Why do governments get into debt?

In bold above is such BS. It's not good enough for you that some people accumulate wealth, and they certainly spend their wealth, but then you wish to demand to them the 'proportion of their income' that YOU feel they must spend. And if they don't spend whatever your subjective proportion might be, then you berate them as if they are evil people...this is utter nonsense.

You can't even quantify how much money is offshore, and why it's offshore, yet you continue harping about it??

BTW; if you stole your $1.3 trillion from the wealthy, for no purpose whatsoever other than to redistribute wealth, and redistribute it your 99% which is maybe 100 million Americans, a majority of it will be spent at Walmart, Target, Sears, Kmart, Macy's, Best Buy, etc. all of which are primarily imports. If you allow your 1% to spend that $1.3 trillion on more homes, and boats, and cars, and real estate, all of which are primarily domestic consumption, the 1% spending will actually benefit the economy more than the 99% spending...IMHO.

But I don't actually believe your true interest is in doing what's best for the economy; I think it's more about jealousy of the wealthy and redistribution of wealth...

 

Not all spending benefits the economy. It is entirely possible for spending in certain sectors to bring about an economic collapse, which has happened many many times. More than a few nations have experienced periods of economic growth by macroeconomic measures while collapsing at the micro-economic level. When all the economic growth is in sectors that are lightly taxed government revenues can actually decline as the economy appears to grow. Industrial output and exports can increase for quite a while without any corresponding increase in employment in an economy recovering from a recession.

This is quite common in economies where equity market speculation has sucked up the available wealth. The only solution is to drastically raise taxes on short term capital gains, which will make equity speculation relatively more risky than medium and long term direct investment in companies, money they can invest in growth, which will grow the economy outside of the equity markets.

 

That's what the Feudal landlords said.
The reality is that its a measure of whatever one can take.

 

If I work and produce a million dollars. Then a million in work went into the economy and a million in credit was awarded to me. Whether I spend that credit to pay my debts or the debts of myself and a child, that credit was still earned. The economy still got value for all either of us took out of it.

If I do no work and collect welfare. Then nothing went into the economy, the credits I spend were never earned. What value I take out of that economy diminishes it. To sustain the economy, the weight of providing the value equal to those unearned credits falls on my neighbors.

That some family has produced such a pile of credit that they can make a living simply by contributing a loan of that credit to their neighbor and asking for legal and fair interest on it, is no indictment of that family. Rather it shames those other families who worked so little, who saved so little, that they had nothing to offer other than a promise to contribute $11 of work in the future to spend $10 of credit today.

I can't fault a man who's paying his bills without asking a thing of me. Even if his father gave him that money. But the man who's failures puts more weight on my shoulders. That he needs to ask for the charity of welfare from me. Whether I choose to offer him charity or not, I have a right to ask myself — and ask him — if there isn't another way he can earn what he's asking me to provide.

That there are 3 million jobs available to that man — and an infinite number of problems, each of whose solution is still one more job — and instead of stepping up to any of them he's asking me to work harder... that's frustrating.


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You do realize your simplistic analogy falls apart when you consider a man who earns a million dollars by killing another man's wife at that man's request, or sells a million dollars of meth, or earns a million dollars by eschewing regulations for the disposal of waste or earns it because he won the lucky sperm race. You also realize that welfare money goes to purchasing goods and services from people who then turn around and buy other goods and services. And finally you realize the either-or of work and welfare is unrealistic and absurd, right? Well now you do.

 

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But you can't.
Only the government can produce government money.
When people work they merely receive a transfer of money.​

 

So many broken windows in our economy. Look up 'rent seeking'. I'd say it's more likely that you shoveled already existing million dollars worth of wealth or coming into existence regardless of you million dollars worth of wealth into your pockets. In order for the economy to benefit, you have to actually do something productive for the money you get and not just extract economic rents.

 

For one simple reason. They tell their voting sheeps, that they would make debts to use the capital for social activities and welfare that everyone supposedly benefits from. What a preposterous crap that is, but it works fine like drugs on the sheep.
I admit that the voting manner and behaviour really facinate me.
They can be yapping about greed every day and every night, but where would the western societies be if it was not the greed of pioneer entrepreneurs that paved the way into modern economy, globally shaped trade and technological advances in context of human and modern values.

 

The problem is not with taxing and borrowing per se.

The problem is not taxing enough to fund authorized expenditures and not repaying the borrowing that could be necessary in a financial emergency.

