A painful consensus coming
Years ago when I was a hippy kid traveling in Morocco, I stumbled late at night into a filthy hotel in Tangiers.
The proprietor showed me a room so disgusting that only sheer desperation made me consider it. Instinct caused me to throw back the bedclothes.
I found that some feckless soul had been chewing pistachio nuts and spitting the seeds onto the bed.
I turned to the hotelier and said, “I’ll take the room, but you have to clean up the pistachio shells.”
The man looked at the shells, then at me, and said, “There are no shells.”
That moment was a metaphor for American politics since 2000, when George W. Bush began accelerating both the growth and indebtedness of the Federal government at rates never seen before.
It was a metaphor, too, for President Barack Obama’s budget proposals, which offer no remedy for dangerous levels of government borrowing into the distant future.
Finally, it was a metaphor for the GOP’s “Pledge to America,” which demands that tax cuts for the wealthiest citizens in our country continue indefinitely.
All of these politicians have been gesturing feebly at the pistachio nuts on the bed and saying,” There are no shells.”
They know better, and so do the American people. Even in “liberal” states like New York, a consensus is forming that the time has come for a major and painful realignment.
Boiled down to its simplest terms, the truth is this: Our taxes are too low and our government is too big.
On the revenue side, state, local and Federal governments will all have to boost the amount that we pay in taxes significantly — and not just for people who earn more than $250,000.
The claim made by Mr. Obama that we can turn the corner on this problem with 95% of our citizens avoiding pain is, in a word, ludicrous.
And those conservatives who claim that we are overtaxed are simply ignoring facts and history. Our tax rates are at the lowest level in post-WW2 history, at a time when we are fighting two wars.
We are also trying to rebuild our badly eroded infrastructure — everything from highways to broadband networks — and scrambling to revitalize America’ s education and healthcare systems before they collapse.
That will cost big bucks. More of it will have to come from us, and less from lenders in Asia and the Middle East.
But at the same time, Americans will have to accept dramatically reduced services from our government.
The era when we could foist our elderly grandparents onto the taxpayer, or demand that the Federal government support us with Social Security checks for a third of our lifetimes, is coming to an end.
The day when we could spend more on our military than the next ten nations in the world combined is winding down.
The idea that public employees can earn more and enjoy better benefits than workers in the private sector — that’s an imbalance that simply can’t be sustained.
Ideologues on both ends of the spectrum will squawk at these facts. But most Americans see the pistachio nuts for what they are and want something done about them.
Will the change be painful? Sure. But there’s an old saying: You made your bed, now you have to lie in it.
Unless we start cleaning soon, we’ll be stuck in this mess for a long time to come.
Tags: election10
Your mindset is limited by your view of the greatness of this country.
George Washington didn’t summons his men onto the field of battle with a cell phone. Why not? Everything that makes a cell phone work was available on earth in the 1770s.
All the inventions that made our country prosper came because of the freedoms our form of government allows.
We can grow our way out of this mess if the government gets out of our way. Inventions too great to imagine are available if free men and women are rewarded for trying to achieve them.
This baloney about tax breaks to the rich is the lowest form of pittance from an unimaginative group that thinks everything great comes from the government.
It does not.
Rich and poor need less punitive taxing. Thieves disguised as politicians need to be voted out of office (if not thrown in jail – Mr. Rangel).
We need to get out of the class envy rut and get on with working to make this a better nation.
“For every complex problem there is an answer that is clear, simple, and wrong.” ~ H. L. Mencken
Market fundamentalists would do well to heed these words. 30 years ago, this chant of, “… business good, Government bad”, has proven to be the ultimate incarnation of the story of, “The Emperors New Clothes”. The Republican’s latest cynical ploy to continue transferring wealth from the middle class to the wealthy elite, as they have for the past three decades, is the most cynical approach yet. They would see the deficit increased by 700 billion dollars over the next ten years to finance tax cuts for the wealthy. They would increase defense spending by hundreds of billions, (which is their favorite form of pork barrel spending). Between financing our current obligations and funding these new debts, there would be no money to finance any of our current social safety net programs. Gosh, what a coincidence, all of the New Deal and Great Society programs, ( the ones that conservatives hate), would be defunded out of existence and replaced by private, for-profit insurance models. After all, the private sector has done such a great job on health insurance for the past 60 years, we should be thrilled to put business in charge of all of our safety net programs, right?
