Make no mistake: our taxes weren’t lowered this week

The cost of government is not determined by how much we decide to tax ourselves right now. It’s determined by how much we are spending.

Every time the federal government spends a dollar, it will cost us at least a dollar. If we have balanced budgets, that dollar gets taxed within the same fiscal year in which it was spent. If we instead fail to raise enough revenue to pay for it, America will still have to pay the dollar back later plus interest.

Of course, there are other ways of paying back government debt that are even more expensive than the interest on our Treasury bonds. There’s the Argentinian way, where our fiscal leverage can be paid back with hyperinflation or the Greek way where it’s paid back by negative economic growth from a prolonged financial crisis. Either way, from taxes, devaluation, or a sovereign default, we will be paying dearly for this administration’s spending.

The data shows that during the eleven months Donald Trump has been in office, two of them (March and June) were record-setting in spending. The others were essentially the same as his predecessor. The fact that our average federal spending levels are higher now than they were when Barack Obama was president means necessarily that the net present value of our tax liability is going up, not down.

Eric Shierman lives in Salem and is the author of A Brief History of Political Cultural Change.

  • Dave Lister

    That’s the short view. The long view is that the corporate rate cut will increase economic activity and overall revenues will increase. JFK did it and it worked. Reagan did it and it worked.

    • Eric Shierman

      Gross revenues will increase, but not enough to cover how much our spending is increasing. Also, there have been many credible estimates of this tax reform’s net effect on revenue. None of them show a positive change. Let’s not confuse an increase in gross revenue with net revenue.

      The reason the JFK and Reagan examples don’t apply is that our tax rates are already much lower than they were then. There certainly exists a Laffer Curve, but we are to the left of its optimization point.

      • Dave Lister

        “Gross revenues will increase, but not enough to cover how much our spending is increasing.”

        That’s opinion, not fact. We won’t know until the fat lady sings.

        • Eric Shierman

          By that use of the word “opinion,” what you said was an opinion too, but I don’t use that word in that way. Not all such opinions are created equal.

          When I use the word “opinion,” I tend to mean normative claims in a contrast with positive claims. Both you and I are making positive claims, not normative ones.

          Mine is backed up by rigorous dynamic scoring from the conservative Tax Foundation and conservative economists like Martin Feltstein showing this piece of legislation will have a net negative impact on revenue. Trump’s own Treasury Department has reached this same result. If there exists research of this caliber showing a net positive change in revenue, I’d like to see it.

          • Dave Lister

            When you pull out the “optimization point of the Laffer curve” we are all stunned by your stellar intellect. You are obviously way smarter than anybody else, so we will put a gold star next to your name on the fridge. Good boy.

            Because you can accurately predict the future, how about some hot stock tips?

          • William Butterfeld

            Wow, Dave. That was simply incredibly rude and certainly doesn’t help the discussion progress. I’m not sure why you felt the need to engage in an ad hominem personal attack, but evidently you have very low standards for civil discourse. I’ve flagged your comment, and I hope the moderator removes it.

          • Dave Lister

            Shierman claims he can predict the future. I want some stock tips. And I really don’t care if you, or the moderator (oh no! the moderator!) don’t like it.

          • William Butterfeld

            It was the sheer rudeness of the reply. Not just the snarky asking for a stock tip, but the entire gold star comment. Some people just can’t seem to handle disagreement and making comments. I feel sorry for you.. you evidently have difficulty with being a decent person.

          • Dave Lister

            Don’t feel sorry for me, my life is great. And thanks to Trump and the tax cut, my future retirement is now 14% rosier than it was last week. I am giddy.

          • William Butterfeld

            It is difficult to not feel sorry for you.

          • Dave Lister

            Well, say your rosary over this post and maybe you can help me in the afterlife. Thanks for your sorrow.

          • Eric Shierman

            Dave, I don’t think I ever claimed to be as smart as Martin Feltstein. Nor does the fact that I’m familiar with the relevant research on this bill imply that I’m smarter than you.

            One does not need to be smart to be informed. One just needs to read the Wall Street Journal.

            Most policy analysis involves making judgments about what the most probable future outcome is expected to be. You do it all the time in your own writing. Indeed you did it in your initial comment here. How did you go from predicting that this bill will “increase economic activity and overall revenues” to mockingly offering me a gold star?

