Priorities and the Size of Government
This is what the ASCE think s of our infrastructure:
ASCE estimates that $1.6 trillion is needed over a five-year period to bring the nation’s infrastructure to a good condition. Establishing a long-term development and maintenance plan must become a national priority. But in the short term, small steps can be taken by the 110th Congress, as well as state legislatures and local communities, to improve our nation’s failing infrastructure.
According to their report card, nearly every category of infrastruruce in this country is doing poorly, with none listed at B or above. The bridge that collapsed in Minneaopolis is hardly unique in terms of ifs condition and need for serious repair.
The first priority of the Bush Administration was a tax cut:
Making the tax cuts permanent would generate large, backloaded revenue losses over the next 10 years. Combined with a minimal but necessary fix to the government’s Alternative Minimum Tax, making the tax cuts permanent would reduce federal revenues by almost $1.8 trillion over 10 years — and that’s in addition to the $1.7 trillion of revenue losses already locked into law. By 2014, the annual revenue loss would amount to $400 billion, or 2 percent of gross domestic product — almost the size of this year’s federal budget deficit.
Emphasis mine.
In 2004, law makers tried to raise money for infrastructure repairs. The Bush Administration threated to veto it:
But this election year, increased highway spending is threatened by the need to control rising budget deficits. Under pressure from fiscal conservatives, President Bush called for a trimmed-down transportation bill, no more than $256 billion.
Nonetheless, the Republican-controlled Senate approved a $318 billion bill, and today the House passed its own $275 billion measure. Mr. Bush has promised he’ll veto either of the higher figures. But House Transportation Committee Chairman Don Young said even the House bill is tens of billions of dollars less than what’s needed for America’s roadways.
The 2004 bill did not pass. The Bush Administration’s number came from the amount of money that was projected to be raised by existing tax formulas. In other words, the Bush Administration was proposing a budget that had no increase in infrastructure funding beyond what was already planned. The fight was not about earmarks, as the Bush Administration signed a bill that contained thousands of earmarks the next year — but a bill that was closer to the Bush Administration’s desire for no significant increase. Money for tax cuts, yes. Money for infrastructure, not so much.
And then there is the Iraq war. To date, the United States has spent about 450 billion dollars on the Iraq war, with continuing cost estimated at about two billion per week. Some economists have estimated that the actual cost of the war, including economic effects, is closer to two trillion dollars. Money for a useless invasion that has damaged the country almost beyond measure, yes. Money for infrastructure, not so much.
Obviously it is impossible to tell if any of the recent budget decisions, either at the Federal or State level, would have prevented that bridge collapse. What is not in doubt, however, is that our national infrastructure is crumbling at the same time a notion of “small government uber alles” has taken over our political discourse. The conservatives promised smaller government — a government so small they could drown it in a bath tub is the dream of Grover Norquist — and they delivered, at least in some areas. And if you want to argue that this is a bipartisan problem, that Democrats have not done much better, there is a certain truth to that. National Democrats have not done a good job of countering the “government is the problem” rhetoric and they have even adopted that argument themselves occasionally. But the problem is not individual politicians but an ideology that sees government as an impediment not as the collective engine of society.
We are not a small country; we are not an undeveloped country. We are a large country with a complex and technologically dependent economy. And if we want to maintain a robust economy and a safe nation, we must maintain a technologically complex infrastructure. Our government is going to be large because our society requires things that only a large, efficient government can provide. The question has never been how big the government should be. The question has always been whether or not our government can provide the support our society needs to be safe and prosperous. By focusing on the size of government, conservatives have created an ideology that is incapable of governing effectively, because it is incapable of knowing what to measure in order to asses whether or not the government is behaving as it should. An ideology that is concerned with the size of government will always see restraining growth in services and cutting budgets as a good thing, regardless of circumstances. And so we get trillions of dollars for tax cuts and fights to constrain the growth of federally funded infrastructure repairs at a time when the nation’s infrastructure is in dire shape.
We simply cannot continue down the conservative path and expect things to get better. Their ideology doesn’t merely come to the wrong conclusions. Their ideology is simply incapable of asking the right questions.
>The conservatives promised smaller
>government — a government so small they
>could drown it in a bath tub is the dream
>of Grover Norquist — and they delivered,
>at least in some areas
You have to be joking? The government has been growing at the fastest rate since the Johnson adminstration under Bush. Even setting aside defense and security spending it has been exploding.
Again, our current tax level is not the source of our neglect for infrastructure, it is politicians willing to endlessly delay necessary expenses that lack advocay groups in order to waste it on frivilous expenditures that will buy them more votes.
