“This “debt crisis” in no way had to happen. No natural disaster, no tsunami, has suddenly pounded the United States out of fiscal balance. We have simply suffered a colossal political failure. Our powers that be, by feeding the rich and their corporations one massive tax break after another, have thrown a monstrous monkey wrench into our national finances.
Some numbers — from an Institute for Policy Studies report released this past spring — can help us better visualize just how monumental this political failure has been.
If corporations and households taking in $1 million or more in income each year were now paying taxes at the same annual rates as they did back in 1961, the IPS researchers found, the federal treasury would be collecting an additional $716 billion a year.
In other words, if the federal government started taxing the wealthy and their corporations at the same rates in effect a half-century ago, the federal debt to investors would almost totally vanish over the next decade.
Similarly stunning numbers have come, earlier this month, from MIT economist Peter Diamond and the University of California’s Emmanuel Saez, the world’s top authority on the incomes of the ultra-rich. These two scholars have shared some fascinating “what ifs” that dramatize how spectacularly the incomes of our wealthiest have soared over recent decades.
In 2007, Diamond and Saez point out, taxpayers in the nation’s top 1 percent actually paid, on average, 22.4 percent of their incomes in federal taxes. If that actual tax burden were to about double to 43.5 percent, the top 1 percenter share of our national after-tax income would still be twice as high as the top 1 percent’s after-tax income share in 1970.
So why aren’t we taxing the rich? Why are we now suffering such fearsome “debt crisis” angst? Why are our politicos so intent on shoving the “fiscal discipline” of layoffs and cutbacks — austerity — down the throats of average Americans?
No mystery here. Our political system is failing to tax the rich because the rich have fortunes large enough to buy off the political system.”
Whenever I see a discussion about the real crisis this country faces—that would be unemployment, not the manufactured one over the deficit– a couple of words keep coming up from the alleged smartest guys in the room, confidence and certainty. Businesses would hire, so it’s said, if they had either or both.
President Obama referred to it in a recent press conference:
“What we need to do is to restore business confidence and the confidence of the American people that we’re on track — that we’re not going to get there right away, that this is a tough slog, but that we still are moving forward.”
It came up again yesterday in a roundtable discussion about jobs on Meet the Press. Just as an aside, two members of this roundtable were Ohio Governor John Kasich and Honeywell CEO David Cote. It has been estimated that Kasich’s budget cuts in Ohio could lead to over 50, 000 layoffs. Mr. Cote’s history at Honeywell, where his 2010 compensation topped $20 million, has been one of outsourcing and union-busting. Just the two opinions you want on what to do about unemployment, right?
Mr. Kasich and Mr. Cote, who also sits on the board at JP Morgan Chase, spoke about the need for businesses to have certainty. Certainty about taxes and regulation. Certainty meaning lower taxes and less regulation, naturally.
In August of 1934, President Franklin Roosevelt addressed the same issues we face today. Here’s what FDR had to say about confidence:
“In one year and five months, the people of the United States have received at least a partial answer to their demands for action; and neither the demand nor the action has reached the end of the road.
But, my friends, action may be delayed by two types of individuals. Let me cite examples: First, there is the man whose objectives are wholly right and wholly progressive but who declines to cooperate or even to discuss methods of arriving at the objectives because he insists on his own methods and nobody’s else.
The other type to which I refer is the kind of individual who demands some message to the people of the United States that will restore what he calls “confidence.” When I hear this I cannot help but remember the pleas that were made by government and certain types of so-called “big business” all through the years 1930, 1931 and 1932, that the only thing lacking in the United States was confidence.
Before I left on my trip on the first of July, I received two letters from important men, both of them pleading that I say something to restore confidence. To both of them I wrote identical answers: “What would you like to have me say?” From one of them I have received no reply at all in six weeks. I take it that he is still wondering how to answer. The other man wrote me frankly that in his judgment the way to restore confidence was for me to tell the people of the United States that all supervision by all forms of Government, Federal and State, over all forms of human activity called business should be forthwith abolished.
Now, my friends, in other words, that man was frank enough to imply that he would repeal all laws, State or national, which regulate business—that a utility could henceforth charge any rate, unreasonable or otherwise; that the railroads could go back to rebates and other secret agreements; that the processors of food stuffs could disregard all rules of health and of good faith; that the unregulated wild-cat banking of a century ago could be restored; that fraudulent securities and watered stock could be palmed off on the public; that stock manipulation which caused panics and enriched insiders could go unchecked. In fact, my friends, if we were to listen to him and his type, the old law of the tooth and the claw would reign in our Nation once more.
The people of the United States will not restore that ancient order. There is no lack of confidence on the part of those business men, farmers and workers who clearly read the signs of the times. Sound economic improvement comes from the improved conditions of the whole population and not a small fraction thereof.
