How our Government Spends Money

[Riverwind (imported)]

The president has called a summit of both republicans and democrats to get the health care bill right, I don't think the republicans will show up, it for them will be just one more delay which they just about have a lock on these days. I don't think they want to show the American people what transparency is, I don't think they want to show the people what jerks they are, i think there scared to death about having it all on camera.

I hope I am wrong but by the end of the week we will know for sure.

River

[bobover3 (imported)]

River, businesses can't always pass all their costs to customers. Past a certain point, higher prices cost them customers and sales, losing more revenue than the higher prices bring in. That's how businesses go bankrupt. If all a business had to do to right itself was raise prices, no business would ever fail.

Success in business depends on satisfying the needs and wants of the public, and that includes affordable, competitive prices. It's a classic error to just raise prices - what too many governments, colleges, etc., do. That starts a death spiral. Higher prices lead to less business, leading to further price increases, and so on until disaster. Monopolies may get away with it for a while, until they wear out their welcome, and the public sees them as an obstacle to be circumvented. That's what happened to AT&T when I worked there. That's what's happening to public schools and the post office now.

Every business in a competitive market is under continual pressure to cut costs wherever it can. No area is sacrosanct. Any area that isn't a short-term revenue producer is subject to cuts. So, yes, increased taxes will lead automatically to layoffs, deferred spending, and limited growth, as well as higher prices.

One more thing - many businesses have much thinner net margins than the public supposes. In many cases, taxes make the difference between profit and loss. Higher taxes will cause many businesses to fail, especially small businesses, costing jobs and robbing the public of the goods and services they create.

To the extent that businesses can pass taxes on to the public, raising their taxes is just a sneaky way of taxing the public. Politicians bluster about stopping "exploitation," but guess who's really doing the exploiting.

[A-1 (imported)]

P.S. President Obama recently said he's open to ideas about how to limit "mandatory" programs. Democrats' health care proposals still call for cuts to Medicare. Look out below!

Hmmm,

Doesn't this, at least in theory, make him a REAGAN DEMOCRAT?

[TheOtherSide (imported)]

In the bad news column....

It doesn't matter what you do, or how you work it. In the next decade taxes will increase, and services (especially ones like medicare) will decrease. Why?

Look at the population curve right now. There's this bubble reaching retirement age, whose medical expenses will only go up from here on in. At the same time, there are fewer people of working age to pay the taxes that pay for those programs. That's not even factoring in the recent recession and job losses which are boosting the rolls (and costs) of other programs like unemployment, welfare, and likely even SSDI.

I suppose you could always eliminate those last three programs. After all, isn't it your responsibility to put money aside for yourself in case you lose your job? Nobody really cares about those deadbeats on welfare, they're just lazy anyways. And disability? They're just leeches, a drain on society that give nothing back. Let their families support them.

[bobover3 (imported)]

See post 12 above, and substitute "government" for "business" and "monopoly." The principles are same: charge more, do less, and lose the support of your customers (citizens).

[Riverwind (imported)]

sometimes you can have the best product in the world, do everything right, and still go BK, take buggy and whip makers of the last century.

I have seen businesses go BK because of bad business practices. Not because there prices are bad or anything else. They over extend, they miscalculate the market. It sometimes is because of tax problems, but it can be said bad business practice is the reason, they did not change there business to the times, (buggy whips) or over extended, over built like Starbucks and had to close hundreds of shops, the market will decide if you can stay in business. Having said that, there is the cost of doing business, taxes are included in that model, if taxes are raised, then you need to adjust your model.

Now that the supreme court as determined that Businesses are people they should be taxed at the same rate as people, NO?

Welcome to the double standard.

River

[Dave (imported)]

>>Paul Krugman in the New York Times

>>

http://www.nytimes.com/2010/02/22/opini ... an.html?em

February 22, 2010

Op-Ed Columnist

The Bankruptcy Boys

By PAUL KRUGMAN

O.K., the beast is starving. Now what? That’s the question confronting Republicans. But they’re refusing to answer, or even to engage in any serious discussion about what to do.

For readers who don’t know what I’m talking about: ever since Reagan, the G.O.P. has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government “down to the size where we can drown it in the bathtub.”

But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?

The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait and switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.

And the deficit came. True, more than half of this year’s budget deficit is the result of the Great Recession, which has both depressed revenues and required a temporary surge in spending to contain the damage. But even when the crisis is over, the budget will remain deeply in the red, largely as a result of Bush-era tax cuts (and Bush-era unfunded wars). And the combination of an aging population and rising medical costs will, unless something is done, lead to explosive debt growth after 2020.

So the beast is starving, as planned. It should be time, then, for conservatives to explain which parts of the beast they want to cut. And President Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission.

Many progressives were deeply worried by this proposal, fearing that it would turn into a kind of Trojan horse — in particular, that the commission would end up reviving the long-standing Republican goal of gutting Social Security. But they needn’t have worried: Senate Republicans overwhelmingly voted against legislation that would have created a commission with some actual power, and it is unlikely that anything meaningful will come from the much weaker commission Mr. Obama established by executive order.

Why are Republicans reluctant to sit down and talk? Because they would then be forced to put up or shut up. Since they’re adamantly opposed to reducing the deficit with tax increases, they would have to explain what spending they want to cut. And guess what? After three decades of preparing the ground for this moment, they’re still not willing to do that.

In fact, conservatives have backed away from spending cuts they themselves proposed in the past. In the 1990s, for example, Republicans in Congress tried to force through sharp cuts in Medicare. But now they have made opposition to any effort to spend Medicare funds more wisely the core of their campaign against health care reform (death panels!). And presidential hopefuls say things like this, from Gov. Tim Pawlenty of Minnesota: “I don’t think anybody’s gonna go back now and say, Let’s abolish, or reduce, Medicare and Medicaid.”

What about Social Security? Five years ago the Bush administration proposed limiting future payments to upper- and middle-income workers, in effect means-testing retirement benefits. But in December, The Wall Street Journal’s editorial page denounced any such means-testing, because “middle- and upper-middle-class (i.e., G.O.P.) voters would get less than they were promised in return for a lifetime of payroll taxes.” (Hmm. Since when do conservatives openly admit that the G.O.P. is the party of the affluent?)

At this point, then, Republicans insist that the deficit must be eliminated, but they’re not willing either to raise taxes or to support cuts in any major government programs. And they’re not willing to participate in serious bipartisan discussions, either, because that might force them to explain their plan — and there isn’t any plan, except to regain power.

But there is a kind of logic to the current Republican position: in effect, the party is doubling down on starve-the-beast. Depriving the government of revenue, it turns out, wasn’t enough to push politicians into dismantling the welfare state. So now the de facto strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe. You read it here first.