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Comment by rsp1984 | Hacker News Reader

rsp1984

What I don't understand is how in the US in the 1920s the tax rate was in the single digits while deficit was negative (!) and debt was low [1], while today tax rates are at 40%, deficit is about 17% (!) of budget and debt is over 100% GDP. What on earth went wrong?

[1] http://www.usgovernmentspending.com/debt_deficit_brief.php

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Keep in mind that the article compares Fitzgerald's effective rate (5.5%) to the equivalent marginal bracket (40%) today. If you are in a higher tax bracket you don't pay that rate on all of your income. I'm not too familiar with US federal and state taxes and other deductions, but I would bet the effective rate for someone in the 40% bracket is closer to 30% (similarly to Canada and the UK).

"What on earth went wrong?"

Immediately thereafter? The Great Depression.

Well that one wouldn't have lasted until today, would it?

The govt. began to care for people that had previously been cared for by family members or religious groups. This includes the very poor, the elderly, the disabled, etc. That makes the bulk of it.

Enormous military spending makes up the bulk that is not (at least theoretically) paid for by the SS trust fund.

Military spending is only 3-5% of GDP while total government spending has gone up from 10% of GDP to over 35%. The vast majority of the increase is not military spending.

In exchange for votes from such people. Before, many of those people were disenfranchised.

Family system used to take care of elderly and the disabled, which ultimately meant housewives were supposed to do that, unless you could afford a caretaker (which was socially frowned upon in middle class).

Then women got voting power and family system broke down, replaced by social structure. In a way today's capitalist Europe is closer to what Marx suggested than USSR.

Sorry, my comment was too oblique.

My points were two.

First, a whole lot of things have happened since, to the point that the environment we're operating in now is quite substantially different.

Second, the shallow numbers may mislead in trying to determine what's better - maybe something went right. Higher spending is only bad if we're not getting value for it.

Mostly, it boils down to "you're not going to get very far analyzing it at this level."

We can make a list of things that happened around those years...

Women's suffrage in the USA was in 1920, wasn't it? :-p

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