Learn from the fall of Rome, US warned

By Jeremy Grant in Washington
Published: August 14 2007 00:06 | Last updated: August 14 2007 00:06


The US government is on a “burning platform” of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.

David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.

These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.

Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.

“Sound familiar?” Mr Walker said. “In my view, it’s time to learn from history and take steps to ensure the American Republic is the first to stand the test of time.”

Mr Walker’s views carry weight because he is a non-partisan figure in charge of the Government Accountability Office, often described as the investigative arm of the US Congress.

While most of its studies are commissioned by legislators, about 10 per cent – such as the one containing his latest warnings – are initiated by the comptroller general himself.

In an interview with the Financial Times, Mr Walker said he had mentioned some of the issues before but now wanted to “turn up the volume”. Some of them were too sensitive for others in government to “have their name associated with”.

“I’m trying to sound an alarm and issue a wake-up call,” he said. “As comptroller general I’ve got an ability to look longer-range and take on issues that others may be hesitant, and in many cases may not be in a position, to take on.

“One of the concerns is obviously we are a great country but we face major sustainability challenges that we are not taking seriously enough,” said Mr Walker, who was appointed during the Clinton administration to the post, which carries a 15-year term.

The fiscal imbalance meant the US was “on a path toward an explosion of debt”.

“With the looming retirement of baby boomers, spiralling healthcare costs, plummeting savings rates and increasing reliance on foreign lenders, we face unprecedented fiscal risks,” said Mr Walker, a former senior executive at PwC auditing firm.

Current US policy on education, energy, the environment, immigration and Iraq also was on an “unsustainable path”.

“Our very prosperity is placing greater demands on our physical infrastructure. Billions of dollars will be needed to modernise everything from highways and airports to water and sewage systems. The recent bridge collapse in Minneapolis was a sobering wake-up call.”

Mr Walker said he would offer to brief the would-be presidential candidates next spring.

“They need to make fiscal responsibility and inter-generational equity one of their top priorities. If they do, I think we have a chance to turn this around but if they don’t, I think the risk of a serious crisis rises considerably”.

SOURCE

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Originally posted by occrider What? Heh please elaborate such that it's applicable to the current economic situation.

let me replace one word in my original statement to clear up any confusion. it was confusing.

you increase revenue by cutting the marginal rate of taxation as opposed to increasing the tax rate.

venomX asserts that nothing the administration had done was responsible for the increase. i assert that one of the primary reasons for record Federal revenue was what the Administration did in 2001-03.

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Originally posted by Q5echo let me replace one word in my original statement to clear up any confusion. it was confusing. you increase revenue by cutting the marginal rate of taxation as opposed to increasing the tax rate.

No. You increase revenue by cutting the marginal rate of taxation ONLY when the marginal tax rate is excessively high. Your equation fails because it lacks the other end of the equation. You only increase revenues so long as marginal tax rates do not dip below marginal revenues ... in other words marginal taxes should equal marginal revenues to maximize revenues. It's retarded to assume that increasing the tax rate generically reduces revenues.

Asides from that, the economics of taxes isn't about maximizing revenues. That's bad public policy. Taxation is far more complex than just how much you're taxing and how much you're earning. Good economic policy resides around minimizing the concept of excess burden as much as possible rather than maximizing revenue.

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Originally posted by occrider No. You increase revenue by cutting the marginal rate of taxation ONLY when the marginal tax rate is excessively high. Your equation fails because it lacks the other end of the equation.

it should be understood that the clear choice between the two, living with "excessively high rates" i.e. prior to 2001 or cutting the rates, would be the latter. which is exaclty what was done.

i mean if you're looking down the face of a recession and across-the-board declining revenues, then someone in the Administration would surely be more than remiss and deserve to be held accountable for not doing something about it, would they?

maybe you would now like to address venomX's assertion that basically "what happened happened and noone deserves any credit"?

...or maybe Yoepus' comparitively simplistic but similar assertion to mine?

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Originally posted by Q5echo it should be understood that the clear choice between the two, living with "excessively high rates" i.e. prior to 2001 or cutting the rates, would be the latter. which is exaclty what was done. i mean if you're looking down the face of a recession and across-the-board declining revenues, then someone in the Administration would surely be more than remiss and deserve to be held accountable for not doing something about it, would they? maybe you would now like to address venomX's assertion that basically "what happened happened and noone deserves any credit"? ...or maybe Yoepus' comparitively simplistic but similar assertion to mine?

He should. The world economy grew at a good rate this last few years. Many countries across the world have been presenting increasing revenues, mostly due to circumstantial events like high oil and metal prices. As far as I'm concerned, the increase in revenue for the states is driven by the same process.

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Orbax At that point you kind of crossed the rubicon and you might as well lay siege to Rome

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Originally posted by Q5echo it should be understood that the clear choice between the two, living with "excessively high rates" i.e. prior to 2001 or cutting the rates, would be the latter. which is exaclty what was done.

It should be understood that the goal of the federal government shouldn’t be to maximize tax revenue. The purpose of the 2001 tax cut, which I agreed with, was not to maximize revenue. As an economic/administrative policy that would be retarded because such a target is completely immeasurable and relies on so many dependant variables along with tax law that you’d have to be a moron to try to form such a simplistic assumption of causation. Along with lowering taxes, the administration significantly relied on debt issuances to accommodate the increase in spending to go along with it … hmmm you incorporated the economic impact of that in your analysis right?

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i mean if you're looking down the face of a recession and across-the-board declining revenues, then someone in the Administration would surely be more than remiss and deserve to be held accountable for not doing something about it, would they?

Yes. I’m a monetarist, but I believe that the federal government has a slight Keynesian role in smoothing the business cycle with light touches. Something it did well in 2001 but failed miserably after the economy started booming. You can’t bring an economy out of recession by loosening the purse strings without tightening them when the economy starts doing well. It’s tit for tat this isn’t fucking Christmas where money goes on trees.

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maybe you would now like to address venomX's assertion that basically "what happened happened and noone deserves any credit"?

I think VenomX is wrong. Yea they deserve the credit back in 2001. But they also deserve the credit for the fiscal mess we’re in now.

quote:

...or maybe Yoepus' comparitively simplistic but similar assertion to mine?

I think Yoepus is wrong too. Substantiates economic theory? Huh? There is NO economic theory that states prima facie that reducing tax rates increases revenues. It’s a one sided equation. What’s the other side??? And yea I’ve seen the retarded faux economic sites cite evidence where they blatantly confuse correlation with causation. The closest proper case study I can find that approximates what you and Yoepus are trying to say is an analysis among 70 countries analyzing corporate tax rates. In that study, It’s found that lower corporate tax rates typify higher growth rates. Of course it doesn’t say to eliminate higher tax rates or that country specific economic factors might influence that conclusion in any way whatsoever. Particularly, they DO say that they cannot make any conclusions on personal income tax rates.

http://econ.ucsd.edu/~rogordon/growth.218.doc

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