|
Taxes, the national
debt, and us.
I was visiting a
friend’s home a couple of weeks ago, and my friend, who is far to the right of
me on political issues, was watching Glen Beck on Fox TV. I bit my tongue
and didn’t comment on Beck’s monologue, but it was amazing to me that
apparently intelligent Americans could hear what he is selling without
questioning it.
Beck was droning on and
on about the present argument in Washington on whether to reinstate the 2001
Bush tax cuts. The irony is the fact that the same people who are arguing FOR
the tax cuts are the same ones who complain most loudly about the federal
government going 1.3 Trillion dollars farther into debt under the Obama
administration, as it attempts to stem the economic disaster generated by Bush-era
policies.
Never mind the fact that
when Obama took office the nation was losing 750,000 jobs each month, and never
mind the fact that under President Bush (43) the US went 4.9 Trillion dollars
farther into debt because federal revenues were insufficient to meet the cost
of federal expenses. I am not aware of anyone disputing these numbers. At the
end of the Clinton administration, the national debt (“total public debt
outstanding”) was 5.7 Trillion dollars. At the end of the Bush (43)
administration, eight years later, the national debt was 10.6 Trillion dollars.
Difference: $4.9 Trillion, an 86% increase. Source: www.treasurydirect.gov.
The thrust of Beck’s
argument was that taxes the government would collect if the Bush tax cuts are
not reinstated, “are ‘our’ money.” His narrative suggested that American
taxpayers somehow constitute a separate entity, entirely unrelated to the
federal budget. So he proposes that we voters should elect candidates who
will allow “us” to keep “our” money, rather than paying additional taxes to the
federal government. He says this with a straight face, although if one is
paying attention to the discussions in Washington, D.C., it is clear that the
only disagreement between Democrats and Republicans is whether the tax cuts
should be reinstated for individual taxpayers who make over $200,000 per year
or couples making over $250,000 per year. It is worth noting that for such
taxpayers, the tax increase that we are arguing (4.6%) works out to about
$3,500, after all adjustments. Even if it were a straight percentage, it would
be less than $10,000 for a taxpayer making $200,000 in taxable income. Beck’s
argument, going out to ordinary Americans, clearly implies that the taxes that
would be collected if the Bush cuts are not reinstated will have to be paid by
Americans of ordinary means, which is untrue.
At this point, it is
worth reviewing a little American history.
Section 8 of the United
States Constitution gives Congress the power to levy taxes and to pay debts of
the country. In 1913, the United States ratified the 15th Amendment, which clarified the right of Congress
to collect income taxes. This is the framework within which we pay taxes.
We have a reasonably
clear process for managing our country’s finances. Congress approves the
expenditure of federal funds, both through the budget process, where it
approves broad categories of expenses, and through the federal legislative
process, where it first “authorizes” projects for expenditure of federal funds,
and then “appropriates” the necessary funds for authorized projects. This
two-step system allows Congress to determine each year that the funds it
appropriates will fit within the approved federal budget. I’ll discuss the
budget and where we can cut spending later, in another article.
Every two years, we
elect our Representatives in Congress. We send them to Washington to make these
financial decisions for us. We live in a democracy, and a republic. But we
mustn’t forget that the members of Congress are there, representing us.
We, the people of the
United States, are the American government. We are responsible for what the
people who we send to Congress do in our name. So when we hear that the
American government is 13.6 Trillion dollars in debt, it is OUR debt, not
someone else’s. We don’t have a king, who owns everything. It is ours and we
are the responsible parties. Do you remember “This land is your land, this land
is my land?” Well, this debt is your debt and my debt.
Glen Beck doesn’t get
this. He would like to pretend that “we” have “our” income and that it is
somehow unrelated to the money “we” owe as a country. It isn’t.
Responsible people pay
their debts. As individuals, we have mortgages on our homes, we borrow money to
buy cars, or to make credit card purchases, and we make the payments necessary
to pay off those obligations. In the same way, we have an obligation to pay off
the money we borrow as a nation. The way we do this is by paying taxes. And the
way we decide just how we are going to pay them off is by sending our
Representatives and Senators to Congress to make those decisions for us. Their
job is to pass bills that amend the tax code to specify who is going to pay how
much to reduce our debt.
