ARRA News Service
ARRA News Service facebook page  
News for social, fiscal & national security conservatives who believe in God, family & the USA. Upholding the rights granted by God & guaranteed by the U.S. Constitution, traditional family values, "republican" principles / ideals, transparent & limited "smaller" government, free markets, lower taxes, due process of law, liberty & individual freedom. All content approval rests with the ARRA News Service Editor. Opinions are those of the authors. While varied positions are reported, beliefs & principles remain fixed. No revenue is generated for this site - no paid ads accepted - no payments for articles. Fair Use doctrine is posted & used.
Editor/Founder: Bill Smith, Ph.D. [aka: OzarkGuru & 2010 AFP National Blogger of the Year]
Contact: editor@arranewsservice.com (Pub. Since July, 2006)
    Home Page

One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. -- Plato (429-347 BC)

Thursday, August 04, 2016

Government Debt and Spending in 4 Graphs

by Antony Davies & James R. Harrigan: “A power over a man’s subsistence amounts to a power over his will.”

So wrote Alexander Hamilton in Federalist no. 79 in 1788. In pointing to the need for an independent judiciary, Hamilton stressed that the president and members of the judiciary could only be truly independent if they did not have to rely on Congress for their paychecks. Without this independence, the other two branches of government would simply become puppets of the legislative branch.

Hamilton was right, but why stop there? If placing the livelihood of some in the hands of others creates a structural problem within the government, then yoking the immediate financial interests of citizens to the government would cause much the same problem without. Just as the executive and judicial branches would be bought and paid for by the legislature, the entire citizenry would become nothing but vassals of the state.

This is exactly what came to pass in the twentieth century. As the size and scope of government ballooned, so too did Americans’ dependence on it. And a disastrous synergy was born. Citizens demanded ever more from the government, and politicians obliged, steadfastly refusing to balance the budget in the bargain. Instead, the government borrowed what politicians needed to keep the people fat and happy. It ran up $19 trillion in official debt, or (conservatively estimated) $120 trillion including unfunded liabilities (think promised future Social Security and Medicare benefits).

Equal parts debt and dependence resulted.

Debt and Dependence
The federal debt is simply the accumulation of annual deficits. How bad have these annual deficits become? Figure 1 shows the inflation-adjusted per-capita deficit. In the 1960s, the deficit averaged $200 per year per person (in today’s dollars).This number tripled to more than $750 in the 1970s, then more than doubled again to over $1,600 in the 1980s. It held constant in the 1990s, then increased by 50% in the 2000s and again in the 2010s. Adjusted for inflation, the annual deficit per person today is almost seventy times what it was in 1960.

Figure 1.
And what is the government doing with all this spending? It’s buying off voters in two ways.

First, the government buys off today’s voters with tomorrow’s voters’ money. Tomorrow’s voters will pay for today’s deficits through increased taxes, reduced government services, or inflation resulting from monetization of the federal debt.

Second, the government buys off the majority of voters with the minority’s money. According to the Congressional Budget Office, only the top 40% of taxpayers (on average) pay more to the federal government than they receive back in the form of tax credits and transfers (figure 2). This means that a majority of Americans—almost a supermajority—have a personal interest in expanded government. The more government spends, the more they stand to receive.

In the end, politicians buy dependence with money the government does not have. This is doubly destructive, because it chains dependent citizens to a ship that is slowly sinking.

Figure 2.

How Much Is Too Much?
Today’s government grows at the expense of tomorrow’s taxpayer through the accumulation of debt, so the obvious question seems to be "How much government is too much?" There is no clear answer, because this isn’t the right question. The right question is “How much government is possible?”

“How much government” can be measured by federal receipts (all federal government revenue) as a fraction of GDP. This ratio measures the fraction the government takes of value the economy creates. It is a reasonable measure of the government’s “footprint” on the economy, and the government’s footprint has remained remarkably constant for a long time.

Figure 3 shows federal receipts as a fraction of GDP from 1950 to the present. Over this period, the ratio has averaged 16.9%, with a low of 13.1% in 1950 and a high of 19.7% in 2000. What’s noteworthy is that the ratio has remained relatively stable despite wide fluctuations in tax rates. Over this period, the top marginal income tax rate fluctuated from a low of 28% in 1988–89 to a high of 92% in 1952–53. Social Security and Medicare tax rates fluctuated from a low of 1.5% in 1950 to a high of 15.3% from 1990 to the present. The top capital gains tax rate fluctuated from a low of 15% from 2003–7 and 2010–12 to a high of 39.9% in 1976–78. The average effective corporate tax rate ranged from a low of 20.2% in 1985 to a high of 45.3% in 1960. Finally, the estate tax rate moved from a high of 77% from 1950–76 to a low of 0% in 2010.

