Raising Taxes On The Rich Won't Seal The Deficit Hole

If a country runs a deficit (as a percentage of GDP) that is equal to its growth rate, the debt level will remain constant. This year U.S. GDP will be a little less than $16 trillion, and its historical growth rate is 3.25%. That works out to what we might call a “safe” deficit of $520 billion, or even $600 billion if you allow for a little inflation. Last year, however, the U.S. deficit was $1.1 trillion -- or roughly $500 billion too much.

That gap could be closed by ending all tax cuts, tax breaks and stimulus payments for everyone, according to the Tax Policy Center. But two-thirds of the burden would fall on the middle class -- something both political parties want to avoid. All the proposed tax increases on the wealthy, however, even combined with the end of the payroll-tax cut, would raise only $295 billion. So unless there were spending cuts twice as big as the ones currently scheduled, the deficit would still be too large.

So if raising taxes on the rich nets you $295 billion on a deficit of $1100 billion, what's the point? It's like spending $11,000/year too much, and getting a job that only pays you $2950 for the year. I submit that raising taxes on the rich is not a plan to actually close the deficit hole; it is instead a ploy to encourage you to vote for them what's raising the taxes. Via Investment Advice as the U.S. Approaches a Fiscal Cliff | TIME.com.