We have, for example, more than enough wealth production and income to fund all of the authorized expenditures of government in the United States today. The problem is that those with more than enough income to pay the taxes (i.e. wealthy investors) are taxed at half the rate (or less) than the workers of America that are already over-taxed. To exemplify this the top tax rate for an investor is 20% while the top tax rate for a worker is 39.6% and the worker has to pay FICA/Payroll/Self-employment taxes in addition to their income taxes while the investor does not. We also tax small business, that creates over 70% of the jobs, at a much higher tax rate than we tax large corporations.

 

With the one exception of 'winning the lucky sperm race', which 'Taxpayer' attended to in his post, you misconstrue the analogy you attempt to refute by employing what would be unlawful, and illegal actions.

We seem to be avoiding answering "WHY" governments get into debt, and if it is "GOOD" for governments to get into debt, "WHY" would it not be just as good for those benefitting from government acquired debt to acquire the debt as well as the responsibility of repaying it themselves?

NINO

 

It used to be illegal to mix commercial and investment banking too. Glass Stegal did away with that and we're finding out how smart that action was. No, the point is that just because you get a million dollars for your work does not mean that the economy benefits in that same amount.

As to why governments get into debt, it's for a variety of reasons. They get into debt to pay for wars or to pay for investments in the economy that would be impossible for individuals or even groups of individuals to do. And why would it not be just as good for those benefiting from the government acquired debt to acquire the debt themselves, beside the previous answer they often do so when they are incapable of taking on that debt with any terms that would be possible to bear. Right now the US Government can print money and issue treasury bonds, and with rates where they are they're practically being paid to borrow. So it would be just as good for them to do it just like it would be just as good for them to be able to field an entire police force and army on their own; it just isn't practical.

 

If that man got money from an illegal act, prove it and society will revoke those credits. Welfare money might purchase goods and services, so does stolen money. That someone works to offer goods and services consumed by cheats, thieves and beggars doesn't mean the economy isn't diminished by begging, cheating and stealing. The burden of matching the work consumed falls on the rest of us.

A pie bought with stolen money or welfare money takes work to make. The welfare recipient or thief offers no value in exchange for the work done to make the pie. To keep the economy going a burden falls on the community to make up that difference.

A pie purchased by myself, or by my child, with money I earned takes the same work to make. The value I provided matches the pie makers work and no one need make up the difference. No burden falls on my neighbor.



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A transfer of value. Dollars are a measure of value, just like quarts is a measure of milk. A dollar bill is simply a certified IOU. You want milk, but have nothing the grocer wants so you give him a promise of future work measured in dollars provided in dollar bills. Your boss wants you to run an errand. He has nothing you want, so he gives you a promise of future work measured in dollars delivered in a bank credit.

If I work and produce a million dollars, I've worked for one or many people and provided them with a total value that we mutually agreed measured a million dollars. Whether we choose to record that exchange of delivered value for promised value by trading government produced IOU slips, debits in a bank ledger, PayPal credits, yen, gold, salt, or bit-coins is irrelevant.


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Except for the police force that makes sure that you aren't robbed on your way to get that pie, the food inspectors that make sure that pie is free of ecoli and other contaminents, the government that provides and guarantees the medium of exchange so you don't have to lug chickens into town and hope that the baker wants them as well as paves the public roads that get you to where you are going, the schools that educate your kid, and we could go on and on. And I hope you haven't purchased a product at a store that actively encourages its employees to sign up for welfare; that dollar burger or discounted soda pop doesn't look so good when you realize that every taxpayer (not just you) subsidizes that as well.

Libertarianism; asperger's expressed as a political and economic philosophy.

 

You have it backwards. Glass Stegal didn't do away with that protection, Glass Stegal was what made it an illegal mix in the first place. Glass Stegal was repealed by the Gramm–Leach–Bliley Act, signed into law by Bill Clinton. Bill was a good president who did a lot of smart things, but in hindsight the deregulation of the banking industry wasn't good for this country.

If you earn a million dollars legally it means you, whoever you delivered value to, and the law agree that you provided a million dollars of value to your neighbor and thus the economy. As a result you are promised a million dollars in future value from that community. The community already owed that million dollars to whoever was originally holding the cash. The net impact of that trade is zero, you put in as much as you took out and the community owed no more after the trade than before.

If you are get a hundred dollar check from the government but offer no value in exchange for it, then the community now owes you a hundred dollars in future value but received no matching value from you. Your neighbors will have to make up that deficit if they want to prevent further economic decline. If we don't collect an equal value in taxes from your neighbors or borrow more value from China, those dollar bills everyone is already holding will shrink in value.


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There's no exception. Those are valuable services, provided equally to all Americans. It's reasonable that we cooperate to pay for them. That doesn't explain why I should also buy you a pie.