Not paying our debt is not
a realistic option. That course, for an individual, leads to bankruptcy. For a
nation, it leads to economic disaster, because we are dependent on other
countries, and the investors in those countries, to sell to us and buy from us.
If our economy is in disarray, as it would be if we did not act responsibility
to pay off our debt, our money would become worthless, and those foreign
investors would go elsewhere to invest in businesses, to buy products they need
or to sell their products.
The Census Bureau says
we have 310,000,000 people in the USA. And we owe $13.6 Trillion. That works
out to a little more than $44,000 per person in national debt.
Now if you are with me
so far, the big question is “Are we going to be responsible adults and pay off
our $44,000 per person debt, or are we going to default on our obligation to
the people from whom we have borrowed this money?”
I suggest that we owe it
to ourselves and to future generations to move as rapidly as possible to pay
off that debt, so that we don’t leave those future generations stuck with it.
How do we do this?
The national debt
represents the accumulation of annual federal deficits, over the past 100
years. When there is a deficit, the debt is increased, when there is a surplus,
the debt is reduced. Most of the debt has accumulated since 1981. In
January of 1981, when Ronald Reagan took office, the national debt was $934
Billion, most of which was a residual due for the cost of World War II.
Up until 1981, the debt, expressed as a percentage of the GDP, had been
declining, because of responsible policies by all the presidents up to that
time. The increases since 1981 have been approximately $12.7 Trillion dollars.
Why has there been such a dramatic increase in the last 30 years?
During the Republican
presidential primary campaign before the 1980 election, Ronald Reagan, in a
debate with George H. W. Bush, called for tax cuts for American taxpayers,
stating that if the wealthiest taxpayers could keep those monies, instead of
paying taxes, they would spend it to build capacity in American businesses,
employing more people and actually resulting in MORE taxes being collected.
This is the famous “trickle-down theory.” (Please note: this is the same
argument being made today by Republicans in Congress, and by Glen Beck, in
their arguments for reinstating the tax cuts for America’s richest taxpayers.)
During that debate, George H. W. Bush described that tax-cutting concept as
“voodoo economics.” Of course he was right. Despite three decades of tax cuts
for America’s wealthiest taxpayers, the deficit and national debt have grown at
an accelerated rate. The tax savings realized by America’s richest people have
been invested abroad, and in investments that don’t employ Americans.
The result of the 1980
election was that Ronald Reagan won, pushed through the tax cuts he had
proposed during the campaign (Doesn’t everyone want to have their taxes cut?)
and simultaneously expanded federal spending, particularly to big defense
contractors who had contributed to his campaign. During the Reagan
administration, and the George H. W. Bush administration that followed, the
national deficit, expressed as a percentage of the GDP, rose from 2.53% in
1981, to 3.83% in 1993, when Bill Clinton took office. During 1983, 1984, 1985
and 1986, the heart of the Reagan administration, the deficit was running
between 4.72% and 5.86%, because of irresponsible spending and big tax cuts by
the Reagan administration.
Source: http://www.usgovernmentspending.com/federal_deficit_chart.html
At the end of the Bush
(41) administration, the national debt stood at $4 Trillion, an increase of 328
percent during the twelve years when Reagan/Bush were in the presidency. By
comparison, during the eight years of the Clinton administration, the debt
increased only about $1.4 Trillion, an increase of less than 30%.
Source: http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm
Actually, unlike the
preceding twelve years, the federal deficit during the Clinton administration
was reduced each year, with the last four years actually negative, expressed as
a percentage of the US Gross Domestic Product.
Source: http://www.usgovernmentspending.com/federal_deficit_chart.html
There is a good video,
and a graph showing who raised the national debt at: http://zfacts.com/p/318.html
There is another aspect
of the federal debt that we need to recognize.
