Walter Williams Demonstrates Conclusively That We Have A Spending Problem, Not An Undertaxing Problem

Excepted from :

http://townhall.com/columnists/walterewilliams/2012/12/05/future_generations/page/full/
Future Generations
by Walter E. Williams

...Former Congressmen Chris Cox and Bill Archer have written an article -- "Why $16 Trillion Only Hints at the True U.S. Debt," The Wall Street Journal (November 26, 2012) -- pointing out our dire economic straits. They say, "When the accrued expenses of the government's entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit." Let's analyze that.

Washington would have to collect $8 trillion in tax revenue, not to pay off our national debt and have reserves against unfunded liabilities, but just to avoid accumulating more debt. Recent IRS data show that individuals earning $66,000 and more a year have a total adjusted gross income of $5.1 trillion. In 2011, corporate profit came to $1.6 trillion. That means if Congress simply confiscated the entire earnings of taxpayers earning more than $66,000 and all corporate profits, it wouldn't be enough to cover the $8 trillion per year growth of U.S. liabilities.

Given this impossible picture, the message coming out of Washington, especially from our leftist politicians and the news media, is that we solve our budget problems by raising taxes on the rich. If Americans were more informed, such a message would be insulting to our intelligence. There are not enough rich people to satisfy Congress' appetite.

In 2011, Congress spent $3.7 trillion. That turns out to be about $10 billion per day. According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies as being rich. It can't even buy a Learjet.

Households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would bring in about $1.9 trillion. That would keep Washington running for 190 days, but there's a problem because there are 175 more days left in the year.

The profits of the Fortune 500 richest companies come to $400 billion. That would keep the government running for another 40 days, to mid-July.

America has 400 billionaires with a combined net worth of $1.3 trillion. If Congress fleeced them of their assets, stocks, bonds, yachts, airplanes, mansions and jewelry, it would get us to at least late fall.

The fact of the matter is there are not enough rich people to come anywhere close to satisfying Congress' voracious spending appetite. The true tragedy for our future is that there are millions of uninformed Americans who will buy the political demagoguery and treachery that our problems can be solved by taxing the rich.


Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of 'Race and Economics: How Much Can Be Blamed on Discrimination?' and 'Up from the Projects: An Autobiography.
conceptualclarity conceptualclarity
51-55, M
2 Responses Dec 6, 2012

Consa, I take issue with analyses of tax receipts that claim x amount was "lost" by lowering rates. Static analysis that assumes tax rates do not affect behavior is central to progressive economics. But the evidence is quite abundant that changing tax rates does affect behavior. And in the 2000s, tax receipts grew enormously, over 40%, after Bush's tax cuts that liberals claim caused all the US economic problems of the last 6 years.

Concerning medicine, I am unalterably opposed to greater government control. That means stifling innovation and entrenching the status quo in medicine. I see the status quo in medicine as a new Dark Ages. Re Julian Whitaker and Andrew Weil, MDs : pharmaceutical drugs are effective for emergency care. They are horrible for chronic conditions, which is most of what medicine deals with. It is false to assume that the course of science or what is passed off as science is always forward. History shows regression happens. Contemporary medicine is a disgrace. Medicine is the handmaiden of the drug industry rather than vice-versa.

Republicans have advocated shifting control of insurance from government and employers to consumers. The last thing we need is the govt. dictating that people buy plans with coverages they don\'t need. I think that shifting to consumer power and more, not less competition, offers the best hope for shifting medicine toward something that actually serves health rather than the drug industry and overpriced doctors and facilities.

The cancer industry should be seen as a stain on the human conscience. The FDA sees suppressing therapies other than chemotherapy and radiation--which are known to be carcinogenic themselves--as central to its mission. I read the 5-year survival rate for chemo is the same as doing nothing. It is horrendously expensive, government-blessed legalized torture. I don\'t expect to get cancer. But if I did, I would head for Baja California. I have a book by the Oasis of Hope. Very, very impressive, not \"quacks\". But they can\'t operate in the US.

Providing there's anyone out there still paying attention at all, I think the numbers we throw around today are so enormous that we can't wrap our heads around them. For someone in my income bracket, even a million dollars sounds like a lot to me.

When John Boehner offers almost 800 billion in "new revenue" to most of us, that sounds like a huge number and we think, right on, that's got to make a difference. But we're into uncharted territory here in the trillions of dollars of debt, and it's hard to grasp what a drop in the bucket even billions of dollars are.

I've always loved reading and listening to Dr. Williams. He's so good at boiling it all down, and the way he can relate almost any concept to an economic construct has caused me to look at common situations in my own life with a fresh perspective.