Posted by tax payer (+353) 10 years ago
The Tax Cliff Is a Growth Killer
No matter what happens from now on, 2013 will be a very tough year.

By ARTHUR B. LAFFER AND FORD M. SCUDDER

The United States faces an economic collapse thanks to massive tax increases on Jan. 1, and continued deficit spending for years on end.

Keynesians worry about spending cuts and to some extent the expiration of the temporary 2% payroll tax cut. But the looming expiration of the Bush tax rate cuts along with new levies enacted as part of ObamaCare pose the greatest threat.

The breadth of what will hit the country is extraordinary. The top federal rate on personal income will increase to 39.6% from 35%, with an additional 0.9% increase in the payroll tax for Medicare. The highest federal rate on dividends will increase to 43.4% from 15%, and the tax rate on capital gains will increase to 23.8% from 15%.

The rates on capital income are rising because of the expiration of the Bush tax cuts, and a 3.8% tax on investment income for the highest earners enacted as part of ObamaCare. As happens almost every year, there is a large scheduled expansion of the Alternative Minimum Tax (AMT) to ever-lower levels of income. The highest estate tax rate is scheduled to rise to 55% from 35%, with the lifetime individual exemption dropping to $1 million from $5 million. Meanwhile, tax rates will rise in many states.

In all, federal tax increases total almost $500 billion (over 3% of GDP) per year on a static-revenue basis. And that's not counting the $1 trillion, 10-year increase in excess spending over tax receipts in the ObamaCare legislation. Given that many of the new taxes are rate increases at the margin, they will affect incentives to earn additional income. Thus it is a certainty that we face a lower level of output in 2013.

The blunt reality is that we cannot have a prosperous economy when government is overspending, raising tax rates, printing too much money, overregulating and restricting the free flow of goods and services across national boundaries.

In the 1980s and '90s, Ronald Reagan's tax cuts and Bill Clinton's spending cuts (as a percentage of GDP) and his 1997 cut in the capital gains tax rate propelled the economy to grow rapidly. We're looking at the mirror image of that in years ahead-a situation in which the economy deteriorates more than it might otherwise.

There are a number of reasons for dwelling on the tax cut experience during the Reagan years. First, tax cuts were ostensibly less important to the economy of the early 1980s than the Obama tax increases are to today's economy.

Before he became President Obama's budget director, Peter Orszag once estimated the static revenue losses to the federal government of Reagan's tax cuts at 2.1% of the nation's GDP. The tax increases scheduled for Jan. 1 amount to more than 3% of current GDP on a static-revenue basis as scored by the Congressional Budget Office, the Heritage Foundation and others. Mr. Obama's tax increases will do more harm to the economy than Reagan's tax cuts helped the economy.

Second is how the contrast between the Reagan tax cuts and the looming increases of next year affect overall economic performance. In anticipation of the legislated tax increases, individuals and businesses have already and will continue to shift income and output from 2013, the higher tax year, into 2012, the lower tax year. This income shift has and will continue to make 2012 look a lot better than it should. But next year will be much worse.

Reagan's 1981 tax bill phased in the income tax cuts, thus providing people incentives to postpone taxable income from 1981 and 1982 into 1983 and beyond.

For example, 1ΒΌ percentage points of Reagan's tax cut took effect on Jan. 1, 1981, with the full tax cut increasing to 10% on Jan. 1, 1982, and 20% on Jan. 1, 1983. It was not until that late date that the bulk of his tax cuts went into effect. Under Reagan, people had enormous incentives to defer income. In today's situation, they have enormous incentives to accelerate income.

For 1981 and 1982, real GDP growth was pretty close to zero, 3% below its long-term average. Then, in the first quarter of 1983, annual quarter-on-quarter real GDP growth was 5.1%, second quarter growth was 9.3%, third quarter 8.1%, and fourth quarter over 8% again.