When the federal
government spends money, most of it is for projects that employ private
contractors to carry out the work authorized. More than anything else, federal
administrative agencies are, in addition to their regulatory functions, really
big contracting agencies. The money they spend is used to hire private
contractors, who actually do the work. These contractors are the primary
beneficiaries of government expenditures, and their shareholders are the
secondary beneficiaries. These shareholders are the people who make the largest
incomes from their investments in the corporations, and the CEOs and other
executives of those corporations have notoriously high salaries and are big
campaign contributors to Republican tax-cutters.
These are the people who
would be most impacted by reinstating the taxes that Glen Beck is talking
about. So what would be the result if those taxes are NOT reinstated.
The result would be that the US government (us) would have to go even deeper
into debt to borrow the money necessary to make up for those missing taxes.
During the last 30
years, there has been a big emphasis, pushed by conservative think tanks like
the Heritage Institute, the Cato Institute and others, to “privatize”
government programs. The argument goes something like this: “Federal workers
are lazy and inefficient. They are not necessary to have as employees, when we
can contract out the work that they would otherwise be doing. We can save
taxpayer money by spending less for a private contractor to do a particular
job, and then when the job is completed, we don’t have to continue to pay the
employee.”
Now, what is the
reality? The truth is that federal employees are, on the whole, highly
trained, competent and experienced in their jobs. They produce high-quality
work at a price that is stable. The ability to see how much it actually costs
to do such work gives the federal government a good standard for comparison
when private contractors bid on federal jobs, and if the bids are too high, the
agencies can still perform the needed work “in-house.”
The truth is that the
savings realized by “privatizing” federal jobs are not as much in the pay for
the employee as it is in the nature of the employment agreement. Federal
employees, in addition to being fairly well paid, under the Federal Employment
System, have health care benefits and retirement benefits, which they pay for
out of their salaries. Privatizing the work eliminates those benefits and, by
the way, shifts the cost of those services to public agencies providing those
necessary services for the working population, and paid for by taxes on the
rest of us, the general taxpayers. So even though we aren’t paying a federal
employee, we later get to pay the cost of the health and retirement expenses
for the people who are doing the work, but it doesn’t show up on the
contractor’s balance sheet, so it seems less expensive.
When federal employees
are replaced by the employees of private contractors, who can be hired for
less, without benefits, the cost to the contractor of performing the work with
temporary workers is dramatically reduced. Some of the savings are passed back
to the government through a lower price, but most of the savings, that are
realized by not paying benefits, show up as increased profits for the
contractor. The result of all this is that federal funds, which we all are
ultimately responsible to pay for, are diverted to the corporate entities,
their executives and owners, for whom taxes have been cut. We ordinary
taxpayers are subsidizing the accumulation of wealth and rewarding the
wealthiest people with disproportionate tax benefits. We are borrowing money
from our grandchildren to make the richest people in our society richer. It is
a scam, a Ponzi scheme of sorts, imposed on people who have no way to object to
it, those children who cannot yet vote.
In another way, our
taxes, as members of this society, are the dues we pay to be able to enjoy the
benefits of this country. Those who get the greatest benefits, i.e., the people
who make the most money, should be paying more than those who are just
squeaking by. Democrats are often pejoratively described as “Tax and Spend
Liberals.” That, of course, is how our government is designed to operate. We
pay taxes that the government spends on projects Congress, in its wisdom,
decides are necessary. Democrats advocate for “Pay as You Go” to keep the
deficit under control. Republicans, based on their record of the last 30
years, are “Borrow and Spend Conservatives.” They cut taxes for their
friends while giving those friends lucrative government contracts and putting
the rest of us farther into debt. You decide which is the more
responsible policy.
So for Glen Beck, and
those who subscribe to the “no taxes” philosophy he is selling, I have to ask,
“If you are seriously suggesting that those who are most prosperous in this
country and benefit most from our economy should not pay their fair share of
taxes, and you are concerned about the size of our national debt, how do you
propose to meet our collective responsibility to retire our national debt?
Where will that money come from?”
|