RoR: Forum

This 1924 presidential speech can be viewed here:

http://www.americanrhetoric.com/speeches/calvincoolidgeeconomyandfreedom.htm

I was sure that I already posted this here before, but could not find it either in the quotes section or in the videos section -- so here it is again. Keep in mind that if you do not adjust for inflation, the government was 5000 times smaller (spent 5000 times less money) back then. In the interim, it may be good to shoot for 1934 levels of government revenue/spending. In 1934, tax revenues were less than 5.0% of GDP. A simplified plan to fix all of America's fiscal issues by the year 2024 might look like this:

2013 tax revenue (and total government spending) = 16% of GDP
2014 tax revenue (and total government spending) = 15% of GDP
2015 tax revenue (and total government spending) = 14% of GDP
2016 tax revenue (and total government spending) = 13% of GDP
2017 tax revenue (and total government spending) = 12% of GDP
2018 tax revenue (and total government spending) = 11% of GDP
2019 tax revenue (and total government spending) = 10% of GDP
2020 tax revenue (and total government spending) = 9% of GDP
2021 tax revenue (and total government spending) = 8% of GDP
2022 tax revenue (and total government spending) = 7% of GDP
2023 tax revenue (and total government spending) = 6% of GDP
2024 tax revenue (and total government spending) = 5% of GDP

:-)

Now 16% of GDP is awful high. The government is not even currently taking in that much. I used a start point of 16% for 2013 in order to give the politicians some wiggle-room at the start -- i.e., to ensure that the plan, if tried out in reality, would actually work. What keeps the plan going after the first year is economic growth -- which would easily exceed 4% for the foreseeable future. If investors know that the US is going to adopt this tax plan, they will most heavily invest in America for the foreseeable future. We would easily be the investment capital of the world. No other country would even come close to us.

What keeps the plan honest are rule #2 and rule #3. Rule #2 says that a sliding-scale of 10-20% of all "government spending" has to be not on upkeep or growth in government programs, but on "pay-down" of indebted programs. Rule #3 simply says "work within this budget" which would mean reform of entitlement programs.

Problem fixed.

:-)

Ed

Further:
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205

(Edited by Ed Thompson on 12/01, 5:46pm)

Post 1

Saturday, December 1, 2012 - 7:51pm

And here are some rough numbers carried out to 2030 and assuming 10% annual growth -- on the principle that the best tax plan ever devised, all else equal, will lead to the best economic growth ever seen (and assuming that 10% is as good as things ever get in the world):

....................GDP ...............Flat/Fair Tax Rate .....................Tax Revenue....................% Earmarked to pay debts................$ Earmarked to pay debts
2013 ..........$16T......................16%......................................$2.56T.........................................14%...............................................$0.36T
2014 ..........$17.6T...................15%......................................$2.64T.........................................16%...............................................$0.42T
2015 ..........$19.4T...................14%......................................$2.71T.........................................18%...............................................$0.49T
2016 ..........$21.3T...................13%......................................$2.76T.........................................18%...............................................$0.50T
2017 ..........$23.4T...................12%......................................$2.81T.........................................20%...............................................$0.56T
2018 ..........$25.8T...................11%......................................$2.83T.........................................20%...............................................$0.57T
2019 ..........$28.3T...................10%......................................$2.83T.........................................20%...............................................$0.57T
2020 ..........$31.2T....................9%.......................................$2.81T.........................................20%...............................................$0.56T
2021 ..........$34.3T....................8%.......................................$2.74T.........................................18%...............................................$0.50T
2022 ..........$37.7T....................7%.......................................$2.64T.........................................16%...............................................$0.42T
2023 ..........$41.5T....................6%.......................................$2.49T.........................................12%...............................................$0.30T
2024 ..........$45.6T....................5%.......................................$2.28T.........................................10%...............................................$0.23T
2025 ..........$50.2T....................5%.......................................$2.51T.........................................14%...............................................$0.35T
2026 ..........$55.2T....................5%.......................................$2.76T.........................................18%...............................................$0.50T
2027 ..........$60.8T....................5%.......................................$3.04T.........................................20%...............................................$0.61T
2028 ..........$66.8T....................5%.......................................$3.34T.........................................20%...............................................$0.67T
2029 ..........$73.5T....................5%.......................................$3.68T.........................................20%...............................................$0.74T
2030 ..........$80.9T....................5%.......................................$4.05T.........................................20%...............................................$0.81T

This thing still needs some tweaking ...

Ed

Post 2

Saturday, December 1, 2012 - 9:00pm

A 5% PERCENT FAIR TAX RATE!!!! But, uhh, Ed, don't ya think, uhh, the, uhh, rich should, uhh, pay their, uhh, fair share. I think that everyone should, uhh, pay their fair, uhh, share.

*Alas, the teleprompter wasn't working that day; must've went on strike*.

Post 3

Sunday, December 2, 2012 - 6:06am

Good one, Kyle.

