“The time has come” the walrus said,
“To talk of many things:
Of shoes–and ships–and sealing wax–
Of cabbages–and kings–
And why the sea is boiling hot–
And whether pigs have wings.”
–Lewis Carroll, “The Walrus and the Carpenter.”
Ah, yes, let’s distract from the abstract. Let’s diffuse, distort, dissemble and dismember our rationality. Let’s not look at what has happened over the last ten years. Let’s talk of cabbages and kings.
European and American economists are gathered to discuss the current world-wide economic crisis. They will assemble in suits and ties and then abandon suits and ties for more relaxed attire and congratulate themselves, one and all, for the decision. They will look at numbers. They love numbers. They will look at the graphs and charts of the numbers because they love graphs and charts even more than the numbers.
They will muse, and discuss and analyze and predict and pontificate…some of them. Others will sit, staring at what is before them. And what is that? It is the best economic minds of our era, somehow detached from the rest of their bodies. That is, a very intelligent mind, falling off a cliff, without the rest of the human being necessary to reach out and grasp the branch that would save it.
Because the mind seeks the rational and the current state of economic rationality is wrong for so many reasons it is difficult to explain. Let’s try. If your daily reality is that you arise from a woven mat on the floor of a thatched-roof hut the size of a camping tent, and before you can do anything else you must walk a mile to the river for water, then you have one set of expectations.
If you arise and brush your teeth with water flowing from the gold-plated faucet in your Spanish-tiled bathroom and grow impatient for the arrival of a painter who will repair the gash your teen-age son put in the mural on the wall of your marble-floored, 5-car garage, then you have a different set of expectations.
Somewhere in between lies the communal expectation of the world’s economists, in particular European and American economists. Like an exit from Tara, “where shall I go; what shall I do?”
Well, frankly, we do give a damn. Economists are now flatly stating that we must become more austere. “Austere” is a wonderful word. It beats “cheap” by a long shot. It is better than “save,” or “tighten your belt” or “cut your damned living expenses.” Instead, can’t we all just get together…and be “austere?”
Who is going to be austere? Halliburton? BP oil? The CEOs of health insurance companies? Republicans in the U.S. House and Senate? How has that worked for us? Or will it be the guy with the ten bedroom home among the palm trees and the marble floored garage? Who is going to bear the brunt of the economists’ austerity program?
We already know the answer in this country. The President, playing footsie with the Republican Congress because he doesn’t want to rock the boat on his political agenda, has done the expedient, the intelligent thing…that which all his advisors would advise. Get what you can from these people, (these greedy, arrogant, anti-middle class crooks.) Don’t rock the boat.
So we have meetings in Europe and a “commission” set up here in the United States to solve our fiscal crisis. If you have read this blog before, you know how we got into this fiscal crisis. You know that it was money stolen from the people, stolen from Social Security and the future of Medicare and stolen from domestic infrastructure.
For example, there was the several hundred dollars that was cut from the Corps of Engineers budget, funds that they said they needed–and they were right–to strengthen the levees around New Orleans in case of…well, you know what happened. Those funds were cut because of budget “austerity” measures because of lack of revenues, because of tax cuts for million dollar and up households every year for ten years. And, yes, dammit…New Orleans had to do in large part with racism.
Everything in this country has to do with race. Race and racists. Bigotry and guns and ignorance. What is that you say…it can’t be so…because we have a half-white President? If you want to elect a Black President, elect Al Sharpton. If you want something done, Al Sharpton will get it completed by sundown. You won’t fool him and if you try to, you won’t be back.
Don’t elect a Harvard Law School graduate and Chicago Law School professor with white PhD mother and a white WWII veteran grandfather and say that you voted for the first black President. You didn’t vote for his wife. That would have been voting for a black President. And she’d kick the same, kind of ass as Al Sharpton. Oh, yes, there’d be a lot of weeping and gnashing of teeth. But things would get done. Now. Today.
Let’s get back to economics, back to the basics. Answer this question. If you owe $2000 on your credit card bill and each payday you have the opportunity to put some money, say $100 against it, are you saving money? The answer is yes, because you are reducing your debt. One day your savings will go from negative to positive.
The next question is this: Can you reduce the national debt by spending some current tax revenues to create jobs in this country? The answer is yes. The reason is similar to the credit card answer. When you spend money to create jobs you are taking a portion of that money and returning it to pay down your debt. Those jobs create more jobs and more business.
As we have seen from the Bush Recession of 2008, lack of jobs shuts down business, especially small business. If you create jobs, they will create new jobs and more government revenues to pay down the debt. The longer you have large numbers of unemployed, the longer you will have huge deficits.