And the growth continued. In the first quarter of 1984, growth was 8%, second quarter 7.1%, third quarter 3.9%, and by the fourth quarter of 1984 it had fallen to a still respectable 3.3%. Under the current administration, scheduled tax increases have been delayed, thereby providing people with enormous incentives to accelerate income into 2012 from 2013 and beyond. As a result, growth from 2013 on will be below trend.

Even if the 2013 tax increases do not take effect as legislated under current law, a good portion of the income-shifting is already set in stone. Consider what happened in 2010.

We wrote extensively at the time about the impending negative impact of the scheduled expiration of the Bush tax cuts on Jan. 1, 2011. In the lame duck session, President Obama and Republicans reached a compromise solution to extend the Bush tax cuts through the end of 2012. While that compromise prevented a decline in the long-term growth of economic output, the damage from the scheduled tax-boundary effect was already locked in place.

The first half of 2010 saw real GDP growth at slightly less than 4% per year, and the second half stood at 2.3%. And then in the first half of 2011, real GDP growth dropped to less than 1%, and the second half of 2011 was still anemic at 2.2%.

Third, and finally, ObamaCare will (according to the Congressional Budget Office estimate in March) add more than $1 trillion to government spending over a 10-year period over and above revenue raised by the higher taxes and penalties embedded in that legislation. As Milton Friedman taught, government spending is taxation-and therefore increases in government spending are increases in taxes.

America is going to get socked by a triple whammy on output, employment and income. No matter what happens from now on, 2013 will be a very tough year.

Mr. Laffer, an economist, is president of Laffer Associates, where Mr. Scudder, a Chartered Financial Analyst, is chief operating officer.

A version of this article appeared July 16, 2012, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: The Tax Cliff Is a Growth Killer.
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Posted by Jeri Dalbec (+3269) 10 years ago
"Malice blinds the heart and mind"!
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Posted by Richard Bonine, Jr. (+15197) 10 years ago
Taxpayer: your post is so 2007 it isn't funny. The Laffer curve has been throughly debunked numerous times. Tax rates are too low, not too high. Taxes need to be raised. Additional cuts/maintaining the current rates are not going to generate the required additional revenue.

We need to cut military spending so that it is maybe 15% of federal spending rather than 54%. This one cut would do more to solve our problems than anything else. We could easily afford a single-payer healthcare system and provided for those struggling for survival.

The truth is that isn't going to happen because war is a huge cash-cow for the wealthy 1%. We need to dismantle the military industrial complex.
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Posted by Bridgier (+9362) 10 years ago
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Posted by tax payer (+353) 10 years ago
Entitlement programs need to be cut.

" I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. "- Ben Franklin - 1766
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Posted by Richard Bonine, Jr. (+15197) 10 years ago
You can cut entitlements to procreateing ZERO and it won't make an iota of differences to federal spending. Your premise that everyone receiving unemployment is a lazy bum is offensive. Nearly all of them want to work. In case you haven't noticed there are limited opportunities for employment right now. I don't believe letting people starve in the gutters is the manner in which we ought to treat our fellow citizens.
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Posted by Bob L. (+5103) 10 years ago
Hey Tax Dodger:

Medicare is an entitlement program.

So is Social Security.

Think about it.
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Posted by tax payer (+353) 10 years ago
It is an entitlement program when you pay into it your whole working life?
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Posted by Bridgier (+9362) 10 years ago
I don't think you understand what some of these words you use mean.
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Posted by tax payer (+353) 10 years ago
Make it so that the people that have money can expand and create jobs. Cut the regulations back and make it jon job friendly inviroment.
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Posted by tax payer (+353) 10 years ago
I just don't believe it fits the word. I mean government entitlements. The working class fund social security not the government.

[This message has been edited by tax payer (7/17/2012)]
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Posted by tax payer (+353) 10 years ago
Should be environment
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Posted by Bridgier (+9362) 10 years ago
I think you need to watch this:

and ruminate a bit about who creates jobs in a demand driven economy.
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Posted by Bob L. (+5103) 10 years ago
Tax Dodger wrote:
It is an entitlement program when you pay into it your whole working life?



Yes.

