I mean that.
Look at the graph in this report (not sure if I can reproduce it for copyright reasons).
Corporate tax revenues down 57% in the US.
Personal tax revenues down 22%.
You’ll never get out of that shortfall of tax revenues without a fiscal stimulus for the economy that means positive, proactive spending. Let’s call is a Green New Deal.
Hat tip to TJN
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In real terms (adjusted to CPI), the combined projected receipts from individual and corporate income tax in 2009 is higher than the combined receipts from those sources in 2003 and 1995. In between, we have had two huge bubbles. I would look at projected receipts for 2009 as a return to the post-war norm, with a bit of an overshoot (but not much). If government manages to jack its real receipts up once again in the coming years (as they plan), it will be a sign that we are going for a third bubble in a row. Better for governments to learn to live within more limited means, so they aren’t tempted to blow yet another bubble.
To be fair, GDP has increased in real terms, so relative to real GDP, the 2009 share is lower than 2003 or 1995. But it’s not as big a difference as this graph indicates. Total receipts, in real terms, are down 16% year-on-year in 2009. Total outlays, in real terms, are up 32% year-on-year in 2009, having already increased by another 32% since 2000 (or by 14% as a proportion of GDP). Total receipts fell slightly between 2000 and 2008 in real terms, and more significantly (15%) as a proportion of GDP.
There’s definitely a bit of a deficit problem. This divergence has only exacerbated an existing problem. The US has run a deficit in all but 6 years in the past half-century (including every year since 2002), averaging around $122 billion (in 2000 dollars) a year from 1940 to 2008, or 3% of GDP. That accumulates quite an imbalance and isn’t sustainable in the long-run.
The following statistic perhaps best illustrates the extent of their deficit problem. In real terms, the deficit they are projected to run this year is nearly three times higher than the highest annual deficit that they ran during WWII, and more than the combined deficits for 1943-45.
It’s worth adding that the budget deficit is logically linked to the external (current account, CA) deficit, given by the national income identity (I-Sp) + (X-M) = (T-G). Assume for convenience that the first term equals zero (domestic investment and private domestic savings are in balance). If the CA (X-M) is negative, then budget balance (T-G) must be negative. And yes, the CA has been negative since 2002 and earlier.
Is the cause of this ‘excessive Govt spending’? The orthodox IMF argument is to cut G, (govt spending). Cutting G lowers Nat Income (Y) and reduces import absorption (M) until the CA and Govt budget are again in balance. What’s the alternative you might ask?