Tuesday, December 18, 2012

Houston, we have a spending problem

Via The New York Times:

A couple of items worth highlighting:
  • The last time the US enjoyed a budget surplus, spending was 4-5 percent lower as a share of GDP than it is today. We hear a lot of talk about tax policy under President Clinton, but the spending side has gone almost entirely unremarked upon.
  • Note that dating back to 1950 the amount of revenue collected never exceeds 20 percent of GDP with the exception of the peak of the dot com boom. This is true even during the 1950s when top marginal tax rates were far, far higher than they are today. Of course, this is basically a restatement of Hauser's Law, which -- like spending -- is almost completely unmentioned in the current fiscal debate. The idea that we can tax ourselves into a balanced budget, or even a much lower deficit, does not appear supported by history. 

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