Consider the bill you mentioned is the one that secured $223 million for the infamous “Bridge to Nowhere”. How many highway bridges could that money have repaired?
Stormy
Your growth numbers are meaningless, even aside form the fact that a lot of that growth is in entitlement programs. The question is not and has never been the size of government or the rate it grows but whether or not it has enough funds to provide the appropriate infrastructure. Its clear that this is not the case. You have exactly the same problem Norquist does – -you so hate government and taxes that the only question you can ask yourself is “how big” when you should be asking yourself “how well”.
“Again, our current tax level is not the source of our neglect for infrastructure, it is politicians willing to endlessly delay necessary expenses that lack advocay groups in order to waste it on frivilous expenditures that will buy them more votes.”
Like what, Stormy? Aside from tax cuts, what, precisely, are you talking about. Medicare? education spending? Or maybe you have in mind some tiny little museum somewhere that got an earmark once. becasue, after all, we all know that the cheese museusm is equal in cost to the tax cuts of the past seven years.
[...] Kevin at Lean Left thinks that America has effectively outgrown conservative ideology: Our government is going to be large because our society requires things that only a large, efficient government can provide. The question has never been how big the government should be. The question has always been whether or not our government can provide the support our society needs to be safe and prosperous. By focusing on the size of government, conservatives have created an ideology that is incapable of governing effectively, because it is incapable of knowing what to measure in order to assess whether or not the government is behaving as it should. An ideology that is concerned with the size of government will always see restraining growth in services and cutting budgets as a good thing, regardless of circumstances. And so we get trillions of dollars for tax cuts and fights to constrain the growth of federally funded infrastructure repairs at a time when the nation’s infrastructure is in dire shape. [...]
It does have enough to fund infrastructure. IF IT ACTUALLY SPENT MONEY ON INFRASTURUCTURE. The problem is with your tax increase plan is that unless we solve the spending priority problem first, any increase isn’t going to get spent on infrastructure and in a few years we’ll be standing around another collapsed bridge going through this same argument again with a yet higher level taxes.
Stormy,
Don’t waste your time. He will avoid answering your obvious point that it isn’t about whether or not we have the money (we do), but whether or not we SPEND the money on infrastructure. Not to mention Kevin’s argument for increased taxation would actually lower the amount of real dollars the government collects anyways, so I’m not sure what exactly he’s proposing. Increasing taxes will make people spend less money, thus less tax revenue collected. I’ve had this argument with Kevin before and it was a waste of time then too.
Stormy
yeah, if we stop stupid wars and roll back the tax cuts, sure. but beyond that, tell me expressly what you plan to stop paying for to come up with the 1 trillion dollars required.
Until then, I sand by my original statement: you are so fixated on the size of government that you aren’t capable of dealing with the question with anything other than “taxes bad!”.
And I am still waiting for examples of significant — and I mean significant enough to make a dent in the one trillion dollars needed — examples of politicians buying votes with frivolous vote buying actions.
Kevin:
You’re wasting your time. Any attempt to tie taxes to the things taxes pay for is going to be resisted tooth-and-nail by the anti-tax crowd, because they’re completely unwilling to own up to the reality that while everyone hates paying taxes, most everyone likes the things that taxes pay for.
The only way to meaningfully cut spending on the order of magnitude you’re talking about is to cut spending on defense, Medicare/Medicaid, and social security. These three, plus interest on the national debt, combine to account for over 73% of the 2008 budget. Conservatives won’t cut the first, they don’t dare cut the second, and they got their asses kicked when they tried to cut the third.
You could eliminate absolutely everything else the federal government does apart from those four expenditures, and only save $780 billion — or barely 3/4 of what’s needed to fix infrastructure.
There’s never going to be meaningful budget reform in this country until we re-couple taxes with the things they pay for in the public mind. And that re-coupling will always be avoided like the plague by anti-tax conservatives and libertarian types, because they know they’ll get their asses handed to them on that playing field.
TMan:
Not to mention Kevin’s argument for increased taxation would actually lower the amount of real dollars the government collects anyways
You still believe in the supply-side fairy tale, eh? Maybe if you clap three times…
Tgirsch, while I generally agree with you, you are playing a bit fast and loose with your numbers. We don’t need to spend a trillion dollars every year on infrastructure.
Budgeting for and properly maintaining national infrastructure requires a mature, responsible, forward-thinking society. Unfortunately, we are more like a bunch of crack addicts, unable to see past our need for a fix today, and unconcerned about tomorrow.