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By 2020 the annual payment on U.S. debt will be $644 billion a year.(*) That's over $2,000 a person. Your average family of four will owe $8,000 a year — just for interest on our debt. That debt, and all those programs you mentioned, FICA doesn't pay for any of them.

Until that family has paid $8,000 in income tax, it hasn't paid a dollar towards any federal program you listed. Half the families in this country pay nothing in income tax. Very few will pay even for the interest on our debt, much less contribute beyond it.

That federal farm subsidy you're talking about. Less than 7% of American families kick anything into that pot.




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Other than the fact that you employ people who do get the money for that service rendered and that as a society we've decided that it's a good to help those who are not as fortunate as others? And no, just because you voted no on that outlay of taxes for those services does not make those taxes "theft" "slavery" or any other Randian bs term you want.

 

Regarding the bold;

My problem with asking anyone to fund more government, or the government we have, is it's not clear to me what our federal government spending should actually be? Should it be $2.5 trillion, $3.8 trillion, or maybe $5 trillion?

It would be rare that a 'worker' pays 39.6% income tax rate...more like 0% to something less than 20%.

Anyone who desires to have SS/Medicare at retirement age must pay FICA...workers and investors and wealthy.

Corporate tax is the same for all corporations...big and small...and varies according to taxable income. Probably most truly small corporations have no taxable income, therefore don't pay corporate taxes, but instead the owner pays personal income taxes...

 

We, the American People, don't determine the amount of government spending. Congress does that. Now we may not like what Congress spends money on but we, the American People, have an obligation to pay for that spending and Congress has the responsibility to collect the taxes necessary from us to pay the expenditures it has authorized.

What can't be argued is that America generates enough annual wealth (income) to fund the expenditures of Congress today and has created enough annual wealth (income) to fund all of the government's expenditures since WW II. Congress has been fiscally irresponsible for decades and if a person supports fiscal responsibility in government the first thing they should be opposing are the Republicans and Democrats that are responsible for the fiscal irresponsibility of our government. Of note the worst of these are the Tea Party Republicans that are adamant in refusing to collect enough in taxes to fund government expenditures today.

Yes, it is the rare worker that pays the top 39.6% tax rate as they would be in the top 1% of income earners. What we can say is that anyone with over $400,000 in net "earned income" is in that tax bracket and pays that tax rate on their income above $400,000/yr.

At the same time virtually no one in the top 1% pays the 20% "unearned" income tax under the Capital Gains tax loophole. In fact we have Americans with hundreds of millions of dollars in investment income that pay virtually not income taxes as they channel their income through off-shore paper corporations in foreign tax havens.

Americans don't pay Social Security/Medicare taxes because they desire the benefits. They pay those taxes because the government mandates that they must pay the taxes. Investors don't pay these taxes as the law exempts their income from the taxation.

A working family with a net "earned" income of $72,500 is in a 15% income tax bracket (plus Social Security/Medicare taxes) but an investor with the identical $72,500 net "unearned" income is in a 0% income tax bracket (and pays no Social Security/Medicare taxes).

All ENTERPISES are not taxed the same. Not even large corporations and small corporations are taxed the same as there are many tax loopholes for large corporations that small corporations cannot take advantage of. When we have corporations like GE that have gross net income in the tens of billions of dollars on the sales of their goods and services and don't pay any corporate taxes because of special tax loopholes for large corporations (that only provide a small percentage of the jobs in America) there is something wrong with our tax codes, When a sole proprietor pays roughly twice the federal taxes when compared to a "corporation" there is something wrong with our tax codes.

Why "conservatives" continue to support the special tax codes for a less than 1% of the wealthiest Americans and for very large corporations that only employ a small percentage of American workers is something I can't understand.

What do "conservatives" have against the small entrepreneurs and working American families?

 

Voters choose their representatives, and although the legislation takes place in Washington, voters have significant say about budgets and taxation. I don't believe Americans are obligated to fund whatever Congress decides to do...Congress must make sure the funding is in place no matter where this funding might come from...including today's SOP of using deficit spending. I also don't believe this is a partisan issue; both parties have their hand in the cookie jar right up to their armpits!

People don't actually pay income tax based on 'earned income' but on 'taxable income' which is the net income after deductions. Someone earning $750K might not be paying 39.6%.

Capital gains tax is not a loophole...it applies to all Americans. In fact, IMO the word 'loophole' is used today solely as a political soundbite. There are no true 'loopholes' but instead questionable tax laws and questionable enforcement of those laws.

Just as when an American company, or American, invests offshore and creates taxable income offshore, they must pay applicable taxation in that offshore location...so do foreign investors in the US who create taxable income are required to pay applicable taxes to the US government.

