IF THE GOP WERE SERIOUS ABOUT THE DEBT ... (but they're not)

Last week in "Ten Myths About Our Budget Mess" I discussed in Myth #2 how America's wealthiest (and upper middle class) benefit from more than a trillion dollars in tax exemptions and tax deductions. These refunds are really taxpayer funded gifts that help subsidize corporate America's profits. I didn't provide any details other than to note that we could go a long way in solving our budget problem if we went after some of these deductions.

Below, courtesy of the Huffington Post we have a pretty good break down of the ten most expensive exemptions and deductions that transfer wealth from you and me, and end up costing us at least a trillion in revenue per year - and even more in the future (click to expand).

As I pointed out in my earlier post, if the GOP were really serious about our budget deficits they would be looking at reducing or eliminating some of these exemptions and deductions. But they're not serious. So don't expect them to consider any of these deductions and refunds.

- Mark

TEN MYTHS ABOUT OUR BUDGET MESS (and Why The GOP Isn't Serious About Solving It)

Imagine what would have happened if after Pearl Harbor the president had declared war on Japan, and then invaded Korea. Most Americans would have thought FDR was crazy. Taking your eye off the ball to pursue monsters that exist only in your world doesn't win you many fans.

But this is precisely what the GOP is doing with our current budget mess. They are taking their eye off the ball, as they pursue monsters in a world that only they believe is real. Below I consider their Monster Myths, and the very real Budget Realities that should be shaping our current budget debate.


MYTH #1: BUDGET DEFICITS ARE PRESIDENT OBAMA'S FAULT
We hear it all the time. President Obama is to blame for jacking up our budget. Nothing could be further from the truth.

BUDGET REALITY: Consider this. If it weren't for the Bush era policies - tax cuts for the rich, unfunded wars, deregulation induced market collapse, trillions in bailout costs, etc. - our budget deficits would be right about $100 billion - or less - instead of around $1.3 trillion.

Or we can look at numbers this way ...

Either way you cut it, President Obama isn't to blame for this budget mess.


MYTH #2: TAX CUTS FOR THE RICH REDUCES DEFICITS
We've been told this for the better part of 30 years: "We need to cut taxes on the richest Americans so they can invest." The added benefit of increased investments will "trickle down" to the rest of America in the form of economic growth, and more tax revenue.

REALITY: After 30 years of tax cuts for the rich we now have a national debt that's gone from just under $1 trillion in 1980 to $14.3 trillion today. The Republican response after more than 30 years of having their grand theory blow up in their face? They're proposing yet more tax cuts for the rich.

MYTH #3: WE CAN FIX THE BUDGET BY CUTTING ENTITLEMENTS
We're told every day about rising Medicare and Social Security costs. Ergo, the argument goes, we need to cut benefits for these programs.

REALITY: After decades of providing favorable legislation for a select few Americans we've created at least $1 trillion in write-offs and charge-offs for corporations and other individuals. The really good part is that you and I pay for it. For example, if you like going to lunch with your business friend, who picks up the tab, guess what? You and I actually help pay for it. It's called a business expense, which the business community gets to deduct from what they pay in taxes. Congress has created so many of these deductions that you and I get to pick up more than $1 trillion in business and other expenses.

The Republican want to ignore that we could go a long way in solving our budget deficits if we went after some of the more than $1 trillion in write-offs and deductions we have in our tax code. Why? Because these deductions help their campaign donors.


MYTH #4: SLASHING SPENDING WILL FIX THE MESS
One of the things we're told is that spending money on the state is a waste. The state can do nothing right. As such, we need to cut back on wasteful federal and state budgets because they drain revenue.

REALITY: Today there is more than $330 billion in uncollected federal taxes. Yet, the Republicans want to cut the budget of the IRS by $600 million (with even more cuts later). What the GOP doesn't understand is that for every dollar the Internal Revenue Service spends on audits, liens and seizing property from tax cheats they bring in more than $10. This is a 10:1 rate of return. So, to simplify, if we allow the IRS to spend ...

... we get $10 in revenue in return ...

While no one likes paying taxes, this sounds like a pretty good investment to me.


MYTH #5: SLASHING SPENDING WILL FIX THE MESS (again)
Again, we're told that state spending is a waste. The state can do nothing right. As such, we need to cut back on wasteful federal and state budgets because they drain revenue.

REALITY: According to the Congressional Budget Office (CBO), for every dollar the federal government spends on public work projects, or transfers to ordinary Americans (in the form of unemployment benefits) it generates between $1 and $2.50 in economic activity. This is what it looks like every time we spend money on regular Americans ...

will get us about ...

MYTH #6: TAX CUTS FOR THE RICH GENERATES GROWTH
Like Myth #3 above, for the better part of 30 years we've been told that if we cut taxes on the rich they will invest and generate more economic activity because the rich know what to do with their money. Ergo, we need to provide the rich with more tax cuts.

