Daily Archives: August 30, 2011

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America doesn’t have a spending problem. It has a tax problem.

There’s been some discussion on Newsvine this afternoon about the various federal agencies and programs people would like to cutto solve our supposed spending problem. Only none of those ideas would work even if you ignore the strong public opposition to cutting programs like Medicare and Social Security that make such cuts politically impossible.

The thing is, this country hasn’t really increased spending that much over the past three years. Rather the tax revenue base has collapsed as a result of millions of people losing their jobs. Not only do those people not have income to pay taxes on anymore, their lost income isn’t going back into the economy to buy goods and services, lowering demand at companies that usually pay taxes on those sales – unless you’re GE – in a self feeding cycle that results in stagnation.

Would it surprise you to know that without any substantive change in tax policy in the past three years, that federal government revenue has fallen by $530 billion dollars? Revenue as late as 2009 was $2.7 trillion. This year it’s closer to $2.17 trillion. The government didn’t cause that, the recession did.

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