Monday, December 03, 2012

The Most Important Graph You Will Need For The Fiscal "Cliff"

What you are looking at is a graph that measures the percentage of GDP that both taxes paid by Americans and government spending compared to an average of tax revenues over the past 50 years or so.
You'll immediately notice two things: Spending as a percentage of GDP  has only declined under both Democratic presidents Clinton and Obama (altho Obama's spending has spiked for the most part because of TARP and other stimulus programs, he does show a sharp drop in 2010-2012), and had tax revenues remained at Clintonian levels in the 2000s, we wouldn't be facing a crisis of confidence at the present time.
Those are facts, not rhetoric. Granted, the underlying variable to all these curves is the growth of GDP over time. You'll notice that Clinton managed to keep the economy humming along even as tax revenues increased and spending was reduced during his eight years.
Likewise, for one shining year, President Obama managed to grow the economy fast enough that the increased spending put in place by the trainwreck his predecessor left him was absorbed and paid dividends.
This graph alone justifies the expiration of the Bush tax cuts (I'd argue they should all be allowed to expire, but that's just my opinion) AND for much more stimulus spending. The spending on infrastructure repair alone would pay for itself almost immediately (within two to three years). The spending on infrastructure improvements that actually benefit the economy (and not pork barrel projects like bridges to nowhere and airports that close three months later.)
Of course, the problem with tax hikes is, well, you. I mean, who wants to pay more in taxes? If you live in a high tax state like New York or California, do you want to have to pay Federal taxes on those taxes? Is the policy of allowing home mortgage interest deductions good for the economy or bad for it? What about the money your boss might pay for health insurance for you? Should you be taxed on that? Is that now irrelevant since we have national health coverage?
And how much will truly be raised and will it be enough to give Republicans cover to say they didn't raise a tax (rates) while giving Democrats something to crow about with raising a tax (revenue)?