Archive for the ‘Economic Policy’ category

Understanding the Debt Ceiling

November 17th, 2013

Last night the Republican Senate very irresponsibly refused to pass an increase in the debt ceiling which is necessary if we ‘re going to borrow and keep the government running…I sounded off and told them I’d veto every damn thing they sent down unless they gave us a clean debt ceiling bill. That ended the meeting.” —Ronald Reagan (Nov. 1st, 1983; The Reagan Diaries, p. 192)
debt ceiling negotiationsRonald Reagan, the patron saint of the Republican Party, once said of the debt ceiling: “The United States has a special responsibility to itself and the world to meet its obligations. It means we have a well-earned reputation for reliability and credibility – two things that set us apart from much of the world.” (source)

In 1987, he said, “The choice is for the United States to default on its debts for the first time … or to accept a bill that has been cluttered up. This is just another example of Congress trying to force my hand.” His treasury secretary said, “To play around with the debt limit this way means really that you’re playing with dynamite…There is a gun at [the president’s] head, if you will.” (source)

This government-cripling tactic accelerated under the Gingrich-led House in the 1990s, and became far more radical starting in 2010 when Tea Party Republicans took the House back from Democrats. The debt ceiling is now being used as a tool to hold the economy hostage in exchange for minority rule of the government. This approach has created a Federal Government in unprecedented gridlock. But this approach to the debt ceiling is a recent trend, and should not be used as a way to rule from a minority position. In fact, the debt ceiling is a highly misunderstood procedure. If understood correctly, the American people would never tolerate their Republican representatives in the House to use it in this way.

Sean Wilentz’s article in Rolling Stone gives a useful history of the debt ceiling:

The Republicans either believe, or would have you believe, that the debt ceiling limits the size of the national debt and thus limits government spending. Raising it, Rep. Walter Jones of North Carolina has remarked, is just another way of saying, “Well, you’ve got a little bit more credit – keep spending.” The words “debt ceiling” or “debt limit” can certainly sound as if that’s what’s involved. But these assertions are false.

The debt ceiling dates back to America’s entry into World War I. Contrary to a widespread misimpression, it came into existence not as a constraint on congressional spending, but in order to make government fiscal procedures less cumbersome amid the pressures of mobilizing for war. It had – and has – nothing to do with authorizing spending; Congress does that as part of the normal legislative process. Nor does the ceiling have anything to do with annual deficit levels, which explains why even today, with the deficit shrinking, Congress still needs to raise the debt ceiling. Rather, the ceiling is an artificial cap, determined by Congress, on the amount that the government can borrow to cover obligations already made.

Through the era of World War II, the limit looked to some like it might actually act as a useful check on government borrowing. But over the decades that followed, as the size of the nation’s economy – and with it the national debt – grew exponentially, the debt limit became a vestige of a bygone era. By 1974, it was truly obsolete; that year Congress passed a new law compelling it to approve a budget and thus set borrowing levels annually.

The implication by the Republicans that raising the ceiling will enable the government to spend the nation into bankruptcy all the faster is utterly phony, a pseudo-crisis rooted in no real problem, a fraud manufactured and then stage-managed by the GOP to frighten the public and score political points. Indeed, it is the Republican radicals, and not the Democrats, who are threatening to throw the government into immediate bankruptcy unless they get their way over other issues, above all defunding (which means, basically, repealing) Obamacare.

You don’t have to be Paul Krugman to understand all of this. Since the 1950s, economists have called the debt ceiling an experiment that failed long ago. Addressing Congress in 2003 as the chairman of the Federal Reserve Board, the Ayn Rand acolyte Alan Greenspan disparaged the debt ceiling as “either redundant or inconsistent with the paths of revenues and outlays you specify when you legislate a budget.” Eight years later, as the House Republicans threatened, Greenspan called the debt-limit problem “unnecessary” and said flat-out that the debt ceiling “serves no useful purpose.”

For decades, though, Congress went along with raising the debt limit as a mere formality. Every year from 1941 to 1945, Congress raised the debt ceiling to accommodate the accumulating costs of World War II. Since 1960, Congress has raised the ceiling 78 times, including 18 times under Ronald Reagan, six times under Bill Clinton, seven times under George W. Bush and seven times under Barack Obama. Occasionally members of both parties have voted against raising the ceiling as a symbolic gesture to focus attention on various issues. Indeed, in 2006, Sen. Barack Obama joined every other Democrat in the Senate in voting against raising the debt ceiling, a bit of political posturing that was part of the normal cut-and-thrust on Capitol Hill.

If the debt limit is not raised when necessary, the federal government will immediately default on some of its obligations. That, in turn, would disrupt its ability to pay its creditors, from bondholders and defense contractors to recipients of Social Security and Medicare. A default that lasted for just a single day – and perhaps even the threat of such a default – would have dire effects, causing every credit agency to downgrade the nation’s credit rating while presenting to the rest of the world a bizarre spectacle: the richest and most powerful nation on Earth willfully damaging both its economy and its international credibility. A default that lasted more than a few days would risk triggering a catastrophic financial crisis. Until now, no member of Congress, from either party, has seriously entertained wreaking such havoc. (Source: http://www.rollingstone.com/politics/news/republican-extremism-and-the-lessons-of-history-20131010page=2#ixzz2kvf0h61I)

Americans need to put pressure on their elected representatives to stop using the debt ceiling as a way to cripple government. Instead, public servants should propose ideas that appeal to the interests of the American people, and in turn, they will win elections.

Who Really Pays Taxes?

October 7th, 2012

Let’s explore the misconceptions and realities about who pays taxes.

Republicans love to paint the rich as the minority-victims who pay most of the taxes in this country. Mitt Romney’s recent video gaffe is a perfect example of this view. They will say things like, “86% of all income taxes are paid by the top 25% of income earners” (source). Or in the case of Romney, he claims that 47% of the country does not pay taxes and mooches off the system; these people are therefore entitled and will not take responsibility for their lives. These claims are wildly inaccurate. Their point is to paint the rich as victims and force more of the tax burden on the poor and middle class. They have despised our progressive tax system for decades, favoring a flat tax that would dramatically harm the poor and middle-class to the benefit of the wealthy (go learn about “regressive taxes“).

The Center on Budget and Policy Priorities provides some important insights on this topic.