It highlights how far current politics is away from the real problem -- or how far it distracts public attention away from the real problem. In stark contrast to that, my tax plan is aimed directly at the problem. Speaking of which, here is a much needed amendment (with an ascending proportion of revenue earmarked toward debt, in order to help the government meet its fiscal obligations):

.....................GDP .............Flat/Fair Tax Rate ..................Tax Revenue....................% Earmarked to pay debts................$ Earmarked to pay debts.......Debt/GDP (est.*)
2013 ..........$16.0T...................16%......................................$2.56T.........................................0%...............................................$0.00T...................... >100%
2014 ..........$17.6T...................15%......................................$2.64T.........................................1%...............................................$0.03T...................... ~100%
2015 ..........$19.4T...................14%......................................$2.71T.........................................2%...............................................$0.05T...................... <100%
2016 ..........$21.3T...................13%......................................$2.76T.........................................3%...............................................$0.08T...................... 90-95%
2017 ..........$23.4T...................12%......................................$2.81T.........................................4%...............................................$0.11T...................... 85-90%
2018 ..........$25.8T...................11%......................................$2.83T.........................................5%...............................................$0.14T...................... 80-85%
2019 ..........$28.3T...................10%......................................$2.83T.........................................6%...............................................$0.17T...................... 75-80%
2020 ..........$31.2T....................9%.......................................$2.81T.........................................7%...............................................$0.20T...................... 70-75%
2021 ..........$34.3T....................8%.......................................$2.74T.........................................8%...............................................$0.22T...................... 65-70%
2022 ..........$37.7T....................7%.......................................$2.64T.........................................9%...............................................$0.24T...................... 60-65%
2023 ..........$41.5T....................6%.......................................$2.49T........................................10%..............................................$0.25T...................... 55-60%
2024 ..........$45.6T....................5%.......................................$2.28T........................................11%..............................................$0.25T...................... 50-55%
2025 ..........$50.2T....................5%.......................................$2.51T........................................12%..............................................$0.30T...................... 45-50%
2026 ..........$55.2T....................5%.......................................$2.76T........................................13%..............................................$0.36T...................... 40-45%
2027 ..........$60.8T....................5%.......................................$3.04T........................................14%..............................................$0.43T...................... 35-40%
2028 ..........$66.8T....................5%.......................................$3.34T........................................15%..............................................$0.50T...................... 30-35%
2029 ..........$73.5T....................5%.......................................$3.68T........................................16%..............................................$0.59T...................... 25-30%
2030 ..........$80.9T....................5%.......................................$4.05T........................................17%..............................................$0.69T...................... 20-25%

Note how effective my plan is at lowering the Debt-to-GDP ratio, without ever substantially lowering the absolute amount of money that the government takes in -- although the size of government relative to the private sector does drop substantially, which reflects the objective morality of this practical solution to our debt problem. To my knowledge, no other plan does that.

Importantly, if you carry the projection further forward, absolute dollar amounts to the government, and dollars earmarked toward the debt pay-down, both increase substantially (until all debt is paid). This makes the plan ultimately fiscally-sound, even if there are slight errors in the figures above. After 2024, government revenues persistently increase, even though the dead weight of the government has been all-but-lifted off of the markets of the economy(s). In children's book terms, this is how you reap the golden eggs from the goose on a permanent basis (i.e., without ever killing the goose).

:-)

Ed

*These are just flashy figures that I added into the picture, and they may not accurately reflect the reality of the situation. What can be said for certain is that the Debt-to-GDP ratio in 2030 -- with a GDP of $81 trillion -- would be less than 100% (we would be solving our problem). Though long-term projections of debt reach up to into this $80-90 trillion range, to my knowledge that projection is farther out than 2030. In other words, economic growth would exceed debt growth -- and we would grow ourselves out of our debt.

(Edited by Ed Thompson on 12/02, 6:36am)

Post 4

Sunday, December 2, 2012 - 6:48am

Things may be more rosie than I have made them appear. I may have been too conservative by holding annual economic growth down to 10%. The reason that this is the case is because out in reality, it is possible to have more year-over-year growth than this. An example of this is Qatar, and here are the WorldBank numbers:

........................GDP growth (annual)

2007........................18.0%
2008........................17.7%
2009........................12.0%
2010........................16.6%
2011........................18.8%

Even just using the 12% annual economic growth figure would dramatically improve my projections in the United States.

