Does Government Have a Revenue or Spending Problem?

People say the government has a debt problem. But what causes federal government debt? Deficits cause debt. Every time government spending is greater than the amount government collects in tax revenue, the government runs a deficit, which increases the debt. In this video, economics professor Antony Davies traces the root cause of government debt to find out if the problem is too much spending or too little government tax revenue.

Davies examines the data to determine whether the government debt problem is really a revenue problem. It turns out that federal tax revenue today is significantly greater than it was in the 1950s. Even adjusted for inflation and population growth, the federal government collects three times more tax revenue per person than it did 50 years ago. So if revenue isn’t a problem, why are we still in debt?

Ultimately, the data suggest that the debt problem is really a spending problem: No matter how robustly our tax revenue grows, government finds a way to spend everything it collects and more. Professor Davies concludes that the root cause of the government debt is spending, not a lack of tax revenue.

7 Comments

  1. taschrant

    Well explained.  Makes me think of those protesters who scream "Raise our taxes!  Raise our taxes!"  Um, that won’t work.

  2. Anonymous

    Didn’t Reagan triple the national debt with his unpaid for tax cuts, his 16 month long recession and massive increase in the number of federal employees, not to mention his Star Wars spending–even as Dems let him cut the growth of domestic welfare programs and other federal spending? 

    Didn’t Bush1 double the national debt? 

    Didn’t GWBush add $6.4 trillion to the national debt in his 8 Fiscal Years as president…Oct 1, 2001 (when the national debt was $5.6 trillion) to Sept 30, 2009 (when the national debt was approx $12 trillion)…Do the math!  $12 trillion minus $5.6 trillion is $6.4 trillion isn’t it?  Yeah!  That’s what an unpaid for $trillion war does…That’s what cutting taxes during a $trillion war does!  That Bush tax cut was a $1.3+ trillion unpaid for piece of fiscal lunacy…and then there was a multi-$trillion unpaid for Prescription Drug Act…And, to top it off, there was that unpaid for multi-$trillion Bush2 Great Recession which cut revenues drastically and increased the cost of government drastically..

    Let’s get real, Professor!

  3. Anonymous

    LBJ cut taxes (not Kennedy) and then added a tax surcharge to pay for his “guns and butter”…and had the last balanced budget–1968-1969–(that rolled over into Nixon’s first year) as president before the Clinton budget surplus years…That ’68-’69 balanced budget was not a Nixon budget.  We didn’t have another balanced or surplus budget until Clinton’s last four FY budget years…and that was a result of his tax 1993 increase…There was not a single FY cut in federal spending during Clinton’s years a president and he still had surplus budget in his last 4 budgets…

    I think this Antony Davis is delusional or a iiar!!

  4. Anonymous

    If we had the
    population and GNP we had in the 50’s Vermont would be ahead of us in
    development…We have dirt roads, unpaved city streets, few
    reservoirs/lakes…no military to speak of…What a silly
    analysis…Wasn’t it Cheney who said deficits don’t matter…

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