Actually, my private health insurance is pretty good. If yours isn’t you should switch to another one. Competition is a good thing.
My dad recently had a stay in intensive care. He has both Medicare and private health insurance. As expected, the Medicare was a nightmare, and the private insurance was ideal.
Not sure where you are coming from with your dislike of private health care. Once again, you can always shop around for a better one.
I’ll be honest. I find these ideological responses more or less beside the point.
They all offer an essentially painless answer: Tax the rich to solve our problems or, conversely, cut all our taxes and THAT will solve our problem.
Most Americans are smarter than this.
They understand that when you’ve bumbled your way into a deep hole – by, for example, funding two massive wars and huge new entitlement programs on borrowed money — everyone is going to have to make sacrifices to solve the problem.
Whenever anyone offers an easy and painless answer to our current situation, they’re outing themselves as fundamentally unserious.
–Brian, NCPR
It would be nice to think that people would be willing to make sacrifices, but they dont seem to. Many are resorting to “magical thinking” e.g. we are going to grow or invent our way out of this mess. On the other hand the sacrifices arent really that large. Reign in social security cost of living increases slightly, and raise taxes slightly, and we would be ok. Honestly facing health care cost increases (would require “rationing” health care and maybe restructuring financial incentives) would help a lot as well.
Another adjustment might be devaluation of the currency either by the Fed or US government. Devaluation of the currency would reduce the debt burden at the expense of lenders. It also might come about by changes in the exchange rate. If oil is no longer priced in dollars but a basket of currencies, the US dollar would lose value as the world’s premier currency.
JDM said:
“Actually, my private health insurance is pretty good. If yours isn’t you should switch to another one.”
This is one of the great problems with the current system. Most individuals have employer-based health insurance. It is employers who have the choice to switch, not their employees. My wife and I both have employer-based insurance options. We could have a family plan through my employer, or through hers, or we could each have individual coverage through our respective employers–but that’s it.
Another problem is that most people have no way of telling whether they have a good plan or not, until they need something pricey. After that it’s too late to switch–they have a pre-existing condition.
Dale Hobson
NCPR Online
Yeah, lets devalue the fiat currency and back it with……hope and change? And just “raising the taxes a little” will fix it all? Jeeze, I’d love an easy answer too guys, but the problem is a little larger than that.
You have 2 major parties, both fanatically driving to stay in power or gain power. Both are in bed with various and often the same industrial, corporate or Wall St type players. None of them, at least the vast majority of them (“them” being Congress and the entrenched bureaucracies and political hangers-on) have any interest in fixing the problems they benefit from. Democrat or Republican, I really don;t think there’s much difference between the two.
So with that in mind you have to realize the only way any of “them” will actually move towards fixing anything is if it’s from a position where they can take credit for anything good that happens, deflect blame for anything bad that happens and be almost guaranteed that they will be able to profit from what ever is done.
So Brian M or JDM or John or anyone else tell me why you have any faith in the current “powers that be” in actually fixing anything. Maybe some of you see things more clearly than I do, but I have ZERO faith in the current PTB making any real difference. Re arraigning the deck on the Titantic so to speak…
When was the last time a President or a politician asked the American people to sacrifice? I sure can’t remember.
I was not advocating devaluation but think it likely that this is where all this is going for the exact reason that Bret mentions–no one is willing to make the tough decision. That presumes of course that what is going on is a problem that can be solved somehow rather than a predicament– a set of converging issues that do not readily lend themselves to being resolved through normal means. The alternative is some kind of crisis, quite possibly with change forced on us by other countries–such as the dollar no longer being the reserve currency, or reduced access to oil for geopolitical reasons.
