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Originally Posted by Arty The US Treasury doesn't loan money to itself. Why do I even need to say this? It's just SO OBVIOUS that no one can loan money to themselves. Governments get money from issuing securities, which can be bought by foreign governments. I suspect that the fact that you think that the Treasury lends itself money suggests that you really haven't thought about this through, and you're just parrotting (incorrectly) what you've read elsewhere. |
I know the Treasury does not loan money to themselves. Sir said that other nations were making a fortune off of those loans, which is ridiculous. We are borrowing at the lowest rates in 50 years. That was what I was addressing.
I should have said the loans TO the Treasury, but misspoke.
As for the rates, this is how it works:
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So, given that the deficit is large and they need to sell loads of bonds, I'm guessing that they're going cheap.
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The debt load on them is super cheap.
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You're confused, on both points. I'll take the second point first, that tax revenues always go up when taxes are cut. It's nonsense. It's based on the idea of the Laffer curve, which isn't nonsense in itself. Laffer noticed that if income tax was 0% then no tax would be collected, and also that if it was 100% then no tax would be collected (because no one would bother working). If it is, say, 50%, then some tax will be collected. So, the tax revenue curve meets 0 at both ends, and is higher between those points. Somewhere in the middle is a point, (called B, for reasons I can't remember), where revenues are maximised. If the current tax rate is above that, then by cutting taxes you will increase revenues. So SOMETIMES revenues will increase when you cut tax.
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I know the Laffer Curve. We are nowhere near the area where if you cut taxes the revenue stream goes down.
Revenues DOUBLED when Reagan was in office.
Revenues are already $100 BILLION dollars higher than were predicted, and that's only after 9 months.
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Also, cutting taxes will ALWAYS produce a higher revenue than the amount which it was theoretically reduced to. So, if you cut tax by 30% then receipts will always be greater than 70% of the original receipts. However, there is no guarantee at all that taxes will be greater than 100% of the original receipts.
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There is history, which has always shown tax cuts to produce more revenue, at least at the parameters which have been used so far.
Reality is on my side.
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Extreme supply-siders such as yourself seem to make the logical error of thinking that, because cutting taxes can sometimes increase revenue, that this will always happen. The fact is that no one knows where point B is, or which side of it any tax system is on. It's almost certainly different for different taxes (income tax/ corporation tax etc), and it almost certainly isn't fixed, but in general the evidence suggests that point B is quite high and that cutting taxes will NOT yet increase revenues, which leads me on to your other point, which was that tax revenues have increased under Bush.
Oddly, I found this almost impossible to determine by looking at the internet. However, the fact that you aren't scheduled to come back into the black for as far as the White House predictions go, which is up to 2008, might suggest that it has not happened. However, as you made the claim I'm sure you know where the stats can be found so will enlighten us as to the exact statistics with a helpful cite.
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Once again, the proof is in the pudding:
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Federal Deficit Likely to Narrow By $100 Billion
Tax Receipts Pare Borrowing
By Jonathan Weisman
Washington Post Staff Writer
Tuesday, May 4, 2004; Page E01
http://www.washingtonpost.com/wp-dy...0-2004May3.html
Smaller-than-expected tax refunds and rising individual tax receipts will pare back federal borrowing significantly for the first half of this year and could reduce the $521 billion deficit projected for the fiscal year by as much as $100 billion, Treasury and congressional budget officials said yesterday.
The Treasury Department's borrowing estimates may prove to be more good news for President Bush on the economic front, as opponents attempt to make his fiscal stewardship a campaign issue. The $184 billion the government is now expected to borrow through June is a 27 percent improvement from Treasury's February projection of $252 billion, the department said.
G. William Hoagland, a senior economic aide to Senate Majority Leader Bill Frist (R-Tenn.), said he dashed off a memo to GOP leadership predicting the 2004 deficit could be trimmed to $420 billion, a record in dollar terms but considerably lower than the White House's $521 billion projection.
"This is better than what everybody expected," Hoagland said.
Democratic and Republican budget aides in the House warned yesterday that it was too early to reach conclusions. Spending could still take an unexpected jump because of surging hostilities in Iraq. The improving federal borrowing picture, they said, may just be bringing the administration's $521 billion deficit forecast more into line with the $477 billion deficit predicted by the nonpartisan Congressional Budget Office, Capitol Hill's official budget scorekeeper.
Individual disappointments last month could prove to be to the government's fiscal advantage. Earlier this year, Bush had boasted that this year's average income tax refund would be $300 larger than it would have been without last year's tax cut. But refunds have fallen well short of that mark. Treasury officials also cited lower-than-expected government spending and higher payroll and individual income taxes as reasons that less borrowing may be needed.
All of this indicates that the improving economy is beginning to slow a three-year slide in overall tax receipts.
"The 5.5 percent average [economic growth] pace in the latest three quarters was the largest since 1984," said Mark J. Warshawsky, assistant Treasury secretary for economic policy, in a statement to the department's borrowing advisory committee. "With the assistance of tax cuts, growth has become self-sustaining."
An improving picture could strengthen the political hands of the president and House Republican leaders as they wrangle with the Senate over more tax cuts and a budget blueprint for the fiscal year that begins Oct. 1. For weeks, the negotiations have been stalled, with a majority of the Senate demanding new procedural hurdles for further tax cutting and the House and White House steadfastly refusing.
The latest compromise would mandate that tax cuts over the next three years be offset by equal tax increases or spending cuts, unless 60 Senate votes could be mustered to set the restriction aside. However, under the compromise being floated, some tax cuts -- $92 billion worth in 2005 -- would be exempted from that restriction under Congress's annual budget resolution.
So far, House tax cutters have been undaunted by federal red ink. Last week, lawmakers in both parties voted overwhelmingly to make permanent Bush's tax cuts for married couples, a bill that would cost the Treasury $105 billion over 10 years. For the next three weeks, the House has scheduled successive votes on more tax cuts totaling hundreds of billions of dollars.
© 2004 The Washington Post Company
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