So, when you read an article written by someone advocating cuts in "entitlement programs," they're likely referring to Medicare and/or Social Security.

Think about it.
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Posted by tax payer (+353) 10 years ago
I don't have high speed Internet like some on welfare do, so only got to watch the first min. Will see if it loads later, but in the first minute I agree the rich should pay more and they already DO. He said poor could not afford to buy from his companies so they would go broke. They buy now on credit but at least if they had a job at his company they could pay their credit card bills.
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Posted by Bob L. (+5103) 10 years ago
Source: http://www.auburn.edu/~jo...nt_program


Entitlement program
The kind of government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right (enforceable in court, if necessary) whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. The beneficiaries of entitlement programs are normally individual citizens or residents, but sometimes organizations such as business corporations, local governments, or even political parties may have similar special "entitlements" under certain programs. The most important examples of entitlement programs at the federal level in the United States would include Social Security, Medicare, and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs.
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Posted by Bridgier (+9362) 10 years ago
I don't have high speed Internet like some on welfare do
Then I guess you shouldn't work so hard then should you?

Douchebag.
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Posted by Buck Showalter (+4457) 10 years ago
Hey now, lack of high speed internet is the only excuse I'll accept for someone being so procreateing ignorant.
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Posted by Gunnar Emilsson (+17809) 10 years ago
I'm very much looking forward to paying higher taxes in 2013, as I appreciate the fine government services I receive and support their efforts to help the less fortunate.
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Posted by howdy (+4952) 10 years ago
Will gladly pay higher taxes just to get lower health care costs...if it lowers our current bill of 800 per month at all it is worth it...
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Posted by Wendy Wilson (+6173) 10 years ago
There are so many things wrong with taxpayer's article but I'll just pick on one:

As happens almost every year, there is a large scheduled expansion of the Alternative Minimum Tax (AMT) to ever-lower levels of income.


Well, no. The problem is that nothing happens to the AMT. Therefore over the years it has trapped more and more folks due to the relatively low income requirements. This has been a problem throughout several Democratic and Republican administrations but no one wants to do anything about it. It's a money maker.
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Posted by Jan Cornutt (+271) 10 years ago
Military retirement plans are entitlement plans ? Bob L you are out of your rabbit ass mind. You and your cohorts can call it what you want, but it is not an entitlement program. It is a retirement plan that is earned by years of service. Contrary to you and your cohorts belief our countrey, be it socialistic or free enterprise cannot survive without a military. However, it can survive without unions...etc..Are their retirement programs entitlement s too ? or did they earn them ? ........korkyII
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Posted by howdy (+4952) 10 years ago
Of course a country can survive without military and do quite well indeed...

http://voices.yahoo.com/n...html?cat=9
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Posted by David Schott (+17668) 10 years ago
It wasn't Bob L. that said that. It was Dr. Paul M. Johnson from Auburn University's Dept. of Political Science.

It's accurate. Here it is being said by the Department of Defense:

http://comptroller.defens..._Sep96.pdf
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Posted by Bob Netherton II (+1913) 10 years ago
I worked for the VA for many years, Jan. One thing I can tell you for sure. By the definition you seem to be using, the retirement and medical care many vets recieve are definately entitlements. Not everyone who joins up is Pat Tillman.
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Posted by Bob L. (+5103) 10 years ago
Hey, Korky took some time off from sucking off the government teat to make an appearance!


It hurts to learn you're living off ENTITLEMENT PROGRAMS, doesn't it?
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Posted by Bob L. (+5103) 10 years ago
Closed Circuit to the Teabaggers on this site (YOU KNOW WHO YOU ARE):


Words have meaning.

Medicare, Medicaid, Social Security, VA benefits, military retirement, etc... have always been classified as ENTITLEMENT PROGRAMS. Just like food stamps.

Your saying they aren't ENTITLEMENT PROGRAMS doesn't mean poop.

Now, go back to sponging off Uncle Sam.
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Posted by Richard Bonine, Jr. (+15197) 10 years ago
Contrary to you and your cohorts belief our countrey, be it socialistic or free enterprise cannot survive without a military.


