Friday, November 12, 2010


Christmas is around the corner.

Immediately after Thanksgiving we'll all be treated to a never ending stream of Christmas classics, including It's a Wonderful Life. And that's a good thing. I like the film. In the movie Jimmy Stewart plays the part of George Bailey, who is guided by a guardian angel and shown how the people in his world would have turned out if he were not around to influence events.

Most of us remember admiring Jimmy Stewart's character, George Bailey, because he did the right thing, and stood up to the town's financial bully, Mr. Potter (played by Lionel Barrymore).

The theme of the movie is important because it's message is both moral and highly suggestive to those of us who try to work hard and do the right thing (even when things don't break your way). I bring all of this up because President Obama's Deficit Commission has come out with a report that lays out a plan to solve our deficit problem.

Unfortunately, it does so without considering how we got into our current predicament, let alone attempting to balance issues of equity with ability to pay for the mess we find ourselves in today. What this means is that unless you're fortunate to belong to the Top 2% of America's richest population, or work as an executive in corporate America, there were no guardian angels on the commission to watch out for your interests.

Just a committee of Mr. Potters looking to make sure no one asks questions or challenges the rules of the game.

To get an idea of what I'm talking about take a look the Washington Post's interactive on President Obama's budget proposal and deficit spending here. One of the first things you'll notice is that budget deficit projections for 2011 come in at about $1.27 trillion (click graph to enlarge).

Where do these deficits come from, you ask? If you talk to Tea Baggers or members of the Republican Party (or listen to Fox News), you'll learn that it's all President Obama's fault. George W. Bush, if we are to believe his comments during his book tour, had nothing to do with the current mess we confront.

However, the closer we look at the roots of our budget mess the easier it is to see that President Obama had little to nothing to do with our deficit problem. In fact, if we were to reprise the George Bailey story line, and ask what the world would like if George W. Bush had not been around to influence events, we see an entirely different picture of our world.

Specifically, if we removed George W. Bush's policies - and took away all the spending made necessary by the deregulation-induced economic downturn, the subsequent bailouts and rescues, the unfunded tax cuts for the rich, and the financial costs associated with paying for the ineptly managed wars that George W. Bush pursued - our national deficit for this year would be approximately $120 billion instead of $1.27 trillion!

That's right, our budget deficits would be about one-tenth what they are today. Here's another look at the root causes behind our current deficit numbers, courtesy of the Congressional Budget Office ...

Either way you cut it, if George W. Bush had pulled a George Bailey and found it necessary to remove himself from our nation's history - and if we had a guardian angel that would have let him - chances are you and I would be looking at quite a different world. A better world.

Instead, after being handed a national economy with budget surpluses, President Bush turned around and transferred those surpluses to his already wealthy friends, and then blew some more on wars that he essentially bungled and left to his successor to clean up. Throw in an economic downturn made possible by deregulation and easy money - then add subsequent bailout and other recovery measures - and it's easy to see how we've ended up in the economic hole that we now find ourselves in today.

Still, many Americans seem to think that our deficit problems begin and end with President Obama. As if President Obama has some kind of "fix-Bush's-mess" magic wand.

As President Bush continues his "Don't blame me" book tour, one thing is more and more evident: He has a clear conscience and doesn't seem to mind that President Obama is blamed for his mess.

Before I close, I want to point you to some data that should be important as we begin to discuss how we should pay for the economic challenges that now confront us.

If we look at the Nov. 17, 2010 Federal Reserve Statistical Releases we can see that while wage compensation for all of America's employees equals about 62% of national income (p. 14, line 2), America's wage earners contribute more than 83% of our nation's total tax revenue (that number is sure to increase if we consider who the Deficit Commission wants to pay for the national debt on the books).

Corporate America, on the other hand, currently earns about 14% of our nation's pre-tax (p.14, line 12), but is on pace to contribute only about 9% of nation's tax revenue in 2009 and 2010. If we compare this to the period between 1940 and mid-1960s, when corporations paid about 25% of our nation's tax revenue (and even paid 39.8% in 1943), one thing becomes clear: Individual Americans have been taking on a greater share of our nation's tax burden since the late 1960s and early 1970s, while corporate America has seen it's overall tax contribution decline.

By reducing it's overall tax load, at precisely the time that our nation has gone to great lengths to organize and stabilize our global economy for their sake, corporate America has been able to both increase profits and make bigger and bigger payouts and bonuses for its executives and shareholders. These dynamics help explain how growing income and wealth disparities in America have occurred over the past 30 years.

At the end of the day, not only did we see our already weak guardian angel get mugged when Georg W. Bush came to office, but the Tea Baggers and their Republican brethren are completely off base when it comes to understanding the roots of our national deficits, and how to fix them. 

- Mark

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