“The notion that ‘half of Americans don’t pay taxes’ not only overstates the share of households that do not pay federal income taxes in a typical year.  It also ignores the other taxes people pay, including federal payroll taxes and state and local taxes.  Policymakers, pundits, and others sometimes overlook this point.” Source: bit.ly/iWtaO0

“The reality is that the income tax is one of a number of types of taxes that individuals pay, both over the course of their lifetimes and in a given year, and it makes little sense to treat it as though it were the only tax that matters.  Some 82 percent of working households pay more in payroll taxes than in federal income taxes. In fact, low- and moderate-income people pay a much larger share of their incomes in federal payroll taxes than high-income people do: taxpayers in the bottom 20 percent of the income scale paid an average of 8.8 percent of their incomes in payroll taxes in 2007, compared to 1.6 percent of income for those in the top 1 percent of the income distribution.” Source: bit.ly/iWtaO0

See also: http://economix.blogs.nytimes.com/2009/04/13/just-how-progressive-is-the-tax-system/

“The liberal Citizens for Tax Justice says the highest overall tax rate (this includes federal, state, and local taxes) is 32.2 percent. The top 1 percent pay even less—30.9 percent. They include employer-paid FICA taxes as income, which seems wrong to me. But the conservative Tax Foundation reports that the top 0.1 percent pay an effective federal tax rate of 21.5 percent. The last total tax rate I see from them is 2004, when it reported that the top quintile of earners paid an average total tax rate of 34.5 percent. They don’t break out the top 1 percent, but their rate would actually be lower than that of the top 20 percent as a whole.” (Source)

 

And: http://morallowground.com/2011/11/21/u-s-billionaires-paying-1-tax-or-why-the-buffett-rule-makes-sense/

 

 

 

Paul Ryan: Hero of the One-percent

August 12th, 2012

With Romney choosing Paul Ryan as his running mate, it is a good time to review just how extreme Representative Ryan and his fellow Republicans have become in recent years, and how a Romney/Ryan administration would govern if elected. In a previous post, we looked at the Republican agenda, explaining:

The problem with giving Republicans another chance at fixing the problems that they created is that they don’t have a different plan from what they have done in the past. That is, their plan  is to do what they have always done over thee past several decades.

Since the 1980s, the Republicans have basically used their “Starve the Beast” strategy. This strategy is basically to cut taxes (i.e., revenues) so that we can’t afford government programs. The ultra-rich are given special tax cuts, breaks, credits, loopholes, etc. Military spending is increased to suck up most of the federal budget. With less tax revenues they drive up the deficit, blame the Democrats, and scare the public about the mounting deficit. Once voters throw them out of office, Republicans happily leave behind a huge mess for the Democrats to clean up. Democrats now have to make the tough choices about spending and reviving the economy. While out of power, Republicans sit on the sideline and criticize anything the Democrats do to fix the mess, and even try to block anything that might help people, such as extending unemployment benefits. Republicans do everything they can to cut social programs that actually help people and create a middle class, and to cut taxes that would actually help us pay down our debt. They turn the public against Democrats with their rhetoric about “tax-and-spend-liberals,” and throw in a few words about abortion and gay marriage to please the religious right (but do nothing on these issues while in office). And then they bet on public amnesia to try to regain power in subsequent elections. This strategy has worked for them over the past several decades, but it has harmed our country.

In Paul Ryan’s opening speech as Romney’s running mate, he acknowledged that Obama inherited a mess, but did not mention what policies let to the mess in the first place. After acknowledging Obama inherited a mess, he went went onto say, “in his first 2 years, with his party in complete control of Washington, he passed nearly every item on his agenda. But that didn’t make things better…This is a record of failure.” This is an interesting charge because Senate Republicans had a record-breaking number of filibusters (by a long shot) to block anything Obama and the Democrats tried to pass, including legislation to hasten economic recovery; and when the Bush Administration had control of both houses of congress they actually did pass many of their agenda items—and we know the economic outcome of those policies (if they had passed all of their policies, such as privatizing Social Security, it would be been even more devastating to the economy).

The Romney/Ryan ticket represents a return to the disastrous past; not only a return to the failed policies of the Bush years, but also a return to the militarism and inequality that characterize the Reagan years. Like most Republicans, Ryan reveres Ronald Reagan as a quasi-deity, theIncomes under Reagan from MotherJones Magazine 10.14.2011 ultimate leader of the free world. As we can see in this chart, the policies of the Reagan era were very good to those in the top 1%, but harmed everyone else.

A Romney/Ryan administration would be far more extreme in its approach to propping up the rich at the expense of the middle-class and low income families.

Romney’s choice to add Paul Ryan to the ticket sends a clear signal to all of us that he supports congressman Ryan’s extreme approach to fiscal policy, as outlined in his budget plan: “A Roadmap for American’s Future.” The Roadmap continues the conservative fear-mongering about deficit spending, which we have also addressed in a previous column, and offer the same old solutions that conservatives have espoused for decades: tax cuts for the rich, deregulation for big business, and slashing the safety net—while pandering to the religious right by talking about traditional morals.

Ryan’s Roadmap is highly problematic. Dean Baker found 20 inaccuracies and 4 references to raiding Medicare in the Road Map. See this Critique of Paul Ryan’s “Roadmap by economist Dean Baker; and this report. See also Nobel Prize-winning economist Paul Krugman’s critique of the Roadmap. He points out that Ryan’s plan would reduce federal government revenues by $4 trillion over the next decade, which would add significantly to the current deficit (something Republicans seem to worry about on the surface). Krugman goes on to state that, “the Road Map wouldn’t reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich…even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.” This is exactly the opposite of the Obama plan to cut taxes for everyone except the ultra-rich, whose tax rate would return to what it was during the prosperous Clinton years, and would allow us to close the deficit.

Representative Ryan’s proposal, if implemented, would be a disaster for the economy and for working families, and would essentially redistribute wealth upward. Again, Ryan is really proposing the same destructive policies that have been pushed by Republicans for the past thirty years, usually with painful result for low-income and middle-class families. The bottom line is that Paul Ryan is the most extreme vice presidential candidate in a century (the guy requires his staff to read Ayn Rand!), as illustrated in the chart below.

Source.

In 2012, voters will have a choice about whether they want to live in a society of massive inequality and increased vulnerability for the majority of hard working Americans, or whether they will support the more-centrist approach that Obama and the Democrats are pushing, which, if Republican obstruction can be overcome in congress, can return us to prosperity.

See this fact check on the Romney/Ryan’s VP-announcement speeches.

DN Report on Paul Ryan

See also this report.

 

 

Atlas Shrugged: The GOP Blueprint

June 22nd, 2012

Of the Modern Library Reader’s List of 100 Best Novels, Ayn (pronounced eye-n) Rand’s titles hold four of the top eight positions, with Atlas Shrugged at #1 and The Fountain Head at #2. In a survey done by the Library of Congress and the Book of the Month Club, respondents ranked Atlas Shrugged second only to the Bible when asked what book made the biggest impact on their lives. The New York Times called Atlas Shrugged “one of the most influential books ever written.”

I recently read Atlas Shrugged, Rand’s magnum opus, having attempted it several times previously. I trudged through all 1,168-pages of this philosophically-dense novel. The book has a fascinating premise and an intriguing plot. And there are aspects of its message that will appeal to many who want to see their hard work and abilities rewarded. However, I found the book’s overall message to be highly anti-democratic, elitist, and at times, amoral (if not immoral). The book expresses distain for welfare services, for serving others without payment, and condemns the concept of the “public good.”

The basic story is about a woman named Dagny Taggart, who runs a successful railroad line, that eventually fails as a result of over-regulation and market interferance from the government, and Dagny chooses to step down as its leader. She eventually joins up with a man named John Galt, who has removed himself from society and started a libertarian utopia in the wilderness of the Rocky Mountains of Colorado. He slowly implements a plan to convince all the men of ability, the productive class, to remove themselves from society as well, to go on strike, and join his secret group in the wilderness. Galt’s objective is to “stop the engine of the world.” Each member of the group takes on an oath not to serve others, only themselves. Eventually the outside world falls into chaos without this superior group of men (and one woman, Dagny). Finally, John Galt communicates his intentions with the public in a climactic radio broadcast, spelling out why he and the other ideal men have left them to fend for themselves. His message is essentially this: It is theft when you take what we have earned, when you regulate our activities to the point where we can’t be successful—in spite of our superior abilities—therefore, unless you do it our way, we won’t come back and save you from your own incompetence. In the end, the world welcomes the return of their rulers.