Once you have created a million or five million jobs, for which we have more than enough money–we do have some cash flow, folks–then at some point you don’t need to keep creating jobs. If you then create an economy that serves Americans with products and not just hamburgers and dry cleaning, those funds will return to the Treasury in the form of revenue, and will continue long after the money to create those initial jobs has been repaid.
Let’s be very clear. If you create a job, you have benefits from having created it. First, you don’t have to pay unemployment because you are paying a salary. Some of the money is spent, helping others in the economy, some of it is taxed, going back to the Treasury. Unemployment, on the other hand, creates nothing. A job may create the infrastructure for a railroad, or inspect homes for energy conversion or build wind turbines or electric cars or raise wheat grass or research the hundreds of thousands of things that could turn into new products and businesses.
That is how this country worked from 1945 until 1980. We made things in America that we sold to other Americans who made other things in America. We didn’t need a “commission” to tell us how it worked. Before we had NAFTA and CAFTA and the reality of Ross Perot’s warning about a “giant sucking sound” of jobs being sucked out of this country to Latin America and Asia and the Middle East, we understood that industry served a purpose. It advanced society and it kept us strong.
In 1981 a new Conservative Republican President began a program that cut tax rates from 74%…which no one paid…down to 28%…which no one paid. The important thing to know is that we did cut government revenues by 50% and increased spending by about 25%. That resulted in deficits of from $250 billion a year to $500 billion a year for the next thirty years. Then came the last two Bush years, when their planned Depression became the Great Bush Recession.
The reason for the lower tax rates, the Neoconservatives will say is…who can afford to pay 74% of their income in taxes. The answer is no one. And the second answer is that even Senators aren’t corrupt enough and corporate executives meek enough to earn $300,000 and only take home $90,000.
A 74% marginal rate means that, in those days…under Carter or Kennedy or Nixon or Johnson or Ford for that matter…the IRS only taxed 74% on that portion over $300,000. Here’s how it worked.
Let’s go back to Eisenhower. The top marginal tax rate was 91% on income over $300,000. But that taxpayer would have a rate of 20% on the first $2,000 of income, 21% on the second $2,000 of income, 24% on the next $2,000 and so on, so he or she didn’t pay 90% or anything close to it. A person making $500,000 or $700,000 would pay substantially less than 90% of their income in taxes. If you do the calculation using the tax tables of those days, you will see that one would have needed to make well over $2,000,000 to reach the 90% rate. In an era of $5,000 annual incomes, that was pretty rare.
So when the top marginal rate was dropped by Kennedy to 74%, it wasn’t because rich people, like his father, were paying 90% of every dollar they earned. But they were paying probably around 50%. When Carter was President, people were not paying $7 of every $10 they earned, nor do they now. As many reading this know, large incomes are often generated from stock and bond transactions which start out at rates of only 15%. So, don’t worry about raising top marginal rates back to 74% or anything between the current 35%, which no one pays, and 74%, which no one paid.
So you can imagine that, if my top rate is 35%, and I don’t pay that on everything, which is the case, then it will come out to something around what Dick Cheney pays, 21-23%. And then there are the Wall Street hedge fund managers who still make millions and once in a while a billion, and pay no taxes or very little, less than 15% in taxes. What you do see is fewer people making more money…but those people paying less taxes in a society becoming more sophisticated.
Few people begrudge anyone else a large disposable income, even Dick Cheney. The problem comes at the point that economists do not look at a continuous $200-$300 billion dollar debt in the country and say…Hey! We’re not taking in enough money to pay the bills. When they fail to say that we can’t afford this war or these new tax cuts.
We, even those of us who do not have to walk a mile from our thatched huts or worry about the murals in our 5-car garages, we do not have the luxury of a country that lives above its means. So what does that mean for the future?
It means that people of very substantial means, who have been making millions and keeping it to use on murals for their 5-car garages, have hopefully saved a lot of that money. Because now they have to help the country. If 74% top marginal means 50% net, then that’s what people who make over $750,000 will have to do. If it means less, so much the better.
It also means that we must all accept responsibility for funding the society we live in. People at every level along the way will have to pay more. Right now, about 43% of Americans pay no income tax at all. This is distinct from the payroll tax, which is paid by everyone up to about $95,000 which covers Social Security and Medicare.
Our governmental deficits were running $300 billion in the Bush years up to the Great Recession of 2008. But the amounts of money collected for Social Security and Medicare amounted annually to $870 billion, or a full third of all government revenue–creating a surplus. So if we have a military budget of about $600 billion, then the deficit of $300 billion is not coming from a lack of funds in Social Security or Medicare. It was the other way around. The military was not generating any revenues. We don’t go to Iraq and tax the people there to pay for our war on them. Or Afghanistan. So our Social Security and Medicare funds were going to pay for the wars on Afghanistan and Iraq!