PNElba, it was Jimmy Carter. And he was raked over the coals for it.
We could go back to the 90% tax rate for the rich when “I like Ike” was President. That would be a return to honest Republican values.
Dale:
The great thing about this country is we have the opportunity to get out of it what we put into it.
Hard work is still rewarded.
If one does not the opportunity to get their choice of anything, health insurance, pay level, education, occupation, one can improve one’s self until they achieve their own desire.
Health insurance choices are possible to those who want to work for them, just like higher pay is available to those who want to work for it.
Pete, you can pass tax law that says anyone making more than $100K get’s taxed at 90%, what exactly will it do? Make a lot of poor people. So set the limit at some “reasonable level” like what? A million? A guy makes a million bucks and the Federal Gov’t takes $900,000.00 of it? And why exactly would he stay in business with rates like that? Or even stay in the country?
Sorry man, but ideas like that breed 2 things- a bunch of rich people leaving the country and tax shelters for all those that stay. You be farther ahead going to a flat tax or consumption tax instead of an income tax if you really want to bring in more revenue.
Some proposed ideas are near criminal. There’s a 1% tax being proposed somewhere for every bank transaction. Think about that- you cash your paycheck- 1%, you pay your bills by check or electronically-1%, to make an ATM with drawl- 1%, you buy gas-1%, you buy groceries-1%. Some of you talk about regressive tax schemes, just think about this one.
Actually the last one I remember asking us (telling us) to sacrifice was Bill Clinton when he told us we’d have to “contribute” more. But, he felt our pain.
Okay, I don’t mean to monopolize this, but the potatoes take time to cook. So lets say that people in Gov’t do come to the realization the party is over and that both Dem and Repub have entered into obligations and debt that we simply cannot pay off. Okay?
Option one-
Lets also suppose they do what Mexico did to us a decade or 2 back right after we told the world we’d back them and devalue our currency. Okay? So let’s use 25% as the figure. We devalue our currency to 25% of it’s face value today. So our debt can theoretically be paid back at 25 cents on the dollar. Our current $13.4 trillion dollar National Debt is now only a measly $3. something trillion. Cool! But, the $20.00 Walmart made in China item of yesterday now will cost $35.00 if I follow the idea correctly. And that KIA car at $20K will now run $35K. I think that’s the way it works. So what happens to our commodities like wheat? Say it’s currently $6.00, with deflated currency is it now 75% more or does the farmer get 75% less? And if I follow it right, this would mean our current $75.00 a barrel oil would now cost us 75% more, so gas at the pumps would naturally rise 75% at least, right? But wages….wages would do what? Our dollars would now be worth 75% less in relation to the rest of the world, so what would that really mean here at home?
Option 2-
They do nothing and the system collapses when our credit rating drops to 3rd world country levels.
Option 3-
They do nothing and continue to tax and spend and grow gov’t
until we wake up one morning and find ourselves living in East Germany.
Option 4- They do nothing and continue on present course and suspend the Constitution, BoR, declare price and wages freezes, etc. and we have a Civil War.
Those are the 4 most likely options I see. I’m open to suggestions and, of course, your heartfelt and loving criticism.
Option 5 – cut taxes and for every $1 in tax cuts we have $2 in government spending cuts.
Unlike the Reagan years, when $1 in tax cuts was met with $2 or $3 of government spending increase.
JDM –
I know this is hard because it’s ideological. You think taxes are bad, and government is worse…end of story.
But the truth is that the formula you’re talking about is simply mathematically unworkable.
Here’s why:
As a nation, already spend more than $1 trillion more than we take in.
So say we start by simply cutting that much of the budget, to break even.
That step alone would force us to eliminate 80% of all discretionary spending, including most of our armed forces.
Now say we follow your plan to the letter, cutting taxes by $1 for every $2 that we’ve cut in government spending.
That blows another $500 billion dollar hole in the budget.
Indeed, that amount is roughly the price tag of the entire Social Security program.
