Is this really the end of the medium-tax era?

There are many ways this conversation could go. But let's begin with this chart being taxes as a % of GDP. So the more GDP the more taxes, govt spending, etc. If you charted this in absolute terms, relative to inflation if you like, it would be up up and away. It's been proven that lower marginal tax rates lead to higher GDP. So the moral of the story is: let's keep marginal tax rates low, to keep GDP growing, to keep taxes in absolute terms growing; that will give us as much $ as we can get to pay for medical care and all the rest of it.

You may be overlooking the impact of a growing economy.

What could be of interest is to determine how big the economy has to grow to be able to meet the retirees promises while the tax burden stays at the 21% level.

In other words - how rich do my kids and their friends have to be so that I can retire style.

I will soon retire. If we quit giving away money to derilics for not working and quit electing idoits democrats who cherish giveaway programs, then there would a enough money to lower taxes instead of raising them.

I believe that is unfair to blame retirees for this problem. First the Federal Government has not saved any of excess social security or medicare money. They owe these programs 4.7 trillion dollars so don't blame the retirees blame the US government for not being prudent. This is the foremost reason why the social security programs will go bust. The government should place the excess money in a fund that cannot be touched.

They next major reason is the loss of high paying middle class jobs that are being replaced by low wage jobs by people and businesses that are not paying any tax or social security. The underground economy is getting bigger every day because of illegal immigrants.

The retirees have paid their share and more so do not blame people who have contributed a large amount of money.

I think you are treating a few things as certainties that are not. For example, there is no guarantee that the current Social Security payout system will remain constant, and in my opinion will almost certainly change. Benefits have been reduced before (i.e., raising the retirement age from 60 to 62) and I can see a similar change in the future.

I was surprised that most people did not understand that the raise in retirement age was actually a cut in benefits. Similar "crafty solutions" will surely take place in the future. "Beaking out commitment" to future retirees is not as black and white as you make it out to be.

Also, speaking as a 40 year old male, very few in my peer group are counting on Medicare as our sole means of retirement medical coverage. I for one will have other medical coverage when I decide to retire.

Intersting curve. I think it'll take more than a gradual aging of the population to break the trend though.

We wouldn't have this discussion if the money intended for Social Secuirty use kept for that purpose only.. Govt cannot do things for free like Iraq war..it should have some business sense.. after 800billion dollors and around 4000 soldiers lost.. what did we gain.. a TAX hike for paying for all that...

excellent graph

-For future articles I would show a graph of the social security receipts. I think they have increased the most as a percetage of GDP... I pay 15.3% as a self employeed person, which covers my Social Security and Medicare---- Which all emloyers pay with the employees matching share...

Which Means the federal goverment is sucking 35% of our money in taxes..

I think you will also find that states suck another 20% from us....

So a total of 55% of our money goes to goverment. And if you Give 10% to charity, that leaves you with 35% to pay your person bills... So the average american making $30,000 Year keeps $10500 to pay bills... Pretty tight...

thanks
lamar lee
Autin, TX. 78729
512 689-8425
lamarlee@sbcglobal.net

I am very unsure of the numbers you propose, but if an increase is needed to provide what was promised to the retirees, so be it.

These people have given their lives to obtain a retirement. How can it even be suggested that the rules of the game be changed after peoples lives have been spent. Maybe the intention of the people considering a change are going to give back the years of life already spent by retirees in order for you to have the American dream that you are now living. Your greedy perspective is sickening. Why don't you get off your duff and come up with the next terrific money making idea, like the Big Three did years ago? I could write forever, but don't think you would listen to anything rational if it cost you any money.

I would gladly pay higher taxes if the fed govt would truly provide some form of universal healthcare for everyone, especially the unemployed, underemployeed and working poor.
I am not a protectionist, but there are too many tax dollars going abroad and not enough spent to truly improve America for Americans. It comes down to whether taxpayers think their money will be spent wisely.