REALITY: Of all the lies about tax cuts creating more wealth for everyone this one has to be perhaps the biggest lie of all. In fact, according to the Congressional Budget Office, for every dollar in tax cuts we give to America's richest class we only get 50 cents (and perhaps as little at 10 cents) in return. Or ...

in tax cuts for the rich will get us (maybe) ...

MYTH #7: TAXES ARE TOO HIGH ON CORPORATE AMERICA
A couple of weeks back we heard on "60 Minutes" (from corporate America) that corporate tax rates in America were among the highest in the world.

REALITY: Apart from the fact that corporations should stop whining since they are able to draw from U.S. government funded universities, infrastructures, research centers, its military, legal networks, policing bodies, etc. the reality is corporate tax rates in America are at record LOW levels.

In fact, when we look at what corporations (and what their millionaire CEOs) are paying as a share of tax revenue today versus what they (and you and me) paid years ago, the "high corporate tax rate" meme is, quite frankly, a hoax.

Incredibly, the high tax rate meme gets worse once you understand the difference between the "marginal" tax rate and the "effective" tax rate, which you can learn about here.


MYTH #8: SOCIAL SECURITY/PENSIONS ARE A BURDEN
We know that Social Security has produced surpluses, and that the federal government owes the system at least $4 trillion from what it has borrowed from the program. The Republican response? Lie, and say our retirement system is broke, and then make misleading proposals to cut or privatize Social Security.

REALITY: As I've been pointing out year after year, social security is not in trouble. In fact, it's one of the few "profitable" government programs we have. Every president knows this because they've been borrowing hundreds of billions from the program for years. We now owe Social Security trillions in back pay. Oh, and federal pensions aren't really underfunded either. We're just getting ripped off by the private sector, in more ways than one.

MYTH #9: WE NEED TO BE MORE LIKE THE RUGGED RED STATES
Remember Sarah Palin on the 2008 presidential campaign trail, telling us how we needed to do what they do in Alaska? Indeed, how many times did you hear Sarah Palin say how much she appreciated being in the American south because the people there reminded her of the rugged individualists in her home state? There's a reason why this was the case. They're a bunch of Red State Welfare Queens too.

REALITY: While Sarah Palin and other Red State politicians likes to wax nostalgic about the rugged individualists they represent, for every dollar most Red Staters pay into our nation's treasury they take out more than they put in. So, for example, for every dollar Alaskans pay into our nation's treasury box they take out $1.84. However, for every dollar California puts in we get 78 cents in return. 

MYTH #10: GOVERNMENT = SOCIALISM
We've all watched as Fox News, Rush Limbaugh, and virtually every Tea Bag groupie has piled on, telling the world that "the State is the problem."

REALITY: OK, time to have a little fun. I posted on this a few years back (and in the fall). Unless you're a conservative, this helps illustrate how intellectually bankrupt the "hate-the-state" mentality really is.



Moral of the story? The Republican party and their Tea Party brethren are not serious about the budget. They never have been. Why else would they have introduced misleading stories and a budget with no numbers? They would rather peddle myths about trickle down economics, and blame President Obama for our budget mess, than deal with our budget realities. It's all about creating a political narrative.

Put more simply, the GOP has no problem with the state appearing bankrupt, or allowing it to go broke, because it makes their "private sector" ideas look better. It's part of their 30 year race to the bottom strategy.

Unfortunately, in spite of overwhelming evidence that debunks their smoke & mirror lies, their strategy appears to be working.

- Mark

THE REAL NATIONAL SECURITY THREAT

Of all the problems we've had over the past two years, perhaps the worst is what's been happening in Congress. Rather than look at itself and understand that it's the institution that's supposed to control the rules of the game, it points to Wall Street and says they're to blame for making things bad. Former Labor Secretary Robert Reich looks at Sen. Christopher Dodd complaining about Wall Street and says that Dodd complaining about Wall Street is like an alcoholic complaining about the bartender who gives him more drinks when he only wanted one. Indeed.

At issue is how bailing out Wall Street over and over, coupled with the continuous and seemingly never-ending costs of the wars in Iraq and Afghanistan, drains our national treasury. As I've pointed out before, because they're not being paid for today the wars in Iraq and Afghanistan constitute a "hidden tax" on our future. Worse, war coupled with the incompetence of Wall Street are putting a drain on our larger economy, which the Director of National Intelligence, Dennis Blair, points out poses a greater threat to our country than al Qaeda.

This article makes it clear that reckless financing is the real threat we face as a nation. Why? Because "More empires have fallen because of reckless finances than invasion ..." I couldn't agree more. Read this article. It's a good one.

- Mark

MAINTENANCE? HIGHER FEES? FURLOUGHS? IT'S A TAX

Whenever I teach American Politics (PS 101) at the university I cover economic policymaking and discuss the roll taxes play in building our society. One of the points that I make is that if there's no money in government coffers we either have to go without, borrow, or find new ways to pay for our quality of life. The Republican "tax cut / no new taxes" jihad has given me the perfect example to explain all three.