            And I certainly can give you an investing tip. If your long-term savings are in a broad-market index fund, it will outperform any alternative portfolio made of “hot stock tips.” From personal finance to public finance, we don’t have to be as smart as the Nobel-winning economists that bestow upon us this knowledge. We just need to take the time to learn what insights have been discovered.

        • Chris Mckeeman

          So why should we believe your claims?

          • Dave Lister

            I am not making any claims. I am just saying we will not know until the full impact of the cuts take effect.
            I do know that all the Boeing employees who just got bonuses as a result of the tax bill being signed figure it is working pretty well.

          • Chris Mckeeman

            You literally made this clam two comments above

            ” The long view is that the corporate rate cut will increase economic activity and overall revenues will increase.”

            Also short term optics and one time bonuses don’t solve massive budget deficits created by top heavy tax cuts.

          • Dave Lister

            Reagan cut taxes and went on a massive spending spree to rebuild the military. That worked. In my OPINION (it’s an opinion, not a claim) this will also.

          • Chris Mckeeman

            Which leads us back to square one, why should i believe your opinion? Why should i believe yoir claim that this new tax bill will cause “overall revenues [to] increase”?

          • Dave Lister

            I don’t care if you believe it or not and I am not trying to convince you. I think it will. You maybe think it won’t. Time will tell.

          • Chris Mckeeman

            So why post your claim at all then? Why not just say nothing?

          • Dave Lister

            Because Catalyst posted an opinion with which I disagree, that’s why.

          • William Butterfeld

            So, why not post your disagreement in a respectful and polite manner? Why throw a tantrum when Eric continued the debate and disagree with you? Why not post an informative response instead of lashing out?

          • William Butterfeld

            LOL.. as for my deleted comments. sometimes a little self-editing is needed.

          • Dave Lister

            I thought you were going to turn me in to the moderator to have my comments removed. Instead yours were. I actually thought mine should have been, but what the heck. Who is the moderator and how do they think? I am curious (yellow, blue and every other color).

          • William Butterfeld

            I did. Evidently in the Age of Trump, decent behavior is no longer of any value at all.

            I removed my comments. I can’t unfeed the troll, but I could remove the trough.

          • Dave Lister

            How do you delete them? I don’t see an option.

          • William Butterfeld

            Way to the right of your name… past the notation of how long since you last posted.. you’ll find a down arrow.. drag your cursor up to that line.. and you’ll see it appear.

          • Granola girl

            OMG Chris, typical liberal thinking when anyone opposes you? Yes I am generalizing and it is my OPINION and I will not “just say nothing”. As Americans we are all entitled.

          • Chris Mckeeman

            So asking people to actually have sources for their claims is now liberal?

          • Granola girl

            No not at all, but all conversation does not need to be backed up with sources, don’t be ridiculous! No time for an argument for an arguments sake.

          • Dave Lister

            Hey lame brain. I will say it again. It was not a CLAIM. It was an OPINION. Is there something you do not understand in that?

            You must be a professor at Reed College.

          • Dave Lister

            So if we have an opinion, but cannot include foot notes and annotations and a reference to the “Laffer Curve”, we should just shut up? I don’t think so. Maybe you should shut up, since you have nothing to add to the conversation.

          • William Butterfeld

            Hmmm.. no gold star for you.. a definite Needs Improvement. .

  • heaventaste

    I have a question. Is the reason why Oregon won’t benefit from Trump’s tax cuts because our tax money has been mismanaged at the state level (thanks to Governor Brown and her liberal taxing/overspending) and not at the federal level? If this is true, time to vote Kate out!

    • Bob Clark

      Most Oregonians still benefit from the tax cut despite what the media is tossing out there. If you don’t itemize with Schedule A on your tax form, you get a near doubling of the standard deduction and a tax rate reduction. These tax cuts are only good for five years. Maybe they will be extended if the past is any guide. I am an Oregonian (only because I can’t get my better half to move), and according to various tax plan calculators my wife and me save about $700 in federal taxes; and this could be higher if only we didn’t itemize. Our state taxes might bump up a bit, again mostly because we itemize.

