The KGB Oracle Forums General Public Discussion (SPECIAL ACCESS) KGB Political Debate Central We've heard it all before !

Tax a look at the numbers for ending the bush era tax cuts. I think you will find a different outcome.

Actually it does work that way.

Right now we are headed toward disaster. The only hope your average person has of mitigating its impact on their personal life, is to have as much money as possible available now to invest in things that will generate a positive return in a crashed economy.

Taking more money from me today, without addressing the systemic deficiencies of the system will not prevent the massive correction heading our way.

Right now both major political parties would simply take more available tax dollars and spend them... the amount of borrowing would not actually decrease. Just more of our money ending up in the pockets of the connected and the corrupt. More cash to feed the warfare state.

I can see it now "Improved Federal fiscal situation due to tax increases means it is financially viable to invade Iran after all, writes the WSJ".

In order for reasonable people to trust the govt to responsibly use more of our money, the govt needs to re-earn some degree of trust. Without even the faintest level of trust that additional taxes would be used wisely, what reasonable person will volunteer to give more?

Let the govt come up with a real plan, and re-earn some trust in the honesty and effectiveness of govt and people like myself will be willing to cough up more cash - if its to fix actual problems.... not give the govt license to make new ones.

I have to call BS on this. The most significant contributor to "headed toward disaster" is that we don't collect enough taxes to meet our spending levels.

Your call is met and raised.



First of all, I am not sure we *could* collect enough taxes to meet our current spending levels without breaking our economy.

Second, what indication exists that either party would not simply spend more if they felt more money was available? You seem to be assuming that additional taxes collected would go towards reducing our deficits but I see no evidence of this.

Third, when Bernanke is bailing out connected folks to the new tune of 40B per month and printing money like it was going out of style so the beneficiaries of the bailouts and super low interest rates can turn around and do things like speculate on the commodities markets making more bubbles and driving real inflation up even higher - how on earth does it make sense to squeeze your average taxpayer for even more? (hint printing money - devaluing the dollar is widely considered a tax. so taxes have already been raised quite a bit in real terms.)

The most significant contributor to our current predicament is not the tax/spend calculus. It lies in irresponsible monetary policy. The deficit somewhat contributes, but indirectly at this point. The Fed is culprit #1. Namely, their actions are making it impossible to grow out of our deficit.

Raising taxes willy-nilly at this point, without first addressing the warfare state, the Federal Reserve system and bringing sanity back to our money markets, and addressing entitlement reform (via means testing) is like trying to put out an electrical fire with water - without first shutting off the electricity.

At some point we may in fact need to raise taxes to some degree, though I anticipate most of this to be via raised fees/means testing for affluent people on social entitlements. But raising taxes above and beyond what Bernanke is doing is insanity, without first addressing the real systemic issues.

Lets separate these claims into two - a) I am not sure we could collect enough taxes, b) collecting enough taxes will break our economy.



a) Is demonstrably wrong win otherwise absurd example - if we were to confiscate and liquidate every asset held by US Gov and all US citizens we very can collect enough taxes. I don't think we even need to run numbers on this one.

b) Now, if we simply collect enough taxes, would it have detrimental effect on the economy? Absolutely, any level of taxation above 0% has some detrimental effect. How would you define “break our economy” and how would you compare it to the alternative? I would argue that deadweight loss from taxing to cover our existing level of spending would be demonstrably less than effects of a complete default or even reaching anywhere near 200% debt:GDP level.

Now, you will inevitably bring up Laffer curve, but even proponents and strict followers of this theory will tell you we are nowhere near maximum revenue point and at our present taxation level behavior is strictly linear. As a result the only logical conclusion that increasing taxation will increase revenue levels, for as long as any attempted tax dodging/loopholing is quashed.





“Either party” already has all the opportunities to spend more, just consult Ryan’s Plan if you want to see examples of “spend more” unconstrained by fiscal reality. His plan also has some cuts, but it is inconsequential in ’money in-money out’ scheme of things. Our government already is not forced to balance the budget, so spending is happening regardless of tax revenue.

What is also happening is that population that enables/benefits from this deficit spending is resisting paying for it, in effect offloading this debt to future generations. You can easily demonstrate that each year taxes are not raised means additional burden on people who are currently not even of age to vote get to pay for this debt while people that did get to die without paying the bill.

In fact, I will make a case that resisting taxation is supporting “taxation without representation” violation of future generations.



Actually, what Bernanke is doing is raising taxes on the poor and middle class. Corporations and wealthy typically derive wealth from a flow of money, while poor and middle class from face value of money. Pumping money into the system and diluting purchasing power of $ disproportionally affects “wrong people”.

What can Bernanke do when The Hill is so bat shit insane that they are refusing to increase taxes in fears of political fallout? Value has to be extracted out of the system in some way.



So reality of situation is as follows:



a. Extract value by on-going QE, in process enriching channels (connected and banks, since Bernanke doesn’t have other channel to the market)

b. Extract value by increasing taxation level, making it slightly more transparent and accountable system than a.





I agree with irresponsible monetary policy, and raise you irresponsible taxation policy. Both are at fault.





Raising taxes will not fix the system, but it will stop irresponsible offloading of this problem to future generations. Plus, it is my hope is that if average-Joe sees his taxes increased to accurately reflect fiscal situation there will be more political pressure to fix the system.

You cannot separate the single statement regarding increasing taxation to a degree required to balance our current budget without breaking the economy into two statements and still be addressing the same point. So your "a)" is meaningless. I never said that the taxes could not *be* increased, I simply wonder if the degree of damage we would do to our economy would be sustainable if we raised them enough to actually become solvent. Why you would try and split the statement to create an artificial absurdity to debunk via wordplay is beyond me.

