by Tom Kando
Regarding the never-ending political crisis in the US: The solution is obvious, but hardly anyone is able to see it, or has the courage to mention it, or is not willfully ignoring it. A combination of imbecility, cowardice and evil.
There are two aspects to the crisis: (1) the government shutdown and (2) the looming default. The second aspect is by far the most serious. It exists because of the government’s insane indebtedness. $17 trillion so far, i.e. 110% of GDP. Worse than Greece.
The growing debt is the PRIMARY CAUSE OF AMERICA’S IMMINENT RUIN. The government spends more on finance charges than on nearly any other budget item. Half as much as the military budget. Imagine what goods and services could be provided with the $400 billion squandered every year on finance charges!
This is a death spiral. Even though the annual deficit has been declining, the problem will grow worse until the government begins to pay back the principal. The last time that this happened - that there was a surplus - was during the Clinton presidency.
And let’s not forget who got us into this mess: First, George W. Bush cut taxes for the rich. Then he started several wars without raising taxes. Then he got us into the worst recession in a century. And it was up to Obama to clean up the mess.
Yet no one, not the politicians, not the media, nobody admits that without raising taxes, America will NEVER, EVER solve its insolvency.
The taboo persists at ALL levels of society: Even Fox’s liberal counterpart MSNBC often fails. Even Ed Schultz, a guy with a good heart, invites moronic right-wingers on his show so as to appear “balanced.” Those imbeciles then dismiss Obamacare by labeling it “Socialist,” as if a label represented an argument (in addition to the fact that socialism is not a bad thing, in the first place). Even MSNBC lets the neo-McCarthyists get away with their idiotic arguments.
The other day, my congressman Ami Bera held a teleconference with his constituents. I tried to call in my two bits worth: What about raising taxes? I was not permitted to do so. Apparently, even a nice Democratic congressman is afraid of breaching the taboo.
The last time it was permissible to talk about increasing revenue without running the risk of being lynched was under Simpson-Bowles (2010): The deficit would be eliminated through a combination of spending cuts AND increased revenue. This was proposed to Congress by a national commission, and then it went nowhere.
This was not a 50-50 solution, mind you. 63% of the debt reduction would consist of spending cuts, and 37% of added revenue. Also, you can bet that the 63% cuts would fall overwhelmingly on the poor. Furthermore, the alleged “added revenue” was supposed to come from tax reform that would lower income and corporate tax rates and “broaden the base by eliminating tax expenditures.” Good luck with that! What was there for Republicans not to like?
At least, Simpson-Bowles had the audacity to mention increased revenue. Today, the silence about that topic is deafening. Instead, the wackos have shut down the government, and they are proposing to shut down the economy as well, by letting the government default, ending the dollar’s status as the world’s reserve currency, causing the stock market to collapse and untold other calamities.
We hear that Obama is about to cave in: Maybe the debt ceiling will be raised before Oct. 17, while the government shut down will continue. It figures. Wall street gets its way, but the people don’t.
Any 9-year old understands that the only way out of our death spiral is to raise taxes, at least temporarily. For now, the government has to be funded at a much higher level, so it can repay its debt and stop squandering hundreds of billions every year on finance charges.
Where is it written that the federal budget should not exceed 19% to 23 % of GDP? We have to lowest tax rates in the Western world (see graphic). We are also the most conservative country.
In fact, Americans should hand over about 50% of their income to all levels of government combined. That’s what they do in Scandinavia and other such places. That’s why those countries work well, and ours doesn’t.
California, too, works well. Once again, the Golden State shows the way to the rest of the country. Governor Brown raised taxes. It was a no brainer. Now, California is out of the woods.
Republicans reply that raising taxes stifles economic growth.
First of all, it’s not clear that this is so. It may be a myth, or a deliberate lie. Keynesians like Paul Krugman and Robert Reich would definitely dispute this.
But more importantly, so what? We do not need more growth anyway. When a country already “enjoys” a one-per-capita rate of car ownership, it does not need more cars. An October 10 AP article by Seth Borenstein (See Sacramento Bee) shows that by 2047, most major cities in the world will reach a temperature that permanently exceeds the hottest year on record so far, 2005. The world is already burning too much coal and oil, and it is already manufacturing too many things.
America does not need more growth. It needs the following three things:
1. Fix and clean up the mess the country is in, especially its infrastructure and its public services. Fix the roads, housing, schools, public health, diet, the criminal justice system.