Despite the rhetoric, government can neither raise nor lower taxes. Government can only raise or lower tax rates. Taxes are what emerges when the government applies tax rates to economic activity, and economic activity is controlled by individual people. How much government is possible? The answer seems to be 17% of the economy. That’s all the revenue the economy appears willing to deliver.

Figure 3.

But the government can control spending. While the government has collected a relatively constant 17% of GDP, it has spent a relatively constant 20% of GDP, as figure 4 illustrates. In other words, the government consistently chooses to spend more than it can take in, to the tune of about 3% of GDP. In any given year, the government spends about 15% more than it should. Since 1958, federal receipts have only been large enough to support the size of government we had eight years prior.

Cutting spending to match the 17% of GDP the government collects every year is the first step.

Figure 4.

The second step is addressing the near supermajority of Americans who receive more from the government than they pay in. The present trajectory is both unreasonable and unsustainable. The solution could be quite simple. About 15% of Americans live below the poverty line. It is wholly reasonable that these people receive more, perhaps significantly more, than they pay in. Another 35% are above the poverty line but below the median income. These people should neither pay nor receive anything. Finally, 50% are above median income, and these are the people who should pay more than they receive.

Taking one of these steps without the other is pointless. Hamilton was right: the power of a man’s subsistence is power over his will. And where citizens are concerned, this is a dangerous thing. It is so dangerous that it has resulted in a crushing debt that will cripple, if not annihilate, the United States in the coming years. Citizens who want things at no cost and politicians who want to dole those things out in exchange for votes will have to put their short-term interests aside if they have any desire to keep their republic.
-------------------
Antony Davies is associate professor of economics at Duquesne University in Pittsburgh. James R. Harrigan is director of academic programs at Strata in Logan, Utah. Article shared with ARRA News Service by the Intercollegiate Studies Institute.

Tags: Government Debt and Spending, 4 Graphs, Antony Davies, James R. Harrigan, Intercollegiate Studies Institute To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service. and "Like" Facebook Page - Thanks!
Posted by Bill Smith at 4:00 PM - Post Link

0 Comments:

Post a Comment

<< Home



national debt
Don't miss anything!
Subscribe to the
ARRA News Service
It's FREE & No Ads!

You Receive One Email Each Morning
With Prior Days Articles / Toons / More


Also, Join us at:
Facebook.com/ARRANewsService


Recent Posts:
Personal Tweets by the editor:
Dr. Bill - OzarkGuru
Married 48yr #Conservative #Constitution #NRALife #GunRights #USAF 22yr #military #veteran #Christian #CCOT #ProLife #TEAParty #GOP #TCOT #SGP #schoolchoice



Action Links!
Arkansas State Senators
AR State Representatives
Arkansas Governor Office
Arkansas Attorney General
Bankrupting America
US House of Representatives
US Senators
Family Research Council
GrassFire
NumbersUSA
Ballotpedia
Judgepedia
Sunshine Review


Facebook Accts - Dr. Bill Smith
Pages:
ARRA News Service
Arkansans Against Big Government
Alley-White Am. Legion #52
Baxter County Republicans, AR
Catholics & Protestants United Against Discrimination
End Taxpayer Funding of NPR
Overturn Roe V. Wade
Prolife Soldiers
Project Wildfire
Republican Liberty Caucus of Arkansas
The Gold Standard
Twin Lakes Republican Women
US Atty Gen Loretta Lynch, aka Eric Holder, Must Go
Veterans for Sarah Palin
Why Vote for Hillary (Satire)
FB Groups:
Arkansas For Sarah Palin
Arkansas Conservative Caucus
Arkansas County Tea Party
Arkansans' Discussion Group on National Issues
Blogs for Borders
Conservative Solutions
Conservative Voices
Defend Marriage -- Arkansas
FairTax
FairTax Nation
Arkansas for FairTax
Friends of the TEA Party in Arkansas
Freedom Roundtable
Let's Mine AR Lignite NOW!
Personhood Initiative
Pro-Life Rocks - Arkansas
Republican Network
Republican Liberty Caucus of AR
Reject the U.N.

