There’s lots of talk in Washington about spending cuts, with almost everybody saying that there needs to be at least $2 trillion of cuts in exchange for hiking the debt limit. Since the federal budget is about $3.8 trillion and is riddled with waste, fraud, and abuse, this sounds like great news.
But, as you can imagine, things are never what they seem in Babylon on the Potomac. As I’ve repeatedly noted, a spending cut means something different for politicians than it does for those of us in the real world. The political elite claim they are cutting spending anytime they don’t increase spending as fast as previously planned.
You think I’m joking?!? I wish. Take a couple of minutes to watch this new video from the Cato Institute and you’ll understand how politicians are playing us for fools.
Rather than getting sidetracked by empty rhetoric, here’s the best way to understand what’s really happening in Washington. Apply this simple 5-step process when a “deal” is announced.
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1. Find out what spending is this year.
2. Find out what spending will be next year.
3. Find the projected spending levels in subsequent years.
4. Measure how fast spending is projected to grow (or, if there is a miracle, how much it will decline) and compare to estimated inflation.
5. Then discount everything by 50 percent since promised spending cuts (oops, I mean reductions in previously planned increases) tend to evaporate.
When you follow these five steps, you’ll probably want to go to step 6, which is to inquire about the cost of property in Costa Rica or some other place to which you can escape when America collapses into a Greek-style fiscal crisis.
International Liberty 
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VI senators are using the 8% cut of government workers’ salaries to fund the General Fund. This is how they are paying to keep a widow of a former governor at a the lifestyle she is used to.
its amazing that people don’t realize its not their money to take
Taxed Man: You originally stated that “US tax rates are actually not that high.” I’m glad to see that you’ve come around.
Sorry, USAS is actually me. I’ve got my internet pseudonyms crossed!
But my point is that the reason other countries collect proportionately more tax, is not because of the Laffer Curve, but because US special interest groups have managed to win more concessions. (Although maybe that is part of the Laffer Curve?)
But the bottom line is the same, US tax revenue is the lowest among its peers. This is why you won’t convince anyone that taxes shouldn’t go up.
That link above to Thinkprogress shows that there is a leakage of around $1 trillion pa in deductions, loopholes, etc. So while tax rates may be be high, actual tax paid is among the lowest (if not the lowest) among OECD countries.
I asked my boss for a 10% raise. He only gave me 2%. So by Washington reasoning, that’s an 8% pay cut. Can I deduct this loss from my income taxes?
It would be unwise to inquire about the cost of property in Costa Rica when America collapses into a Greek-style fiscal crisis. Chile is a much better investment, and the capital, Santiago, is a much more populous, wealthier, and interesting city than San Jose, Costa Rica.
Imagine living with a responsible government like Hong Kong, in a Mediterranean climate like California. Unfortunately, no such Utopia exists; but Chile offers a combination of pleasant climate and fewer government burdens than many others. If you’re ready to shed the debt your government has imposed upon you, it is a good destination to consider:
http://brophyworld.com/move-to-santiago-chile/
We don’t need cuts right now. We need DEMAND to spur the economy. Is it 1938 again? Have we learned nothing?
Taxed Man: Read this:
https://danieljmitchell.wordpress.com/2011/07/01/cap-leftists-have-accidental-encounter-with-the-laffer-curve-learn-nothing/
I’m curious as to what you think of the following link, which shows that US tax rates are actually not that high.
http://thinkprogress.org/economy/2011/07/05/260535/graph-corporate-tax-second-lowest/
Truer words were never… typed, Mr. George.
The Federal Budget is every bit as ethereal as Derivatives. No one can adequately explain what they are, and the numbers change3 with the wind.