NOBODY here has proposed doing without a military. But we don't need to be spending 54% of our federal budget on it, when 15% will adequately defend our shores.
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Posted by Frank Hardy (+1673) 10 years ago
Hear hear! But, let's make it 16% and throw in the borders, too.

FH
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Posted by howdy (+4952) 10 years ago
What a great idea!!
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Posted by Jan Cornutt (+271) 10 years ago
Bob L, If Military retirement program is an entitlement program then so is any and all union retirements. If thats the case then why don't we all just give everythingwe make to the government and let the government just run everything including our lives. Is that what you want ? They can change the military retirement any time they want, they don't for what ever reason only known to them. I really don't think you know what the Military is all about anyway. Only a part of it is warfare.
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Posted by Kelly (+2762) 10 years ago
Holy Hyperbole!
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Posted by Bridgier (+9362) 10 years ago
I really don't think you know what the Military is all about anyway. Only a part of it is warfare.

That's true - in the Navy, there's also rum, sodomy and the lash...
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Posted by Bob L. (+5103) 10 years ago
Korky the Stooge wrote:
Bob L, If Military retirement program is an entitlement program then so is any and all union retirements.


No no no.

Pensions from unions and employers are not entitlement programs BECAUSE THE MONEY DOESN'T COME FROM THE GOVERNMENT, FOOL!!!!

You subsist solely from government largesse. Others, like me, work for a living.
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Posted by howdy (+4952) 10 years ago
Bob L., it is hard to understand why people like taxpayer or Korky don't "get" the difference between unions and government programs...it is so simple and yet they are so brain washed, they don't get it...all in all unbelieveable...like the fool standing with the sign saying to the government "keep your hands off my medicare" LOL...they don't understand they have to figure out where those funds come from and in the case of medicare it is the government...same as Social Security, and VA benefits and the amount paid into the funds are used up in just a couple of years...the unions funds are solely from private funds from the workers in most cases unless it is a public service union...so many dense folks and so little time LOL...

[This message has been edited by howdy (7/19/2012)]
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Posted by Jan Cornutt (+271) 10 years ago
Howdy and Bob L , You two are the brainwashed idiots (since were name calling) A retirement system is a retirement system whether it is govt or union or non union. If what you are saying is that if a person spends 30 yrs working for the military and then go out with nothing then we won't have anyone joining the military and if thats the case then you can kiss your candy asses goodby and we will be under the rule of another country. What I am saying is that if a person is a member of a union for 30 yrs and goes out he/she is going to get a retirement. It's no different for the government than the unions, they should get a retirement. Whether you realize it or not, it is a strong military that protects your right as a US citizen to show what dumbasses you are.
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Posted by David Schott (+17668) 10 years ago
They aren't government ENTITLEMENTS but you're certainly ENTITLED to them? Does that sum it up?
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Posted by Bob L. (+5103) 10 years ago
Welfare Queen wrote:
If thats the case then why don't we all just give everythingwe make to the government and let the government just run everything including our lives. Is that what you want ?



That's pretty much what you did, huh Korky?

You'd be nowhere without the government.

Living in a van down by the river. Like Matt Foley.

[This message has been edited by Bob L. (7/20/2012)]
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Posted by Buck Showalter (+4457) 10 years ago
If what you are saying is that if a person spends 30 yrs working for the military and then go out with nothing then we won't have anyone joining the military


My world view has been completely shattered.
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Posted by Jan Cornutt (+271) 10 years ago
Were you ever in the Military Bob L ? It doesn't sound like it.
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Posted by howdy (+4952) 10 years ago
How should one sound, if one is in or out of the military??
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Posted by Frank Hardy (+1673) 10 years ago
You mean, how should one sound sir?

FH
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Posted by howdy (+4952) 10 years ago
Good point LOL...
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Posted by Bob L. (+5103) 10 years ago
Gross National Parasite wrote:
Were you ever in the Military Bob L ?


Yes I was.

You've already asked me that question, Kork.

