Monday, February 28, 2011

Insufficient Funds?

This graph shows the differences in income bet...Image via Wikipedia
Yesterday, Mike's sermon was about Jesus' lesson on not worrying about clothing or food and about not worshiping "mammon".  After the sermon, we had a great discussion about what that means for us today.  And, being the political group we are, it came around to talking about what we should be doing as a society and what the government should be doing.

Generally speaking, we're a pretty liberal bunch at Nexus.  During Mike's sermon he showed some recent graphs showing the increasing gap between the rich and the middle class and the poor.  Speaking for myself, I find that growing gap to be deplorable.  The rich are getting richer while the middle class is losing ground and the poor are just barely holding their own.  So, we inevitably got around to the budget cuts going on right now- cuts which seem to be targeted at the people who can least afford them.  Most of us were talking about how deplorable the cuts are.  One of our members point out (rightfully so) that we cannot keep up the deficit spending we've been doing.  I absolutely agree with her.  Something's gotta give.  But, I wonder,  when John Boehner says "We're broke.", who is the "we"? He's right.  Tax revenues for the government are down.  Government spending is up.    The government is broke, just like a lot of us are.  But, wait a minute.  During the midst of this financial crisis, while the government is strapped, the middle class is losing ground and the poor are suffering, the rich are not only getting richer, the rich are paying tax rates that are historically low.  So, while, I agree with Boehner, the "we" he is talking about is the middle class, the poor and the government, not the top 1% of income earners.  The top 1% who, by the way, control 35% of the wealth in this country.  Sure, our government needs to be more responsible with how it spends money.  It's way out of control.  But, I'm not sure the problem is simply the fact that the country is broke.  I think the rich are  trying to take advantage of this fiscal crisis to fundamentally alter what the American public expects out of its government.  I am not at all convinced that a tax increase on the wealthy would be a bad idea.  The top marginal federal tax rate has been as high as 90% in the past.  Today it's at 35% and we're being told the rich cannot afford to raise it to 39%.  And, we believe that!

While we're all scrambling around fretting over insufficient funds and debating about whether we can afford to continue to fund programs like home heating assistance, the rich continue to get richer.  We believe that wealth redistribution is a bad thing, a socialist thing.   When Barack Obama told Joe the Plumber he'd like to spread the wealth around a little bit, he was labeled a socialist.  People in this country are very scared of socialists.  I've got news for you who fear wealth redistribution.  It's already happening.  The thing that amazes me is middle class and poor conservatives keep buying into the very system that is taking the wealth of our country and redistributing it.  Increasingly, our country is turning into a plutocracy, a society run by the rich for the benefit of the rich.  Why aren't people who of scared of socialism scared of plutocracies?

While the rich and the corporations do have most of the wealth and the power.  The rest of us still have 90% of the vote. It's not too late to change things.
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Freedom from Tyranny said...

An important fact: when top marginal tax rates were 90%, there was an endless supply of deductions (i.e., loopholes) in which rich folks could "hide" their income and avoid getting taxed on it. This was the government telling them where they could invest their money to keep it safe.

When the tax rates came down, many of those loopholes (not all, because some are favored by the middle class, like mortgage interest) were eliminated. The end result was that rich folks could then invest as they saw fit rather than as the government saw fit. This meant more investment in areas that the market saw as up-and-coming (e.g., cell phones, desktop computers, etc.).

I do agree with you that a tax hike on the rich to 39% wouldn't be a bad thing - but think about this: IF we taxed ALL the rich at 100%, we still wouldn't have enough money to pay the current budgetary obligations...and who exactly would bother working if they had to pay all the money they owed to the government?

The real issue, the real crisis, is that our monetary system is based on debt - no debt, no money. This is why there's no answer to it EXCEPT to eradicate the debt. Two ways to do that: cut spending and tie our money to a hard asset - like gold or silver.

We cannot spend our way out of a recession. No stimulus will just creates more "money" without the requisite productivity to go along with it. Thus, inflation will result. You can see it at the gas pump already and in the grocery stores. If the world decides not to trade in US dollars any longer, we're dead and see.

Brian said...

Thanks for the comment.

As you pointed out, I'm not proposing we return to 90% tax rates. I'd like to even see tax rates on the wealthy lowered (and corporate tax rates as well) as long as we close up loopholes. The point I'm making is they are not paying enough.

I don't agree that no stimulus will work. It's not the only fix. But, it makes sense to me that when the consumer is too scared or too broke to get dollars circulating the government spending on infrastructure can help to stimulate things. That doesn't mean that it is a permanent fix. But, more of a jump start.

There are two ways to reduce debt- cut spending or increase revenues. Your post only focuses on cutting spending which is exactly the problem I'm trying to highlight with this post. Draconian cuts cannot be the only answer to this crisis. There are people in this country who can afford to contribute a little more and we are letting them off the hook.

Freedom from Tyranny said...