I agree with most of the comments above. Bottom line: The government needs to learn how to spend what they have, maybe less, but not more.

Huge amounts of money go toward pork barrel projects, the post office, "emergency" aid bills, and social programs. The government needs to be responsible for what they spend and can't keep heading back to the working american to foot the bill.

As to welfare - Give a person a fish and they will not be hungry today. Teach a person to fish, and they will be full for a lifetime. Welfare is a trap that cuts aid so much when a person attempts to get a job that they actually make more not working. If you are on welfare you will only be able to go to school to be a social worker. This is a mired system that is not at all designed to help people become self-sufficient, but rather, make them indebted to the government to secure an ongoing problem politicians can propose to "fix" and use to lock votes.

I'm not sure that it's as simple as "keep taxes low." Lower marginal tax rates have always carried larger budget deficits as consequences (see Reagan, Bush budgets). That is, the infamous Laffer Curve just doesn't work; tax cuts never pay for themselves. Budget deficits can affect interest rates, which then affect the economy, while the GDP gain from tax cuts appears to be small (though it is a positive effect). I had posted this link on this blog earlier (sorry for the repeat), but this is to help back up my points:

http://www.ndol.org/documents/03-25-AnalysisPresidentBudget-Final.pdf

If we continue along our current path, the problems with deficits will start to outweigh the positives from tax cuts, and soon we will be in serious trouble. Given that we already have a major budget deficit, and given that costs for social security and medicare will only rise from here, we are in trouble. Though I hate to say this, we might even have to do the unthinkable: raise taxes and make serious budget cuts simultaneously. I think we can at least all agree that the budget needs some trimming, but which parts should we cut? What does everyone else think?

Matt

"If we quit giving away money to derilics for not working and quit electing idoits democrats who cherish giveaway programs,"

This brilliant piece of advice coming from someone who likely voted for the people who thought that invading Iraq was part of the war on terror.

We spend more on ONE month in Iraq than the yearly budget for the National Cancer institute. For what we spend in 10 months in Iraq we could provide universal pre-school so that a lot of those "derilics" you complain about could work during the day.

Someone remind me why succession would be such a bad thing. Just because we started out united doesn't mean we have to stay that way, does it? Can't we find a mechanism for an amicable separation?

I would dearly love to see people like John with their own country to run the way they want. I'll take my chances with the "derilics" and Democrats on the other side of the border.

"Mom and Dad" are going to have to be provided with a reasonable standard of living regardless --- and as more wealth and income is concentrated in the upper tiers, the more pressure there will be to take care of "mom and dad" by redistributing wealth.

Of course, all of this kind of speculation is based on the presumption that the economy won't implode at some point --- and the economy is so vulnerable thanx to Bush's "policies" that betting against an implosion is pretty risky [here's a clue for you right wingers -- the real threat of radical islamic fundamentalism lies not in terrorism, but in control of mid-east oil reserves. The economic consequences to Islamic societies should oil be used as a weapon are of little import to religious fundamentalists. ]

As a member of a younger generation, I'd like to remind you entitled older folks, my generation did not make a promise to your generation to provide for you in your old age - and it is pretty rich coming from the generation, that has cut school in many areas to the bone, my kids schools have no where the niceties of the schools when I was a kid, which probably had less then when you folks were young. And it only gets worse. Poorly educated young, with few middle class job options in the new economy will not only be unable to support you, they will be unwilling.

As for not blaming the retires, bull - it wasn't us who elected the government - it was the retires, and the choices they made resulted in how the money was used, deal. After all it won't be there when I retire, why should the young care if its there when you retire? And on top of that keep paying more and more of their minimum wage no benefits job pay check - for your retirement, when they will never be able to retire?

Just exactly what have you provided to the generations after you? Good schools- no, jobs - no, medical care - no ... get real, why are we supporting a generation that has more money, more options, and more assets then any other generations will likely ever have?

As a member of a generation that is a lot closer to seeing "the club" as where you go to play shuffleboard rather than dance and drink all night, I have to agree with Helen to some extent.