If you decided to preserve Social Security, you would have to eliminate or gut something else big, like Medicare.
In Reagan’s day, there was a fair argument to be made that tax cuts would generate enough growth to offset cuts of this magnitude.
But no one — including the people who developed Reagan’s economic plan — believes that anymore.
It was tried and it simply didn’t work. (Yes, tax cuts generate new economic activity, but not enough to make up for the lost revenue.)
So again, let me be blunt:
It’s fun to throw around talking points and ideological catch-phrases.
But this problem is bigger, more complex and more painful than that.
–Brian, NCPR
I don’t think it can be solved politically, it is a prisoners dilemma.
Most people in the US get more from the government than they pay why would they vote to change that?
They would rather say no I want to keep my government job, my social security my medicare and medicaid and so forth. Those who do pay more certainly don’t want to have to pay even more and will fight that tooth and nail. But lets just say we could just tax into the ground every rich person in the US, it would not matter it is not nearly enough we need severe cuts in spending. No politician will be elected who actually says specifically they are going to cut one of these large programs.
This is the reason they don’t say that and that is the reason this will not change through the political process in my opinion.
“The claim made by Mr. Obama that we can turn the corner on this problem with 95% of our citizens avoiding pain is, in a word, ludicrous.”
Actually Brian I think that many Americans already have been experiencing pain. That said, many people, some on this blog, have said that they would be happy to have all of the Bush tax cut expire and I don’t think you would find too many people that don’t believe that the size of government can’t be cut.
Do we still have a strategic helium reserve?
But the answer isn’t all in government. People’s ideas and expectations of what it is to live a good life have gone wildly out of whack. The idea that we can keep using resources profligately, living in enormous homes in the suburbs, commuting long distances (or short distances stuck in traffic), eating the kind of foods we eat…it all has to change. We have all this crap but we aren’t happier people.
Politicians may be annoying but they are not crazy, if they could get votes by telling us they were really going to solve the deficit problem by cutting medicare by cutting health care benefits by cutting social security benefits and by cutting defense they would do that. But they know that they can’t win actually solving the problem. Its easy to say tax the rich which is fine they should pay more, but it won’t solve the problem.
PNE: Jimmy Carter. And although he was right, the American people of course chose the deception of Ronald Reagan instead. We want politicians who SEEM honest, not ones who actually are.
If only we had listened to Jimmy Carter we’d be in a lot better shape right now.
We’d have more efficient cars, lower national debt, more solar power and the Taliban wouldn’t exist.
Plus his emphasis on those stupid pesky human rights would ruin our China game.
Brian:
I don’t think it’s a zero-sum game. Cutting $2 for every $1 doesn’t make sense if and only if it’s a zero sum game.
It is not.
By cutting $1 in taxes you unleash the human desire to make and keep more wealth for those willing to work hard.
That more than makes up for the math that is lacking in your zero-sum world view.
JDM “the human desire” to work and provide a good life to yourself and those around you is far older than any system of taxes or even any form of government. You’re listening to too much propaganda.
JDM –
No, I’m sorry, but you are wrong.
This experiment has been tried. The “unleash human liberty by cutting taxes” ideology is not an abstract, untested concept. We’ve done it.
And it does boost economic activity somewhat. But not nearly enough to close the gap.
As I say, none of the people who created this economic model believe in it any longer. Reagan’s budget and economy team believe that taxes should rise.
One other point: A lot of economists believe that there are threshholds at which taxes will stifle entrepreneurship.
But we’re nowhere near those tax levels. On the country, our taxes are lower now than at any time since World War 2.
During the boom years of the 1950s and 60s, we were taxed at much higher levels.
Currently only one developed country in the world — Japan — pays less in taxes (as a percentage of GDP) than the US.