(NOTE: If you want to save yourself a lot of time, and still get the main ideas from the book, simply read John Galt’s philosophically-dense radio speech, from pages 1,009-1,069.)

Prominent conservatives such as Alan Greenspan, Milton Friedman, Justice Clarence Thomas, and Paul Ryan all count themselves among Ayn Rand’s devotees. In fact, Congressman Paul Ryan has made Atlas Shrugged required reading for his staff. Rand’s ideas have been incredibly influential, and have helped shaped the platform of today’s GOP.

In a sense, it is odd that today’s conservatives would accept Ayn Rand’s ideas (Ayn Rand, 1905-1982). Rand was an militant atheist who opposed Ronald Reagan on his antiabortion stance (she was emphatically prochoice). In 1975, she wrote, “I urge you, as emphatically as I can, not to support the candidacy of Ronald Reagan.” She was also an early opponent of the Vietnam War (hardly a position of that today’s Republican hawks would take), and said “I am an enemy of racism.” Such positions would be seen as heresy by Republicans today, who are anti-choice, frequently use religious rhetoric about their belief in God, are more hawkish than ever, prevent racism does not exist, and worship a mythical version of Ronald Reagan (while taking positions far to the right of the real Reagan).

Today’s Republican Party has skillfully aligned itself to court both the evangelical movement and big business. Yet, in many ways, the ideas of Ayn Rand draw a stark contrast between these two groups. Atlas Shrugged has great appeal for the corporate executive/business owner who is conservative but not religious. It leaves those who live solely for making money feeling like their values are the only values that matter, and that they are meant to rule. These readers will be fed with the message—over and over—that they alone should lead the world, and the the “looters” (i.e., everyone else of lesser ability) should simply serve them, the more-worthy and noble men of ability. In essence, the book glorifies “The Virtue of Selfishness” (the name of a non-fiction summary of Rand’s philosophy). Rand condemns helping anyone who has not earned it, an idea that is contrary to what a Christian—or moral—person would believe about grace, service, compassion, and honoring and protecting human life. The oath that is taken by the superior people of Rand’s story goes like this: “I swear by my life, and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine.”

This message does not strike me as a Christian message; it stand in stark contrast to ideas like, “love your neighbor,” “love your enemies,” “sell all you have and give to the poor,” etc. So which is it Republicans, are we meant to be a “Christian nation” or a libertarian utopia that discards the vulnerable and is ruled by the fittest, with superior power-grabbing traits (“abilities”)? These two visions do not line up. Which interest group do you want to appeal to, big business libertarians or Christian-nation evangelicals? You can’t have your cake and eat it.

Where Atlas Shrugged has valid and important arguments is when Rand alludes to: maximizing freedom, the importance of rational thinking, the idea that man should not subordinate his mind to authority, the idea that government should minimize the tyranny of the majority by protecting minority rights, the value of voluntary associations of people who are hard working and responsible, and the importance of property rights. Although Rand takes many of these ideas to extremes, these are all very important ideas, and at times, she illustrates them well.

She also makes an important point when discussing irrational government regulations that get in the way of productive endeavors and self-actualization (e.g., innovative ideas, small businesses, a woman’s right to choose, etc.). Yet, Rand goes beyond the widely-accepted point that markets have great benefits and bad regulation is inefficiency and harmful. She argues for a radical libertarian approach to markets and government. This is a dangerous approach because we have been there before. We have had a world with no labor laws, no food regulations, no labor protection, limited public safety, no social security, etc. This is a horrific world where feudalism rules, and where the common man has no voice or power. This is the land of limited freedom and opportunity. And this is where Ayn Rand and today’s Republicans want to return. I suggest, that instead of going backward, let’s go Forward.

 

Quotes by the heroes of Atlas Shrugged:

  • “We haven’t any spiritual goals or qualities. All we’re after is material things. That’s all we care for…Whatever we are, it’s we who move the world.” (pg. 87-88)
  • “I want to be prepared to claim the greatest virtue of all—that I was a man who made money.” (pg. 96)
  • “There’s nothing of importance in life—except how well you do you work. Nothing. Only that…It’s the only measure of human value…Why are you and I the only ones who seem to know it?” (pg.100)
  • “If you didn’t want to make money, what possible motive could you have had?” (pg.120)
  • “Money is the barometer of a society’s virtue…Money is the root of all good.” (pg. 413; 415)
  • “All I want is the freedom to make money…I am rich and I am proud of every penny that I own. I have made money by my own effort…I refuse to apologize for my money.” (pg. 480)
  • “If I were asked to serve the interests of society apart from, above and against my own—I would refuse, I would reject it as the most contemptible evil.” (pg. 481)
  • “I will remain faithful to the one commandment of my code which I have never broken: to be a man who pays his own way.” (pg. 566)
  • “There are only two modes of living left to us today: to be a looter who robs disarmed victims or to be a victim who works for the benefit of his own despoilers.” (pg. 575)
  • “I’m after a man I want to destroy…Robin Hood…He was the man who robbed the rich and gave to the poor. Well, I’m the man who robs the poor and gives to the rich—or, to be exact, the man who robs the thieving poor and gives back to the productive rich.” (pg. 576)
  • “There is one word which is forbidden in this valley [i.e., Galt’s wilderness utopia]: the word ‘give’.” (pg. 714)
  • “We are on strike against those who believe that one man must exist for the sake of another.” (pg. 740)
  • “You have no duty to anyone but yourself.” (pg. 802)
  • “Give up and get out of the way and let those of us who can, start from scratch out of the ruins.” (pg. 916)
  • “‘Public welfare’ is the welfare of those who did not earn it.” (pg. 1,050)
  • “No value is higher than self-esteem.” (pg. 1,056)

 

Further Study:

Jesus or Ayn Rand

NPR Story on Atlas Shrugged

Critique of Rand

Critique of Rand #2

Rand: Back from the Dead

 

 

 

Grover Nordquist: Anti-Tax Crusader

March 13th, 2012

Few political activists have had a bigger impact on the direction of public opinion than Grover Nordquist. Over the past 30 years, he has successfully shifted public opinion—at least conservative perspectives—on two major topics. First, tax cuts. He has made tax cuts the sole conservative solution to the economy in whatever condition it may be in. If the economy is good, we need tax cuts; if the economy is bad, we need tax cuts. He joins others radical conservatives, such as Arthur Laffer, in promoting the idea that tax cut increase government revenue. Nordquist has famously convinced the majority of congress to sign his tax pledge not to raise taxes, which has made it very difficult to manage the deficit, especially during a tough economy.

The second idea that Nordquist has had a major influence is in deifying Ronald Reagan. He has successfully convinced dozens of cities across the country to put the former president’s name on street signs and other monuments to this conservative icon. He has promoted revisionist history of the former president. He has even attempted to have Reagan’s face on the ten dollar bill and added to Mount Rushmore. Strangely, Nordquist gives Reagan a free pass on his own tax record—Reagan raised taxes between 8-11 times (depending on how you define a tax increase). In the clip below, you will find Nordquist expressing his view that Reagan should get a pass on his tax record, because he did not sign his tax pledge.

Nordquist has undoubtedly contributed to the crippling environment that we now have in Washington, and the radicalization of the Republican Party.

