – In the podcast, when I use the example of $40,000 as the level of income at which the payroll taxes cut off, that was purely for the sake of argument and explaining the structure of the tax. To be clear, I don’t know the actual cut-off point (a commenter suggests it’s around $100,000) or the actual level of taxation as a percent of income. And frankly, it’s too late in the day for me to go traipsing around the internet looking for the specific numbers. But I can see how the way I said it in the podcast could be confusing.

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Responses

  1. I’m too lazy to look up the exact number, but the upper limit on the income that is taxed by social security is close to $100K, not $40K as Jeff stated.

    I hadn’t looked at the long term projections of the deficit, but that they are expected to increase is very alarming. Three years ago I was convinced that George W’s $500B deficits were unsustainable and represented a long term and structural threat to the economy. A couple of trillion now, and $500B or more per year going forward is crazy. This is a huge, huge problem.

    It is, along with energy/global warming, the most important issue that the country faces. I think that those issues will have to be addressed very soon or our social stability is in real danger. In my opinion, the first steps to the solution, if there is one, is to nearly eliminate our “defense” spending and spending on international military adventures — which do little for our long term security — raise taxes and invest in a carbon neutral infrastructure. This would reduce the deficit, and increase domestic jobs.

  2. Agreed on the second two paragraphs. As to the first paragraph, I threw out $40K just an example for the sake of argument. I stated (I think) that I didn’t know what the actual cut off point was. Something around $100K wouldn’t surprise me at all.

  3. Great topic. Sadly, our government is incented to spend money more than it is to maintain a reasonable (if not balanced) budget. I’ve been meaning to blog about that…maybe this podcast will get me off my butt.

    Some thoughts…
    – What good will a VAT really do? It’s just a bigger sales tax, which will simply jack up consumer prices. More taxes won’t solve our deficity/debt problems long-term, least of all a tax that introduces friction at every stage of business transaction.
    – If you think of military spending as “foreign aid” (since we protect other countries with our forces, thereby allowing them to have little-to-no military spending), it’s not as big a waste of money, right? More on my military spending thoughts in a comment to one of your other posts: https://theregimen.wordpress.com/2009/12/02/a-sad-and-terrible-thing/#comment-178
    – Your point that (I’m paraphrasing here) “there’s only so much we can raise taxes on the rich because there’s just not that many of them” is true in once sense, misleading in another. True in that (depending on how we define “the rich”) there are fewer of them than there are “not rich” people. However, it’s misleading because no matter how you define “rich”, the top N% of the population earn/own far more than N% of income/wealth in this country. We can certainly afford to tax “them” more than we currently do, if the alternative is saddling the “not rich” with more of the tax burden. While I’m far from being a “taxes are the answer” kind of guy, I strongly believe that progressive taxation is just and more efficient than the alternatives. BTW, I was very surprised to learn that our tax-to-GDP ratio is lower than that of many European countries’.

    Very nice meeting you, Jeff, and good to see you again, Joe.

    peter


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