You are correct that the 'law' does not deduct FICA from capital gains taxes...but this is the law and it is equal for all Americans.

Using your income tax example above, your family earning $72,500 in the 15% tax range will only pay about $7500 in federal income tax...while your investor might pay 20% or $14,500 in federal income taxes. And while the family pays FICA and the investor does not, the family receives SS and Medicare while the investor will not.

Regarding corporations paying taxes...there are no 'loopholes', only tax laws. Either the laws are followed or they are not. Regarding GE...they pay taxes just like all other corporations and Americans...http://www.factcheck.org/2012/04/warren-ge-pays-no-taxes/

 

True, both parties are responsible but when Congress authorizes an expenditure to American People are responsible for funding the expenditure regardless of whether the revenue is collected at the time the expenditure is made or later based upon borrowing to fund the expenditure. Those we elect are committing US to pay the bills.

I referred to "net" income which would be "taxable" income.

If a worker is earning $750,000 in net (taxable) income they are paying 39.6% on roughly $350,000 of that net (taxable) income.

I would estimate that less than 25% of American families have any capital gains in any year and that probably a gross over-estimate as in all likelihood perhaps only the top 5% of income earners have any capital gains every year. Capital gains tax laws are for the wealthy investors that are a small percentage of Americans and not for working Americans that actually produce the wealth of America.

Any tax code that allows one person to pay a much lower rate (i.e. 1/2 the tax rate) on the identical net (taxable) income when compared to someone else with the identical net (taxable) income is a TAX LOOPHOLE.

A "paper" corporation in the Bahamas or other member state of the British Commonwealth pays zero taxes on "capital gains" for that corporation to the UK and zero taxes the US by treaty agreement between the UK and the US. That's why these locations are called "tax havens" as no taxes are paid to either country. It all hinges on the tax codes for "capital gains" as profits from the sales of goods and services are taxed in the "home country" where the income is derived but not on "capital gains" in those countries.

BTW I believe that a citizen of the UK that establishes a paper corporation to collect capital gains in the US is also exempted from taxation by the US government under the same treaty.

True but only a part of the top 1% that are collecting a highly disproportionate amount of the income in the United States have any substantial amount of income from capital gains.

There is a zero capital gains tax on income until "earned income" is taxed at 25% which is above $72,500/yr from what I've found. When earned income hits a 25% tax rate then capital gains tax codes impose a 15% tax rate until earned income taxes hit 35% at which time the capital gains tax increases to 20% maximum, Of course we know that's BS because Romney, in 2011, had $22 million in income from investments and paid less than 14% in taxes (and I paid 28% in federal taxes for the same year with less than 1/200th of Romney's income).

They do not pay the same rates as a sole proprietor that has roughly double the tax rates when compared to a corporation. The link also ignores special tax deductions that only very large corporations like GE and exploit while a small corporation cannot.

 

Most likely if you made a million dollars it was leveraging the work and efforts of others. So you didn't do a million in work, you and your employees did a million of work, and you leveraged higher income from their lower wages.

Better to have people work.

Junior who got the trust fund from daddy didn't produce it and produces no more for the economy than the guy receiving welfare. Less actually, when you consider that the guy receiving welfare likely spends all the money he gets.

I can fault a system where those who have acquired wealth from the efforts of others gets special low privileged tax rates that are lower than the rates paid by the people actually producing and contributing.b

But the issue is what contribution the trust fund baby is making living off daddy's trust fund. And the answer is, very little.

There aren't 3 million jobs available to that man. That's simply 1% apologist talk.​

 

If you are really concerned about the debt write your Tea Party Republican and tell them to compromise with a revenue increase, to get a budget deal done.

But you won't because you'd rather run up more debt that increase revenues as part of a budget deal.

 

http://www.forbes.com/2010/07/30/av...tz-personal-finance-baldwin-tax-strategy.html

Avoiding capital gains taxes cannot be done.

80 million Americans have capital gains instruments in pensions and retirement funds, etc. and another 120 million own property all of which is subject to capital gains.

There is no such thing as a loophole...the only thing we have are tax laws. Everyone must follow whatever laws are on the books for whatever situations or face penalty.

I personally have no problem whatsoever with GE, or oil companies, or any so-called evil corporations because all of them are bound by the tax laws. If the tax laws can be improved, or they are not enforced, this is a Congress and president issue. Over decades with thousands of members of Congress and many presidents, of all political stripes, ALL of them have forged the tax laws. They are obviously very complex and it's impossible to have a one-size fits all tax system. Lastly, I'll bet every American cheats on their taxes, especially those who receive cash, and a majority of Americans don't pay any federal income tax...yet it's always those evil corporations who are the problem...