Brian, I understand what you are saying in relation to what would be normal, everyday, state-level economics. My point is that, due to both Republicans and Democrats both allowing the Central Bank, and the central bankers who control the Treasury Dept, to control the money supply - trusting that they know what they are doing - we are in such a state of affairs that no amount of raising taxes will solve the problem WITHOUT spending cuts - but I don't mean across the board Draconian cuts.

First we need to end the wars overseas, but also bring the troops home from Europe, and Asia. On top of salaries, we are spending a lot more money on maintaining the Empire.

Second, end the war on drugs. Tax the darn stuff (not my first choice though, but it seems that's the only way that GOP and DNC leaders will agree to it). It will account for an immediate $42Billion reduction in the budget deficit. I also propose legalizing prostitution, gambling, ticket scalping...anything else where a person can make money while not hurting someone else (no one is forced to buy scalped tickets, or prostitutes...nor are they forced to gamble). Not having to enforce these victimless crimes would help many municipalities.

Third, end Corporate Welfare. I'm not talking a real corporate tax rate reduction - I'm all for that, but I'm also in favor of a tax cut for ALL business, small business included. No global corporation should have an advantage over small businesses (like Walmart does). What I mean by ending corporate welfare are the subsidies that our Congress pays to farmers, pork producers, etc. (and I'm not talking organic farmers, I'm talking Corporate Farmers). We need to stop subsidizing corporations moving jobs overseas, etc. But we also need to be wiser about regulation of businesses. Too much regulation is killing us.

Fourth, get rid of the Departments of Energy, Education, CIA (who cause most of the wars, or at least keep them going, and who have funded the international drug trade for decades), the FDA, the Agriculture Department, and a whole host of other ones that I can think of.

(continued below)

Freedom from Tyranny said...

Something needs to be done about Social Security and Medicare. I have an idea but I'm not sure it would go over well in Washington. I'll share it with you now.

We need to allow drilling for oil, and natural gas in this country - to the fullest extent that we can. Every raw material that these outfits take out of the ground (including gold, silver, ore, trees, etc.) should be taxed. ALL of the money generated by that tax should be used to set up a fund that will pay every American CITIZEN a basic guaranteed income (BGI). This income would follow the person through to the end of their life. No more need for Social Security. Those who've paid in will get theirs (along with the BGI). Other than that, no one will pay in any longer...that would give every American a tax break - not having to pay SS tax any more. There'd be no need for much of our welfare system, as it will be replaced by the BGI.

Re: health care. Ban all for-profit hospital insurance companies from this country. Allow non-profits to be created, with strict controls concerning administrative costs (no multimillionaire CEOs). Those non-profits would get government monies out of the Raw Material Tax, and the savings that we experienced by eliminating welfare, etc., and would create neighborhood clinics to care for local citizens. Those who are more well off could be asked to pay a small co-pay for their medical care, while those who only have the BGI (and maybe some extra dollars from working) would pay nothing. The government could fully fund non-profit hospitals too.

With the savings that corporations would have in not paying for workers' health insurance any longer, they could assist in paying for the health insurance plan I mentioned above. In addition, with the BGI to follow their retiring workers, they wouldn't have that cost of having to fund private pension plans.

There are a million things that we could do that would not hurt the poor, not hurt the middle class, not hurt the rich even, but that would only hurt the bankers and politicians (who rely on these other schemes to get elected by badmouthing their opponents).

I got my ideas from reading a writer from the 19th century named Henry George (you can find his institute online). While he advocated eliminating all taxes except a land tax (the Freedom Democrats and the Green Party of Canada, and of Europe both endorse his Land Tax policy), I am only proposing the Raw Materials Tax as a measure to get us out of the middle east and out of the financial mess we are in.

Oh, btw, we have to END THE FED - supported by Republican Ron Paul, Democrat Dennis Kucinich, and Socialist/Independent Bernie Sanders. That would fix most of our problems right there.

Sorry I got so long winded. I like sharing my ideas with people who obviously think (you obviously do). I'm not saying my ideas are perfect, but we have to start somewhere.



Brian said...

Thanks Ed. That's a lot to take in. I agree with some of it and I don't understand some of it. But, I agree that we need a change of course.

Rhonda said...

Hi Brian and Ed,

Do we realize that when a person's property is taxed, this is theft? By force? Why would we want to sanction (by voting) stealing behind the threat of imprisonment, and/or a gun? Stealing is taking by force what belongs to another. Why would we sanction that?

The only kind of taxation that isn't stealing would be a voluntary system, such as a sales tax. --rhonda

Someday said...

Kudos to Freedom from Tyranny on all that he/she said except the "getting rid of" for profit insurance companies. Get rid of group insurance plans, have the insurers have to compete in a real market again, where they will have to compete for the attention of the individuals again. Never subsidize it, that just drives up the prices.