You still believe in the supply-side fairy tale, eh? Maybe if you clap three times
I don’t have to clap three times. I just look at the recent numbers for tax revenue that completely eviscerate your unfounded and unsupported arguments that raising taxes will generate more revenue. You most get frustrated as the Bush tax cuts push us closer to your vaunted 19% of GDP. The latest budget estimate is that fiscal 2007 revenues will reach 18.8% of GDP, compared to the 40-year historical average of 18.3%. Tax revenues this year are rising by nearly 8%, following increases of 11.8% in 2006 and 14.6% in 2005. The budget deficit is down to 1.5% of GDP, and falling. But apparently some idiots still think Americans are undertaxed.
Ted:
We don’t need to spend a trillion dollars every year on infrastructure.
Valid point. The assessment states $1.6 trillion over five years, or about $320 billion per year. But the larger point still stands. The FY2008 federal budget includes $13.2 billion for transportation, which is just a tiny fraction of that $320bn figure (to be fair, some of that spending is probably under the nebulous label of “homeland security,” so the actual number is probably higher than $13.2bn).
Unfortunately, we are more like a bunch of crack addicts, unable to see past our need for a fix today, and unconcerned about tomorrow.
At the risk of veering off course, a lot of this falls squarely on the shoulders of the media. Generally speaking, when people have access to good information, they make good (or, at least, better) decisions. The estate tax debate is a great example of this — studies have shown that the more people understand about how the tax works and how much revenue it generates, the less likely they are to support its repeal.
I suspect larger tax debates fall out the same way: voters make bad decisions about tax policy because they get bad information about tax policy, and that is in large part because the media simply regurgitates spin, rather than providing anything like insightful analysis (because, heaven forbid a thorough analysis should favor one side or the other — that would be bias!).
Look no further than the last two rounds of tax cuts for evidence of this. They explicitly told us that tax cuts would not result in deficits, and the media ate that crap up, giving only lip service to the other side.
If we had a good media, one where both major parties viewed them more as an enemy than as a tool to be manipulated, we’d be a lot closer.
Tman:
That “19% of GDP” of which you speak still puts us well below 2000 (20.9%) and 2001 (19.8%) levels. So post-tax-cut, revenue is still lower, as a percentage of GDP, than it was before them. (Enter Ted’s objections against using GDP for normalization in this context into the record. I use that scale only because Tman did and wanted to do an apples-to-apples comparison based on his numbers.)
As for your increases in tax revenues, those figures are meaningless with respect to tax cuts unless you can say, comparatively, what those revenues would have done without the tax cuts. We’ve been through this before, by the way: you’re once again forgetting to correct for inflation. As of 2006, in inflation-adjusted dollars, tax revenues finally got back to the level they were at in 2000, before the tax cuts. (I’ll skip the GDP-corrected figures, lest I incur Ted’s wrath.)
Supply-side theory says that the increased revenues owed to tax cuts are supposed to more than make up for any budget increases owed to spending hikes and inflation. But thanks to Bush’s implementation of this budget “strategy,” the government spent 26.7% more in 2006 than it did in 2000, with roughly the same amount of revenue as it had in 2000. How is this a “win” for supply-side theory, again?
I love watching you squirm. The economy absorbs Enron, stock market crashes, and 9/11 thanks to the Bush tax cuts and is now ADJUSTED FOR INFLATION returning to the revenue percentage that is your 19%. You argument is that Bush is now spending too much money has nothing to do with what revenue is coming in. I’m not denying that Bush and Congress spend too much money.
Supply-side theory says that the increased revenues owed to tax cuts are supposed to more than make up for any budget increases owed to spending hikes and inflation.
No, it doesn’t. Supply side simply says more revenue will be collected than the amount that would be by raising taxes. And the facts back this up.
Tman, you are omitting a key consideration in your simplified supply side argument. That being the current tax rate. Serious advocates of supply side economics never assert that cutting tax rates always increases revenues; they assert that cutting taxes increases revenues if the current tax rate is to the right of the inflection point on the Laffer curve. Left of the inflection point and cutting rates reduces revenues. Accroding to supply side theory.
The impact of taxes on revenues is extraordinarily difficult to predict in the long term, but exceedingly easy to predict in the short term (one year or less). The short term impact is: cut rates and revenues fall. Anyone who has been paying attention over the past 40 years (hell, over the past 5 years) knows that reliably predicting GDP growth, tax revenues, or deficits more than about 3 months out is impossible. Given that, I find it comical that anyone claims to understand the long-term linkage between tax rates and revenues. The one fact that is indisputable is the national debt has grown significantly during the past three Republican presidencies, with the current Admin/Congress winning all prizes for running up the debt.