My generation has done the equivalent of borrowing lots of money that we won't be able to pay back before we retire, while at the same time "putting money away for our retirement". And guess what? Paying back the loans SHOULD come out of our retirement income.

The problem is that a lot of US acted in good faith -- we elected Clinton, and tried to elected responsible leadership in 2000 (and 2004). We didn't want the Bush tax cut -- and the massive federal deficits that Bush and the GOP congress has created for the last six years. And now those of us who acted in good faith are stuck in the same boat as the idiots and greedheads who have gotten us into this mess.

I'd be all for penalizing those who voted "GOP" and are responsible for providing irresponsible "leadership" for this country --- but the sad fact is that there is no way to do that. And even sadder for people like Helen is that we baby boomers are going to demand our social security benefits regardless of whether it means higher taxes for our grandkids (who, after all, will be inheriting all the money we've accumulated anyway.)

Wow! After reading all these comments I can see that we Americans are nowhere near a concensus on a problem we're all going to face in the future. Everyone thinks he can have his cake and eat it too. The Economist magazine thinks that Mr. Bush could gain some points if he would approach this problem in a constructive manner but I think he's far too confrontational to do that.

I will soon retire. If we quit giving away money to derilics for not working and quit electing idoits democrats who cherish giveaway programs, then there would a enough money to lower taxes instead of raising them.

Could you be any more stupid?

1) welfare was gutted under Clinton ( a Democrat! ) there really aren't any "derilics" getting paid not to work - except this one guy from Crawford, Texas.

2) The biggest "giveaway" programs are Social Security and Medicare (which I'll assume you'll want when you "soon retire". But 50% of taxes go to the military.

3) Bush and the REPUBLICAN congress lowered taxes and increased the deficit by a TRILLION, I think. Clinton was running a surplus, decreasing the deficit.

4) turn off your computer - I think Bill O'Reilly is on now. Or maybe Brit Hume.

To the Pompous fasteddie, who so conveniently picked the one democrat who excersized fiscal responsibility (not really since he cut into defense severely to pay for it, which cut intelligence and other important funding sources) since America's inception... Heres a bit of a history lesson and some current facts you misconstrued(made up).

Social Security was signed into existence by a democrat: FDR in a time when the united states was in financial peril 1935 to cover the costs for senior citizens and widows who were particularly at risk of serious poverty, unfortunately 2 years after it was created it already needed its 1st reform becuase it already wasn't working and the US was in a recession (Roosevelt Recession 1937)It was also supposed to be a self sufficient program run out a of a reserve, not to be tapped for other uses. Additionally the trust was set up to keep women out of the workforce not to descriminate but to help families get along on a single family income (sounds a bit Republican in a way, family values and all) but do you know anyone who can afford to live without a 2 income family in 2008.

After 2 consecutive rate raises, Lyndon B Johnson a Democrat added Medicare and signed a new Social Security Bill increasing the cost of the program while merging the Dedicated Social Security Trust Fund with the general Fund essentially utilizing Social Security Collections for other projects such as pork bellieness; this also may refer to the hindsight name of "PAY IT FORWARD" benefits which we are currently suffering from now and they may have beleived would work due to the baby boom but more on that later.

During the Carter (A Democrat)administration, the economy suffered double-digit inflation, coupled with very high interest rates, oil shortages, high unemployment and slow economic growth. Productivity growth in the United States had declined to an average annual rate of 1%, compared to 3.2% during the 1960s. There was also a growing federal budget deficit which increased to $66 billion. The 1970s are described as a period of stagflation, meaning economic stagnation coupled with price inflation, as well as higher interest rates. Price inflation (a rise in the general level of prices) creates uncertainty in budgeting and planning and makes labor strikes for pay raises more likely.

Since I think i have made my point on Democratic Fiscal Irresponsibility lets look at how these programs fared during 2007 (even though there was a republican in office, he was left with Democratic programs; not much to be done in 8 years except make of the best of what was left for you.)

