Tax cuts, deficits: easy on the rich, tough on grandkids
Tom Maertens
The Mankato Free Press
Wed Dec 22, 2010, 04:01 PM CST
The Bowles-Simpson Commission on the deficit made its report this month, noting that we are on an “unsustainable fiscal path” that threatens our future economic viability. The ink wasn’t even dry on the Commission report when President Obama and Republican leaders agreed to another trillion dollars in unfunded tax cuts/spending over the next two years, including at least $55 billion in corporate welfare.
Whatever happened to the deficit hawks, the ones who promised during the electoral campaign an “adult conversation” with the American people about deficits, pain, and shared sacrifice, about perhaps cutting spending and raising taxes?
Maybe they plan to deal with the debt using the Tim Pawlenty Magic Wand method: when confronted with Minnesota’s $6.2 billion dollar deficit that he is leaving to his successor, the governor simply waved it away by announcing that “the state was on the right track … with money in the bank.” Some people would consider this characterization as dishonest, deceptive, disreputable, cynical, mendacious chicanery, and perhaps even, a bald-faced lie.
Michele Bachmann tried another tack, arguing on national television that tax cuts shouldn’t be counted against the deficit, an idea that could have come straight from Alice in Wonderland. The CBO attributes 48 percent of the deficit since 2001 to Bush’s tax cuts.
Meanwhile, the Washington chattering classes are praising Obama’s “centrist moderation,” as Charles Krauthammer called it, for embracing a program that requires the U.S. to borrow $2 billion every day from China. In what alternate universe are exploding deficits and runaway spending considered centrist policies?
Furthermore, this tax cut/spending policy is directed at pumping up consumer spending, inevitably another boom-and-bust, debt-financed bubble. In contrast, a program of investment in education, R&D and infrastructure would increase productivity and promote long-term growth. A report issued in October by the Technology CEO Council, including the chief executives of IBM, Dell, Intel, Motorola, and other tech giants titled “One Trillion Reasons,” lays out seven “commercially proven best practices” for maximizing productivity, which it claims could save the federal government $1 trillion over 10 years.
In the end, the two sides agreed on the budget-busting tax cuts because it serves both their interests. For Obama, re-election looks problematic unless unemployment comes down. Only another major stimulus package in the form of “Keynesian” tax cuts and additional spending has the possibility of improving job creation in the short term. But Bush and his tax cuts, even combined with $800-900 billion in Keynesian deficit spending on two wars, created no net new jobs over eight years. Why should we expect something different this time?
For Republicans, the package ensures a continued redistribution of wealth upward, to the wealthiest Americans who fund their party. According to Jacob Hacker and Paul Pierson (Winner Take-all Politics), 51 percent of the Bush tax cuts go to the top 1 percent of earners. It also continues the march toward unsustainable deficits — including payroll tax cuts that will blow a $120 billion hole in Social Security — that will allow them to argue that Social Security and Medicare must be axed.
Obama thinks he faced a hostage-situation this year, but he will face worse situations over raising the debt ceiling this spring and later when the Republicans, inevitably, agitate to make the payroll and Bush tax cuts for the wealthy permanent.
The tax structure is already skewed so heavily toward the wealthy that, even during this great recession, the top 5 percent of households have seen their income rise. The top 1 percent of Americans currently own 34 percent of our nation’s wealth — more than the combined wealth of 90 percent of Americans.
Studies consistently show that such high concentrations of wealth correlate with poor economic performance of the country as a whole. It was to prevent such concentrated wealth and the rise of a hereditary aristocracy that Teddy Roosevelt advocated a progressive income tax.
As Justice Louis Brandeis said, “We can have concentrated wealth in the hands of a few or we can have democracy, but we can’t have both.”
The only groups likely to face a tax increase under the new legislation , according to the New York Times, are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.
Eisenhower in his farewell address told Americans to “avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow.” What we are doing is undermining the country’s financial security for short-term political gains, and increasing the Grandchildren’s Tax.
The Mankato Free Press
Wed Dec 22, 2010, 04:01 PM CST
The Bowles-Simpson Commission on the deficit made its report this month, noting that we are on an “unsustainable fiscal path” that threatens our future economic viability. The ink wasn’t even dry on the Commission report when President Obama and Republican leaders agreed to another trillion dollars in unfunded tax cuts/spending over the next two years, including at least $55 billion in corporate welfare.
Whatever happened to the deficit hawks, the ones who promised during the electoral campaign an “adult conversation” with the American people about deficits, pain, and shared sacrifice, about perhaps cutting spending and raising taxes?
Maybe they plan to deal with the debt using the Tim Pawlenty Magic Wand method: when confronted with Minnesota’s $6.2 billion dollar deficit that he is leaving to his successor, the governor simply waved it away by announcing that “the state was on the right track … with money in the bank.” Some people would consider this characterization as dishonest, deceptive, disreputable, cynical, mendacious chicanery, and perhaps even, a bald-faced lie.
Michele Bachmann tried another tack, arguing on national television that tax cuts shouldn’t be counted against the deficit, an idea that could have come straight from Alice in Wonderland. The CBO attributes 48 percent of the deficit since 2001 to Bush’s tax cuts.