Ted,
The fundamental argument I’m making, regardless of what you want to call it is thus-the more money people are allowed to keep, the more they spend, and the larger the economy grows. The more money government takes, the more this money is wasted, and the less people have to spend, thus slowing the overall economic growth.
This argument is proven repeatedly not just in the US, but more recently in various European nations that embraced a flat taxm which in turn helped to grow their economies.
Tman:
The economy absorbs Enron, stock market crashes, and 9/11 thanks to the Bush tax cuts and is now ADJUSTED FOR INFLATION returning to the revenue percentage that is your 19%.
I expected you to make those excuses (and that’s exactly what they are — excuses). The problem is, you’re assuming that it would be worse had the tax cuts not gone in, a fact not in evidence.
The claim is that tax cuts result in greater total incomes, resulting in higher total receipts even though the rate is lower. That greater total income should be reflected in the GDP. But as we’ve been through before, there’s simply no evidence that tax cuts have a positive impact (or any discernible impact) on GDP. Look at the chart again. See if you can point to where the tax cuts took place based on that GDP curve. (And conversely, increasing taxes should have a negative impact on GDP — see if you can identify where the increases took place, from that graph.)
And the facts back this up.
No, they don’t. Aside from what Ted says, as I’ve already pointed out, the only way you come close to that predicted result is to ignore inflation.
Put it more simply: If what you say is true, then the converse should also be true: increasing taxes should result in reduced tax revenues.
Let’s look here again, shall we? Taxes were increased in 1993, then cut in 2001, 2002, and 2003. Let’s look at the history of tax code changes and what happened to revenue over the last twenty years (additional source here
1987: 18.4% — Tax cut here
1988: 18.1% — Top brackets cut, bottom brackets raised
1989: 18.3%
1990: 18.0%
1991: 17.8% — Top bracket increased here
1992: 17.5%
1993: 17.5% — Top brackets raised here
1994: 18.1%
1995: 18.5%
1996: 18.9%
1997: 19.3%
1998: 20.0%
1999: 20.0%
2000: 20.9%
2001: 19.8% — Tax cut here
2002: 17.9% — Tax cut here
2003: 17.5% — Tax cut here
2004: 16.3%
2005: 17.6%
2006: 18.4%
That’s not exactly a storied history for the tax cut proponent. Five times in that span, taxes were cut. And in all five cases, revenues were down as compared to the year before. And rates continued to drop after the cuts, with 1989 as the lone exception. Meanwhile, revenues increased after each tax increase, with the lone exception being 1991.
I think what actually happens here is that tax revenues naturally tend to grow as the economy grows, and that the exceptions to this rule are when taxes are cut. Now one could make the argument (and I expect you probably will) that tax cuts spur the economy and get us out of recession, but there’s simply no evidence to back that up (see again my XLS chart on the GDP, above).
So it boils down to this: if tax cuts are supposed to increase revenues, why to revenues almost always go down after the cuts?
Tman:
the more money people are allowed to keep, the more they spend, and the larger the economy grows. The more money government takes, the more this money is wasted, and the less people have to spend, thus slowing the overall economic growth.
Again, not if GDP is any measure of the economy. Look again. Taxes were increased in 1991 and again in 1993, and the period from 1991 to 2000 saw record GDP growth, averaging 3.67% growth per year. 2001 saw a 0.75% GDP growth, with Enron and 9/11 of course being huge factors, so we’ll ignore that. But what happened next? From 2002 to 2006, the average year-over-year GDP growth was just 2.74%. The best growth year — 2004 (3.64%), in which there were no tax cuts — still was lower than 1991-2000 average.
And keep in mind, this slower post-tax-cut GDP growth comes despite the fact that 9/11 and Enron caused a temporary-but-dramatic dent in the economy. This, in theory, should leave more room for growth. That is, you’d expect to see some spike in growth as the economy recovers from those hits, irrespective of tax policy.
Tman, you seem to be unable to accurately summarize your own position. In comment 14 above, you failed to even mention tax revenues.
Also, a flat tax rate does not imply lower taxes.
Ted:
Good point about flat taxes. The “fair tax” proposal that’s been getting some following lately amounts to a 30% federal VAT tax on all spending. Note that everyone who currently has an AGI (total income after deductions) of less than $160,000 per year currently pays less than that. In most cases, substantially so.
In fact, with every formally-articulated “flat tax” proposal I’ve seen in the US, the overwhelming majority of taxpayers would pay more in taxes than they currently do.
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