Patriots
Exchange
Links

Links to ARRA News
A Patriotic Nurse
Agora Associates
a12iggymom's Blog
America, You Asked For It!
Americans for a Free Republic
America's Best Choice
America's Whatchtower
An Ol’ Broad’s Ramblings
AR Republican Assembly
ARRA Twitter
As A Matter of Fact
As The Crackerhead Crumbles
Baaad Media!
Baxter Co. GOP Assembly
Baxter County Republicans
Benton Co. GOP Assembly
Black & Right
Blogs For Borders
Blogs for Palin
Blow the Trumpet Ministry
Boot Berryism
Cap'n Bob & the Damsel
Chicago Ray Report
Chuck Baldwin - links
Citizen Pamphleteer
Common Cents
Conservative Hideout
Conservative Observer AZ
Conservative Voices
Conway Real Deal
Defeat Obama's Agenda
Diana's Corner
eGOP News
Florida Pundit
Franklin Online Outreach
Free Zone Media Center
For God and Liberty
Garland County Republicans
Greater Fitchburg For Life
Guns and Religion
Lasting Liberty Blog
Liberal Isn't Amy
Liberty's Lifeline
Maggie's Notebook
Marathon Pundit
Monkey in the Middle
NASA Satellites
No Runny Eggs
Okie Campaigns
Our Voices Arkansas
Patriot's Corner
ProLifeBlogs
Publius Forum
Randy's Roundtable
Real Debate Wisconsin
Religion and Morality
Right on Issues that Matter
Right Reason
Rocking on the Right Side
Saber Point
Saline Watchdog
Secure Arkansas
Sentry Journal
Teresamerica
Stop Obama Satire & Cartoons
The Arkansas Patriot
The Audacity of Logic
The Blue Eye View
The Bobo Files
The Born Again Americans
TEA Party Cartoons
The Conservative Citizen
The Foxhole | Unapologetic Patriot
The Liberty Republican
The Lid
The Looking Spoon
The Maritime Sentry
The O Word
The Path to Tyranny Blog
The Real Polichick
TOTUS
Truth About Obamacare
Twitter @ARRA
Warning Signs
Women's Prayer & Action
WyBlog

Editor's Managed Twitter Accounts
Twitter Dr. Bill Smith @arra
Twitter Arkansas @GOPNetwork
Twitter @BootBerryism
Twitter @SovereignAllies
Twitter @FairTaxNation


Editor's Recommended Orgs
American Committment
American Enterprise Institute
American Family Business Institute
Americans for Limited Government
Americans for Prosperity
Americans for Tax Reform
American Security Council Fdn
AR Faith & Ethics Council
Arkansas Policy Foundation
Ayn Rand Institute
Bill of Rights Institute
Campaign for Working Families
Center for Individual Freedom
Center for Immigration Studies
Center for Just Society
Center for Freedom & Prosperity
Citizens Against Gov't Waste
Citizens in Charge Foundstion
Coalition for the Future American Worker
Competitive Enterprise Institute
Concerned Veterans for America
Concerned Women for America
Curtis Coleman Institute for Constitutional Policy
Declaration of Am. Renewal
Eagle Forum
FairTax
Family Research Council
Family Security Matters
Franklin Center for Gov't & Public Integrity
Gingrich Productions
Global Incident Map
Great Americans
Gold Standard 2012 Project
Gun Owners of America (GOA)
David Horowitz Freedom Center
Institute For Justice
Institute for Truth in Accounting
Judicial Watch
Less Government
Media Reseach Center
National Center for Policy Analysis
National Right To Work Foundation
National Rifle Association (NRA)
National Rifle Association (NRA-ILA)
News Busters
O'Bluejacket's Patriotic Flicks
Open Secrets
Presidential Prayer Team
Religious Freedom Coalition
Renew America
Ron Paul Institute
State Policy Network
Tax Foundation
Tax Policy Center
The Club for Growth
The Federalist Today
The Gold Standard Now
The Heritage Foundation
The Leadership Institute
Union Facts



Blogs For Borders

Reject the United Nations

Adopt Our Troops in Prayer


Thousands of Deadly Islamic Terror Attacks Since 9/11

FairTax Nation on FaceBook
Friends of Israel
Blog Feeds
Syndicated - Get the ARRA News Service feed Syndicated!
ARRA Blog Feed

Add to Google Reader or Homepage

Add to netvibes

Add to Bitty Brouser

Add to The Free Dictionary

Powered by Blogger

Politics Blogs
Politics blog


  • How To Exchange Links!
  • Comments by contributing authors or other sources do not necessarily reflect the position the editor, other contributing authors, sources, readers, or commenters. No contributors, or editors are paid for articles, images, cartoons, etc. While having reported on and promoting the beliefs associated with the ARRA, this blog/site is not controlled by nor funded by the ARRA. This site/blog does not advertise for money or services nor does it solicit funding for its support.
  • Fair Use: This site/blog may contain copyrighted material the use of which has not been specifically authorized by the copyright owner. Such material is made available to advance understanding of political, human rights, economic, democracy, and social justice issues, etc. This constitutes a 'fair use' of such copyrighted material as provided for in section Title 17 U.S.C. Section 107 of the US Copyright Law. Per said section, the material on this site/blog is distributed without profit to readers to view for the expressed purpose of viewing the included information for research, educational, or satirical purposes. Any person/entity seeking to use copyrighted material shared on this site/blog for purposes that go beyond "fair use," must obtain permission from the copyright owner.
  • © 2006 - 2016 ARRA News Service
Creative Commons License
Creative Commons Attribution Noncommercial Share Alike 3.0 Unported License.