Over the last couple of days, we’ve had a good debate at Hot Air over the nature of our fiscal crisis between Jazz Shaw, and J. E. Dyer, and me. At least we all recognize that we have a fiscal crisis; some members of Congress and “intellectual authorities” (with interesting if unreported conflicts of interest) still act as though nothing at all is wrong. My friend Jazz wrote yesterday that we have a revenue problem as well as a spending problem in answer to my post rebutting David Brooks’ column, so let’s take a look at federal revenue to see whether Jazz’ contention holds up.
The Heritage Foundation provides this chart of federal revenue over the last 50 years in inflation-adjusted 2010 dollars, and the data is pretty clear that we have a recession problem, not a revenue problem:
Take a look at the trends here, again remembering that the data is all in 2010 dollars. In fifty years, we have tripled overall federal revenue, and prior to the current recession/stagnation we had quadrupled it. The current trough from the 2007 peak resulted from the fall in economic activity, not from tax cuts or any other intervention. It’s similar to what happened in the prior trough, when the 2000-1 recession and the 9/11 attacks cut economic activity through 2003.
For that matter, look what happened to federal revenue after the much-maligned Bush tax cuts took full effect in 2003. Economic activity expanded rapidly — and so did federal revenues. In fact, the economy during that period boomed, and receipts from both personal and corporate taxes peaked as a result. The Bush tax rates, as they are properly called today, did not create a revenue vacuum; they helped produce an expansion that enhanced rather than lost revenue.
Simple sometimes is the most effective way to illustrate a point.
Seems – looking at the two charts – that the 9-11-01 attacks crimped our economy but that gov’t could not pare back its programs to align with its income.
Then, as Ed Morrisey pointed out, the Dems took the reins of Congress in 2007 and all their pent-up shopaholicism was released.
Just look at that spending line rocket up!
It certainly is NOT a problem of too little revenue.
It is a problem of cutting back on spending.
Years ago I read that every gov’t department tried to spend all of its allotted budget each year, even if it meant wasting a lot of it rather than carry over a balance to the next fiscal year.
Is that still going on?
If so, it needs to stop.
Our Federal Government does not have a revenue problem.
Our Federal Government has a spending problem. The efforts of Democrats to provide “entitlements” to voters, in order to insure their permanent allegiance to the Democratic Party, are succeeding. We have a majority of voters whose votes have been purchased. Social Security, Medicare, Medicaid, and all of the other “entitlement” programs are intended not to help the ordinary person but to guarantee re-election.
The proof of this assertion is the demagoguery engaged in by Sen Reid every time such a program is brought up.
There is no need to grant Social Security to illegal immigrants. Or to prisoners. There is no need to refuse means-testing for Social Security. I could go on.
The facts are simple: the more Federal money you dole out, the more people will be in your Agency doing the doling. So it is a Federal Jobs Program.
On the current track, we will soon be bankrupt.
Speaking of the spending side of the equation…
The real cost of the War on Terror: $6 Trillion, exceeding the inflation-adjusted cost of WW2