Too much federal spending or too little tax revenue..which is the bigger cause of Budget deficits in USA?

Obviously there is likely good argumentst that can be made on either side, but if you were cornered right now and asked...what is the fastest way for the government to start consitently having a balanced budget starting in the year 2009 and moving forward, what would it be?

Raising taxes and tax revenue or slashing programs wholesale no matter who is affected by them?

I would love to see some good answers backed up by some good details and explanations.

9 Answers

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  • 1 decade ago
    Best Answer

    80% cutting taxes, 20% increased spending. Cutting taxes while at the same time increasing federal spending is your culprit.

    The people who say that cutting taxes actually increases federal revenue are quoting what's known as the "laffer curve" (see here http://en.wikipedia.org/wiki/Laffer_curve ). Basically, if you increase taxation past a certain point tax revenue will actually go down. So if your society is extrememly heavily taxed, cutting taxes may actually increase revenues, by spurring economic growth.

    What they always fail to point out is that the USA is already one of the lowest taxed jurisdictions in the world. If your jursidiction isn't heavily taxed, than cutting taxes won't actually create enough of an economic stimulus to recoup the tax revenue. Statistics from the OECD ( http://www.taxpolicycenter.org/taxfacts/displayafa... show that taxes as a percentage of GDP in the US is around 25%, whereas the average of the other industrialized nations is 35.9%. That is a pretty big difference.

    Keep in mind that some government spending is necessary for economic vitality (eg: paying all those cops to protect that private property of yours, building and maintaining roads and other infrastucture, fire services etc.). Maintaining the society that allows people to produce wealth is the governments main job, and this gives it a moral right to tax people in my view (you wouldn't be earning as much as you do if the government didn't maintain those before mentioned services, and more).

    Here's some articles for you to pore over which discuss these issues, one from Paul Krugman (Nobel winning economist) http://www.pkarchive.org/column/012704.html , and another from a blog which discusses some of the Bush era budget and financing http://angrybear.blogspot.com/2005/07/budget-nonse...

  • 1 decade ago

    Too much spending on too many 'entitlements'. You must first accept the premise that the money you earn belongs to you, not to the government. You should pay taxes for the programs that benefit the common good. Some things are necessary, like defending our borders and our sovereignty (which is not being done properly anymore) and building and maintaining infrastructure - roads and bridges and the like (which, again, are getting short shrift). Far too much is spent on programs that do not benefit those the programs are supposedly helping, instead, merely maintaining them in the poor lifestyle their poor choices have given them. Such spending programs were brought about by those who believe that your money belongs to the government, not to you.

    Too little tax revenue can be a problem. But increasing taxes to raise more revenue is never the answer, because history has shown time and time again that it never works. High taxes punishes productivity and dampens the ambition to go out and produce. Why take the risk of starting a business if the government is going to take a huge chunk out of what you did, and that they had nothing to do with - except maybe to make your path harder with their rules and regulations?

    Tax cuts have worked every time they are tried. Over and over, the evidence is there to show that when taxes have been lowered, business activity (including investment, both by individuals investing in all sorts of things to companies investing in research and development), increases, jobs are created, and tax revenue goes up, not down. But those who argue against tax cuts say that the government 'can't afford it'. This is the mentality that believes that it's the government's money, not yours.

  • Anonymous
    1 decade ago

    The cause in the staggering federal deficits traces back to the tax cuts initiated by president Bush (as most rep. believe that personal finance should be a private matter)-during times of war or increase in military spending, it is unwise to cut taxes, especially for the top 10% of the population that contributes about 1/3 of all income taxe. In fact, the US has seen a period of economic growth after every war except this one so far....Raising taxes now may seem harsh and unjustified but in the long run, our nation would benefit from it. Furthermore, the federal government (on a global level) should commence programs to revive the economy as high unemployment levels depict low tax revenues.

    Source(s): Global studies
  • 1 decade ago

    Too much wasteful spending! The best way to get more revenue into the treasury is to cut taxes, not raise them...Cut out all programs that don't work for starters, then work on lowering the capitol gains tax and leave the Bush tax cuts in place. Give the country some stability for the future, not burden an already bad economy with more taxation.

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  • 1 decade ago

    Well really there has to be a balance. Cutting federal spending means cutting welfare and education which would then fuel lower tax revenues.

    Increasing federal spending would increase the deficit but should see higher tax returns in the future to balance.

    The deficit is looked at too much anyway. Higher government spending would be good for you country.

    So yeah, raise those taxes!

    Lower welfare and social projects fuels crime and poverty, spend some money, give people some help to get jobs or better ones and you'll have a fairier society.

  • wdx2bb
    Lv 7
    1 decade ago

    Obviously, some of both would be nice. But here's the basic problem, as I see it:

    We want as many government services as possible, and we don't want to pay for it.

    When times are good, people say that taxes should be lowered rather than having governments establish fund balances for rainy days. When times are bad, people say taxes should be lowered in order to stimulate the economy. And in the meantime, they get upset if their parks aren't open, the garbage isn't picked up, the roads aren't clear and flat, etc.

    You can't have it both ways. We want a government that does its job efficiently and well, paying for what we need to do and not anything more. But that job usually takes more and more money, and not just because of inflation. We have new situations come up all the time -- homeland security, for example. These cost money.

  • 1 decade ago

    easy answer use the proved means cut taxes to increase revenue to the Federal Government, and at the same time don't just cut spending, but slash it. there is way to much money being wasted overall, and a whole lot spent on needless programs that are not in the realm of the Federal Governments responsibility, such as welfare,education,unemployment,medical, and the list goes on.

  • silvi
    Lv 4
    3 years ago

    the two. in case you're making $50,000 a 365 days on your interest and additionally you spend $60,000 you have a $10,000 deficit. the two decrease spending or improve revenues. endure in innovations, that this recession has been coming for some years and it did no longer happen in one day. So, it won't circulate away in one day. The economic device will improve while human beings experience confident adequate to spend funds. as a manner to try this, they p.c. jobs. they do no longer p.c. a one time $1200 shot interior the arm, they p.c. jobs. Create jobs and placed human beings back to artwork and the economic device gets greater effective.

  • 1 decade ago

    Stop going to war.

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