–Brian, NCPR
–Brian, NCPR
Brian M, you aren’t comparing apples and apples. Tax law and the various loopholes and shelters were different in the 40’s, 50’s, 60’s. The 90% tax bracket was never effective in actually getting 90% of those peoples money. It was a paper tiger. Still is and so is the idea that letting the Bush tax cuts sunset and reinstating the death tax will somehow magically fix all this. And you avoid a fact in your assessment of the Regan tax cuts- it generated revenue that kicked in more spending! What would have happened if spending had been cut while the revenue increased? I don’t think simply saying “it doesn’t work” is accurate.
Actually, according to something I read someplace yesterday, I’ll try ad find it, our current taxes rate about the same as we were paying under Carter.
the Bush Tax cuts were rationalized on the basis that we had a surplus and we didnt need the money. they (bush et al) also probably hoped the economy would be pumped up so they could get re-elected easily. The economy got pumped by the mortgage-backed-securities/housing/credit card bubble instead. Those tax cuts did not lead to “unleashing the private sector”, and the original rationale no longer exists. But we should get back to Brian’s painful consensus. We have made promises to my generation that cant be kept (medicare social security with built in cost of living increases). Thats the only consensus. There is no consensus, unfortunately, on how to proceed. We either have to raise taxes or reduce benefits (or more likely both). Meanwhile we are in this giant game of economic chicken. The longer we wait to deal with it, the more painful whatever solution we adopt is.
Bret, I’m not advocating a return to the 90% tax rate. I’m only reminding all of what it once was. And whatever a tax rate is, it is a sliding rate. The top rate starts at $250K. This means one who nets more than $250K after all legal deductions have been subtracted, pays the top rate on what is above. It doesn’t apply to the entire income. It applies only to what is above the $250K. X amount of $ is taxed at one rate, then another rate as you go up the scale. And it’s all based upon the after deductions net. This is how some very wealthy people avoid paying any or very little taxes. They have a lot of deductions because it is very expensive to live high on the hog. You got all your lawyers, accountants, mortgages, business expenses, donations, etc., etc., etc. You might even have to pay alimony to numerous wives.
God, is it ever expensive to be rich!
Pete, I understand that, but that’s the way people think it’s supposed to work. When you say “tax the rich at 90%” or 50% or whatever it’s a strawman. It doesn’t really happen and we simply won’t get that much more revenue. Same thing with the Bush tax cuts and the death tax. There simply isn’t a large enough population of “the rich” to make a difference in the grand scheme of things. It’s just feel good class envy politicing and the only ones who will really benefit are the politicians pushing it and the tax accountants and tax lawyers that help “the rich” avoid as much taxation as possible. Although it’s been said before, lets remember that less than 50% of our population effectively pay income tax. I say effectively because people forget that many people get a return for more than they paid in! I believe that’s the “Earned Income Tax Credit”. I know my oldest kids both get that. So just who are we going to tax to death to get more money? The truly wealthy, the Kennedys, Kerrys and Soros, etc, will have the ability to move the money offshore and hide much of it. As Leona Helmsley (sp) said, “Only little people pay taxes”. The ones this would hurt are those no good SOBs that own a company or made some smart investments and make between $250K and a few mill. Yeah, that seems like a lot of money if you’re sitting at Jane and Cathys with the boys, but if you live in downtown Metropolis and are supporting 14-1500 employees it ain’t squat. Tax those guys more and it ends up hurting the employees. Same thing as a minimum wage hike. It ends up costing jobs every time.
Taxation isn’t the easy answer it appears to be. I apologize for not making clear that I was speaking of the 90% hypothetically. Spending cuts are going to have to be made. Personally, infrastructure is a lot more important to me than my getting Social Security 20 years down the line. So if they have to cut it for me, (I’ll be PO’d cause I’m as greedy as the next guy), I can understand that. But cutting it for those currently on it will mean death for a lot of people. And Medicade/Medicare could maybe be cut some too. Yeah, it means rationing health care, just like the Gov’t has promised time and again will never happen. Well, they lied. Establish some new rules on what they can and can’t do, bargain with the health care system. Maybe the gov’t would be better off hiring it’s own providers as they do with the military. But you can’t pull the rug out from the elderly and truly ill who are already on it.