Enjoy all three parts of the recent Jon Stewart interview with Nordquist.

What is a Fair Society?

January 28th, 2012

It has been said that from any set of facts an almost infinite number of stories can be told. In other words, people often see what they want to see–they interpret facts through an ideological filter. For example, you see a man on the street in the cold, holding a cardboard sign that reads, “Need Help.” The man is wearing an old coat, but looks like a fairly capable person. If I am Ebeneezer Scrooge (before he changed to becoming a leftist who gives handouts to the undeserving :lol:) I am going to see this person and think, “Lazy…They do not need help…They should get a job…They probably make more than I do just standing their getting free money…They’ll just spend it on booze,” etc. On the other hand, if I am a liberal, I may see this person and think, “This person likely has a disability of some kind…They do need help…This kind of suffering is immoral and we should do something about it.”

The underlying assumptions of these two perspectives are playing out in our broken political system. The question is, what is the right approach? What kind of ethical system should we accept as a basis for our social policies? Getting together to discuss this problem has inherent challenges because everyone brings their own interests to the table. The ultra-rich have an interest in not having generous social programs that would require them to pay more in taxes. They see their wealth as their property, and taking it is theft. A low-income citizen, who may be struggling to feed their kids, may ask for a society that limits the free market and provides equal opportunity to all, and perhaps ask for economic equality. Which perspective is the fair way to set up a society? Which is more important: freedom or opportunity? And can one exist without the other? The wealthy might say that creating opportunity for all would require limiting their freedoms. The masses might say giving freedom to the wealthy would limit their own freedom and opportunity.

The American philosopher, John Rawls, addressed this dilemma in an innovative way. He proposed a thought experiment, a hypothetical situation that would help guide our ethical principles of fairness. He described a situation where all of us would be in a pre-mortal state, behind a “veil of ignorance,” where none of us would know what circumstances we would be born into. We could just as easily be born into a wealthy family as we could be born into the slums. With these assumptions, what principles would we all agree are fair principles upon which to build a society?

Most of us would not want to risk being born into poverty in a libertarian society that has no safety net. On the other hand, we may not want to risk being born into a completely egalitarian society where we may work hard for our success, only to find our possessions taken and given to others whom we perceive as less deserving. John Rawls solved this problem by eliminating unequal distribution but without handicapping the talented. He simply says, the fastest runners should not be held back, but they should understand that their winnings do not belong to them alone, and should be shared with those who lack similar gifts. He says,

“Those who have been favored by nature, whoever they are, may gain from their good fortune only on terms that improve the situation for those who have lost out. The naturally advantaged are not to gain merely because they are more gifted. , but only to cover the costs of training an education and for those using their endowments in ways that help the less fortunate as well. No one deserves his greater nature capacity nor merits a more favorable starting place in society. But it does not follow that one should eliminate these distinctions. There is another way to deal with them. The basic structure of society can be arranged so that these contingencies work fgor the good of the least fortunate.”

This is a just way to approach equality while not creating disincentives to develop talent and work hard. The current system is not a free market; and it is certainly not a just system that pays a school teacher $43,000 per year while paying David Letterman $31 million. We need something different. Rawls details a number of principles that would govern a just society (see his book, A Theory of Justice). These principles provide a general basis for how we might restructure our society—one shaped by neither the left or the right. We should start trying to get beyond liberal/conservative talking points and start discussing an ethical system that grants everyone the chance to exercise their right to pursue happiness.

Watch this video of Michael Sandel lecturing about John Rawls and the idea of a just society. It is great!

John Rawls (Wikipedia)

Do Tax Breaks Create Jobs?

July 11th, 2011

There are two fundamental Republican articles of faith with regard to the economy. First, “tax cuts increase tax revenue.” Second, “tax cuts create jobs.” We have already debunked the first of these ideas (see: Do Tax Cuts Increase Revenue?), so let’s look at this second Republican belief.

There is really one fact that significantly challenges this faith-based belief: Profits are at record highs, and the level and lengths of unemployment it at a high. The idea that tax cuts create jobs is based on the idea that letting people keep more of their money will lead them to growth their businesses by hiring more people, and thus decrease unemployment. If profits are up and unemployment is down, this logic does not work.

When politicians talk about tax cuts, they are typically referring to personal income taxes. If I am a highly compensated executive, and I get a tax cut, that means I take home more money. What will I do with this extra money? Will I go out an hire someone? Probably not. Why? Because companies hire people, individuals don’t hire people with their net salary.

“But,” I can hear my Republican friends say, “if that highly-compensated executive decides to invest that extra income in a business, this will create jobs.” Again, probably not. If I own a business, my primary concern is not to create jobs, it is to maximize profits. If there is extra money, and I don’t absolutely have to hire more people to grow the business, I am not going to hire. I am going to pay myself and my shareholders first. And because taxes are paid on profits, not revenue, I am actually inclined to keep my costs (labor) down so I can maximize profit.

There is a reason that the rich don’t suffer in a recession; that middle-class wages have been stagnant for 30 year; that the majority of the nation’s wealth is in the hand of the top 1%. Conservative tax policy has dominated for 30 years. And in this Great Recession, with profits way up, there is not need to hire more people. And in this context, with a skyrocketing national debt, with millions out of work, the Republicans can still talk endlessly of how tax cuts are the answer to creating jobs. No. Tax cuts are the answer to enriching the already-wealthy.

A Forbes blogger asks the question, “do tax cuts create ‘real’ jobs?” The answer in this pro-business publication is rather surprising: “Do tax cuts create jobs? No, just deficits.” This article goes on to say,

U.S. public companies pay well-below the official 35% tax rate while 13.5 million American workers search unsuccessfully for jobs  And start ups tell me that tax cuts don’t affect whether they’ll create new jobs. In short, the tax cut rhetoric, while effective politics, is lousy economics.

George H. W. Bush wisely pointed out in his 1980 debate with Ronald Reagan that expecting to balance the budget with tax cuts and defense spending increases was “voodoo economics.”  But along with Reagan’s ascendancy came the rise of huge budget deficits — that Bush wisely helped end when he agreed to raise taxes in 1990.

Despite $858 billion in December 2010 tax cuts, companies still complain that they pay too much in tax. General Electric (GE) has become famous for paying no taxes on its $5.1 billion in 2010 U.S. profits while keeping a big staff of lawyers on hand to make sure it pays as few of them as possible. Meanwhile, the New York Times reports that GE is not alone and that the prevailing estimate for the actual U.S. corporate tax rate is 25% — costing the U.S. about $100 billion in lost revenue.

But corporations have absolutely no reason to complain about taxes. After all, they earned record 2010 profits of $1.68 trillion and 85% of them are beating their first quarter 2011 earnings estimates as 70% are growing revenue faster than expected while their operating margins stand at a near record 19.8%.

And companies are achieving that record profitability by squeezing workers. After all, 2010 productivity rose 3.9% while unit labor costs fell 1.5%. To get more work out of the same number of workers while paying them less, it helps to have 13.5 million people out of work and the easy ability to hire part-time labor and outsource to countries that pay much lower wages.

So tax cuts have not spurred big companies to create jobs. But what about start ups? Based on my October 2010 interviews with 17 start up CEOs, my conclusion is that not a single one of them would create a job based on tax cuts. All of them told me that their decision to create a new job would be based on whether the long-term cost of that new job would be offset by higher revenues and profits.

