Wednesday, February 01, 2012


Given the size of government that we have (theoretically at least) "agreed" to. This is a drag on aggregate demand that we certainly don't need right now.

If current laws remain unchanged, federal revenues will grow by almost
10 percent in fiscal year 2012, to a total of about $2.5 trillion, the
Congressional Budget Office (CBO) projects. Those revenues will equal
16.3 percent of gross domestic product (GDP), substantially above the
range of 15.1 percent to 15.4 percent of GDP seen in the past three
years, though still well below the roughly 18 percent of GDP that
revenues have averaged over the past 40 years (see Figure 4-1). Almost
all of the projected growth in revenues relative to GDP in 2012 comes
from changes in tax rules that have already occurred or that are
scheduled to occur this year under current law. The most notable are
the acceleration of businesses' tax deductions for the depreciation of
new equipment into 2011 and 2012 (which reduced revenues to a greater
extent in 2011 than it will in 2012) and the scheduled expiration at
the end of February 2012 of a 2 percentage-point reduction in the
payroll tax rate for Social Security.

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