Brian, I am all for the US creating more wealthy people!! That's what makes the gap between the poor and the rich. MORE Rich people!!! Yay! The more people that move into the "Rich" category, the better we all are. I just cannot abide by this socialist mentality that there is a finite pie.
Why do you think Government redistribution of wealth works? Can you give me clear examples of where government redistribution of wealth has had lasting success? Greece? Spain? Ireland? Please look to Europe and see what these policies have wrought before wishing those policies on the rest of us who do not want to reap it's "Benefit". They are trying to blame Capitalism, but the most Capitalistic nations are having few problems. Singapore, Hong Kong, New Zealand, Australia, Switzerland for example. Why not model society after these nations instead of the failed socialist experiments of Europe??


Brian said...

Someday, I was not suggesting that we model our system on those of failing socialist experiments. I made the comment that those who fear wealth redistribution are failing to see that we already have a massive redistribution of wealth happening right here in the good old USA.

To be clear, I am against pure socialism. It simply doesn't work. People need incentive to be excellent and that incentive is being rewarded for the fruits of their labors and for taking risks.

I'm not advocating a return to the top tax marginal rates of 90% (which we have had) or even 70% or 50%. But, to return to the Clinton era rates on the very rich seems very reasonable to me.

Someday said...

There is a natural wealth distribution that occurs with free trade. Central planners always think they can do it better. They never do.
The Federal Government has proved it is really only good at one thing. Making war. Lets end at least two of our police actions and close a multitude of bases overseas. Let's stop giving money to nations that are turning around and lending it back to us. Let's stop funding NASA to be reaching out to the Arab World. Let's close the Dept of Education. You know there was none when you went to school? And ever since this dept came into being, US test scores have dropped and dropped in relation to the rest of the world. Let's close the Dept of Transportation and give the Coast Guard to the Navy. What? The states can't build roads on their own?
Let's stop subsidizing commodities. Eliminate Saturday Postal Delivery. Get rid of the $1.00 bill and replace it with coins.(Government Accountability Office estimated that replacing the $1 bill with $1 coins would save $5.5 billion over the next 30 years.

Let's investigate all of these things plus many more ways to save money before the Government is allowed to confiscate (at the point of a gun via police powers) any more of it's citizens money. Yes. Rich people are citizens too.....for now.

Brian said...

Great ideas, Someday. Yes, there is a bunch of waste that can be eliminated. Unfortunately, all the things you mentioned added together are probably barely a drop in the bucket. But, that doesn't mean we shouldn't do them.

I still don't understand this ideological refusal to raise taxes on the very wealthy BACK to rates that we had under Reagan, Clinton, and George H.W. Bush. Why is it suddenly Robin-Hood like to remove the TEMPORARY tax cuts of George W. Bush? You seem to be willing to do everything but that. And Republicans are willing to cut seniors Social Security and cut poor people's Medicaid before they'd ask a billionaire to pay $1.00 more in taxes. Please explain.

Someday said...

Hi Again Brian.

I am not a Republican, so I'm not sure that I'm the one that should be defending that parties particular stand on issues. I don't recall them putting cuts to Social Security on the table, however I have heard our President say that he may not pay Social Security recipients if the debt ceiling is not raised. I don't believe that ......for if that were true, that we need to borrow money to pay for S.S., it's in more trouble than ANYONE thought it was and needs a drastic overhaul immediately.
Medicare.....well I'd like to point out that ObamaCare is supposed to cut payments to doctors by 21%. Other cuts planned are to be paid for by "reigning in fraud/abuse". I think the Republican plan cuts less. It plans on there being no ObamaCare in place. Of course, I could be wrong about who cuts more. I am personally for cutting it for future generations.

The main reason I am against raising the taxes to pre-GWB era is because this tax hike affects far more people than it did in the Clinton era. In other words, there are a lot more people/small businesses making over $250,000 dollars a year than there was then. Bear in mind, the policies of the Fed Chairman has purposely caused an inflation of our currency in order to lessen the impact of our debts. The money is worth less so the amount we pay back is less burdensome. This means that inflation has lessened the value of everyone's earnings. Quantitative easing is thereby a tax on EVERYONE. More people make over $250,000 but $250,000 is worth much less than it was in the nineties.
Since quantitative easing has already caused our dollar to decline, to me that's a tax. But it's a crafty sneaky hidden tax that congress never gets to vote on.


Brian said...

The Republican plan for Medicare pretty much ends Medicare as we know it and turns it into a voucher program, Someday.

Someday said...

Interesting, To be applied to the private insurance of their choice? That sounds a lot like a couple of the "Public option" plans that circulated around the House and Senate during the ObamaCare Debate.

Brian said...

What's interesting is the Republicans beat Obama up about cutting Medicare under Health Care Reform. Now they want to gut it.

Someday said...

That's politics for you Brian. Both Dems and Repubs demonize each other for touching either SS or Medicare. They use it to scare voters away from the "evil" party that wants to reform these broken programs.