For the purpose of this discussion let us call an economy "broken" if it is not capable of at least 3% growth on average over a 15 year period and/or the adjusted average income/cost of living ratio drops by more than 15% over same 15 year period. That is a long enough time frame to make a working assumption for the sake of argument that current acute disorders would have worked themselves out.

If you want to deduce the magnitude of the detrimental effect, go do an exercise - calculate the recent deficits, be sure to include all expenditures not just the standard budget. Then calculate how much revenue in new taxes would be required to truly balance expenditures with income. Take a look at the actual numbers, and see if you think it is even remotely feasible.

Once you look at the actual numbers, your tune may change. Or it may not. But you should get an idea of the type of tax increases you are talking about. Yes I know the approx amount, but this is something you should work out for yourself if you want to be credible on the topic and argue that taxes should be raised without first addressing what is broken.

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"In fact, I will make a case that resisting taxation is supporting “taxation without representation” violation of future generations."

Other than this statement that I quoted I agree with the second part of your post. I would agree with the quoted part if you changed "resisting taxation" to "spending above tax revenue". It seems patently absurd to spend ridiculous amount of money, then claim after the fact that we need to raise taxes to not burden future generations.

Why not simply reduce the spending? You are correct though that people want to spend the money without paying for it. This is why the spending needs to be cut first. Because just raising taxes is not going to address the deficit spending mentality. To make a balanced budget become a long term reality without significant economic growth - you first need to show people exactly what their current tax outlay buys, before they can be reasonably expected to fairly judge if more taxes and expenditure is needed.


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"Actually, what Bernanke is doing is raising taxes on the poor and middle class. Corporations and wealthy typically derive wealth from a flow of money, while poor and middle class from face value of money. Pumping money into the system and diluting purchasing power of $ disproportionally affects “wrong people”."

Yes, this is correct. But its not an "actually" its an "additionally".

"What can Bernanke do when The Hill is so bat shit insane that they are refusing to increase taxes in fears of political fallout? Value has to be extracted out of the system in some way."

What he should be doing is tightening the money supply and raising interest rates. This would help ease speculatory driven inflation on the commodity markets and help prevent bubbles. It would also interest the banks in lending more money again, because not only would they get more in interest from doing so - but they also would not be able to turn an easy buck by getting free cash from the Fed to try and turn around by making bets on pushing bubbles and finding anything safer than corporate bonds that turn a yield above 0%.

All he is doing is creating systemic risk, and as you say - taxing the poor and middle class. The banks also have no incentive to make loans to middle america with this bailout, so that part of the official justification is a total lie. Many people seem to have no idea just how dangerous and insane this latest move is.

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" I agree with irresponsible monetary policy, and raise you irresponsible taxation policy. Both are at fault."

I am not going to say that the current tax policy is perfect, its not. But, its still true that we are being taxed enough to pay for an awfully large federal govt.

If someone proposed a modest tax increase as part of what I will call a "Stockman reform bill", that is - an omnibus spending bill that addressed all the points of pain that Stockman laid out - then I would be inclined to support it.

With such irresponsible spending, I say again - why would any rational person want to throw more money at a broken system? Its like if the FedGov was a teenager going on a spending binge with your credit card... and instead of reducing their credit limit, you raise their cash allowance. Its reinforcing negative behavior, not demanding positive accountability.

I will address your points in more detail, but quick answer so far:

"With such irresponsible spending, I say again - why would any rational person want to throw more money at a broken system?"

Because not paying into the system makes it even more broken. I don't think I have to mention that deficit is only the tip of "government liabilities" iceberg. Even slowing the rate of increase of this is a good thing.

At what cost? I might have considered it feasible, if only barely before Bernanke decided to jump head first off the deep end.

But I will say again - there is no reliable indication that increased revenue would lead to less borrowing, less printing or less QE. Just because common sense says that is what *should* happen means little to the establishment currently in power or likely to gain power anytime soon.

Lets say for the sake of argument that our current path will have us default in 10 years. ( Just for an example)

So we tax everyone more on top of the Bernanke squeeze... and instead of defaulting in 10 years, we have 10 years of excruciating pain but dont default until year 11. Is that really worth it? Higher taxes now just deprives the common man of what little chance there is to prepare for the major corrections.

Obviously noone knows any precise timelines... if such a thing could be proven, the topic would be a lot simpler. But with our spending so astronomically high, and the ratio of useful/wasted money also extremely poor - I think at this point it falls on the govt to justify the current expenditures, not the taxpayers to offer themselves up as willing sacrifices.

One secret is that haveing a deficit is not a bad thing.

The other secret is if the government didn't spend so much they wouldn't need to raise taxes.

I work with a guy that tried to get into the Marines, he had to take a test and when the Marine told him that he was not accepeted because he had never seen a score so low in his whole time as a recruiter.
The guy I work with is so stupid he tells people this story.
You can imagine how it is to work with someone like this.

This is how it feels talking with Progessives and Democrats.

You are grasping for the straws here. What you are saying boils down, that just because it doesn't look good right now we shouldn't try doing what even you couldn't deny help.

Increasing taxes WILL HELP with current fiscal situation. Actually, you could solve deficit with just modest across the board tax increase and significant budget cut to defense.

The fact that tea party knuckle draggers would rather see our country burn than compromise is telling volumes.

Why raise taxes? Well, because MORE MONEY IN means LESS DEFICIT. Yes, I know its magical like that.


If you translate your position to a household (I know, generally bad comparison), then you are suggesting that by "living within your means" means just put everything on a credit card and then count on kicking the bucket before it gets maxed out so someone else gets to pay the bill.