Word: gdp
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There are certainly some straightforward ways to start closing the budget gap. The Bush tax cuts for the rich should be rolled back this year, not next, to start collecting about 0.5% of GDP in extra revenues from those who can most easily pay, though this might just partly offset other tax cuts and recession-induced declines in tax collections. The spending on the wars in Iraq and Afghanistan should be ended, not prolonged, saving at least 1% of GDP. We'd still probably be close to $1 trillion (perhaps 6.5% of GDP) shy of budget balance. With the economy...
...look for a variety of solutions. Infrastructure can be financed in part by borrowing against future user fees, like tolls on roads and higher electricity rates for more reliable and cleaner power, rather than against general government revenues. This strategy can probably cover as much as 1% of GDP per year. We can introduce new taxes on the carbon emissions from coal, oil and gas to hasten our transition to sustainable energy. For example, instead of letting gasoline prices tumble now only to see them soar again shortly, we could set a floor on prices at the pump and collect...
...through higher taxes in the late 1970s. And Ronald Reagan made tax cuts the down payment on every election since. George W. Bush, of course, imitated Reagan in cutting taxes, thereby creating huge new budget deficits. Voters are still willing to permit the government to expand its share of GDP, particularly in the face of national crises - and we are certainly in the middle of one. Tax revenues jumped from just 5% of GDP in 1936 to 15% to 20% during and after World War II, creating our modern tax system. At the end of the war, the level...
What has changed is the way we spend that 18%. In the 1950s, during the Korean War and at the height of the Cold War, about 10% of GDP was devoted to defense. Over time, that share of spending on defense declined, making room for proportionally more spending on things like health care, education and infrastructure. By the late 1970s, as defense spending declined to 4% to 5% of GDP, there wasn't a lot more room to squeeze defense for higher domestic spending. Even with the end of our current wars in Iraq and Afghanistan, it's most unlikely...
...European strategy, with levels of taxation and government spending roughly 8% to 10% of GDP higher than in the U.S., has many successes to show for it: less costly and more reliable health care, the elimination of hard-core poverty, solid educational achievements, and social services that ensure better care for children and more flexibility for mothers and the elderly. The U.S. will not mimic Europe for many reasons - size, diversity, tradition and, of course, vested interests - but we can learn from Europe. Most important, we can see how government can be a partner of the private sector...