Only 12%? How many people do you think this would cause to go bankrupt? How many people can’t afford this extra 12%. I think you really underestimate the size of increase you are proposing.
You really miss the point, it’s not a substitution from personal to government spending. It’s a loss of that spending on the personal side. The government is already doing that spending via borrowing. So yes, a 12% tax increase given to the govnernment who will “supposedly” stop borrowing because they have the money in taxes, will be a 12% reduction in total spending. So 12% down in spending, means 12% down in tax collection, which means taxes have to go up even more, …
Also, why do you think the government versus citizens should spend? Are you and the rest who think this way just too stupid to be trusted with the fruits of your labor and need someone to be your mommy? How about instead we have a 50% reduction in government spending and let the citizens use their own money and be responsible for their own lives…
A few of the reasons taxing the rich may not work are the following:
[quote]
High wage earners tend to be smart people, and they are adept at “gaming the system” to lower their taxes.
At some point, high wage earners are incentivized to opt out of higher tax rates by voluntarily reducing their taxable earnings and/or moving their income offshore to nations with lower effective rates such as Switzerland.
The super-wealthy simply “buy” tax credits or loopholes via millions of dollars in campaign contributions. [/quote]
I also don’t think we can say that economic growth will remain as long as the government spends the tax dollars instead of individuals, especially considering the things our government spends money on (direct and indirect bailouts of financial institutions, useless wars, etc.) which do little to contribute to economic growth. I’m not saying any tax increase is necessarily a bad idea, but I think it’s a far cry from a solution to cutting our enormous deficits and debt.
In regard to reducing the government’s debt, I think it might be useful to step back and take a look at the larger picture. I think we all agree that the government needs to reduce its spending, but I’m not sure many fully understand how they personally factor into the equation. What equation am I referring to? Private Sector Spending/Saving + Government Spending/Saving + Trade Deficit/Surplus = 0
This equation implies that if we want to reduce government spending, there is only one realistic solution; we must reduce the trade deficit. The only other option is to increase private sector spending, which is not a viable option because the private sector (households and businesses) is in the middle (or beginning) of a deleveraging/saving cycle.
So how do we reduce the trade deficit?
We spend our money locally.
We invest our money locally.
We significantly reduce how much oil we use.
We boycott the Walmart Global Business Model and establish a demand for products and services produced in the USA, and especially those products and services produced locally.
By doing this we support the local economy (jobs), maintain our ability to save and reduce personal/business debt, and reduce the need for government spending. Obviously this implies personal sacrifices to our lifestyle, but those sacrifices are just around the corner for each of us anyways. We might as well use this time to make these changes with a more comfortable learning curve.
Don’t waste your time looking for change from the politicians, look for change in the mirror.
Raising taxes will create the same sort of chase-your-tail-down-the-toilet cycle as above. More taxes paid by citizens = less to spend = less revenues into (heavily consumer-spending-oriented) economy = less corporate taxes paid = less revenue for gov…and so forth.
There’s not clean and simple solution. Which is why it’s a predicament. Not a problem.
Well, I don’t have excellent data to either confirm or refute your point but the general rule of thumb is that if the government taxes an additional percent, that represents a percent that is not available for the private sector to spend on the economy. Again, rule of thumb time, a percent increase in taxes = a percent reduction in GDP.
So I consider that a wash to the deficit to GDP ratio. Yes the deficit fell by a percent, but so did the GDP.
Obviously there’s a lot of wiggle room in there and innumerable details, but on the larger stage, it’s a wash. The most important detail to remember is that with very, very few exceptions (DARPA and the internet being one) the government does not create wealth, it only distributes it. So while it may seem like the government taxing and spending a percent of GDP is neutral, it is not. It is GDP-destructive because, by and large, government spending is only distributive and, as is true for any engine, there is heat loss in the transfer of power (wealth).
The more devilish construct is that after a certain point, say a 5% or 8% hike in taxes, the GDP falls off even more than the taxed 5% or 8% due to the pernicious effect of over taxation. This raises the infamous “Laffer Curve” for which there is, actually, quite a bit of evidence in support of its reality but I think simple common sense bears it out.
At 100% taxation, people will do no (identifiable and/or taxable) work.
By the time the government had imposed a 12% of GDP tax hike, my best guess would be that GDP would decline by something close to, if not more than that amount. Just a guess, but one that I can imagine easily based on historical and (other) country data.
A few of the reasons taxing the rich may not work are the following:
I will disagree that a 12% increase in taxes would be an enormous burden. Of course the unemployed make no income, so an increase in income taxes would have no effect on them. It would mean about $4,000 additional taxes for someone with a median income of about $45,000. If someone with an income of $45,000/yr can’t stay afloat with an additional $4,000 taxes, I would argue that this person has not learned the lessons of the last couple of years and will eventually go under anyway.