As Dick Cheney famously pointed out — deficits don’t matter. And his supporters are probably profiting from the weak-dollar, commodity-inflation bet whose profitability depends on the persistence of those deficits.

If Washington was serious about creating new jobs, it would make companies pay the 35% rate — yielding $600 billion in tax revenue on their 2010 profits. That and the peace dividend that should flow in the wake of Bin Laden’s execution, would go a long way towards balancing the budget and creating a climate that would spur a boost in capital flows to new ventures.

As always, Rachel Maddow brings up some excellent issues on this topic:

Another astute blogger pointed out:

“Rush Limbaugh famously said, “Ive never been employed by a poor person” which is true, if irrelevant

­. I’ve never been employed by a rich person myself… I’ve been employed by a lot of companies though. An increase in taxation on millionair­es would mean nothing, let me repeat, NOTHING in the way of jobs.

Corporatio­ns employ large numbers of people, not individual billionair­es. If a billionair­e got a tax break, he wouldn’t immediatel­y invest it into his company for the purpose of hiring new employees. There is a salient difference between taxing an individual CEO’s paycheck, and taxing the corporatio­n itself.

Rather he would most likely save it (along with his other excess funds); which again does NOTHING to stimulate the economy or jobs. A Poor person with excess funds, on the other hand, would be prepared to spend it, which WOULD stimulate the economy.

If you really wanted a fairer system, I’d eliminate the tax on the first 20k of EVERYONE’s income. Then leave all the loopholes and tax cuts that the rich enjoy in the dust, and raise taxes on everyone making over 250k a year. If everyone is sacrificin­g, those poised to benefit societal rewards should pay most of the costs.” (source)

Republicans say they know how to create jobs but they never produce the results. Take Mitt Romney. According to the Huffington Post: “[A]s Massachusetts governor from January 2003 to January 2007, Romney presided over one of the puniest rates of employment growth among the 50 U.S. states, at a time the nation’s economy was booming.” (Huffington Post, 5/31/11). According to MarketWatch:
While he was Governor, “according to the U.S. Labor Department, the state ranked 47th in the entire country in jobs growth. Fourth from last. The only ones that did worse? Ohio, Michigan and Louisiana. In other words, two rustbelt states and another that lost its biggest city to a hurricane. The Massachusetts jobs growth over that period, a pitiful 0.9%, badly lagged other high-skill, high-wage, knowledge economy states like New York (2.7%), California (4.7%) and North Carolina (7.6%). The national average: More than 5% (MarketWatch, 2/23/11).
FactCheck.org noted, “By the end of his four years in office, Massachusetts had squeezed out a net gain in payroll jobs of just 1 percent, compared with job growth of 5.3 percent for the nation as a whole.”
If you look at how Romney made his millions, you get a sense for how important jobs really are to his class.  In 2007, the Los Angeles Times reported:

From 1984 until 1999, Romney led Bain Capital, a Boston-based private equity group that earned jaw-dropping profits through leveraged buyouts, debt hedge funds, offshore tax havens and other financial strategies. In some cases, Romney’s team closed U.S. factories, causing hundreds of layoffs, or pocketed huge fees shortly before companies collapsed.

See more of Romney’s record.
Conclusion
To says that tax cuts do not necessarily create jobs does not mean that all tax cuts/breaks are without value. There are certainly ways to offer tax breaks as incentives to businesses to invest in areas that stimulate the economy. But these incentives should be offered to businesses to encourage investment, not gifted to individuals who already make great money.
In conclusion, Republicans hold fast to their two faith-based economic axioms: (1) tax cuts generate more revenue; (2) tax cuts create job. Both of these idea are false. But it is worth exploring why Republicans push these ideas so forcefully. Why is it so important to Republicans to make sure the rich continue to have low taxes, even at the expense of many social programs that they happily cut? What is it in the system that allows they to get away with this? Why do the American people tolerate this? We’ll have to tackle these questions in another post. But I think we already know the answer: Follow the money.

More resources:

Republicans are Bad for the Economy

June 25th, 2011

Democrats Outperform Republicans by Wide Margin

The Dow Jones industrial average increased by 29.5% in the one-year period following Barack Obama’s inauguration on Jan. 20, 2009—the third best showing, going back 110 years, for the U.S. stock market in the 12 months following the inauguration of a new President. Franklin Delano Roosevelt’s first year, which began on March 4, 1933, tops the list with the Dow increasing by 96.5% over the next 12 months. Meanwhile, Jimmy Carter trails his peers with a loss of 19.6%. On average, Presidents in the Democrat party saw an average one-year gain of 24%, while Republicans averaged 1%.

Barack Obama (DEM)

Inauguration Date: Jan. 20, 2009
Percentage Change in Dow Jones Industrial Average During First Year in Office: +29.5%

At 468%, Genworth Financial was the best-performing S&P 500 stock during Obama’s first year in office.

William J. Clinton (DEM)

Inauguration Date: Jan. 20, 1993
Percentage Change in Dow Jones Industrial Average During First Year in Office: +19.3%

The industrial sector was the best-performing sector in the 12 months following Clinton’s inauguration.

Woodrow Wilson (DEM)

Inauguration Date: Mar. 4, 1913
Percentage Change in Dow Jones Industrial Average During First Year in Office: +0.5%

After World War I began during Wilson’s second year, the U.S. stock market closed for 4 1/2 months.

John F. Kennedy (DEM)

Inauguration Date: Jan. 20, 1961
Percentage Change in Dow Jones Industrial Average During First Year in Office: +10.8%

The U.S. economy grew 6% in 1961, more than any other President’s first year since at least 1948.

Lyndon B. Johnson (DEM)

Inauguration Date: Nov. 22, 1963
Percentage Change in Dow Jones Industrial Average During First Year in Office: +21.6%

The Dow increased 27% over the length of Johnson’s five-plus years in office, or about 5% a year.

Richard M. Nixon (REP)

Inauguration Date: Jan. 20, 1969
Percentage Change in Dow Jones Industrial Average During First Year in Office: -17.0%

The Dow also lost 17% during the first year of Nixon’s second term.

Ronald Reagan (REP)

Inauguration Date: Jan. 20, 1981
Percentage Change in Dow Jones Industrial Average During First Year in Office: -12.7%

The prime rate topped 21%—the highest level on record—during Reagan’s inaugural year.

Dwight D. Eisenhower (REP)

Inauguration Date: Jan. 20, 1953
Percentage Change in Dow Jones Industrial Average During First Year in Office: +0.5%

The Dow hit a bottom in September 1953 and then went on to double over the next 2 1/2 years.

Franklin Delano Roosevelt (DEM)

Inauguration Date: Mar. 4, 1933
Percentage Change in Dow Jones Industrial Average During First Year in Office: +96.5%

The Dow Jones industrial average rose by an average 9% a year during FDR’s 12-year tenure.

George Bush (REP)

Inauguration Date: Jan. 20, 1989
Percentage Change in Dow Jones Industrial Average During First Year in Office: +19.6%

The 1980s ended during Bush’s first year, with the Dow rising 228% over the decade, or 13% a year.

George W. Bush (REP)

Inauguration Date: Jan. 20, 2001
Percentage Change in Dow Jones Industrial Average During First Year in Office: -7.7%

During his eight years in office, the Dow fell 22%, to 8,281. The S&P 500 lost 37%, closing at 850.