Ed

Post 5

Monday, December 3, 2012 - 6:37pm

And, updating the figures to reflect the possibility that -- under the best tax plan ever devised -- that we grow our total wealth by 12% every year (the minimum level of annual growth in Qatar during the last 5 years)*:

.....................GDP ............Flat/Fair Tax Rate..............Tax Revenue...............% to pay-off debt.............$ to pay-off debt.......Net Revenue .......Debt/GDP (est.)
2013 ..........$16.0T...................16%...............................$2.56T..............................0%................................$0.00T.................$2.56T............... >100%
2014 ..........$17.9T...................15%...............................$2.69T..............................1%................................$0.03T.................$2.66T............... ~100%
2015 ..........$20.0T...................14%...............................$2.81T..............................2%................................$0.06T.................$2.75T............... <100%
2016 ..........$22.4T...................13%...............................$2.91T..............................3%................................$0.09T.................$2.82T...............90-95%
2017 ..........$25.1T...................12%...............................$3.01T..............................4%................................$0.12T.................$2.89T...............85-90%
2018 ..........$28.1T...................11%...............................$3.09T..............................5%................................$0.15T.................$2.94T...............80-85%
2019 ..........$31.5T...................10%...............................$3.15T..............................6%................................$0.19T.................$2.96T...............75-80%
2020 ..........$35.3T....................9%................................$3.18T..............................7%................................$0.22T.................$2.98T.............. 70-75%
2021 ..........$39.5T....................8%................................$3.16T..............................8%................................$0.25T.................$2.91T.............. 65-70%
2022 ..........$44.2T....................7%................................$3.10T..............................9%................................$0.28T.................$2.82T.............. 60-65%
2023 ..........$49.5T....................6%................................$2.97T............................10%................................$0.30T.................$2.67T.............. 55-60%
2024 ..........$55.4T....................5%................................$2.77T............................11%................................$0.30T.................$2.47T.............. 50-55%
2025 ..........$62.0T....................5%................................$3.10T............................12%................................$0.37T.................$2.73T.............. 45-50%
2026 ..........$69.4T....................5%................................$3.47T............................13%................................$0.45T.................$3.02T.............. 40-45%
2027 ..........$77.7T....................5%................................$3.89T............................14%................................$0.54T.................$3.35T.............. 35-40%
2028 ..........$87.0T....................5%................................$4.35T............................15%................................$0.65T.................$3.70T.............. 30-35%
2029 ..........$97.4T....................5%................................$4.87T............................16%................................$0.78T.................$4.09T.............. 25-30%
2030 ........$109.1T....................5%................................$5.45T............................17%................................$0.93T.................$4.52T.............. 20-25%

What you can glean from the new column above (Net Revenue) is that we are stuck with at least a 2-and-a-half-trillion-dollar government, because even after diverting all of this money toward paying down the debt (which is the responsible thing to do), the government still keeps about $2.5T -- or much, much more than that! -- in its deep pockets every year. Another thing to glean from above is that you can't tax your way out of our kind of crisis -- you have got to grow your way out of it. There is no other solution.

NOTE: A note about our current, nominally-low tax revenue as a % of GDP. The reason we're taking in less than 16% of GDP in the form of taxes right now is because the GDP is being arbitrarily propped up via non-wealth-productive methods (i.e., by excessive government spending). If the government wasn't spending all of this money, then proportional revenue would be much higher than 16% of GDP (because GDP would be much smaller than it nominally is). So, even though proportional revenues are less than 16% of current GDP, they are still unproductive and uncompetitive, and they are still stifling overall economic growth in this country.

Ed

*Dissenters may object to my using Qatar as an example that you can grow total wealth by 12% every year, but what is their main argument?: That Qatar is sitting on a 'gold mine' of oil. But that's not a good argument, because America is sitting on a 'gold mine' of shale and on natural gas that is just as lucrative, even when scaled to size. Because this line of argument is so weak, critics will have to find other arguments -- if they want to try to argue against the possibility of growing wealth by 12% every year in the United States. The argument that Qatar, because of being rich in the natural resource of oil, is therefore a very special case of economic growth (and not applicable to what's possible in the US) -- is not a strong argument, it's very weak. In fact, there may be no country in the world as rich in such natural resources as is the US.

Post 6

Monday, December 3, 2012 - 8:23pm

Canada has more oil reserves than the entire middle east combined(it is just a bit pricey to extract however our methods are improving alll the time and what just 20 years ago was thought to be experimental and mostly a waste of time is now making a profit.)

Post 7

Thursday, December 6, 2012 - 8:50pm

Good point, Jules, and your country is on track for becoming one of the most capitalist countries in the world (more capitalist than the US).

I heard on the radio today that, down here in the US, we have natural gas coming out of our ears. No, wait. That didn't sound right. What I meant to say is that we have so much natural gas that we do not know what to do with it (several billion cubic feet, or several billion cubic meters). The debate was about becoming a major -- perhaps THE major -- natural gas exporter in the world. Greenies and protectionists argued against that.

Ed

Post 8

Thursday, December 6, 2012 - 9:23pm

I am doing what I can to be socialism's fifth columnist!
Every single person I run into through work I nudge towards capitalism. People I train I stress over and over " this is how it is done, learn it and then excel at it. Do not just do the job, strive to be the very BEST at it. Then enjoy the self esteem of a job well done. If you can figure out a better way of doing something that increases production? Do it!

Post 9

Thursday, December 6, 2012 - 10:00pm