U.S. spends $6 Trillion on War and Wall Street but lacks $6 Trillion for Workers’ Retirement


As awful as the mainstream press can be there is quite often a lot of important information presented. It's always useful to try and make sense of it. What follows is just a small effort to do so. For example, I saw an article yesterday on a study issued by the Boston College’s Center for Retirement Research. They did a rather conservative study on how much will be needed to satisfy the retirement of Americans. They found there is a more than $6 trillion shortfall. According to the article, “The $6.6 trillion figure is based on projections of retirement and income for American workers ages 32-64. The study's authors say they arrived at the amount using conservative assumptions, including a 3 percent rate of return on assets and no further cuts in pension coverage or increases in the Social Security retirement age.”

I want to make a comment on Social Security but before I do that I want to point out something: first is income inequality (the top 1% account for nearly half of our financial wealth while 1 in 7 Americans live in poverty). Note that the projections were based on income. The siphoning off of wealth to the rich in various ways is depriving the working class of their retirement.

Also, the Iraq War, excluding the other illegal war of aggression in Afghanistan, will cost taxpayers $3 trillion and the bailout of Wall Street has already cost $3 trillion. The working class needs to have a clear understanding that rather than spend our money on ensuring we will be able to retire we have spent it on wars of aggression and ensuring the banks stay in business of ripping us off and that their corporate officers continue to get big salaries and bonuses.

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As for Social Security, one thing that should be noted is that the program is solid into the 2030’s and this is with no change. There needs to be change though. No, not privatization or cutting benefits or increasing the retirement age, but fixing how the program is taxed and increasing the benefits to a level that is sufficient to actually live on. The latter can’t be done without fixing the former and that could easily be done if government actually cared to make how the program’s revenue was generated was done in a fair way.

As it stands, only $110,000 of one’s earned income is taxed for social security. Income made from investment is not taxed at all for Social Security (and it often has a much lower tax rate all together, which is another problem that needs to be fixed). This means the CEO of Goldman Sachs sees less than 0.025% of his annual income taxed for Social Security while a single mom working double-shifts at IHOP sees 100% of hers taxed for the program. A clear and obvious solution to fixing Social Security is to remove the cap, at least for individuals and big businesses, and to erase the distinction between earned income and investment income so that all income is taxed.

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We should also raise the income tax rate for the rich back to what it was during the peak of the so-called Golden Age of Capitalism: 91%. Despite there being a split on raising taxes for the rich, it has a history of success. There is a connection between government debt and taxes. The right claims they are opposed to government debt and high taxes but this is either out of ignorance or deceit. Check out these two graphs. The top shows the “debt as a fraction of GDP” while the bottom one shows top income tax rates from 1913 to 2009. Put another way: take in more money, have more to spend, borrow/owe less.
 

Government Debt and Tax Rates for the Rich. What patterns do you see?
 
Notice that taxes for the rich fall right before the Great Depression and once it hits the taxes go right back up. But then government debt soars when we enter World War Two. Taxes rise even higher. And after World War Two the taxes remain high and we enter a period of unprecedented and sustained economic growth. The Golden Age of Capitalism. Well . . . actually it had less to do with private enterprise and market allocation and more to do with state intervention and protectionist policies of particular industries, but as the taxes lower the "Golden Age" starts to unwind. The falling of government debt takes a massive turn when Reagan gets into power and radically cuts taxes for the rich. This is also a period of warmongering in Latin America (see military dictators and the Escuadrón de la Muerte) and Afghanistan—remember when Reagan used the launching of a space shuttle to praise the mujahideen? Nostalgia.

Then comes Clinton and he manages to get the tax rate back to nearly 40% (though he also managed to repeal the Glass–Steagall Act, and lay the foundation for the current financial crisis), but not quite the 91% it was during the Golden Age. But that didn’t last long because in comes another cowboy/cheerleader/failed businessman/inmate-killing governor who not only cuts it down but also radically increases government spending on war and the Military Industrial Complex (not to mention give tax breaks to oil companies). Look at the graph again. Taxes for the rich have relatively remained close to the same rate yet government debt is increasing. Our debt is not increasing because social spending is increasing, and certainly not in a way that would correlate with the spike—we are still taking in more for Social Security than giving out so we can’t blame that program. War spending, however, has gone up tremendously. Clinton's last military spending bill accounted for less than $400 billion—which is still radically high—but it's closer to $1 trillion now. Some even say it has surpassed that since a lot of black budget is excluded though can sort of be traced . . .