  • Bob Clark

    I love the new tax cut, even though it only saves me $700 per year in direct right-in-the-here-and-now taxes. It saves most families on average across the U.S $1,600 per year for the next five years (after which the tax cut might be extended or renewed like the Bush tax cuts under Obama’s tenure).
    Roghoff’s study of sovereign debtor countries dating back 400 years show countries do not threaten themselves if their annual deficits do not exceed three percent of their GDP (Gross Domestic Product); and I don’t think this increment of deficit pushes us over the three percent level. Moody’s rating agency says growth in GDP will pick up a tenth to two-tenths of a percent. Moody’s doesn’t see hyper inflation, although the debt increase is not looked on favorably. (this is from my recent readings with Moodies and memory of Roghoff’s book several years ago.)
    Any inflationary effects of this tax cut are likely to be offset by Trump’s deregulation of industries, particularly oil and natural gas industries. The U.S is unleashing a treasure of natural gas and oil resources which is likely to keep gasoline and energy prices down or stable (than otherwise). In fact, we’ve got economic forces which are deflationary. Electric car technology threatens to take out oil demand within ten to twenty years,what with electric motor driving being incredibly more efficient than gasoline powered automobiles and trucks. Then there are robotics, quantum computing, etc.
    There is normally technological advancement going on, but the last three and a half decades the advancement is outpacing the increases in money supply and federal spending. This doesn’t look to be ending soon, although former Fed Chief Greenspan is worried about inflation in and around the year 2030.
    Now you could argue, we would get lower consumer prices if not for the federal deficit spending and money supply expansions. But then again if the federal government instead of lowering taxes spends it on global warming conferences and enriching consulting contractors and themselves in and around the hob knob, high and mighty Washington DC suburbs; I’ll take my $700 in tax cuts now please.
    Hooray, Trump and a GOP Congress which didn’t melt under the onslaught of mainstream media vitriol.

    • Eric Shierman

      But do you love the new spending? I’ve already said kind things about the cut in the corporate rate here at the Oregon Catalyst, but it needs to come with net spending cuts.

      • Bob Clark

        Hi, Eric. Yes I have been hopeful some of the spending is cut but not defense spending. I know defense spending is chalk full of waste, but it is what is…and right now I don’t take North Korea lightly nor China…although I think the other tripartite party of our global Mafia club the Russians we have kind of a mutual respect going on.
        I would like to see things like electric car subsidies, renewable subsidies, light rail, and other forms of user subsidies even them for oil and gas (rather small, relatively speaking though) cut. But I don’t think this comes with Trump as it didn’t really come with Ronald Reagan either. It’s hard to keep the Federal government beast from growing.
        The GOP Ryan is talking entitlement rationalization (Medicare, Medicaid and Social Security), but everyday folks are too addicted to this stream of handout. Tackling this is political suicide. So, McConnell is said to be ditching such talk in ’18.
        Trump talked today about Infrastructure, and being bipartisan. This sounds like significant new general fund expenditure. Need to pay roads with user fees not General funds.
        So, I think Ronald Reagan said a big country like ours can handle more debt; and so far, he’s been right…although it does allocate resources to the government from the private sector (a loss of the efficiency of private capital markets). But interestingly Investment gurus like Ken Fisher think the federal government doesn’t owe enough, and is a big believer in economic multipliers.
        I would like to see the welfare state whittled back because under the Obama Administration the marginal tax/benefit loss rate for the average American worker went from just over 40% under George W. to like 55%; meaning for the average worker doing an extra increment of work resulted in less than 50 cents on the dollar for the extra effort (University of Chicago economist articled in the Wall Street Journal a few years back).
        Bottom line we do need to keep a lid on spending but I don’t see this as politically possible. So until a day of reckoning it’s a food fight between getting mine (tax cut) versus the Swamp getting it instead. If you live in Oregon with the approaching PERS debacle, you might want to turn your federal tax cut into gold so as to escape the state tax man when PERS blows up. I wouldn’t put it into a crypto-currency like Bitcoin because there’s no limit on crypto-currency variants (with Bitcoin all you are believing in is a bunch of software code which can be replicated in alternative forms…by the way, Bitcoin dropped 25% this week in dollar value).
        What can I say Trump is the best dirty shirt available in November ’16, seeing how the Libertarian has a snowball chance of winning.

        • GQ4U

          When the government subsidizes innovation it generally destroys it.

          • Bob Clark

            I took three terms of American Economic History from the renown professor Harold Vatter (deceased now, but honored by Portland State University and other institutions around the country). Your observation of the role of government in technology innovation is greatly debated. Great things can come of government innovation assistance, such as the rise of computer technology helping assist the U.S in catching up with the Russians during the Sputnik period. But there is a side which argues such innovation is inevitable and would have come from the private sector anyways.

