At one point and really not that long ago it seemed the right-winged philosophy of growing the country out of its present fiscal problems might have seemed feasible. It would have been a very difficult road requiring a comprehensive usage of different economic thoughts; reformation of the tax code, an overhaul of monetarist policy, repatriating American investment capital which is currently being sent overseas in droves, rebuilding and modernizing America's infrastructure, massive R&D projects on both the government and private sides, revitalization of manufacturing sector, increasing the US energy sector, etc.
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Well according to the writers over at ZeroHedge we have reached the tipping-point and can no longer grow out of nation's debtor status.
Exactly 199 years ago, in 1815, a “temporary” committee was established in the US Senate called the Committee on Finance and Uniform National Currency.It was set up to address economic issues and the debt accrued by the US government after the War of 1812.Of course, because there’s nothing more permanent than a temporary government measure, the committee became a permanent one after just one year.It soon expanded its role from raising tariffs to having influence over taxation, banking, currency, and appropriations.In subsequent wars, notably the American Civil War, the Committee was quick to use its powers and introduced the union’s first income tax. They also detached the dollar from gold to help fund the war.This was all an indication of things to come.Over the subsequent decades there was a sustained push to finally establish the country’s central bank that will control money and credit, as well as institute a permanent income tax to feed the expanding aspirations of government.They succeeded in 1913 when the Federal Reserve Act was passed and the 16th Amendment ratified, binding the country in the shackles of central banking and taxation of income.
Over the century that followed, the US has gone from being the biggest creditor in the world to its biggest debtor.
Decades of expanding government programs, waste, endless and costly wars, etc. have racked up such an enormous pile of debt that it has become almost impossible to pay it down.
A lot of folks don’t realize that, since the end of World War II, the US government’s total tax revenue has been almost constant at roughly 17% of GDP.
In other words, even though the actual tax rates themselves rise and fall, the government’s ‘slice’ of the economic pie is almost always the same - 17%.
I’ve worked out a mathematical model which shows that, even with absurd assumptions (7%+ GDP growth for years at a time, low interest rates, etc.), it is simply not feasible for the US government to ‘grow’ its way out.Deficits may not matter but the debt and interest they generate sure as hell do.
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