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Deficit Reduction- Spending cuts vs. Increased Taxation (and election effects)

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  1. LuckyWilbury LuckyWilbury is offline

    Saudi Arabia

    Posts: 918
    Joined: Feb 10

    Apr 21st, 2011 (4/21/2011 2:28am)

    I just attended a lecture by Alberto Alesina where he presented a pretty strong case (based on probit econometric studies) that only reductions in spending lead to reductions (or halting of the growth) of deficits rather than increasing taxation which is ineffectual especially long-term. The second part of his conclusion was the most interesting (and counter-intuitive maybe); that reducing spending is not necessarily political suicide, in fact four of the five cases of most drastic reduction in spending (in recent times) led to multiple re-election cycles for the party in charge at the time of said cuts (Denmark being the most drastic in the 90's if I recall correctly).

    So, will anything happen before the next election? Or will the dems back off and wait until after the election cycle since the GOP is the side pushing the hardest for spending cuts? Everyone knows something needs to be done at this point, though. If the dems look to history and compromise with the GOP on what (I think) Americans as a whole want (deficit reducing policies of some form), will that keep Obama in office? What happens in the house and senate under said scenario? Opinions?
  2. Neeek Neeek is offline

    Kansas City, MO
    United States

    Posts: 8,349
    Joined: Sep 05

    Apr 21st, 2011 (4/21/2011 3:07am) in reply to LuckyWilbury

    If you are pushing for spending cuts with the goal of reducing the deficit, then go for it, and I will listen. You probably shouldn't include a shit-ton of tax cuts in the proposal as well, though. kinda defeats the purpose, doesnt it?

    Its a lot harder for someone to swallowing cutting a program that significantly impacts them in a negative way, if you are simultaneously cutting taxes at the same time (see Wisconsin).
    Edited By: Neeek Apr 21st, 2011 at 03:09 AM
  3. saxman saxman is offline

    Posts: 14,155
    Joined: Mar 06

    Apr 21st, 2011 (4/21/2011 3:08am) in reply to Neeek

    The first priority with respect to deficit reduction should be to eliminate ear marks to special interest groups in bills that are passed. The second priority should be to remove tax incentives to special interest groups (the established and highly profitable energy industry for example). Third priority should be to rewrite the tax code so that corporations and the top 1% of income earners have a lower marginal tax rate with the elimination of exemptions. Fourth priority should be to identify multi national corporations who are moving manufacturing offshore to avoid domestic taxes and then importing products back into our domestic markets and impose a tariff on those imports. Fifth priority is to eliminate waste in the administrative functions of government and ensure that the money is being spent in areas that actually produce results. Sixth priority should be to put a limit on lobbyists to reduce their effect on government influence.

    Any increased spending should be limited to areas that have a direct impact on commerce such as infrastructure programs, and there are a ton of regions that are in desperate need of infrastructure improvement. These are real jobs that produce real improvements in society's ability to function efficiently and all of those jobs result in an increased tax base and create other spin off industries.
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