Gerald R. Ford (REP)

Inauguration Date: Aug. 9, 1974
Percentage Change in Dow Jones Industrial Average During First Year in Office: +4.2%

The Dow fell 45% between Jan. 11, 1973, and Dec. 6, 1974, one of the worst bear markets in history.

Harry S. Truman (DEM)

Inauguration Date: Apr. 12, 1945
Percentage Change in Dow Jones Industrial Average During First Year in Office: +30.9%

Almost 18 years after reaching 200 for the first time, the Dow again climbed to 200 in January 1946.

Herbert Hoover (REP)

Inauguration Date: Mar. 4, 1929
Percentage Change in Dow Jones Industrial Average During First Year in Office: -15.6%

The Dow dropped 48% from Sept. 3 to Nov. 13 in 1929.

Jimmy Carter (DEM)

Inauguration Date: Jan. 20, 1977
Percentage Change in Dow Jones Industrial Average During First Year in Office: -19.6%

Inflation increased by more than 6% during Carter’s fi rst year.

Obama Throws Down

April 16th, 2011

Highlights from Obama’s important speech on the budget this week:

What we’ve been debating here in Washington for the last few weeks will affect your lives in ways that are potentially profound. This debate over budgets and deficits is about more than just numbers on a page, more than just cutting and spending. It’s about the kind of future we want. It’s about the kind of country we believe in. And that’s what I want to talk about today.

From our first days as a nation, we have put our faith in free markets and free enterprise as the engine of America’s wealth and prosperity. More than citizens of any other country, we are rugged individualists, a self-reliant people with a healthy skepticism of too much government.

But there has always been another thread running throughout our history – a belief that we are all connected; and that there are some things we can only do together, as a nation. We believe, in the words of our first Republican president, Abraham Lincoln, that through government, we should do together what we cannot do as well for ourselves. And so we’ve built a strong military to keep us secure, and public schools and universities to educate our citizens. We’ve laid down railroads and highways to facilitate travel and commerce. We’ve supported the work of scientists and researchers whose discoveries have saved lives, unleashed repeated technological revolutions, and led to countless new jobs and entire industries. Each of us has benefitted from these investments, and we are a more prosperous country as a result.

Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us. “There but for the grace of God go I,” we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities. We are a better country because of these commitments. I’ll go further – we would not be a great country without those commitments.

For much of the last century, our nation found a way to afford these investments and priorities with the taxes paid by its citizens. As a country that values fairness, wealthier individuals have traditionally born a greater share of this burden than the middle class or those less fortunate. This is not because we begrudge those who’ve done well – we rightly celebrate their success. Rather, it is a basic reflection of our belief that those who have benefitted most from our way of life can afford to give a bit more back. Moreover, this belief has not hindered the success of those at the top of the income scale, who continue to do better and better with each passing year.

…America’s finances were in great shape by the year 2000. We went from deficit to surplus. America was actually on track to becoming completely debt-free, and we were prepared for the retirement of the Baby Boomers.

But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program – but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts – tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.

To give you an idea of how much damage this caused to our national checkbook, consider this: in the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.

Of course, that’s not what happened. And so, by the time I took office, we once again found ourselves deeply in debt and unprepared for a Baby Boom retirement that is now starting to take place. When I took office, our projected deficit was more than $1 trillion. On top of that, we faced a terrible financial crisis and a recession that, like most recessions, led us to temporarily borrow even more. In this case, we took a series of emergency steps that saved millions of jobs, kept credit flowing, and provided working families extra money in their pockets. It was the right thing to do, but these steps were expensive, and added to our deficits in the short term.

So that’s how our fiscal challenge was created. This is how we got here. And now that our economic recovery is gaining strength, Democrats and Republicans must come together and restore the fiscal responsibility that served us so well in the 1990s. We have to live within our means, reduce our deficit, and get back on a path that will allow us to pay down our debt. And we have to do it in a way that protects the recovery, and protects the investments we need to grow, create jobs, and win the future.

…Ultimately, all this rising debt will cost us jobs and damage our economy. It will prevent us from making the investments we need to win the future. We won’t be able to afford good schools, new research, or the repair of roads and bridges – all the things that will create new jobs and businesses here in America. Businesses will be less likely to invest and open up shop in a country that seems unwilling or unable to balance its books. And if our creditors start worrying that we may be unable to pay back our debts, it could drive up interest rates for everyone who borrows money – making it harder for businesses to expand and hire, or families to take out a mortgage.

The good news is, this doesn’t have to be our future. This doesn’t have to be the country we leave to our children. We can solve this problem. We came together as Democrats and Republicans to meet this challenge before, and we can do it again.

But that starts by being honest about what’s causing our deficit. You see, most Americans tend to dislike government spending in the abstract, but they like the stuff it buys. Most of us, regardless of party affiliation, believe that we should have a strong military and a strong defense. Most Americans believe we should invest in education and medical research. Most Americans think we should protect commitments like Social Security and Medicare. And without even looking at a poll, my finely honed political skills tell me that almost no one believes they should be paying higher taxes.

Because all this spending is popular with both Republicans and Democrats alike, and because nobody wants to pay higher taxes, politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse –that tackling the deficit issue won’t require tough choices. Or they suggest that we can somehow close our entire deficit by eliminating things like foreign aid, even though foreign aid makes up about 1% of our entire budget.

So here’s the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20%. What’s left, after interest on the debt, is just 12 percent for everything else. That’s 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.

Up until now, the cuts proposed by a lot of folks in Washington have focused almost exclusively on that 12%. But cuts to that 12% alone won’t solve the problem. So any serious plan to tackle our deficit will require us to put everything on the table, and take on excess spending wherever it exists in the budget. A serious plan doesn’t require us to balance our budget overnight – in fact, economists think that with the economy just starting to grow again, we will need a phased-in approach – but it does require tough decisions and support from leaders in both parties. And above all, it will require us to choose a vision of the America we want to see five and ten and twenty years down the road.

THE REPUBLICAN PLAN

One vision has been championed by Republicans in the House of Representatives and embraced by several of their party’s presidential candidates. It’s a plan that aims to reduce our deficit by $4 trillion over the next ten years, and one that addresses the challenge of Medicare and Medicaid in the years after that.

Those are both worthy goals for us to achieve. But the way this plan achieves those goals would lead to a fundamentally different America than the one we’ve known throughout most of our history.

A 70% cut to clean energy. A 25% cut in education. A 30% cut in transportation. Cuts in college Pell Grants that will grow to more than $1,000 per year. That’s what they’re proposing. These aren’t the kind of cuts you make when you’re trying to get rid of some waste or find extra savings in the budget. These aren’t the kind of cuts that Republicans and Democrats on the Fiscal Commission proposed. These are the kind of cuts that tell us we can’t afford the America we believe in. And they paint a vision of our future that’s deeply pessimistic.

It’s a vision that says if our roads crumble and our bridges collapse, we can’t afford to fix them. If there are bright young Americans who have the drive and the will but not the money to go to college, we can’t afford to send them. Go to China and you’ll see businesses opening research labs and solar facilities. South Korean children are outpacing our kids in math and science. Brazil is investing billions in new infrastructure and can run half their cars not on high-priced gasoline, but biofuels. And yet, we are presented with a vision that says the United States of America – the greatest nation on Earth – can’t afford any of this.