I view this as a national emergency every bit as large a threat as WWII and an equivalent sacrifice would be called for by anyone who truly understands the consequences. A 12% tax increase is more like a major annoyance than a nation saving sacrifice.
Mr Martenson is absolutely correct that it isn’t possible to eliminate the deficit through spending cuts alone, or through borrowing and spending with the hopes of growing enough, especially in a world of diminishing natural resources. But the Math is clearly there to solve the problem with tax increases and some austerity.
But without population reduction, none of the above matters.
There’s been a lot written on the various factors that have led up to our current economic problems, but one thing that seems to get overlooked much of the time is the fact of an ever-increasing life expectancy. Life expectancy has increased about 50% since 1900 (from 48 years to 75 years for males, and 51 years to 81 years for females). This gain is extremely costly on society, but somehow this enormous cost is rarely talked about. It’s daunting to think that in the whole history of the world this is a relatively brand new problem. Governments around the world have continually underestimated these costs. This is one force that has led up to the giant ponzi scheme we currently have. It’s not just governments that are the problem. Citizens increasingly try to dodge paying for the care of their elder relatives. It’s much more fun to pay for a trip to the beach or buy a new boat than it is to pay a medical or nursing home bill. I’m a physician & every single day I see thousands & thousands of dollars being spent on elderly patients that have essentially no quality of life. Our profession gives everyone the “full workup” because of the fear of getting sued, and because few families have realistic expectations regarding life, and the sustainability of our current society. The phrase “this is completely unsustainable” goes through my mind countless times every day I work. I wish there was an unlimited supply of resources to give everyone in this world and the most pleasant & happy life possible. Unfortunately as we all know, resources are limited & magical thinking doesn’t solve problems. There are clearly no easy answers, but I suspect these problems will never be addressed until the bottom completely falls out. It’s too bad. As a physician I know that confronting difficult situations early & directly often prevents much worse problems later.
Dryam,
That is a difficult subject but you’re right. There seems to be a huge amount of resources employed in ensuring people live for as long as humanly possible, regardless of the quality of that life. Unfortunately, I don’t have hard figures for how this issue affects our resources but I sometimes wonder if the only medical help we should provide, apart from some basic stuff like splints to help nature heal in a more useful way, is pain relief.
Actually, the burden is not on us to verify anything that is based on a super-basic level of knowledge. I truly wish we had the time to start at square zero with everybody who demands it of us, but it’s not possible.
So let me turn it around. How about instead that it’s up to you to provide any facts you can to support your implied claim that climbing population levels have not created any problems or predicaments? Perhaps in the interest of simplicity you could start with:
Energy use (in aggregate, across oil and coal just to keep it simple). How is it that you think that more people do not use more energy? Given peak oil, how is this not a predicament? Please be specific and use actual data.
Fresh water use and availability. Again, to keep it simple, how about we constrain this conversation to the American southwest and the use of aquifers? Pick Phoenix and project their issues for the next two decades just for fun.
The impact of populations on local resource utilization including water, water treatment, road congestion, school crowding, land use and parking space availability, etc.,etc.,etc. If you manage to find a way that increasing population does not create additional strains on local resources please PM me immediately as I know of 12,543 local planning boards that need to consult with you pronto.
Honestly, anybody who cannot intuitively and immediately understand the linear and direct connection between population growth and problems that need solving is going to have a hard time at a site where we try and grok the subtleties of living in a non-linear, complex and even chaotic world.
Even more honestly I cannot fathom how somebody could move through life without noting the exceptional levels of dedicated hard work that growth requires and imposes.
At any rate, our style here is not to place our burdens on others (this site has a strong undercurrent of personal responsibility) so I would ask that anybody seeking to challenge something do so in the form of presenting countervailing evidence, not open-ended questions easily addressed on their own time.
Thanks in advance.
Chris M.
Hi Chris,
First let me say this. I have the highest respect for you and what you are doing on this website. Big troubles are coming and I thank you for helping thousands to prepare for it! You are doing a great job! It is not my intention to cause any trouble on your blogs or talk forums.
And I probably should not have posted what I did, because it only detracts from what the mission is on your website. Now in saying all that the reason why I posted what I did, is because I think the evidence doesn’t support the theory that over population is a problem. And since you asked me to respond I would like to. Please give me some time to present it. And also when I am ready to present it, where should I post it so that it doesn’t take away from the main goal of your website? So please understand I am not a person posting trying to make trouble. I have learned much from your crash course and website. Thank you.
Great article, Chris.
