Cut this, cut that - America has a budget crisis - excuse me??!

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As we have seen in the past decade, Republicans are "anti-government" when the Democrats are in power. During the Bush years I don't think I have seen so many pro, big government Republicans, as then. But now that we have Obama and the Dems they are once again pretending to be for small government, while pushing a big government agenda through not only the House, but at the local level as well [regulations on immigration, voter registration, government regulation on women's health care, etc]. Of course, the rich and big business are exempt, as usual from their crafting of big government legislation.

A large part of the problem regarding revenue is the economy. Here's a really good example: In the midst of all this budget crisis in Texas I just had my property taxes CUT. Yes, cut by a fair amount, not just a few dollars. Because the value of my house has gone down over the last year, my tax rate has been adjusted to reflect the decrease in value. This is reflective of the economy rather than a tax issue. This is probably greatly magnified in Cali, where home prices were sky-high, where the housing crisis began, and now things have bottomed out [maybe we all are at the bottom, maybe not].

The core issue is the housing market, which is still holding down the economy, and that is holding down revenue for the government. But like everything else in this country, it has been politicized to the point that the core problems are confused. Rather than say, "if taxes go down in one area, then they need to be raised in another to provide the same level of service," they simply say, "no new taxes." It's a great sound byte, but has nothing to do with the reality of where people actually have to live.

 

Eh? Ireland's crash has had nothing to do with the multinationals, they're pretty much the only thing keeping the country going at the moment. The bubble was a plain old fashioned property bubble. When the Euro came in interest rates became far too low compared to what they should have been and funds poured into Ireland from abroad looking to get a good return compared to what was on offer in their own moribund economies. This drove prices up ridiculously and it all came apart eventually. Irish corporation tax rates aren't as low as they appear either. France has a headline rate of 32% compared to our 12.5% but they boast of having an effective rate of 8% compared to our 11%. There are nowhere near the same level of allowances and tax breaks in Ireland as there is in countries with higher tax rates.

Ireland's tax problem is the same as California's. It's very progressive and places very little burden on lower income earners. 66% of people in Ireland durng the boom were paying income tax of less than 10%. The problem was that the taxes were on very volatile streams (actually ours were mainly on construction so they really took a hit when that bubble burst) whilst the spending commitments needed to be met every year.

This has begun to be rectified and the same will need to happen in the US soon. They can't keep printing money forever. Ideological opposition to new taxes seems silly, if taxes are always bad how then surely roads, judges and so on that they pay for must be too? The laffer curve is U shaped not a line.

 

Which do you prefer, someone who will punch you in the face once, or someone who will punch you in the face twice? Now of course the true answer is someone who wouldn't punch you in the face at all, but when comparing the spending habits of one punch Republicans to two punch Democrats you can see why Republicans like Bush can get elected instead of the Kerry's or Gore's.

 

Why bother? Privatise it!

And anyway, like it or or not, tax increases are going to be part of the solution. Spending cuts alone are not going to be sufficient. Currently, the R's win the battle to influence the public's opinion. They try to cut (think of the anti-abortion legislation and that 'forcible rape nonsense') everything they possibly can that they disagree with ideologically, before the realization that tax cuts increases are needed too becomes clear to the public.

Most brazen attempt so far is Gov. Walker's breathless 'Look, look! There's a crisis and we have to do drastic steps!' (Incidentally all things we long wanted to do in the absence of any budget cries anyway) Look, look! No, the other way! There's a crisis (I made sure of that)!

 

Oh, please. Taxation pays for government services - the choice is paying a certain amount now, or borrowing and paying more later. So the first is bad, and the second good? I can understand it during a crisis, but anyone who makes this a policy during a period of economic growth is doing the country a disservice (and leaving a mess for their successors when things do go sour, as they do every now and then) by hoping for an "out of sight, out of mind" attitude from the voters. Frankly, I find the "get now, pay now" approach a little more honest. Cutting services isn't particularly popular either - arguably even less so than raising taxes, when it comes to the polls. It's just that the people who would lose more by having their taxes raised tend to be more effective in getting what they want, I'd say .

Also, what would you determine their "spending habits" as president on? For Gore we can only make deduction from Clinton's term, and I'd say the US was spending more or less what it could afford, at a tax rates that were fairly conducive to economic recovery and growth. As for this causing Bush to be elected, both the 2000 and 2004 elections were fairly close. A lot of people did prefer the Democrat.

 

For several years of Clinton's presidency, we actually had annual surpluses in the budget - the deficit was being paid down.

 

@Deise

Ireland's bubble simple bursted with the property crisis but a property crisis normally does not bankrupt a state, that requires a much larger screwup and pointing all the blame on ECB is simply folly. When you have a systematic sovereign debt deficit and a deficit in the current accounts the alarm bells should ring. I'll admit that the ECB could have helped to avert parts of this crisis by keeping interest rates higher but that's a secondary problem. Within a currency union the central bank cannot adjust their monetary policy to the needs of individual countries, they have to think of the whole. I'll be the first one to admit that the current model derived from the old German system suits countries like the Netherlands, Finland, Sweden, Austria and of course Germany a lot better than it suits Ireland, Spain, Portugal, Italy or even France but it's an adjustment these countries need to make in their economic policies in order to adjust, otherwise we'll end up in these bailout situations which are in every way problematic. You can't have a system with a single monetary policy and dozens of different economic policies. Luckily the conditions for the bailouts require changes but I'm not convinced that the problems of the euro zone are quite over yet.

If I was in charge I'd chip in the Maastricht criteria for sovereign debt deficits in stone and fine heavily all who did not follow it. Too bad that the big countries like France and Germany only seem to care about the rules when they have to pay for it and turn a blind eye at times they themselves don't follow the rules.

 

I was not even aware that Ireland was "all in" so to speak with the EU to begin with. I thought they were like England - kinda sorta in the EU, but maintaining the pound as their currency.

And if that's not what you were suggesting, then I apologize - I admit I have little knowledge of European economic policies.

 

The Republic of Ireland is, Northern Ireland, like the rest of Great Britain, is not.

 

The most brazen move was the Ryan attempt to destroy Medicare. Take a look at where that got them with public opinon.



Snook, I'll just let Ron Paul respond:

 

I apologise, I certainly didn't mean to suggest Ireland's trouble was solely due to the ECB's monetary policy. Our national fiscal and regulatory conditions were pretty much the opposite of what they should have been. I was trying to make the point that Ireland isn't a good example of tax competition having a bad effect. It is a good example of thinking you can have "the rich" (i.e. other people) pay all the taxes and still expect decent public services. Ordinary people will still have to make a significant contribution even in a progressive system.

 

No need to apologize, I just wished to further clarify the issue a bit.

I'm certainly not an expert in the Irish tax code but I'm under an impression that it offered good rebates for the finance sector which obviously took great advantage of the situation (and the low market rates) by offering excessive amounts of credits which also caused the good old housing boom to emerge. This is simply the impression I get from Finnish sources though.