It’s a vision that says America can’t afford to keep the promise we’ve made to care for our seniors. It says that ten years from now, if you’re a 65 year old who’s eligible for Medicare, you should have to pay nearly $6,400 more than you would today. It says instead of guaranteed health care, you will get a voucher. And if that voucher isn’t worth enough to buy insurance, tough luck – you’re on your own. Put simply, it ends Medicare as we know it.

This is a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit. And who are those 50 million Americans? Many are someone’s grandparents who wouldn’t be able afford nursing home care without Medicaid. Many are poor children. Some are middle-class families who have children with autism or Down’s syndrome. Some are kids with disabilities so severe that they require 24-hour care. These are the Americans we’d be telling to fend for themselves.

Worst of all, this is a vision that says even though America can’t afford to invest in education or clean energy; even though we can’t afford to care for seniors and poor children, we can somehow afford more than $1 trillion in new tax breaks for the wealthy. Think about it. In the last decade, the average income of the bottom 90% of all working Americans actually declined. The top 1% saw their income rise by an average of more than a quarter of a million dollars each. And that’s who needs to pay less taxes? They want to give people like me a two hundred thousand dollar tax cut that’s paid for by asking thirty three seniors to each pay six thousand dollars more in health costs? That’s not right, and it’s not going to happen as long as I’m President.

The fact is, their vision is less about reducing the deficit than it is about changing the basic social compact in America. As Ronald Reagan’s own budget director said, there’s nothing “serious” or “courageous” about this plan. There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. There’s nothing courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill. And this is not a vision of the America I know.

OBAMA’S PLAN

The America I know is generous and compassionate; a land of opportunity and optimism. We take responsibility for ourselves and each other; for the country we want and the future we share. We are the nation that built a railroad across a continent and brought light to communities shrouded in darkness. We sent a generation to college on the GI bill and saved millions of seniors from poverty with Social Security and Medicare. We have led the world in scientific research and technological breakthroughs that have transformed millions of lives.

This is who we are. This is the America I know. We don’t have to choose between a future of spiraling debt and one where we forfeit investments in our people and our country. To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I’m President, we won’t.

Today, I’m proposing a more balanced approach to achieve $4 trillion in deficit reduction over twelve years. It’s an approach that borrows from the recommendations of the bipartisan Fiscal Commission I appointed last year, and builds on the roughly $1 trillion in deficit reduction I already proposed in my 2012 budget. It’s an approach that puts every kind of spending on the table, but one that protects the middle-class, our promise to seniors, and our investments in the future.

The first step in our approach is to keep annual domestic spending low by building on the savings that both parties agreed to last week – a step that will save us about $750 billion over twelve years. We will make the tough cuts necessary to achieve these savings, including in programs I care about, but I will not sacrifice the core investments we need to grow and create jobs. We’ll invest in medical research and clean energy technology. We’ll invest in new roads and airports and broadband access. We will invest in education and job training. We will do what we need to compete and we will win the future.

…Just as we must find more savings in domestic programs, we must do the same in defense. Over the last two years, Secretary Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again. We need to not only eliminate waste and improve efficiency and effectiveness, but conduct a fundamental review of America’s missions, capabilities, and our role in a changing world. I intend to work with Secretary Gates and the Joint Chiefs on this review, and I will make specific decisions about spending after it’s complete.

The third step in our approach is to further reduce health care spending in our budget. Here, the difference with the House Republican plan could not be clearer: their plan lowers the government’s health care bills by asking seniors and poor families to pay them instead. Our approach lowers the government’s health care bills by reducing the cost of health care itself.

Already, the reforms we passed in the health care law will reduce our deficit by $1 trillion. My approach would build on these reforms. We will reduce wasteful subsidies and erroneous payments. We will cut spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency and speed generic brands of medicine onto the market. We will work with governors of both parties to demand more efficiency and accountability from Medicaid. We will change the way we pay for health care – not by procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results. And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services seniors need.

Now, we believe the reforms we’ve proposed to strengthen Medicare and Medicaid will enable us to keep these commitments to our citizens while saving us $500 billion by 2023, and an additional one trillion dollars in the decade after that. And if we’re wrong, and Medicare costs rise faster than we expect, this approach will give the independent commission the authority to make additional savings by further improving Medicare.

But let me be absolutely clear: I will preserve these health care programs as a promise we make to each other in this society. I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs. I will not tell families with children who have disabilities that they have to fend for themselves. We will reform these programs, but we will not abandon the fundamental commitment this country has kept for generations.

That includes, by the way, our commitment to Social Security. While Social Security is not the cause of our deficit, it faces real long-term challenges in a country that is growing older. As I said in the State of the Union, both parties should work together now to strengthen Social Security for future generations. But we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.

The fourth step in our approach is to reduce spending in the tax code. In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans. But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. And I refuse to renew them again. Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like home ownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle-class family that doesn’t itemize.

My budget calls for limiting itemized deductions for the wealthiest 2% of Americans – a reform that would reduce the deficit by $320 billion over ten years. But to reduce the deficit, I believe we should go further. That’s why I’m calling on Congress to reform our individual tax code so that it is fair and simple – so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford. I believe reform should protect the middle class, promote economic growth, and build on the Fiscal Commission’s model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit. And as I called for in the State of the Union, we should reform our corporate tax code as well, to make our businesses and our economy more competitive.

This is my approach to reduce the deficit by $4 trillion over the next twelve years. It’s an approach that achieves about $2 trillion in spending cuts across the budget. It will lower our interest payments on the debt by $1 trillion. It calls for tax reform to cut about $1 trillion in spending from the tax code. And it achieves these goals while protecting the middle class, our commitment to seniors, and our investments in the future.

In the coming years, if the recovery speeds up and our economy grows faster than our current projections, we can make even greater progress than I have pledged here. But just to hold Washington – and me – accountable and make sure that the debt burden continues to decline, my plan includes a debt failsafe. If, by 2014, our debt is not projected to fall as a share of the economy – or if Congress has failed to act – my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code. That should be an incentive for us to act boldly now, instead of kicking our problems further down the road.

So this is our vision for America – a vision where we live within our means while still investing in our future; where everyone makes sacrifices but no one bears all the burden; where we provide a basic measure of security for our citizens and rising opportunity for our children.

Of course, there will be those who disagree with my approach. Some will argue we shouldn’t even consider raising taxes, even if only on the wealthiest Americans. It’s just an article of faith for them. I say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more. I don’t need another tax cut. Warren Buffett doesn’t need another tax cut. Not if we have to pay for it by making seniors pay more for Medicare. Or by cutting kids from Head Start. Or by taking away college scholarships that I wouldn’t be here without. That some of you wouldn’t be here without. And I believe that most wealthy Americans would agree with me. They want to give back to the country that’s done so much for them. Washington just hasn’t asked them to.

Others will say that we shouldn’t even talk about cutting spending until the economy is fully recovered. I’m sympathetic to this view, which is one of the reasons I supported the payroll tax cuts we passed in December. It’s also why we have to use a scalpel and not a machete to reduce the deficit – so that we can keep making the investments that create jobs. But doing nothing on the deficit is just not an option. Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order.

Finally, there are those who believe we shouldn’t make any reforms to Medicare, Medicaid, or Social Security out of a fear that any talk of change to these programs will usher in the sort of radical steps that House Republicans have proposed. I understand these fears. But I guarantee that if we don’t make any changes at all, we won’t be able to keep our commitments to a retiring generation that will live longer and face higher health care costs than those who came before.