Meanwhile, the Washington chattering classes are praising Obama’s “centrist moderation,” as Charles Krauthammer called it, for embracing a program that requires the U.S. to borrow $2 billion every day from China. In what alternate universe are exploding deficits and runaway spending considered centrist policies?
Furthermore, this tax cut/spending policy is directed at pumping up consumer spending, inevitably another boom-and-bust, debt-financed bubble. In contrast, a program of investment in education, R&D and infrastructure would increase productivity and promote long-term growth. A report issued in October by the Technology CEO Council, including the chief executives of IBM, Dell, Intel, Motorola, and other tech giants titled “One Trillion Reasons,” lays out seven “commercially proven best practices” for maximizing productivity, which it claims could save the federal government $1 trillion over 10 years.
In the end, the two sides agreed on the budget-busting tax cuts because it serves both their interests. For Obama, re-election looks problematic unless unemployment comes down. Only another major stimulus package in the form of “Keynesian” tax cuts and additional spending has the possibility of improving job creation in the short term. But Bush and his tax cuts, even combined with $800-900 billion in Keynesian deficit spending on two wars, created no net new jobs over eight years. Why should we expect something different this time?
For Republicans, the package ensures a continued redistribution of wealth upward, to the wealthiest Americans who fund their party. According to Jacob Hacker and Paul Pierson (Winner Take-all Politics), 51 percent of the Bush tax cuts go to the top 1 percent of earners. It also continues the march toward unsustainable deficits — including payroll tax cuts that will blow a $120 billion hole in Social Security — that will allow them to argue that Social Security and Medicare must be axed.
Obama thinks he faced a hostage-situation this year, but he will face worse situations over raising the debt ceiling this spring and later when the Republicans, inevitably, agitate to make the payroll and Bush tax cuts for the wealthy permanent.
The tax structure is already skewed so heavily toward the wealthy that, even during this great recession, the top 5 percent of households have seen their income rise. The top 1 percent of Americans currently own 34 percent of our nation’s wealth — more than the combined wealth of 90 percent of Americans.
Studies consistently show that such high concentrations of wealth correlate with poor economic performance of the country as a whole. It was to prevent such concentrated wealth and the rise of a hereditary aristocracy that Teddy Roosevelt advocated a progressive income tax.
As Justice Louis Brandeis said, “We can have concentrated wealth in the hands of a few or we can have democracy, but we can’t have both.”
The only groups likely to face a tax increase under the new legislation , according to the New York Times, are those near the bottom of the income scale — individuals who make less than $20,000 and families with earnings below $40,000.
Eisenhower in his farewell address told Americans to “avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow.” What we are doing is undermining the country’s financial security for short-term political gains, and increasing the Grandchildren’s Tax.
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1 Comments:
We know that the economy would be far worse if not for the stimulus bill. We also know that the economy would get far worse if not for extending the current income tax rates. I just love hearing the rich hypocrites like Warren Buffet, Keith Olbermann, Bill Gates Sr, Bill Gates Jr, George Soros and the phalanx of Hollywood actors who all begged for a tax increase on the rich. What they don't tell you is that they live on tax free wealth after earning more than enough money to live on the rest of their lives. So, raising the income tax won't affect them since many of the so-called-rich no longer earn W-2 income. But, if the rich are so worried about the deficit, why don't they just hand over their wealth to the government? Why does there need to be a government mandate for them to part with their money? How many Minnesotans 'willing to pay for a better Minnesota' forego all of their deductions on their 1040? Does Tom Maertens take his deductions? How about Editor Spear? If they really believed what they wrote, how could these in good consciences take any tax deductions?
Professor Richard Vedder of Ohio University studied the effect of tax increases on deficits since WWII in a study known as the '$1.58 study'. Vedder looked at several different lengths of time between 1945 and 2009 and concluded that raising taxes actually results in larger deficits. On average, for every dollar the government collected in increased taxes, they spent $1.17 between 1945 and 2009 with the range varying from between $1.05 and $1.81 depending on alternate data tests and depending on which year ranges they looked at.
The study concluded that there is absolutely no evidence whatsoever that increasing taxes reduces deficits. None. Zip, zero, nada. The only time increasing taxes led to surpluses was between 1994 and 2000 during the Clinton administration. The reason for this is simple: after the tax increases implemented in 1993 the Republican Congress between 1994 and 2000 simply didn't spent the additional revenue from the 1993 tax increases. And there is the rub - it takes fiscal restraint to bring down deficits, not increased taxes. Remember after the 2006 elections when speaker-in-waiting Nancy Pelosi promised no new deficit spending? Yet, over the next four years as speaker, she presided over the largest orgy in deficit spending in the history of the world adding over $5 trillion to the national debt in just four years. And what do we have to show for it - higher interest rates, higher inflation, $3 dollar-per-gallon gas, nearly 10% unemployment.
Once again Maertens gets it completely wrong. There simply is no debating the fact that increasing taxes would do nothing to bring down the deficit. The lesson is simple - you cannot borrow your way out of debt, you cannot spend your way out of deficit, and you cannot tax your way in to prosperity. Only serious fiscal restraint will return the nation to financial health. Raising taxes will do absolutely nothing to aid in that regard. Absolutely nothing. Which is why letting the current tax rates expire and ushering in the largest tax increase in the history of the world would have been the final blow for an economy teetering on the brink of total collapse.
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