Sept. 9, 2011, 12:01 a.m. EDT
3 big myths about the U.S. debt crisis
Commentary: The truth about spending, revenue and entitlements
By Howard Gold
NEW YORK (MarketWatch) — President Obama will ask for a much bigger payroll tax cut than expected in new legislation he previewed in his speech to a joint session of Congress Thursday night.
The American Jobs Act will include some old and new ideas that the president claims are acceptable to both Republicans and Democrats.
We’ll see about that, but one thing was striking: The president asked the special committee of Congress charged with finding over $1 trillion of new spending cuts to come up with still more reductions to cover the ambitious $447 billion in new tax cuts and spending he’s requesting.
“Everything in this bill will be paid for,” he declared.
It was a stark admission of how limited his options are because of the debt crisis that’s likely to haunt the U.S. and world economy for years to come.
But unfortunately there’s a lot of confusion about our debt problem. So consider this column an effort to correct that by addressing three big myths about the national debt.
Big Myth No.1: It’s only a spending problem
Some claim that if you just cut spending, all the U.S.’s debt problems will be solved. But at least in the short run, it’s as much a revenue problem as it is a spending problem. (Entitlements are another story, and we’ll deal with it in Big Myth #3.)
Since World War II, the revenues the federal government took in from taxes and other sources averaged roughly 18% of gross domestic product, while spending (outlays) averaged about 20%. That’s not ideal, of course, but it’s manageable. It stayed pretty close to that under President Bush after the four surplus years of fiscal 1998-2001 came to an end.
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Big Myth No. 2: Corporate taxes have been onerous lately
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Big Myth No. 3: I paid for my Medicare so I’m entitled to every penny
Full article: http://www.marketwatch.com/story/3-big-myths-about-the-us-debt-crisis-2011-09-09?pagenumber=2
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