Yes our pride has got to some people's heads. I hate to say it but mainly on the right. They have pushed us so far to the right that dems are now center right.

Is that Christina Hendricks from firefly in your pic?

I welcome the fiscal cliff. It will do what our congress and president refuse to do - reduce spending.

America's problem isn't actually the amount that government spends. This is what annoys me about the American conversation about this issue - everyone seems to agree that spending needs to be reduced.

America's federal budget for 2011 was US$3.8 trillion, with US$3.63 trillion actually enacted. America's nominal GDP in 2011 was almost exactly US$15 trillion. Therefore, spending (actually enacted) was 24.2% of GDP. Sounds like a lot, right?

Australia's federal budget (expenditures) for 2011 was AU$365.8 billion. Australia's GDP in 2011 was roughly $1.5 trillion. Which means that Australia's spending was 24.4% of GDP. As a percentage of GDP, Australia spent slightly more.

But that's not all. Australia has roughly one fifteenth the population of the US. Per capita, America spent US$12,062. Australia spent AU$16,006 - note that the Australian and American dollars are at about parity.

Now for the real point - Australia's budget deficit in 2011 was just AU$20.3 billion, or just over 5.5% of total expenditure. America's budget deficit was US$1.56 trillion, or nearly 43% of total spending. That's right - almost 43% of America's government spending in 2011 wasn't paid for through taxes, but by borrowing money from other countries.

Why is it that Australia can spend more per capita and a similar amount as a percentage of GDP, and have a much smaller deficit? Because Australia's tax rates aren't absurdly low. Our top income tax rate, paid by those earning over $180,000 a year, is 45%. In America, it's 35%, and that rate doesn't kick in until $388,350 a year (it's 33% between $178,650 and $388,350).

Note that Australia's income tax is also more generous for the poor. America's tax system has a 10% tax rate for those earning up to $8700. Australia's has 0% tax rate up to $18,200. And yes, I'm fully aware of income tax credits - an absurd system that demonstrates just how badly screwed up the US tax system is.

Australia's company tax rate is a flat 30%. In the US, the corporate tax rate varies, starting at just 15%, and increasing to up to 35%. Australia's capital gains are included as part of income tax - that is, it's not taxed separately, whereas in the US it is taxed separately, at a lower rate than income tax. Furthermore, Australia's payroll tax does not only apply up to a certain amount of a person's income (in the US, it is only paid on the first $106,800.

Australia also has a national sales tax, called the Goods and Services Tax, at a flat 10% (it used to be more progressive, but John Howard decided to implement the GST for some reason) - in most US states, state sales tax is below 10%.

Of course, all of this would be irrelevant if Australia's greater relative taxation meant a weaker economy. But Australia's got a higher per capita nominal GDP than the US.

Part of America's problem, though, is BAD spending. It's wasteful in how it spends money. This results in less economic impact of government spending. What do I mean by "economic impact"? I'm referring to the effect of government spending on the economy itself. Well-targetted government spending can have a net positive impact on the budget by boosting the economy so strongly that tax revenues increase as a result. Other government spending can have near-zero impact on the economy - this is often true of so-called pork-barrel spending (that isn't to say it's true of all such spending).

Also note that economic impact isn't the only measure of good spending. Money that has no economic impact is often necessary for improving the country nonetheless.

It speaks volumes that the Department of Defense alone is 19% of US federal spending. Australia spends just 6% of total spending on all of defense. And Australia doesn't have state armed forces, either.

not sure how it works in austraila, but i do not think your tax figure shows any kind of local tax, citi tax, county tax, or state sales tax. Only the federal spending. Which the feds do not make up the whole picture as states also want their "fair" share of your money too. So maybe re run your numbers with those included. America has a spending problem.

Since the topic of discussion is the federal government and its budget deficit problem, state and local taxes are entirely irrelevant. Also, I did mention state sales tax, when discussing the comparison between that and Australia's GST (which is a federal sales tax).

In theory, one could also analyse each state, or each local government, for its budget revenue and spending, etc. And I'm sure there would be some interesting results - it's entirely possible that some states of America have spending problems. But America's federal government - that is, the one based in Washington DC with Boehner as house leader, Reid as senate leader, and Obama as executive leader - doesn't have a spending problem (or rather, it doesn't have a problem with amount of spending, only quality of spending).

Try actually reading what I said in my previous post, before replying again.

Australia and the United States are entirely different countries. You say we should adopt Australia's policies, yet as a country we've obviously been successful historically without the need for an over-sized federal government.  Even if we increase taxes on the American people (which they've already shown they don't want) it would not cover the increase in spending as a percentage of GDP as time goes on. The U.S government would be more motivated to print money using our ridiculous federal reserve, and the dollar would be devalued further (meaning Americans will get poorer.) But, the fiscal cliff will automatically decrease spending (particuarly inefficient spending) and it would increase taxes automatically.  We see this within the U.S as well. The states with overbloated governments (California) are doing very poorly, while the states with more freedom from taxation (New Hampshire) are doing quite well.  People know how to spend money better than the government does. It is quite clear. Which I think you agree. One must consider economics with the political lands ape of the country. Americans don't want a large centralized government because of other issues, hence we want a good economy while maintaining the balances between states and the federal government and our freedoms in individual decision making. These are things European countries don't offer, and I'm not sure whether or not Australia does. 

Notice that the states with the highest tax-rates have the most debt. 

Them companies might go elsewhere (which they do anyway for manufacturing) but it gives others a chance to set successful business' in that place. But it's often possible that a economy is hurt for other reasons, like Detroit's economy focused far too much on it's car industry, leaving little room for other industries to go there. Once companies like Ford and GM fought it was too expensive to make cars there they just left, and now Detroit althought still a dump, it's a great location of farming in more years. The people done this, not the corporation. http://online.wsj.com/article/SB10001424052702304898704577479090390757800.html