2. Lift the poor, the homeless, the growing underclass out of their misery. Redistribute.
3. Raise taxes. leave comment here
© Tom Kando 2013
11 comments:
Bill Maher recently noted that Jerry Brown has mostly solved CA's fiscal problems by raising taxes and cutting spending. It can be done if a politician has the courage or lack of ambition!
I would only agree to a slight tax increase for 2 reasons. 1) The wealthy & corporations pay far less taxes as a percentage than the middle class & it's extremely unfair to assault the ever shrinking middle class with yet another burden. Last year G.E tax return was 67k pages long filled with every tax loophole imaginable, they paid zero taxes. The highest income tax in the 1950s was in the high 90 percentage & in the 60s still 90%, even in Reagan time high 70 percentage, Today less than 50% & filled with loopholes so they pay less than the middle class if at all. "Only the little people pay taxes" -Leona Helmsley-. 2) Something about the nature of our system causes our government to be highly inefficient compared to Europe. Where's our bullet train? How much has it cost? At that will it be as modern as Japan's build 45 YEARS AGO?!?! It will not.
Tom,
This is your best piece yet. Please put it in letter form and send it to as many newspapers as you want. Or get on TV, maybe have your daughter present it so people will pay attention to her (no slam on your looks).
Regards,
Don
Nice reactions!
Thanks, Anita, Roy and Don.
I like Don's wit.
And Roy makes a good point: Not only do we need to raise taxes, but we must also make sure that the system is genuinely progressive.
As to how efficient (or not) we are: I believe that our current inefficiency is also rooted in our political paralysis.
However, when I was young, we associated America with the opposite: efficiency. Beating the Nazis, going to the moon, building skyscrapers and jet airplanes. If anyone could do it, it was the Yank. Maybe we'll recover some of that (I hope).
I agree completely with you Tom. I've been advocating raising taxes for years. The advantages to the middle and lower economic classes is obvious. I believe that raising taxes would actually help the highest economic class as well, because they are in fact addicted to money--and power. They simply can't get enough of these to satisfy themselves,so they label any attempt to raise taxes as a form of "socialism."
Simpler solution - grow the economy.
There are two issues here. First, what is the appropriate percentage of the GDP that should be collected to run the federal government. It has traditionally been in the 18-20% of GDP range - and is now closer to 25%. From my perspective that is too high.
Second, the question is not raising taxes (our current system is an abomination) even your beloved Europeans have worked to reduce rates and simplify their systems. If you start with the appropriate percentage of GDP going to the feds - then the real issue is how to raise that dough and that should not be just raising rates. Interestingly if you put your attention more on simplifying the system and lowering rates you might actually raise more dough (that certainly happened in 1981 and 1986).
Finally, the cheap shot about how our current mess happened is below you. Despite the comments about Bush it is not all that simple. From my perspective and also from writers like Gretchen Morgenstern (the NYT economics editor) our mess came from a series of policies many of which started with government.
Thank you, Tom. We need this to be read over and over by everyone! And one result, if we followed your logic, the interest rates would go up so that the little guy could save some money and get a small payback. . .and Uncle Sam would be back in business. Remember the effort to Buy War Bonds. A low interest rate helps borrowers but a too low interest rate makes the scale of economic justice unbalanced. Maybe not quite on topic, but could be part of the discussion.
Great comment . . .hope it gets the reading audience who need it the most.
I am a conservative. An Eisenhauer Republican on this issue.
If a 90% top bracket income was good enough for Ike, that is good enough for me.
The comments by Gene, Jonathan, Terry and Steve are welcome.
Unfairly perhaps, it is always the “disagreer” who gets most of the attention:
Jonathan: our horrible debt problem is caused by the difference between 18% and 25%: One is what the government rakes in, the other one is what it spends. So either one has to go up (which is what I and Obama advocate) or the other one has to go down (which is what you want)
Clearly, the only realistic solution is a combination of both strategies, as Simpson-Bowles correctly explained.
Unfortunately, there is currently hardly any talk of tackling the problem at both ends. In that sense, the Tea-Party driven Republican Party has won a huge victory - one which will be catastrophic for the country.
Makes sense to me. Everything has gone up in the last few yrs & especially medical care & health premiums. So many people forget this. Just look at the cost of gas. Here in the Sacramento Valley diesel is $3.99. for my husband's truck, but we rarely drive it. He uses a bike & motorcycle & I have a 10yr old Honda Accord 4 cylinder.
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