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Deficit Spending And America, Circa 2030

by @ 11:33 am on March 6, 2010. Filed under Economics, Politics

Former head of the Congressional Budget Office David Walker lays it on the line:

“Let’s say our government continues to take in about the same level of historical revenues, but we hold discretionary spending to 2008 levels as a percentage of the economy, and we don’t expand health care or other entitlements any further. That sounds pretty benign, but it’s actually a disaster …. Our interest payments would become the largest single expenditure in the federal budget in about 12 years. …

The bigger the bill we pass on to our children, the bleaker the future we will bequeath to them. …

Right now, on average, Americans pay about 21 percent of their income in federal taxes and another 10 percent to state and local governments. By 2030, to pay our rising bills, that amount could be at least 45 percent–higher even than the average 42 percent that most Europeans pay. …

With reductions in disposable income like that, the children born in 2000 will inherit a much different kind of America in 2030. So much of their money will be devoted to keeping the government afloat that they’ll have relatively little for everything else in life. Their homes will be smaller and drabber. There will have less to spend for cars, vacations, dinners out, and big TV sets. …

And America as we know it will cease to exist. There’s no telling what would happen next because the idea of an America where nearly half of a persons income goes to the state is something that we’ve never faced before, and which none of us can contemplate.

I’m not looking forward to it at all.

H/T: @KipEsquire on Twitter

5 Responses to “Deficit Spending And America, Circa 2030”

  1. Actually taxes went much higher during WWII.

    “Beginning in 1940, the government extended the income tax to virtually all Americans and began collecting the tax via the now-familiar method of continuous withholdings from paychecks (rather than lump-sum payments after the fact). The number of Americans required to pay federal taxes rose from 4 million in 1939 to 43 million in 1945. With such a large pool of taxpayers, the American government took in $45 billion in 1945, an enormous increase over the $8.7 billion collected in 1941 but still far short of the $83 billion spent on the war in 1945. Over that same period, federal tax revenue grew from about 8 percent of GDP to more than 20 percent. Americans who earned as little as $500 per year paid income tax at a 23 percent rate, while those who earned more than $1 million per year paid a 94 percent rate. The average income tax rate peaked in 1944 at 20.9 percent (“Fact Sheet: Taxes”).”

  2. That was a temporary measure necessitated by war.

    This would be near permanent and solely for the purpose of paying interest on debt we will never be able to pay back.

  3. ej says:

    amd the federal government now already takes about 20 percent of GDP

  4. Let's Be Free says:

    Mr. Richmond,

    During the World War II years personal savings rates rose above 25 percent vs. the less than 5 percent savings rates in the modern era. This created a virtuous wartime circle in which government deficits were financed internally by domestic savings. So the interest paid on Federal debt accumulated during World War II went right back into the pockets of the households whose savings financed that debt. These payments, plus the cash flow thrown off by peacetime debt repayment helped to fuel consumption growth and spurred the private investment that drove economic growth in the late 1940’s and early 1950’s.

    That is nothing like the situation we have today where interest payments are not going into the pockets of US consumers, but are going to places with names like China, Saudi Arabia and Japan. National debt is not being liquidated like it was in the late 1940’s and early 1950’s. Instead it of being paid off, debt is being monstrously accumulated by incredibly short-sighted, selfish, power-hungry, generation-thieving politicians.

    I would say something like it is stupid, inane or quixotic to cite out of context economic data from World War II or from other times in US History. Except I won’t, because we already have a better word for it. It’s called Obamanomics.

  5. tfr says:

    We will have England, or one of those European socialist economies like it. Probably it will be like the Carter years, permanently.
    Thanks, Peace Prize man. Thanks, W. And I could continue all the way back to Reagan, and probably beyond.

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