Deficit spending is progressive

Gallons of ink (and millions of pixels) have been spent debating who gets hit most by tax increases, or changes to Medicare, or cuts to Social Security.But what if we don’t cut the deficit? The would …

Gallons of ink (and millions of pixels) have been spent debating who gets hit most by tax increases, or changes to Medicare, or cuts to Social Security.

But what if we don’t cut the deficit? The would presumably hurt some folks more than others. Who gets hit hardest?

Financial Year

American Enterprise Institute’s Aspen Gorry and Matt Jensen have a new paper that tries to answer that question. They note that the federal government has to regularly pay out the principal plus interest on bonds it sells, a process that has to be paid for out of tax revenues.

Budget Deficit

So the cost of the debt burden will be borne primarily by those who pay most federal taxes, to whit the upper-middle and upper classes.

Assuming that the debt is continually serviced in this manner rather than paid down ahead of time, they estimate how much this process will cost each year given our current debt load ($11.254 trillion as of last week), and which groups pay most of the taxes that pay for it.

None of this is particularly shocking. The main sources of general revenue — the income tax, estate tax, corporate tax, capital gains tax, etc. — are quite progressive. 

Read More: http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/02/deficit-spending-is-progressive/

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