Does your assumption that an 80% increase in tax rates will produce 80% more tax revenue? If so, that is patently false. As rates rates approach 100% tax revenue approaches zero. (See failure of communism in 20th century.)

I'm no financial whiz, but it doesn't seem that raising taxes on the wealthy, without some serious tax code reform, will produce the result Democrats suggest. While the tax liability of the wealthy would increase, the taxes they would actually pay after applying exemptions, deductions, tax credits and other income-sheltering devices won't necessarily be any more than what they're paying today which, in some cases, is zero.

And then there's the issue of corporate welfare, i.e., GE made billions in profit and didn't pay a single dime of federal tax on that profit, but President Obama didn't demonize his buddies at GE for not paying their fair share. Our current tax code provides the ultra-wealthy with numerous opportunities to shelter their income. That same opportunity does not exist for the family of six earning $250,000, saving for college educations and retirement and operating a small business.

I am a little confused regarding 2 issues. One is the 80% tax increase. Is that just on the wealthy or is that on everyone? It must be on everyone, but I think it is necessary to state "on everyone" when discussing tax increases. Also, does the 80% account for the decease in productivity, or is that assuming a constant or even growing economy? If you increase taxes that severely you will see a drop in productivity. I am not familar with a single liberal that would argue otherwise (intelligently). It would also be interesting to see what the federal tax rates would look like at that point (10% would jump to 15%, 36% would jump to 64.8 %, etc.) What effect would that have on state government? Local Governments? Property taxes?

Second, focusing on the $100 trillion in excess entitlement spending is only a portion of the problem. The current debt does not include social security or medicare/medicaid. We have a $1.6 trillion deficit today not including entitlements. We will have significant deficits for years to come without entitlements included in numbers. In other words, we have to add the projected deficits to the $100 trillion for a full accounting of the projected expenses. With annual government revenues at abuot 18% of GDP and average annual spending at about 21% there is a big number to add (and it is much bigger with Obamacare, etc.) I suspect that total tax would have to be increase a lot more than 80% to cover all the excess spending going forward.

I agree with Derb, in his most recent transmission, that looking at the budget in ten year blocks is ridiculous. Sure, projecting expenditures for mandatory things like Social Security is possible and necessary. But, wrapping up obligations like Jim does here is pointless.

The more realistic way to judge these things is to take the predictable (Entitlements) and forecast them out based on current formulas. In 15 years, for instance, the best case scenario for just SS and MC is 78 million in the system costing $4 Trillion per year.

If we assume economic growth at 3% over the same period and the rest of the budget is held to 3% growth, total federal spending will be 41% of projected GDP.

The "Just raise taxes" crowd will counter that mild reforms and dramatic hikes in taxes will fill the gap. The problem is historically, extracting more that 20% of GDP from the economy has proven to be impossible for an extended period.

Now, the Euros have been able to achieve much higher collections. Many countries are well over 40%. So, it is easy to see what the left is after in this debate. They think the voters will accept massive tax hikes in exchange for lavish social welfare.

The two problems are these. We do not have a tax system capable of getting tax levels to European levels and the best case scenario still has massive public debt and annual deficits.

Otherwise, it is a great plan.

Jim,

I agree with you as to the goals of the Left. The problem I see is on two fronts. One is simply opposing it will lead to disaster, based on simple math. Second, their plan will never work. America is not Germany or France. Heck, it is not working for them.

The dollar as the default currency is one big problem for them. The other is our political system. While the Euros have local government, it is nothing like our federal system.

We have four plausible outcomes. One is the Left gets what they want and the country goes off a financial cliff ending in collapse. The Left stops reform and we head off the cliff. The right pushes through some reforms, but not enough to avert disaster. The fourth is the right carries the day and we get reform that averts disaster.

Not great odds.

IIRC, you are a software guy. Assuming that is true, you know that all systems eventually become so complex, the cost of upgrades is higher than the benefits of upgrades. That's why companies replace their systems.

In a society facing a crisis of complexity, there's no option to replace the system, without some rather horrible costs.

I'll stop now as I am depressing myself and I have to go out and buy canned goods and ammunition.