            Maybe the best of government and its assistance to the economy comes at times when the nation faces a tribal competition with another nation, such as in the case of Sputnik. At other times, government becomes more corruptible as it thinks more about its perks rather than its survival.

            The bottom line is I believe we are sometimes too pure on the conservative side. As for the Tax Cut, Grover Norquist I see supports it although he thinks of it as a step towards tax reform, and not the end all and be all.

          • GQ4U

            Perhaps “Necessity is the Mother of Invention”.
            Perhaps innovation controlled by governments picking loser & winners based on it’s ideological views of the day does more harm than good. Debacles into ethanol, wind & solar subsidies come to mind.

            I am not familiar with professor Harold Vatter’s economic theory. Was he into Keynesian economics or Austrian School of economics or a blend of both?

            As for taxation, I would like all income taxes eliminated, repeal the 16th. amendment, the IRS abolished, and institute a national retail sales tax similar to the www(dot)FairTax(dot)org plan to end the current progressive/regressive Internal Revenue Code.

            The Trump tax plan is better than the one it replaces, but not by much, it leaves us exposed to government whims and missteps and intrusions into our private affairs. A sovereign people should not have to report their coming and goings or their financial situation to any government. Free people should not live in fear of government or their hired enforcers like the private contractors at the IRS.

          • Bob Clark

            Good points. Yes, the Trump plan boosts work incentive a bit and only until the year 2025 (unless extended), but it does move corporate rates to levels on par with other developed nations (and should help boost economic growth from the 1.9% per year growth used by the Congressional Budget Office to calculate the Tax Reform’s deficit effects.
            I favor eliminating all income taxes in favor of a sales tax; but the politics of getting there look impossible.
            Vatter didn’t subscribe to any particular Macro economic model but used the variant theories to critique historical outcomes.
            Some government projects can bring a community and nation together but admittedly it is hit and miss. I think of things like the Erie Canal, the laying of the cross continental railroad (with land donated it by government), and locally here OHSU is responsible for creating a cure for leukemia.
            Against this we got a boat load of waste by Oregon state government such as the Business Energy Tax Credit, the failed student testing program, the failed state health exchange, to name a few.

          • GQ4U

            OHSU did an amazing thing with a grant of $540,000 from The Leukemia & Lymphoma Society in 1995, but that isn’t a government organization.

            Oregon is a financial shipwreck waiting to sink. Very few government sponsored enterprises perform well. Private sector enterprises must succeed or the entrepreneur pays dearly for their failure. When your life hangs on the outcome the outcome becomes the focus. For government the outcome affects the general population and the outcome is too often poor at best.

          • Bob Clark

            Like or not the push is on in other ways to change out the car fleet to electric from gasoline. There are other reasons besides environment. The way to expand effective road capacity is through the use of electronics embedded in automobiles to enable them to be quicker, more adaptive to traffic flow, and to optimize through the use of big data the collective use of the existing road system.

          • GQ4U

            This can also be accomplished using the internal combustion engine and they will travel much further than any electric car.

            If we all use self driving cars will that eliminate citations for driving under the influence? 8>)

            Merry Christmas!

          • Bob Clark

            Actually I like the hybrid solution where you could generate your own electricity and feed it to your home when its power goes out at home. I still think the trend is towards electric drive (even if assisted in the case of the Hybrids). I think this even if you eliminate the subsidies used to cover the extra costs of the battery. (It was kind of funny though when Mayor Ted Wheeler’s all electric car ran out of juice half way to his meeting in Hillsboro, and summoned a Lyft ride service.)
            But there are a lot of deep pockets behind the electrification of automobile drive, and the tyrants running states like Oregon and California and countries like China are not going to stop mandating such stuff.

            If I ramble, it’s only because these issues are interesting to me and are somewhat complicated requiring or eliciting a response sometimes rich in color.

            Merry Christmas, to you and others here, too.

          • GQ4U

            Supplying your own electricity is a good economic idea as long as its not mandated by tyrants like Oregon’s governor Brown under the guise of curbing Co2 emissions.

            Electric car batteries are short lived and expensive and the raw materials to make them are in short supply. If every driver switched to electric vehicles its likely most people could not afford one. Plus, they are not as pollution free as environmentalists pretend.

            Why don’t you research LNG powered vehicles and their economic as well as environmental benefits. The US today has enough natural gas to power our needs for more than 100 years.

