US posts record $US222.5b budget shortfall

[goldpelican]

US posts record $US222.5b budget shortfall

The US government, facing a record annual fiscal shortfall and a congressional impasse over financing, posted the largest monthly deficit ever in February, reflecting increased spending.

The gap totaled $US222.5 billion last month compared with a $US220.9 billion shortfall in February 2010, according to the Treasury Department's monthly budget statement released today in Washington. Last February's deficit was the previous monthly record, government data show.

The deficit is a long-term threat to the economy and the dollar, the world's reserve currency. Members of Congress are at odds over plans to reduce the shortfall, cut taxes and preserve entitlement programs, such as Medicare and the Obama administration's health care overhaul.
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"People in Congress seem much more interested in yelling at each other instead of fixing the problem," said David Wyss, chief economist at Standard & Poor's in New York. "Bluntly, there is no way out of this unless you cut spending, raise taxes or some combination of the two."

Uh, aren't there countless examples through history of raising taxes being shown as the exact opposite of what you should due to combat deficit spending? Even in the US?

 

[Big A.D.]

Uh, aren't there countless examples through history of raising taxes being shown as the exact opposite of what you should due to combat deficit spending? Even in the US?

Depends.

If the aim is to balance the budget, the guy is probably right and a combination of tax increases and spending reductions is the way to go.

Also depends on what taxes could be raised without buggering things up.

 

[goldpelican]

There's probably a ton of spending reductions they could make.

I've been reading Nathan Lewis's book (Gold The Once and Future Money) and one of his themes throughout the book is the impact of raising taxes to balance budgets usually having exactly the opposite reaction, and cases of where taxes have been cut (primarily income, corporate and capital gains) in the face of a deficit have resulted in higher overall tax receipts because it stimulates rapid growth.

 

[white-metal-man]

they are screwed fulll-stop.

 

[Dwayne]

Uh, aren't there countless examples through history of raising taxes being shown as the exact opposite of what you should due to combat deficit spending? Even in the US?

Presumably there is an optimal tax rate that would result in maximum tax revenue - if you go lower revenue will drop but if you go higher it will suppress economic activity and revenue will drop anyway. I guess it depends where on that curve the US is right now.

 

[Silverthorn]

A lot of(most?) the growth is stimulus and money printing so I suspect huge spending cuts, even with huge tax cuts will tank the economy. They are in a bind politically. No one has the nous to do what's necessary as things would get a lot worse before it got better.

 

[intelligencer]

Taxes are the biggest rort.

A dollar taken from you to spend one way, is a dollar you dont have to spend your way.

Its about who knows better how to spend invest money.

Government, who has no self interest in the money and wastes. Or you, who wants to get every last bit of value out of every dollar.

Taxes lead to misallocation of resources.

 

[intelligencer]

A government should always live within its means.

Thats what keeps government small, responsible and relevant to its citizens.

Governments should NEVER be allowed to borrow.

 

[CriticalSilver]

There's probably a ton of spending reductions they could make.

I've been reading Nathan Lewis's book (Gold The Once and Future Money) and one of his themes throughout the book is the impact of raising taxes to balance budgets usually having exactly the opposite reaction, and cases of where taxes have been cut (primarily income, corporate and capital gains) in the face of a deficit have resulted in higher overall tax receipts because it stimulates rapid growth.

You would think they would just increase the input costs on all productive endeavours with a tax carbon! Don't they know its an economic miracle just waiting for them to embrace it! :lol:

 

[thatguy]

democracy is flawed and here is why.

3 bills get proposed

1) Keep a balanced budget
2) Lower taxes
3) Increase government payments and services

All 3 will pass in a working democracy all 3 cannot co-exist in a logical world.

Iron + clay is the best description of democracy I have heard with Iron being government and clay being the constituency. Very brittle is what you end with

 

[Guest]

Democracy is two wolves and a sheep deciding what to eat for dinner.

 

[Clawhammer]

big question is where does all that tax income go?... I don't know...do you guys?..Swan's budget didn't add up!

 

[Smoothcriminal]

big question is where does all that tax income go?... I don't know...do you guys?..Swan's budget didn't add up!

Waste, wealth redistribution and lowering productivity(i.e. subsidies) and then the doozy of administering the above by taking productive people out of the workforce and making them bureaucrats to administer the monster that has been created.

Welcome to the ponzi scheme