One could break down that need for more jobs in another way. If the population is growing and/or not everyone who wants a job has one, then more jobs are needed. However, you’re right that population growth must end and we need to figure out how to end it before nature does it for us. It seems as though no-one wants to address the issue and everyone is keeping their fingers crossed that population growth will end through demographics, leveling out somewhere north of 9 billion in the second half of the century. They are also keeping their fingers crossed that 9-10 billion people can be safely accommodated without trashing the planet.
I’m so glad you stated explicitly that “sustainable growth” is an oxymoron. However, amazingly, some people, even some who otherwise appear to understand our predicament, think growth can go on forever. Some posit the idea of a small amount of growth (a small fraction of a percent, say). I know, it’s incredible. Some posit the idea of efficiency fuelling growth. That’s incredible too - just improve efficiency by x% per year and the economy can grow by some proportional amount. Bizarre thinking, but common. Just like another thought that scarce resources can always be substituted for.
I’d like to see this message emphasised more here: growth is unsustainable. Clearly we have a need for zero growth (probably after a period of contraction) but have you given any thought to what society might look like with zero growth? This is something I haven’t quite managed to get my head around. Would a zero growth economy have any similarity to today’s growth based economy? How would communities be organised, would businesses be recognisable (profits seem to be incompatible with zero growth). Why would a business start up, if it can’t grow itself or grow the market? What businesses make no sense in a zero-growth world? And so on. Are you planning any articles that address these things?
I will disagree that a 12% increase in taxes would be an enormous burden. Of course the unemployed make no income, so an increase in income taxes would have no effect on them. It would mean about $4,000 additional taxes for someone with a median income of about $45,000. If someone with an income of $45,000/yr can't stay afloat with an additional $4,000 taxes, I would argue that this person has not learned the lessons of the last couple of years and will eventually go under anyway.
Wow LOL......raise my taxes 12% & I will have 3 new people that work for me signing up for unemployment tomorrow.....
Funny, but I feel as if I’ve assimilated the CC info quite thoroughly.
And I work 70+ hours a week to make our biz run and to make it profitable. Seems that one can – with sufficient hard work, know-how and sheer nerve – sail a 30’ boat through 60’ seas (to speak figuratively). At least for a time. My wife & I have been doing it for about 21 months now. We’ll see if we can manage another year…
So to your IMO cavalier assertion that 12% tax would be nothing more than a mote in my taxation eye I say phooey. It would suck up every little bit of gravy that I beat my brains out to lay my hands on. That gravy allows me to provide the bare minimum for my family, and to prep for the great unraveling that is currently eating the floor out from underneath each and every one of us.
But what does that matter? We’re all going to “eventually go under anyway.” Right? Might as well float the clueless, luckless and shiftless on my back in the meantime.
Oh wait – that 12% will set the whole financial issue to rights. Because the politicians will stop increasing their spending everytime their tax base increases, right? And no new off-budget items (war in [insert country name here]) will appear, right? And nary a single new entitlement program will coalesce out of the collective political mind? Right? No Black Swan (hurricane in the GoM) is going to manifest. Right?
Frankly if a 12% increase in my taxes would make all the problems go away I’d gladly dish it out. But (having read back over this post) I reckon you could count me in the Stupendously Skeptical category.
I love it! Only someone living of the Government dole already would see raising taxes by 12% as a GREAT idea…
We would lay off 6 people the same day, and struggle to run our 24hour business ourselves I guess.
We have clients every single day who are collecting social security, un-employment, food stamps, child care checks for watching their own grandchildren!! But do you know what these poor desperate people also have in common? They all have a cell phone, cable tv, a car, and get to eat fast-food all the time. PLUS most of them want to meet at 11am - because they like to sleep in late!
And I can’t stand the comments about the rich hiding money and cheating on taxes. We have worked hard and paid a TON. Never cheated, and don’t hide $.
What a joke. Lets let hard-working people pay more to bail out a sick and twisted system.
I’m about ready for the crash…sounds like a wake-up call.
I’m curious as to why the link in my previous post was deleted as someinappropriatesite.com by the editor.
To be fair, I respect the work that Chris does and his ideas have even impacted the place I’ve chosen to live, and I fully understand exponential growth vs. a finite world. However, to ignore any counter arguments to the crash course, which falls quite short at any mention of the ‘conspiratorial’ view of history, is just sad.
This quote is from that someinappropriatesite.com: “According to the U.N. Population Database, using the historically accurate low variant projection, the Earth’s population will only add another billion people or so over the next thirty years, peaking around 8.02 billion people in the year 2040, and then it will begin to decline. Check their online database.”
I have note done the homework to see if the claim that the “low variant projection” is accurate historically as per this claim, but at least I can look at both sides of the coin.