Let me re-post some questions I asked you in an earlier thread:

I was wondering, Korky, how does it feel to be a drain on society?

To take more from the government and society at large than you could ever contribute?

Do you have trouble looking at yourself in the mirror?

Or do you laugh because you got over on the system?

Or do you operate under the false delusion that you actually worked hard for everything you took from the government your whole life?

[This message has been edited by Bob L. (7/21/2012)]
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Posted by Jan Cornutt (+271) 10 years ago
Let me say I am not a drain on society..etc.. any more than you are, in fact I am probably less a drain on our society than you are. Whether you believe it or not our gov't has to operate and to do so it must employ people and these employees are offered a retirement after years of employment. (same as in the private sector). That is the system that our elected officials put into place. You cannot change that, I cannot change that other than to vote in new reps to change it. If they want to change that, let them change it. However, you take away the incentives for people to join the military, you do without a military and we become something other than a free people without the right of life, liberty and the persuit of happiness....korkyII
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Posted by Bob L. (+5103) 10 years ago
Kork:

It doesn't change this fact: people like me pay for people like you to live.
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Posted by Bob L. (+5103) 10 years ago
Welfare Queen wrote:
Whether you believe it or not our gov't has to operate and to do so it must employ people and these employees are offered a retirement after years of employment.




Wow, Korky! You're making progress.

You're the one who's been posting the anti-government rhetoric for the last two years. Not me.

Oh, and can you explain how I could possibly be a bigger drain on society than you?

I pay the maximum amount into Social Security/Medicare. If they remove the income caps someday, I'll have to pay even more.

You receive Social Security/Medicare. And military retirement.

I will pay more in Federal income taxes this year than you. By a large multiple.

You're receiving benefits from the government. I'm paying in.

You're the drain. I'm not.

[This message has been edited by Bob L. (7/21/2012)]
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Posted by Jan Cornutt (+271) 10 years ago
I am against the current administration and it's socialistic policies if that is what you mean. All that the current congress and the administration has done is to put us farther in debt (Doubled it) than what we were before he took over. The pres said when he was campaigning that he would fundamentally chage the U.S. It is of my opinion that the majority of the people don't want to fundamentally change America and tha will be reflected in the upcoming election.
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Posted by howdy (+4952) 10 years ago
Can't seem to get the link to work...it is a forbes article about Obama spending being less than Eisenhower...

[This message has been edited by howdy (7/21/2012)]
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Posted by Jan Cornutt (+271) 10 years ago
Thats total crap too Howdy, He has outspent the last 3 presidents combined. It's funny how the left can twist things to make it fit their idology.... Math 101 sez you cannot spend your way out of debt. It is mathmatically impossible. I am not saying it is all his fault as every president for years has carried a deficit including Clinton. Clinton had a balanced budget but we still had a deficit and he did not add to the deficit. This administration and congress doesn't even have a budget in place because the senate refuses to draft one. I guess the reason for that is so they don't have to worry about going over budget and they can spend what ever they want....korky II
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Posted by howdy (+4952) 10 years ago
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Posted by Hal Neumann (+10100) 10 years ago
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Posted by howdy (+4952) 10 years ago
Thanks Hal...appreciate the help...
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Posted by tax payer (+353) 10 years ago
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Posted by tax payer (+353) 10 years ago
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Posted by Jan Cornutt (+271) 10 years ago
I don't care what the charts say, when he took office the national debt was around 5 trillion. We are approaching 16 trillion approx 4 yrs later. He wants to raise taxes, not to get us out of debt, but to spend more money and anyone that doesn't belive that has got screws loose. He's not interested in jobs, or the economy, he's only interested in bigger government and anyone that doesn't believe that has got screws loose. ......korkyII
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Posted by David Schott (+17668) 10 years ago
"I don't care what the charts say, when he took office the national debt was around 5 trillion."

Where did you get your $5 trillion figure?
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Posted by David Schott (+17668) 10 years ago
Jan Cornutt wrote:
"Clinton had a balanced budget but we still had a deficit..."