As a recently retired hospital CFO, who spent 20 years reacting to changes in Medicare and Medicaid, and the 20 years before that just observing those programs as a healthcare consultant, I'm even more pessimistic than most posting here.

First, Medicare's projections have always been wrong and low. I once went through about five back years of Trustee reports, comparing the one year projection with what actually transpired. Sad.

Second, the hospital side of things is dominated by non-profits. They've got to generate a margin, of course, but not the kind proprietary firms do, and they get to rely on tax-exempt financing. The aggregate cost in lost tax revenue related to this debt and the tax exemption must be huge, and a part of the system's cost that is never mentioned.

Most importantly, this problem can't be solved with dollars, which we can always print. We've got to put an ever increasing supply of doctors, nurses and technicians (not to mention the ever important CFOs) in place to meet the demand. And as we do that, their relative cost will increase.

So I'm not to sanguine about that $100 trillion projection.

On the bright side, if there is one, my experience convinces me that vouchers offer the possibility of considerable savings.

One of the things I did in my career was organize and run the system the hospital and its related medical staff put together to provide care under the Medicare+Choice program, Medicare's HMO product prior to Advantage. We ended up serving some 40% of the Medicare beneficiaries in our market this way, with the remaining 60% under the traditional fee-for-service system (We fairly isolated geographically, so we essentially had the whole market)

We and the insurance companies that marketed the program were paid on a per capita basis, at 95% of what Medicare spent in the fee for service system for the equivalent (age and risk-adjusted) population.

We did better with +Choice than fee-for-service because guess what? When we put the doctors in charge of paying themselves and gave them a share of any gain the hospital made, activity dropped dramatically. No more marginal tests, visits or procedures. Quality didn't suffer; the insurance company with the largest State-wide number of beneficiaries rated us their second-best medical group, on the basis of customer satisfaction and an array of objective metrics.

So, everyone's better off. Us, Medicare and the beneficiaries, who are paying much less than they would for the equivalent coverage in the traditional system with a Medicare supplement. Everyone except AARP, unfortunately, the largest provider of supplemental Medicare insurance and not in the Medicare HMO game. After their lobbyists got done, Medicare+Choice was effectively history. But maybe this time we'll be smarter.

Finally, I have my own back of the envelope calculation for taxes. If the problem has a present value magnitude of $100 trillion, then the solution should be the amount that would carry debt of that figure indefinitely. Say $5 trillion a year. That looks like more than 81% to me.

Thanks for listening; many buttons were just pushed.

Reading the post by the radical moderate raises the following: Is the past necessarily prologue? Medical care cost is skyrocketing because so much cancer treatment lengthens life but does not produce a cure. From 1935 to 1960 the reverse was true thanks to Penecillen(sp) and Drs Salk and Sabin. I'm sure someone knows what the single most expensive form of life prolonging cancer treatment is; find a cure that involves one moderate cost round of treatment and you bend the cost curve. I am one of the youngest of those who remember the Polio epidemics. Ask anyone under 50 what an iron lung is. They won't know. Those cost were, for the time, brutally high. Now polio shots are what less than $100 per person.
We are in an expensive place on the long-term cancer research curve but at some point the cures will start to come and the costs will start drop.
We need to balance the current budget first and foremost, then we need to get the Feds out of all the places they don't belong, like education, railroad building, and green everything. I remember a world essentially without computers never mind the internet. The main reason that all works so well is because Uncle Sam was so late to the party.

We're at the point where a Democrat win is nearly inevitable. All they have to do is run out the clock until T bond interest rates start to spiral upward. Then both parties will "have to act together to avert the crisis," as they did in late 2008, fast and loose with lots of pork and special interest deals larded in.

A VAT, probably combined with a nominal income tax rate increase on "the rich", will be the only way to raise a reliable trillion a year, so that's what it will be, a
"temporary" VAT, just to reestablish faith in the dollar and in T bonds.

One thing to keep in mind tax: increases are not the same as revenue increases. What ever the tax it brings in about 20% of GDP. We are currently taxed at the limit. Probably above it.