Military spending is a toughy. We’re going to lose no matter what we do. Pull all the troops out of Europe, Japan, most of the far east except South Korea, out of South America and the Caribbean. Land bases are obscenely expensive. We have a fantastic Navy that can be where we need them quickly. Get the troops out of Iraq and finish up in Afghanistan ASAP. Some of the troops can go to the southern border. Despite Brian M’s claims, those who live there or work there tell a story of lawlessness that’s appalling. Brian should talk to some local USBP Agents who’ve worked there. Then you have another RIF and lots more unemployed men and women on the streets. So cutting military expenditures brings it’s own issues. But it’s that or bankruptcy.
Other choices?
Bret is correct taxation either way lower or higher will not make much difference to our massive debt there simply is not enough money out there even among the wealthy. I might make us feel good to tax the wealthy more and it would raise some more money but it would not come close to solving the problem.
Cut the military severely restrict medicare to those who are poor severely restrict social security to those who are poor would be three options.
First, let me make clear I have never been against the wealthy. When a kid, some of my best friends (their parents) were wealthy. I fondly remember one friend who lived in Grosse Point, belonged to the yacht club and we would go sailing on Lake St. Claire in the family 28 ft. folk boat. It had a one ton keel. Afterward, he would sign for hamburgers and ice cream. He was cool. One night he was forced by his mother to put on his tux because he was invited to one of the Ford girls coming out party. While he did put the tux on, he never went to the party. He Joined some of us guys to play poker.
I’m not trying to impress you. I just want to make clear I have had many friends who have far more money than me and never begrudged them for it nor did they begrudge me for having less.
I am not offering higher taxes for the rich as a solution to anything. I’m just saying taxes have been higher and it wasn’t the end of the world.
Probably, the best solution would be to start slashing the number of agencies. My favorite two to go would be the DEA and the ATF. How many law enforcement agencies do we need? I can think of other but they would be a good start.
On the military front, yes, take the troops out of all the places where they are not currently engaged in warfare.
As far as national defense, I regard the Navy as the number power house. That includes the Marines who are a division of the Navy. I must admit that having been in the Navy, I have a soft spot for it. That said, the Navy could wipe out all opponents by it’s self. It could take out Iraq, Afghanistan and Iran, and throw in a few others for good measure.
Not saying they or we should but the ability is there.
I would disagree with the idea our taxes have been higher. Income tax- yes. But overall I don’t think we’ve ever been taxed more, and much of it is hidden so far back in the woods you simply never consider it. Revenue generation (taxes in another form) have never been higher here in NY State. $100.00 to transfer the title on a vehicle! $29.00 for a fishing license! Excise taxes on everything, deposits on every liquid container, surcharge taxes on power, land taxes that charge for “water front” where not water exists…the list goes on.
The problem is spending. I just got done reading North Country Nows headlines- grants, grants, grants. It’s all tax money. OBPA needs outside money like I need a pair of high heels. $1.45 MILLION dollars to Potsdam/Clarkson for bike lanes and signage!!!! $1,450, 000.00 taxpayer dollars to benefit a private college!!! That’s freakin’ criminal. $3.9 MILLION to Ogdensburg favorite good old boys network OBPA to build someting OBPA is more than capable of doing. $2 million to the Rez to monitor fish and wildlife, IOW it’s wasted money going to someones slush fund or to maybe put up another Momansion.
The problem is our politicians hand out this money without any repercussion. That’s the first step in fixing the problem. Stop that and you’re off to a good start.
Bret,
You forgot to mention the tax on tobacco products.
Well Pete, I’m not and never was a smoker. I know you find it really irritating. I simply don’t comprehend why someone would take up such a filthy, nasty, harmful habit. Were I a smoker I suppose I might feel as you do. Still, it’s just another tax in the end. Of course from my point of view if it bothers you so much, why not quit? Yeah, I know, I had the same response from my son, “Jeeze Dad, you just don’t get it…”