Do you mean we still had a DEBT? Do you understand the difference between "deficit" and "debt"?
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Posted by Bob L. (+5103) 10 years ago
Again, Korky:

Oh, and can you explain how I could possibly be a bigger drain on society than you?

I pay the maximum amount into Social Security/Medicare. If they remove the income caps someday, I'll have to pay even more.

You receive Social Security/Medicare. And military retirement.

I will pay more in Federal income taxes this year than you. By a large multiple.

You're receiving benefits from the government. I'm paying in.

You're the drain. I'm not.
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Posted by Amorette Allison (+12085) 10 years ago
Cut the military back to 25% of the budget. Not once cent more. Get rid of all the entitlements including social security, medicare, the VA, all of them. Then we can talk tax breaks.

WE NEED TO RAISE TAXES TO PAY OFF THE DEBT. WE CAN'T CUT OUR WAY OUT OF IT. As for higher taxes on the wealthy being bad for the economy, we are paying the lowest taxes since WWII. By that logic, things should be booming.

Grow up. Take responsibility. If you are getting money from the government in any shape or form, be it VA, SS, or farm subsidies, be grateful and do what you can to pay it forward if you can.

And stop watching Faux News and listening to blovate radio. Read up on the facts and learn, for heavens sake, what the reality is.

Seriously, if you want to fix the economy, socialize medicine. Eliminate that 40% of profit and overhead created by insurance companies. Relieve companies of the burden of paying for insurance for their employees. That would free up BILLIONS.

Oh, wait.

That would make sense.

Sorry.

Back to work, folks.
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Posted by howdy (+4952) 10 years ago
If you cut out SS, a lot of seniors wouldn't have anything to live on...Other than that, I agree with you...
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Posted by Jan Cornutt (+271) 10 years ago
Bob L, I could care less how much you pay in taxes. I have paid taxes my entire life and will continue to pay taxes the rest of my life. If the gov't would get rid of the fraud in medicare/social security it wouldn't be in such a big mess. I don't mind helping the needy, but I despise funding the lazy.....korkyII
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Posted by Bob L. (+5103) 10 years ago
Korky, you've sucked off the government teat your entire life.
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Posted by Jan Cornutt (+271) 10 years ago
Bob L, you must be one misreable person to carry that much hatred around in you. You keep telling me how much you pay in taxes and at one point even said you'd compare paychecks with me. To tell you the truth I could care less how much you make or what you pay in taxes. How much I make is none of your business. I can tell you this. I pay taxes on what little soc sec I do draw(which is a not much compared to what they say I should get). And, I am in the 25 % incometax bracket......korkyII
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Posted by Bob L. (+5103) 10 years ago
Korky, you stupid procreateer:

Let me again summarize.

I pay the government.

You take more from the government than you pay in taxes.

I pay taxes so you can drink at the Yellowstone Tavern and post stupid poop on this web site. You probably have high-speed internet too, like some other welfare recipients.

You're the dumbass who bragged about paying taxes, unlike the other 47%.

You're obviously a bitter, sad old man.

[This message has been edited by Bob L. (7/22/2012)]
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Posted by howdy (+4952) 10 years ago
Korky, you are the one filled with hatred and prejudice...No matter how much people try to point things out to you, all you can say is it isn't true and we are all full of poop...A closed mind isn't something I can debate, ever...Bob L, wasn't trying to do anything but show you the difference between living off the governments largesse vs contributing in private industry...You still don't understand...Doubt you ever will...
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Posted by Jan Cornutt (+271) 10 years ago
Look, you all on here are the ones doing the blame game (typical liberal tactic) All I have ever done on this website is point out another view other than yours and I get accused of being a leach because I was employed by the federal government and draw a retirement that the government offered me. Bob L, I do not embibe at the yellowstone tavern or any of your other watering holes in Miles City. I do not collect food stamps, unemployment or any other form of handouts. I am not a bitter old man, in fact, I am quite happy and quite employed which is more than I can say for a lot of others on this website.....korkyII
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