Indeed, to those in my own party, I say that if we truly believe in a progressive vision of our society, we have the obligation to prove that we can afford our commitments. If we believe that government can make a difference in people’s lives, we have the obligation to prove that it works – by making government smarter, leaner and more effective.

Of course, there are those who will simply say that there’s no way we can come together and agree on a solution to this challenge. They’ll say the politics of this city are just too broken; that the choices are just too hard; that the parties are just too far apart. And after a few years in this job, I certainly have some sympathy for this view.

But I also know that we’ve come together and met big challenges before. Ronald Reagan and Tip O’Neill came together to save Social Security for future generations. The first President Bush and a Democratic Congress came together to reduce the deficit. President Clinton and a Republican Congress battled each other ferociously and still found a way to balance the budget. In the last few months, both parties have come together to pass historic tax relief and spending cuts. And I know there are Republicans and Democrats in Congress who want to see a balanced approach to deficit reduction.

I believe we can and must come together again. This morning, I met with Democratic and Republican leaders in Congress to discuss the approach I laid out today. And in early May, the Vice President will begin regular meetings with leaders in both parties with the aim of reaching a final agreement on a plan to reduce the deficit by the end of June.

I don’t expect the details in any final agreement to look exactly like the approach I laid out today. I’m eager to hear other ideas from all ends of the political spectrum. And though I’m sure the criticism of what I’ve said here today will be fierce in some quarters, and my critique of the House Republican approach has been strong, Americans deserve and will demand that we all bridge our differences, and find common ground.

This larger debate we’re having, about the size and role of government, has been with us since our founding days. And during moments of great challenge and change, like the one we’re living through now, the debate gets sharper and more vigorous. That’s a good thing. As a country that prizes both our individual freedom and our obligations to one another, this is one of the most important debates we can have.

But no matter what we argue or where we stand, we’ve always held certain beliefs as Americans. We believe that in order to preserve our own freedoms and pursue our own happiness, we can’t just think about ourselves. We have to think about the country that made those liberties possible. We have to think about our fellow citizens with whom we share a community. And we have to think about what’s required to preserve the American Dream for future generations.

This sense of responsibility – to each other and to our country – this isn’t a partisan feeling. It isn’t a Democratic or Republican idea. It’s patriotism.

…And I know that if we can come together, and uphold our responsibilities to one another and to this larger enterprise that is America, we will keep the dream of our founding alive in our time, and pass on to our children the country we believe in. Thank you, God bless you, and may God bless the United States of America.”

The War Economy

April 5th, 2011

The military has become an integral part of our economy. What happens when something becomes incredibly profitable?…Will we get more of it, or less of it?

Weaponry is one of the last remaining manufacturing sectors in the U.S. We are the largest producer and exporter of arms and munitions on earth. The U.S. Government spends more on the military than all other nations combined—about $1 trillion annually. The cost of our military adds tremendously to the deficit. Conservatives typically ignore military spending and favor cuts in social program instead (what they call “entitlements”; i.e., programs that assist people in need). Of course, it isn’t just conservatives. There are many in congress who have military jobs in their district or state that they aim to protect by voting to maintain (or increasing) military spending. Also, private military contractors make massive political donations that make peace candidates almost non-existent. With these elements in place, it makes it very difficult to rein in our ever-expanding military.

We now have over half a million military personnel serving on more than 737 military bases all over the world. These bases are on more than 130 countries. According to the late military scholar, Chalmers Johnson, these bases facilitate the “policing” of the globe and are meant to ensure that no other nation, friendly or hostile, can ever challenge us militarily. He predicts that military spending will “sooner or later…threaten our nation with bankruptcy.” Many would argue that a strong military is necessary because it is a deterrent to potential adversaries. Really? Then explain to me why our tax-payer-funded military bases include a ski center, over 200 military golf courses, dozens of luxury jets, and many luxury hotels. Conservatives like to compare government (public) workers (such as military personnel and Wisconsin teachers) with private workers, insisting, for instance, that Wisconsin teacher, police, and firefighters’ pensions and wages are too generous compared to what private workers are paid (to justify why unions should be crushed). So I am sure they will not want to make the argument that military personnel should have private golf courses and other superfluous luxuries that those in the private sector do not enjoy. Come on! We don’t need 200 military golf courses…but we do need more and better-paid teachers! If we are sincere about the deficit, there are plenty of places in the military to cut–including out-dated Cold War-era nuclear facilities and weapons.

In 1961, President Eisenhower delivered his farewell address. His message was a warning against the massive influence of the military:

“We have been compelled to create a permanent armaments industry of vast proportions. . . . This conjunction of an immense military establishment and a large arms industry is new in the American experience. . . .Yet we must not fail to comprehend its grave implications. . . . In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist” (source). See the video of the speech:

See this excellent interview with filmmaker Eugene Jarecki: (his film, “Why We Fight”, is included in its entirely at the end of the post.)

Listen to this radio interview with Eugene Jarecki about the military-industrial complex: Unwarranted Influence

Article #1 – Worldwide Military Bases

Article #2 – Civilian Control of Military is a Joke

Article #3 – The Hidden National Security Budget


Néstor Kirchner of Argentina,

NÉSTOR KIRCHNER: [translated] Bush told me the best way to revitalize the economy is war and that the United States has grown stronger with war. Those were his exact words.

OLIVER STONE: Were there any eye-to-eye moments with President Bush that day, that night?

NÉSTOR KIRCHNER: [translated] I say it’s not necessary to kneel before power. Nor do you need to be rude to say the things you have to say to those who oppose our actions. We had a discussion in Monterey. I said that a solution to the problems right now, I told Bush, is a Marshall Plan. And he got angry. He said the Marshall Plan is a crazy idea of the Democrats. He said the best way to revitalize the economy is war and that the United States has grown stronger with war.

OLIVER STONE: War. He said that?

NÉSTOR KIRCHNER: [translated] He said that. Those were his exact words.

OLIVER STONE: Was he suggesting that South America go to war?

NÉSTOR KIRCHNER: [translated] Well, he was talking about the United States. The Democrats had been wrong. All of the economic growth of the United States has been encouraged by the various wars. He said it very clearly. President Bush is—well, he’s only got six days left, right?

OLIVER STONE: Yes.

NÉSTOR KIRCHNER: [translated] Thank God.

JUAN GONZALEZ: That was former President Kirchner. And these comments of President Bush that he says about the United States growing strong through war, I don’t think that’s ever been reported anywhere.

JUAN GONZALEZ: Well, on this issue of war and, of course, the statement that President Bush made, which to me was startling, is, in essence, when our government goes to war, not only does it spend huge amounts of money that it turns over to the contractors who assist the war, but also technological development always increases sharply, sponsored by the government. And then, after the war, these same companies then use the new technological development to open up new arenas of business. So, in that sense, I think Bush was talking about how war—

OLIVER STONE: Yeah.

JUAN GONZALEZ: —forces the productive forces ahead and allows capitalism to continue to exploit.

OLIVER STONE: It’s a hard way to die.

(source)

Conclusion

The only way we can control the deficit, reduce war, and promote peace is by putting pressure on our government to change course. We need to “starve the beast” of the military-industrial complex, and perhaps create a Department of Peace, as others have suggested. To learn more about this important topic read on…

» Read more: The War Economy