Both those funds had surpluses from 1984 up until the last couple of years. They should be solvent right now. Bill Clinton ended deficits and paid some of the borrowed Social Security back into the funds. Before any austerity program, the American People should be asking for their Social Security money back. In other words, any money that involves a deficit should be first…in addition to current payments…be paid back to the Social Security and Medicare funds. That is easy to understand and easy to calculate.
Who benefited most from the Reagan and Bush II tax cuts? The very wealthy, who now have about 70% of all equity in stocks and real estate and own 90% of the country’s wealth. And that income inequality is climbing. Corporations must also begin to pay their fair share. They now pay 7% or less of all government revenues. The total of government revenues–and this is the real problem with our economy–is less than at any time since 1950.
The President’s Commission, on our fiscal future, the Peterson-Pew Commission, has already said that a big part of the problem is Social Security and Medicare. But you now know that this is pure bullshit. The problem is that guys like Pete Peterson are heading up the commission. Peterson is a hugely wealthy multiple billionaire who likes to think of himself as a populist because he gives away a fragment of his wealth to charity or more likely to cultural affairs to make themselves feel better about going to a building for entertainment that he could afford to build himself out of pocket change.
The Bush Administration left us with the economic problems we face today. Income inequality is one big problem. The top income earners, for example the CEOs of health insurance companies, making an average of $14,000,000 a year, received $120,000 per household income of $1,000,000. So the average health insurance CEO picked up an additional–additional–$1.7 million per year in tax breaks, or a total of $17 million–just in tax benefits–over the ten years of the Bush tax cuts.
You see how it adds up for them, and why Social Security may not be the biggest problem we have in our move towards “austerity?” We paid in to create the surpluses. But the primarily Republican governments and people like Bush, Cheney, McDonnell, Gingrich, DeLay, Frist, Lott and all the rest–took that money for wars and tax cuts to those CEOs who made obscene amounts of money. No thatched-roof huts there. No walking a mile for water. Only steps to the heated pool.
Bush and Cheney ruined the economy. There is very strong evidence that they did it deliberately. They deliberately created huge deficits, spending an average of over a half-trillion dollars per year more than they took in. Now the annual deficit is over a million bucks because we have to take care of people whom they put out of work. With those income revenues gone and the ongoing needs for schools and hospitals and social services, the deficits became what some people think that they meant them to be.
So those who feel sorry for the wealthy can forget that. Warren Buffett makes a lot more than $1 of every $10 he earns. He keeps about $9 and pays $1. That’s the correct ratio and he’ll tell you that himself. The national debt–if we do nothing–they tell us with feigned alarm is going to be 100% of GDP or more by 2020 or so, if it continues at the rate it is going now. And how long has this been going on? Since 1980–since Reagan.
And what does this sound like? Does anyone remember the bearded little twirp who heads up the Americans for Tax Reform–Grover Norquist? This is Jack Abramoff’s pal, the guy who supposedly laundered some of his money through Americans for Tax Reform. This is the guy who wanted to eliminate Social Security, eliminate Medicare and eliminate Medicaid…but not cut one penny of the military budget. This new commission sounds like Grover Norquist.
This is the guy who said he wanted to reduce government to the size that he could “drown it in a bath tub.” The metaphor of death and drowning is appropriate given Norquist’s apparent inhumanity. He was apparently willing to help Abramoff cheat the already multiple-cheated Native Americans out of tens of millions of dollars they were willing to spend to create more jobs on reservations. The first thing we should do is lock Grover Norquist in a closet and throw away the key.
The Peterson-Pew Commission wants to reduce the debt to 60% of GDP by 2018. So what if it is 50% or 80% or 68.333%? The point is this: we need to create jobs here in this country. That means we need to restore manufacturing to do make the kinds of things that we used to make here but now buy from abroad.
We need to triple manufacturing locations from 130,000 to 390,000. We need to cut unemployment from 15 million to a minimum of 5 million while raising wages by 25%. We need to see to it that anyone who is talented enough or fortunate enough to earn over a certain amount pays an increased share of taxes, along with others who must share the burden at every level, until we get our accounts in balance.
We need to bring our troops home from both foreign wars and rearrange our priorities to make our country more secure. We need to secure our borders and increase the security over things that are shipped or flown into this country from abroad. We need to see to it that any corporation that makes a billion dollars a year selling to the American market, pays at least ten percent for that privilege. And any American corporation that makes products abroad and brings them into this country should pay duties the same as any foreign manufacturer.
Those things and others are the ways that we will turn this economy around and stabilize it. Not by cutting the services that Americans paid for over so many years, the benefits from which were stolen to make rich Americans even richer.