$586.1 billion (+20.83%) - Social Security
$548.8 billion (+19.5%) - Defense[2] (Not 50%fasteddie, in fact less than social security alone, forget the rest of the "entitlements")
$394.5 billion (+14.02%) - Medicare
$294.0 billion (+10.45%) - Unemployment and welfare
$276.4 billion (+9.82%) - Medicaid and other health related
$243.7 billion (+8.66%) - Interest on debt
$89.9 billion (+3.19%) - Education and training (If we cut welfare altogether and split the difference to spend it on Education adn training may be we could teach the metophorical "fishing for food instead of getting a fish" and give everyone a much needed tax break or fix social security)

$76.9 billion (+2.73%) - Transportation (we have a crumbling infrastructure that is more than 50 years old may be we can give some derelicts jobs and increase our competitiveness with overseas countries that are making huge strides in this area)

$72.6 billion (+2.58%) - Veterans' benefits

$43.5 billion (+1.55%) - Administration of justice (can fall into the derelicts category you so callously threw away as an issue, besides for free money we give them we need to administer expensive justice, not to mention deal with liberal groups who "defend" criminal rights at a tremendous cost to the tax payer)

$33.1 billion (+1.18%) - Natural resources and environment

$32.5 billion (+1.15%) - Foreign affairs (more free money to other countries no less, and I am an Israel supporter so it takes alot for me to admit this is costing too much)

$27.0 billion (+0.96%) - Agriculture (If we speant more here may be we wouldn't have 26% grocery price increases this year)

$26.8 billion (+0.95%) - Community and regional development

$25.0 billion (+0.89%) - Science and technology

$23.5 billion (+0.83%) - Energy (We could be spending more here as well, on research not subsidies)

$20.1 billion (+0.71%) - General government

Total Bill $2.814 Trillion......

Now back to the thing I said I would get back to later. During the baby boom generation it was estimated that our births would grow since more people have more babies so the "pay it forward" can potentially work.

Except the problem is strictly a lack of breeding sufficient population. When the baby boomers pushed for free love that didnt include marriage and family and the next couple of decades of excess where it was the me generation and less kids were born...In easy terms if 2 parents only have 1 child we have a reduction in younger working population, who could have supported the parents. Worse is the stay single sexxed up 60's and 70's where those potential parents had NO kids provided which provided no cash creators to fend for them in old age.

In summary, why should I a 26 year old commercial real estate professional working in the NYC financial district making an income in the top 1% of the United States still find myself struggling. Around 55% of my money goes to Federal, State, City income taxes followed by Social Security Medicare and some others. Health Insurance is up 24% Year over Year after raising deductibles and copays last year (no this is not a call for universal health care because that wont help, i am sick of picking up the tab for the uninsured or for free money spenders who dont realize that a doctors visit is not $20 its $100 but someone else is paying the other $80, who run to the Dr at the smallest sign of the sniffles.

My income without my wife last year was $155,000 but I still cant afford a house in the New york Metro area for myself my wife and child, because home building costs are way up and the metro area (I am not talking about the luxury apartments in Manhattan, I mean the somewhat seedy pathetic semi detached houses in Brooklyn for $800,000, or the 1,215 sq ft house in the nice suburbs with a minimum price of $600,000, built of shoddy materials in the 60's and have had 3 owners. all this is after the housing bubble collapse; partially this was fueled by irresponsible borrowers as well as lenders who bought houses beyond their means and drove up the cost for the rest of us.)

Bottom line I dont think i should have to pay for the irresponsible breeding habits and spending habits of a fairly successful generation.
For paul_lukasiak while I understand the inheritance point of view you made, unfortunately it seems as if you dont understand our medicare codes and inheritance tax codes. Without proper LTC (long Term Care) prep or Death/Inheritance preparation, most of my generation won't get their "Inheritance" just a mountain of your generational government inflicted debt.