For example, when you drive down a road and hit a pothole that forces you into the repair shop that's a tax.

My students begin to understand how this works when I explain that every time we cut taxes, or refuse to raise them, that they see the result when their tuition fees are raised. This year, to help settle the state's budget shortfall, students in the California State University system will be paying 30% more in fees. This adds up to almost $1,700 in fees per quarter at CSU, Bakersfield. My friends, when you have to pay almost 30% more for state services that's a tax.

Many of our students will either have to borrow more money, cut back in other areas, or simply drop out.

My colleagues and I at the university have just been notified that, with the furlough plan implemented, we will lose a little over 10% of our salary this coming year. Call it what you want, but the furlough program represents a 10% tax on all affected Cal State employees.

There are various ways to pay for programs and necessary services that have helped to make our state and society the most effective and productive in the world. Imposing higher fees, mandated furloughs, and borrowing are several ways of paying the piper.

But make no mistake. It's a tax.

- Mark

WHO PAYS ...

Today a caller wanted to complain about two things: 1) that I made fun of Rep. Michelle Bachmann (R-MN) because she doesn’t know history and (2) that poor people are ruining this country because they don’t pay taxes.

I don’t apologize for making fun of Rep. Michelle Bachmann. Click here to see why.

As for the tax argument, my caller complained that the poor are “dependent” and don’t pay their fair share. It’s the standard right-wing mantra … I work hard, so why should I have to support those who don’t work. To his credit, my caller left out the standard reference to illegal aliens (perhaps because earlier I had trashed Glenn Beck, Jay Severin, and Rush Limbaugh for their xenophobic Mexican hate-mongering over the swine flu).

As for who pays taxes ...


While it’s true the bottom 50% of the wage earners pay just 2.99% of all income taxes, it’s also true that their share of the national income (about $1 trillion divided between 67.8 million workers) amounts to only 12.5%. What an atrocity, my caller might still have claimed, if we had not run out of time.

However, it was clear that my caller didn’t want to discuss that every worker has to pay 6.2% in social security taxes and 1.45% for Medicare, meaning that they do have to pay taxes out of their paycheck. In fact, approximately ¾ of U.S. households pay more in social security taxes than they do in income taxes.

What people also forget is that after they earn $102,000 per year high income earners don’t have to pay into social security. This allows at least 10% of national income to go untaxed. This explains why the average middle-income household pays 9.6% of its income in social security taxes, while households in the top 1% of income pay less than 2%.

There’s more (especially on the philosophy behind progressive taxation), but any further discussion on taxes would bore the hell out of you.

At the end of the day, as Supreme Court Justice Oliver Wendell Holmes pointed out, “taxes are the price we pay for a civilized society." Just as importantly, given the great infrastructures and public institutions we have created in this country, taxes have enabled us to make the investments that have created opportunity for all in this country.

- Mark

PRESIDENT BUSH'S HIDDEN TAX

The Bush administration is taxing the hell out of America. And they’re doing it the same way medieval monarchs and petty tyrants have done it through the ages – by forcing you and I to cover their debts. Here’s how it happens.


Whenever you create or produce too much of anything its value goes down. Today America prints and spends more dollars than we can back with the goods we produce (or the gold we have on hand). Hence, the value of the dollar has gone down. This is how President Bush’s policies make this situation worse.

Since George W. Bush came into office we have added over $3.8 Trillion to the national debt. Today we owe roughly $9.4 Trillion (when Jimmy Carter left office we owed about $979 billion).

Every time President Bush spends money we do not have he's telling the American taxpayer "I'm irresponsible. But you still have to pay this back ... today and well into the future." This, my friends, is a hidden tax.

But it’s also the simple part of our hidden tax.

As the Bush administration continues to send dollars out to the rest of the world the value of the dollar declines. Over time people and countries, like our rich Arab friends, who use the dollar to purchase stuff eventually start looking around and say to themselves, “Hey, this Lexus costs me more in dollars.” But they can’t really complain because our Japanese friends are saying, “There are too many dollars out there. They are not worth as much today. Let’s raise the price of our Lexus.”

Our Arab friends, in turn, raise the price of their product (in this case, oil) so they will have more dollars to buy the Lexus they want. This helps to explain the surge in gas prices (and rising prices elsewhere).

The fact that Americans have to fork over more money – for petroleum and a Lexus (among others) – is a direct result of the falling value of the dollar. Simply put, rising prices (or inflation) constitutes a “hidden tax” on the American consumer.

The worst part? The hard-working American consumer is paying this hidden tax so President Bush can pursue his Blundering Wars Project and, incredibly enough, so he can cut taxes on his rich friends.

Nice.

John McCain, and the Bush administration, are banking on the fact that Americans won't figure this out.

- Mark