Balancing the Budget with Tax Justice

When “fiscal conservatives” talk about balancing the budget a lot of it makes sense.

It really does. It’s good arithmetic. Don’t spend more than you have. Who can’t get behind that?

Isn’t this also the logic of environmental conservationists? We shouldn’t use more natural resources than we have.

It makes sense.

But there is more to it than that and it’s not so much what the fiscal conservatives say so much as what they don’t say.

We are in a very deep recession, possibly even a depression.

We also have an economy that is based on high levels of mass consumption.

Keynesian economics saved us from the Great Depression and has pulled our economy out of the rut many times since with the basic principle that if private enterprise isn’t spending, loaning or hiring, and consumers are just as weary, then government needs to step in and boost spending to get the economy going again.

Here is an analogy I have used and I still think it’s apt.

Imagine you are a big, fat, lazy, obese American. With current trends this isn’t hard to imagine. But here you are lying on the floor because your heart is giving out on you. Someone calls 9-1-1 and first responders show up. What do you think they should do?

(A) Tell you that you need to go on a diet because your eating habits and lack of exercise is killing your heart

(B) Get out a defibrillator, revive you and take you to the hospital to recoup

If you choose (A) then you are a fiscal conservative and you are prescribing death. If you choose (B) you are a Keynesian and understand that the dire emergency of heart failure is more important to address than balancing your lifestyle.

And the lifestyle does need to be corrected no doubt, and we do need to be able to afford the defibrillator.

But we can’t talk seriously about balancing the budget without also talking seriously about tax justice. If some aren’t paying a fair share so that the budget gets balanced then that needs to be rectified.

We need to spend. Spending is not the problem. The problem is having the funds to spend, and if we are wasting money on the Military Industrial Complex, war, corporate welfare and tax benefits for the rich then we are denying ourselves the funds we need to spend on more important things like healthcare, education, jobs, sustainable technology, good social infrastructure, and so on.

President Obama’s deficit reduction commission has released their proposals a bit early and their proposals are not at all surprising. We need to balance the budget and the way they propose to do it is to target the vulnerable, the needy, and the poor: Austerity for the needy, gluttony for the needless. 

We are 5% of the world yet we account for half of the world’s military expenditures. How do fiscal conservatives justify that without relying on falsehoods about “defending our freedoms” and neverending boogeymen? How has the rest of the world avoided annihilation considering they don’t spend as much on military as we do? We use that money to finance weapons we don’t use and don’t need to use or to maintain over 1,000 foreign bases or so we can wage illegal wars of aggression on distant lands. You would think any serious talk about balancing the budget would look at our military spending and go apeshit. You would think.

One program being attacked is Social Security yet the program doesn’t add one cent to our budget deficit. Not one. It is separate from the budget. We pay taxes and it goes into a special trust fund. It is and will continue running a surplus for a couple more decades and that is without any changes. And therein lies the rub. The program is taxed regressively. There is a ceiling, a cap. If you make $220,000 a year then only half of your income is taxed for the program because the cap is currently around $110,000. If you are Lloyd Blankfein, the CEO of Goldman Sachs, whose salary was $600,000 last year then just over 80% of your income was not taxed for Social Security and none of the $262,657 in “other compensation” was taxed. And if you make a million dollars in investments then none of it will be taxed for the program since investment income isn’t taxed for Social Security. If fiscal conservatives were serious they would fight to remove the cap and erase the distinction between various forms of income. They would say, “It don’t matter how you got the income, it needs to be taxed for Social Security.”

The problem with Medicare and Medicaid is the costs of the private system. We spend twice as much per capita on healthcare compared to the rest of the developed world who is not plagued with a dominating private system. They are healthier and live longer too. We need a national singlepayer healthcare program and we need the government to negotiate prescription prices to protect consumers from price gouging. You might want to look for yourself and see if there are any fiscal conservatives, or liberals for that matter, who are fighting tooth and nail for this. Of all the local, state and federal elected officials you may find 1% who would be for such things.

Another big problem is the tax rate for the top earners. It is currently at 35% which is a historical low and not too much higher than it was just before the Great Depression. 

During the Golden Age of Capitalism when corporate profitability was peaking and unemployment was at its lowest and our economic growth was unprecedentedly high, the income tax rate for the rich was 91%. Look at the two graphs on the left. The top graph shows the history of the income tax rate for the top earners and the bottom graph shows debt as a fraction of GDP.  It’s as plain as day. The more revenue we bring in the lower our debt is, and this particular period is called the “Golden Age.”

Our labor productivity has also increased by over 350% since this golden age though wages have stagnated. What this means is that while we work longer hours and produce more we get less for it and the rich pay less on the wealth we generate for them. It’s no wonder we are having trouble balancing the budget.

If there were any serious discussion on balancing the budget the first thing to address would have to be tax justice: dramatically decreasing military spending, progressive taxation and singlepayer healthcare reform. These three things would not only balance the budget but would also free up a tremendous amount of revenue to spend on creating new jobs and new technology, investing more in education and increasing social benefits.

And this won’t be achieved by the goodness of their hearts—“their” being our political and economic leaders. It will have to be the result of a popular struggle by an organized population which currently does not exist.

One of my all-time favorite quotes comes from Eugene Debs:

I do not want you to follow me or anyone else; if you are looking for a Moses to lead you out of this capitalist wilderness, you will stay right where you are. I would not lead you into the Promised Land if I could, because if I led you in, some one else would lead you out. You must use your heads as well as your hands, and get yourself out of your present condition.

And that’s my advice. Don’t play Follow the Leader. If you want liberation then only you can liberate yourselves. No one can (or should) do it for you.

In Greece, France and Britain, and elsewhere in Europe, students and workers have been resisting so-called “austerity measures.” Their leaders are saying they live beyond their means and folks need to take some cuts for the good of the country. But it’s all one-sided. They are going after social benefits for the poor, the young and the working class, while the wealthy sail on by. It’s austerity for the needy and gluttony for the needless. And folks are resisting it. They’re not doing enough and things may escalate, but they’re doing something.

Austerity is coming to America. We have already been through enough bullshit to warrant resistance, but like I said, there is no popular revolutionary movement in sight. Students and workers are not filling the streets and disrupting the bureaucrats of Washington or the Lords of Capital of Wall Street.

Here is the question we all must face:

When Austerity comes to America will we be what everyone expects us to be (i.e. passive-aggressive cowfucks that stay quiet, keep their heads down and obey orders) . . . or will we join the Greeks, French and British and show the world how it’s done?

It hasn’t happened yet. We shouldn’t take a defeatist stance. It only enables our own passive-aggressive cowfuckery. How the question gets answered will be determined largely by how we conduct ourselves. This falls under Chomsky’s wager:

On this issue of human freedom, if you assume that there’s no hope, you guarantee that there will be no hope. If you assume that there is an instinct for freedom, there are opportunities to change things, etc., there’s a chance you may contribute to making a better world. That’s your choice.

We can thank the Tea Party folks for making such a big issue out of the deficit. Time is ticking. The recent commission proposing unpopular changes may give us some time and room to organize and push aggressively for this. Maybe participants from the recent USSF should convene an emergency meeting to adopt a program for action???