          • Bob Clark

            LNG already powers a lot of mining equipment. Other countries have successfully adopted compressed natural gas for transportation, and TriMet does use it even here; but for some reason it just doesn’t catch hold for conventional automobile fueling here in the states. Northwest Natural Company tried pushing it here locally for awhile but maybe because automakers haven’t followed suit it hasn’t caught on.

          • GQ4U

            Compressed Natural Gas (CNG) is okay but Liquid Natural Gas (LNG) is much better.

            “Demand for LNG is growing rapidly across Europe, with the German Ministry of Transport and Digital Infrastructure (BMVI) having identified LNG as the best solution for long distance road transport in the short term and for the next 10 to 15 years.
            https://www.lngworldnews.com/iveco-books-order-for-500-lng-fueled-trucks/

            If LNG takes hold in Europe and Asia the US will take notice and do the same, its just a matter of time. It is cheaper than gasoline or diesel and the range is much greater than any electric vehicle plus the US has vast quantities of natural gas. It is environmentally friendly and its lower cost will offset the increased vehicle cost. The biggest obstacle may be the shortage of fueling stations. As far as I know there is only one in Oregon and its located in Central Point just north of the city of Medford in southern Oregon.

          • GQ4U

            Have you seen the Terminator? This all sounds great until the the smart machines out smart us.

          • carloada

            your ramblings are a good example of why to NOT confuse education with intelligence…

        • carloada

          in fact , without taxpayer subsidy, EV’s are DOA…

          • GQ4U

            I agree. Let’s set free enterprise free and see what happens.

      • GQ4U

        The budget has not been set yet. In fact congress has failed to pass a budget for years even though it is required by law. Want cuts? Put Rand Paul in charge of writing the new budget and force congress to pass it.

        Reducing the size of the federal government by at least 70% would be a tremendous cost savings. Removing illegal invaders would be great cost savings. Bringing home most our military from foreign countries would save untold billions every year. Disengaging in unconstitutional military conflicts could pay for our needed upgrades to our infrastructure. Forcing congress to abide by every law they pass would save us billions by reducing the number mandates they pass. Job creation will reduce spending on welfare programs. Business expansion and economic growth will result in increased revenues to the treasury. The tax cuts of 2017 are a good start but not nearly enough. They do nothing to restore financial sovereignty to the individual or to free them from taxation enslavement. Passing the Fair Tax Organization consumption tax and repealing the 16th amendment would cause massive economic expansion and reduce joblessness to near 0%. What is also needed is to eliminate the Internal Revenue Code and abolish the IRS.

    • carloada

      regarding electric vehicles…what source of energy will be used to charge them?

      methinks you out of touch with reality…

      • Bob Clark

        Edmunds reports it takes about 7 KWH to go 20 miles via an all electric vehicle, and to generate a KWH in a combined cycle natural gas power plant requires 7,000 British Thermal Units (BTUs). Thus the electric car requires 49,000 BTU to go 20 miles. By comparison, the conventional car typically takes about 1 gallon of gasoline to go 20 miles, which one gallon of gasoline contains 120,000 BTUs. As you can see, electric vehicles half or more the amount of energy even if indirect from a plentiful fossil fuel as natural gas.
        Moreover, it’s natural gas instead of gasoline, with natural gas being far cheaper to consume than gasoline. Wholesale natural gas is about $3.00 per million BTU whereas gasoline is going for nearly $14 per million BTU.
        Heat content data provided by the Energy Information Administration.

        • carloada

          you and edmunds needstah go bac to da drawin’ bode, cuz you leavin’ out da convoisahn losses…

        • Bob Clark

          The Leaf is said to actually take only about 6 KWH to go 20 miles, and natural gas power plants are getting down below 7,000 BTU to the KWH.
          But I stick with the higher numbers to account for distribution losses. 7,000 BTU is a conversion loss rate. You get nearly 50% energy efficiency with natural gas fired power, and electric motors tend to be 95% or more efficient. The conventional car is like sitting on a combustion turbine getting less than 30% end use efficiency.

  • Ron Glynn

    Promise Made, Promise Kept! Thank you President Trump and Republicans in Congress. I like to see all the liberals with exploding heads, especially the elected ones and those on Mainstream Media. Also, remember all those celebrities who said they were moving from the USA if Trump was elected. Does anyone know the number of how many celebrities kept their word and left?

    • Dave Lister

      Amen. And God Bless Us, Everyone.