Those who would measure confidence in this country in the future must look first to the average citizen.”
Confidence, schmonfidence. Businesses don’t need either confidence or certainty, they need customers. Those would-be customers need jobs. We’ve had 30+ years of low taxes and less regulation. If those were the engines of job creation we’d have more jobs than we do people.
…the more they stay the same. FDR, 1936:
“In 1776 the fight was for Democracy in Taxation. In 1936 there is still the fight. Mister Justice Oliver Wendell Holmes once said ‘taxes are the prices we pay for civilized society’. One sure way to determine the social conscience of a government is to examine the way taxes are collected and how they are spent.
And one sure way to determine the social conscience of an individual is to get his tax reaction. Taxes, after all are the dues we pay for the privilege of membership in an organized society. And as society becomes more civilized government, national and state and local, is called on to assume more obligations to its citizens. The privileges of membership in a civilized society are vastly increased in modern times. But I am afraid we still have many who still do not recognize their advantages and want to avoid paying their dues.”
To divide fairly among the people the obligation to pay for these benefits has been a major part of our struggle to maintain Democracy in America. Ever since 1776, that struggle has been between two forces; on the one hand there has been a vast majority of citizens who believe the benefits of democracy should be extended and who are willing to pay their fair share to extend them. And on the other hand, there has been a small but powerful group which has fought the extension of these benefits because they did not want to pay a fair share of their cost.
That was the lineup in seventeen hundred and seventy-six and it’s the lineup today. And I am confident that once more, in nineteen thirty-six democracy in taxation will win. Here is my principle, and I think it’s yours too; Taxes shall be levied according to ability to pay. That is the only American principle.”
“Senate Democrats said Thursday that they had abandoned plans for a pre-election showdown with Republicans over taxes, postponing any vote on extending Bush administration tax cuts until after the November midterms.
Democrats discussed the issue during a caucus luncheon but left the final decision to Senate Majority Leader Harry Reid (D-Nev.)”
That was your first mistake, leaving it up to Sir Robin Harry Reid.
“Late Thursday, Reid spokesman Jim Manley said, “We will come back in November and stay in session as long as it takes to get this done.”
Bullshit. If the Republicans take control of Congress, and how can they not with opposition like this, does anybody with half a brain (which excludes Reid) think they’ll be in the mood to make a deal after the election. Here’s what will happen:
“…the GOP is going to shout and scream and throw feces and demand what it will deem one of two acceptable options: a permanent extension of all cuts or a one- or two-year extension. And one of these will pass. And if it’s the temporary extension, the renewal will come up before the very Congress these midterms are going to elect, meaning it will be an even more Republican Congress than the one in the lame-duck session. So the tax cuts for the rich will be made permanent then.”
Meanwhile, back in D.C.:
“The Senate left for the weekend Thursday afternoon and will not return until early next week, when Reid has scheduled a vote on a bill to prevent firms from sending jobs overseas and reward those that bring jobs back to the United States. Congressional leaders are aiming to get lawmakers out on the campaign trail by the end of next week.”
No, don’t go back at all. Slither your worthless invertebrate asses home and stay there. Don’t even come back for the lame-duck session. Get ready for your post-Senatorial careers. At least we can save on the cost of utilities by keeping the Capitol building dark, you useless wastes of space.
The party of no or the party of no backbone. One hell of a choice.
Never mind this, let’s just be sure we keep rich people’s taxes low.
“You see, the rich are different from you and me: they have more influence. It’s partly a matter of campaign contributions, but it’s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain — feel it much more acutely, it’s clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes.
And when the tax fight is over, one way or another, you can be sure that the people currently defending the incomes of the elite will go back to demanding cuts in Social Security and aid to the unemployed. America must make hard choices, they’ll say; we all have to be willing to make sacrifices.
But when they say “we,” they mean “you.” Sacrifice is for the little people.”
Generally speaking, bi-partisan commissions are a bad idea, with just a few exceptions. Those being when something is being investigated–such as the 9/11 Commission or the current Financial Crisis Inquiry Commission. The debt reduction commission, set to be unveiled today by President Obama, falls into the bad idea category, and for the usual reason.
Bi-partisan commissions are nothing more than a refuge for gutless politicians who are more concerned with the next election than the next generation, and who don’t want to go on the record with votes on controversial issues which might hurt their re-election chances. And there are no issues more controversial than what must be done if we hope to make any serious attempt at reducing the national debt. And I don’t mean re-arranging deck chairs on the Titanic with so-called “spending freezes” on areas of the budget which amount to less than 20% of all spending.
Serious debt reduction has to take on Social Security, Medicare, and Medicaid, which together make up about 40% of the budget. And for the two biggest expenditures–Social Security and Medicare– there are only 3 options–raise taxes, reduce benefits, or raise the eligibility age.
