Friday, July 15, 2011

Debt and Taxes

Washington is all aflutter with the impending debt crisis disaster.  Republicans are staunchly sticking to their guns that we need “real” spending cuts with no tax increases and the President is so concerned that he raised the specter of Social Security checks not going out (with the added, and I am sure unintended, consequence of getting Granny on the phone to her Legislator).  Everyone was supposed to have an “adult” conversation about the debt, and all we get is a sideshow.  Make no mistake, this is what is happening, a circus sideshow with everyone attempting to score the political points necessary for their party to prosper in 2012.  Not only are we not talking about cutting any spending this year, which would involve someone creating a budget, they are going to try and implement their plans on a ten year window that can’t be enforced on future Congresses.  Sen. McConnell has gone so far as to forward eviscerating the Constitution by granting the Executive the power to borrow and spend whatever they want without Congressional approval. On the other side of the spectrum the Left somehow reads the 14th Amendment in such a way that the Executive branch is actually bound to borrow and spend money without Congressional approval, despite any notion of precedent, history or reality (isn’t it nice to have such overwhelming faith in one person to make all these “proper” decisions, strange no one thought of this in the “Reign o’ W.”).  All of these ridiculous shenanigans only reinforce the notion that none of the individuals leading this parade have any intention of doing anything but scoring points.

$14 Trillion in debt, that is what we are facing at the moment, over $1.5 Trillion this year alone.  Everyone’s long term plans have the U.S. running deficits like this for years to come.  Republicans throw out little budget nuggets of red meat to their constituents like cutting funding to the evil baby killers at Planned Parenthood or the left wing propaganda machine that is Public Broadcasting (please try and note the sarcasm in the preceding sentence if you would).  The President beats the drum of raising taxes on the evil rich and their corporate jets to fund our Green Jobs bullet train to future prosperity.  And in the end what affect would any of this have on the debt?  Minimal at best.  What many people have yet to realize is that cutting all the things labeled as “non-defense discretionary spending” (i.e. everything outside of entitlements and the military) would barely bring this year’s budget into balance and do nothing to address the debt.  To raise taxes on the rich folks from 35% to 39% would bring in about $70 Billion extra, which is a tad short of $1.5 Trillion.  Without seriously talking about cutting the Defense Budget and reformulating or reforming Medicare, Medicaid and Social Security there is no hope of balancing any budgets or reducing the debt.  The Republicans are standing back, on what they think is the cat-bird seat, waiting for the President to hang himself with his constituents talking about entitlement reform, while they themselves speak platitudes to reforming the system and nothing about Defense.

The tax issue is going to be the lynch pin in this debate, and no one is going to properly address this issue this time around, or anytime in the near future.  We keep hearing how the rich are doing so great, and that they could afford to kick in a little more, to pay their “fair” share.  There are some things inherently wrong with this whole line of reasoning.  First and foremost, it presupposes that the end result of your labors is not your own, that it belongs to the government, and they decide what is “fair” and how much you should keep.  Secondly, you are asking a segment of the population to pay a greater share into a system that you freely admit is broken.  How many articles have you read about government waste, fraud and mismanagement?  Every year there is a story about dozens of government agencies with overlapping and sometimes contradictory jurisdictions.  One of the selling points of the Health Care Reform Law was that it would end billions of dollars of waste, fraud and abuse.  Think on that for a moment: the government runs a program in which no one can properly estimate how much of the budget is flushed away in WASTE, FRAUD AND ABUSE, no idea, and no way to stop it (they are getting around to thinking about it) but it has to come in some sweeping yet to be realized format we can’t define.  Think on all the stories of missing billions in defense contracts, bridges to nowhere and checks to dead people.  Now you are going to tell a segment of society that they are doing so well that they should pay a larger share of their income into a system that everyone agrees is fundamentally screwed up beyond all possible comprehension.  Does that seem reasonable?  If you were one of these “rich” people would you want to step up and do your patriotic duty to pay more into the system?  Today the President spoke about how all the poll numbers say that a majority of people want to see revenue increases along with a long term deficit reduction deal.  Why wouldn’t they?  You are saying there is a debt problem, we need more money, and we will not take it from your pocket but someone else’s, and do all we can to keep your programs and benefits running.  As an abstract principle who wouldn’t sign on to that?  If you started from the premise of we have to raise everyone’s taxes to plug the budget hole left by the wildly inefficient and costly delivery of government services and programs, what would the poll numbers reflect then?  If a larger portion of your income was demanded to pay into a broken system that no one has an intention of fixing, what would your response be?

The same problems can be seen in the corporate tax system.  There is talk about removing subsidies, tax breaks and giveaways to the evil corporations who are sitting on so much money, not hiring people and paying so little into the tax coffers.  Now, any discussion of ending favors and breaks for rent-seekers fills my heart with glee, I would love to see them all disappear and let the market blow off some of the chaff from our system.  There is a major problem that once again involves the government and the backwards way they approach everything.  You can hold up any industry and say: Look at these fat cats and their tax breaks, this isn’t fair, let’s remove those perks and get them paying.  The conversation never gets to the end of that thread though, which is that those breaks exist because of the ridiculously high corporate taxes we have in this country.  The tax breaks and subsidies were put in place, for the most part, because these industries could not maintain a competitive edge with a 35% tax regimen, and instead of changing the tax structure the government passed out a freebie, so that these companies wouldn’t shutter their offices and reopen overseas.  Like any freebie the government shells out it has grown out of control, created a powerful constituency, and they have taken on lives of their own.  From the corporation standpoint, living in the shelter provided by the government, removing some of the elements of competition, they took full advantage and bended the system to suit themselves, as almost any individual would do when provided such a benefit.  Between taxes, regulation and compliance issues it is a wonder anyone keeps a business open in this country.

Pulling at little threads to fire up the base is not going to solve any problems.  There needs to be actual discussion of the necessary function of government going forward from this point.  We cannot start from revenue side of the problem, for it is a spending problem we are facing.  The government could drive up to the houses of Buffet, Gates, Zuckerberg, the Koch brothers and every other billionaire in the country, take everything they owned, leaving them on the corner with a tin cup, and we would not be able to balance this year’s budget deficit.  Then what would we do next year?  We need to rethink the size, scope and function of this government and what we expect from it before we come up with plan to pay for it.  This of course would take leadership, which is non-existent in Washington now and probably in the near future.  Republicans never seem to mention the $10 Trillion of the debt run up under their watch, and it seems that while the President may very well be as smart as everyone says he is, in terms of leadership ability, one would have to doubt at this point that he could lead a Frat House to quarter beer night at the local pub.


  1. The way I'd put it is that a "tax" is an additional fee, charge, expense or transactional cost that you cannot avoid and must pay in order to conduct the ordinary business of life.