[quote=we_are_toast]
I will disagree that a 12% increase in taxes would be an enormous burden. Of course the unemployed make no income, so an increase in income taxes would have no effect on them. It would mean about $4,000 additional taxes for someone with a median income of about $45,000. If someone with an income of $45,000/yr can’t stay afloat with an additional $4,000 taxes, I would argue that this person has not learned the lessons of the last couple of years and will eventually go under anyway.
I view this as a national emergency every bit as large a threat as WWII and an equivalent sacrifice would be called for by anyone who truly understands the consequences. A 12% tax increase is more like a major annoyance than a nation saving sacrifice.
Mr Martenson is absolutely correct that it isn’t possible to eliminate the deficit through spending cuts alone, or through borrowing and spending with the hopes of growing enough, especially in a world of diminishing natural resources. But the Math is clearly there to solve the problem with tax increases and some austerity.
But without population reduction, none of the above matters.
[/quote]
Well, if we assume the 12% increase will be accomplished via the income tax, then you have to consider the reasons why so many people are unemployed in the first place. The simple explanation is that we had a major credit bubble, it burst and now many people find themselves with debt burdens they can no longer service or are struggling to pay down, sacrificing spending on other things. Of course this depresses prices and causes companies to cut costs at the margin to stay viable, which can include outright bankruptcy or laying off workers. Based on that simple process, I would suspect the additional taxes on income would cause people to save more, rush to get out of debt more quickly and spend less - further depressing prices and leading businesses to lay off more workers - creating a large burden on people who previously though their jobs were safe and further increasing the fiscal obligations of state/federal governments who must pay out more in benefits.
I think the basic point many people on here have alluded to is that we are in an economic predicament at the private and public levels, and austerity in the form of spending cuts or tax hikes can actually exacerbate the problem by creating a self-reinforcing positive feedback that makes the debt to GDP ratio even worse. And there is still the problem of making sure the people with enough resources to absorb a significant tax increase do not avoid the taxes through various loopholes or by “gaming the system”. That being said, I think lowering taxes on labor and the productive economy while raising taxes on the FIRE sector may be a good way to stimulate a limited amount of growth and redistribute wealth back to those responsible for the productive activities that produced it in the first place. But even this will not “solve” the public debt problems we have in this country (Greece is a good example of how austerity will not save the bondholders from an eventual default on it’s public debt)
[quote=Sager]
Frankly if a 12% increase in my taxes would make all the problems go away I’d gladly dish it out. But (having read back over this post) I reckon you could count me in the Stupendously Skeptical category.[/quote]
Good point, Sager!!! I think one thing us gullible “put your nose to the grindstone and play by the rules” types have learned over the last couple of years, if nothing else, is that we have been gullible!
I think that to honestly answer the “12% more taxes” postulation, one should (have to) identify if one is:
A single person with no intention of ever having kids
A gay couple
A married couple with one person working and the other raising the children
A married couple with children but both working out of economic necessity or for other reasons
A business owner with two or more dedicated employees.
I happen to fulfill two categories above (#3 and #5) and I can state, with certainty that a 12% increase in my taxes would result in the loss of at least two jobs that I know of.
It is amazing to me that some people think of taxes as somehow neutral and benign. They may be good and there are lots of circumstances under which I see them this way, but an incremental 12% (of GDP!!!) increase from here would not fall equally upon us all.
The very poor would see none of it (they don’t pay any anyways) and neither would any of the very rich (they have better lawyers). Instead the entire 12% would be distributed to the middle and upper middle classes (as always) and that would be closer to a 25% increase to those groups by the time all was said and done.
Did I say that I would lose a couple of people? I guess I meant to say that I would shut this operation down because, truth be told, I could not afford it. I am already too far behind the curve as it is.
I wish that the entire population of people who postulated about the potentially benign impacts of tax increases were business owners. I take the livelihoods of the pople who work for me with a very, very high degree of responsibility that transcends any ethereal discussion of taxes.
Perhaps that’s just me…and Sagar…and a million other people. But it’s a reality.
Thanks pinecarr. Really, if I believed that a 30% tax increase was really going to be balanced across all income levels (i.e., nobody was going to escape it) I’d happily comply for whatever – a couple years – to make the system whole. But I reckon we all know that’s as likely as some intrepid jellyfish single-handedly plugging up the Macondo gusher. More’s the pity.
Not that there’s anything wrong with that, but we are strictly a secular site (among many beliefs we neither spouse nor promote) and the one you linked to is, quite strictly, a non-secular site of the highest order. As such, its facts are presupposed to be not suitable for posting to this site until proven otherwise.
If confused, please re-read the posting agreements you clicked through when agreeing to the terms of this site. They are wonderfully and refreshingly clear.