To summarize, during periods of high taxation for the rich—that is, when they actually pay them—government debt is lower and the economy is in better shape. It also helps when we are not waging wars since they drain our gains (accounting for 50% of the World's military expenditures is a bit of a drag).

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While the working class is at it building movements around attaining an equitable economy, there are some other reforms we could and should be looking at. Namely we should also be seeking to tax derivatives, which currently constitute a $600 trillion financial market bubble. This is not taxed and not regulated. If this bubble bursts it will make the $13 trillion housing bubble look like a hiccup and not the instigator of the Great Recession.

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We should also fight for a serious reduction in military spending. The US is five percent of the world but spends nearly as much as the rest of the world combined. Cutting our spending by a factor of ten would require closing most, if not all, of our nearly 1,000 foreign military bases, ending the criminal wars of aggression and radically reducing our carbon footprint (the pentagon happens to be the largest polluter, excluding countries).

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Passing authentic healthcare reform should also still be on our agenda since what we received was corporate welfare masked as healthcare reform. It’s already been pointed out that the reform bill will not reduce spending, which is the crisis that is supposed to have been resolved. We still need singlepayer reform.

Fixing this spending problem would also fix Medicare but another important fix would be to allow the federal government to negotiate drug prices with the pharmaceutical companies that are currently robbing us blind.

Tea party people and conservatives like to cry about the spending deficit but it’s the trading deficit that is the bigger problem. The obvious solution is to stop outsourcing our jobs across seas. When we allow our jobs to be killed so the Lords of Capital can exploit the poorer labor conditions in third world countries this is what we on the working class are the worse for it.

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Lastly, the climate change crisis should be very important to the working class. If we do not meet this challenge now we on the working class will bear the brunt of it in the not too distant future. We need an internationally binding cap and trade treaty based on the Kyoto protocols, that auction off one hundred percent of all permits, that rebates progressively to lessen the impact on the most vulnerable among us and that has no grand fathering clauses in it. For the last 23 million years the amount of carbon in the atmosphere has been 290 parts per million. In less than two centuries and mostly in the last fifty years it has been increased to nearly four hundred parts per million. We must account for the cost of pumping carbon into the atmosphere but we must do it in a way that is fair. A carbon tax would punish the developing countries that are not responsible for this disaster, which is why we must build on the Kyoto protocols since it treats the developed and developing countries differently. By auctioning off all permits those who do the most polluting will do the most paying and since this would predictably result in higher energy costs the progressively distributed rebates would help lessen the effects on the poor.

Of course all of these reforms would free up a tremendous amount of revenue to invest in sustainable energy resources (not to mention education, our transportation system, so on and so forth). MIT is already making considerable improvement in solar technology with funding lower than what the oil companies get in tax breaks but we could be much further along—the oily bastards get $2 billion a year in breaks and I know MIT doesn’t get anywhere near that amount.

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None of these reforms can be won by voting alone. We should not expect elected officials to carry out these reforms with us doing nothing to pressure them to doing so. No matter who is elected we will have to struggle with them. We should be voting for the candidates we feel we will have to struggle less with. It is how we organize our struggle that is the real task ahead and that will determine whether we stand a chance or not. So long as we are unorganized and inactive, so long as the streets are empty and we are not resisting then our votes are a complete waste of time. The late Howard Zinn once said something to the effect that it is not what happens in the government buildings that determine our fate, but what happens in the streets.

PS: Speaking of class war . . . on Monday the United Nations will convene a summit on the Millennium Development Goals and what a sorry event it will be. Ten years since it was signed, and with only five years to go, none of the goals have been reached. I don't know what's worse: that this shit hasn't been fulfilled yet, that the problems are systemic or that there is so much silence on this.

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