Serious debt reduction has to cut spending across the board, no exceptions and no exclusions, including the Pentagon. The 2009 budget for the Department of Defense was north of $700 billion, which is roughly equivalent to the rest of the world’s military spending combined.
Serious debt reduction has to include tax increases. We, as a country, have been living on a credit card for the last 30 years–it’s time to start paying the bill.
Tough decisions all, and decisions we pay members of Congress to make, not shove off on “bi-partisan commissions” with no authority to do anything other than make recommendations.
Republican National Committee Chairman Michael Steele and wannabe (allegedly) Senator from New York, Harold Ford, squared off in a 90 minute joint appearance at the University of Arkansas at Little Rock on Thursday. The topics ranged from health care to abortion to taxes. The Boston Herald reports:
The two often traded jokes, especially when Steele panned President Barack Obama’s long-stated plan to let income tax rates return to higher levels for families making more than $250,000 a year.
“Trust me, after taxes, a million dollars is not a lot of money,” Steele said.
I wonder if Mr. Steele is growing accustomed to the taste of leather?
I think most people who live in the real world (leaving out the gutless wonders who inhabit Washington, D.C.) will agree that if we ever hope to get our fiscal house in order some tough choices will have to be made. David Pauly has a piece at Bloomberg today with 9 suggestions:
1. Restore all income taxes to the pre-President George W. Bush level, not just those for people earning $250,000 or more.
2. Tax the banks $90 billion as proposed by President Barack Obama to pay for their bailout. Then break them up — making them small enough to fail and eliminating the need for more trillion-dollar rescues.
3. Eliminate income-tax deductions for property taxes and mortgage interest. Phase it in over five years so it hurts less.
4. Break Fannie Mae and Freddie Mac into four mortgage- buying companies and get them off the federal dole.
5. Raise the retirement age for collecting full Social Security benefits to 72. Cut cost-of-living increases for beneficiaries to half the inflation rate for 10 years.
6. Raise the age for Medicare eligibility to 68.
Regarding numbers 5 and 6: Keep in mind that when Social Security was passed in 1936, life expectancy was 62. When Medicare was passed in 1965 it was 70. Today it’s 78.
7. End the wars in Iraq and Afghanistan on the current schedules.
8. Kill farm subsidies.
9. Reduce government.
Pauly lists some of the overlapping agencies and departments which could eliminated:
The government has both the U.S. Postal Service and the Postal Regulatory Commission. Doesn’t competition from e-mail and FedEx Corp. keep postal rates in line?
[Does] the president really needs both a Council of Economic Advisers and a National Economic Council?
Government housing officials will have less to do if we cut Fannie and Freddie loose.
Whole agencies might be suspect. We, for instance, have a Selective Service System but no draft.
Certainly food for thought.
The national debt is like the weather. Everybody talks about it, but nobody does anything about it. Nobody who CAN do something about it, that is. Reactions to President Obama’s proposed $3.83 trillion budget, which is projected to add $8.5 trillion to the debt over the next decade, prove that point, and can be summed up in a few words in this McClatchy article:
“Complicating the debt reduction picture is the desire by members of both parties to preserve what they see as important local programs, as well as to give themselves something to boast about in this election year.”
A few examples:
“There really isn’t anything in this budget which I can take home or talk about in favorable terms with respect to coal when I want to.” said Sen. Jay Rockefeller, D-W.Va.”
“Sen. Patty Murray, D-Wash., criticized Army Corps of Engineers funding. The Howard Hanson dam has been getting weaker and may not be able to control flooding in the Green River Valley, south of Seattle, she said.”
“Sen. Bernard Sanders, a Vermont independent..wanted the president’s proposed three-year freeze on non-defense discretionary spending to be extended to the Pentagon..[White House Budget Director Peter] Orszag said that wouldn’t be practical; Sen. Mark Warner, D-Va., agreed…”Because the nation is at war, we need to have more flexibility,” Warner said.”
One would think that a defense budget equal to the rest of the world’s military spending combined might have room for cuts somewhere. I guess one would be wrong.
OK, no defense cuts. What about entitlements?
“Orszag, who showed no emotion during his testimony, calmly said that Obama had a long-term plan to reduce the deficits, notably an as-yet un-appointed bipartisan commission to recommend remedies…Any commission recommendations also would have to be approved by Congress, where expected recommendations to cut the future costs of popular programs such as Social Security and Medicare and to raise taxes would face stiff resistance…There’s also no assurance that Congress will agree to a commission that has clout.”
So let’s review. Everybody in D.C. wants to reduce the debt and cut spending, but:
They won’t cut Defense.
They won’t cut entitlements.
They can’t stop paying interest on the debt.
They won’t cut any discretionary spending because it’s all somebody’s pet project or program.
They won’t raise taxes.