"Fiscal Responsibility", my FOOT!

Shamelessly stolen from Steve Benen:

"1980: Ronald Reagan runs for president, promising a balanced budget

1981 - 1989: With support from congressional Republicans, Reagan runs enormous deficits, adds $2 trillion to the debt.

1993: Bill Clinton passes economic plan that lowers deficit, gets zero votes from congressional Republicans.

1998: U.S. deficit disappears for the first time in three decades. Debt clock is unplugged.

2000: George W. Bush runs for president, promising to maintain a balanced budget.

2001: CBO shows the United States is on track to pay off the entirety of its national debt within a decade.

2001 - 2009: With support from congressional Republicans, Bush runs enormous deficits, adds nearly $5 trillion to the debt.

2002: Dick Cheney declares, “Deficits don’t matter.” Congressional Republicans agree, approving tax cuts, two wars, and Medicare expansion without even trying to pay for them.

2009: Barack Obama inherits $1.3 trillion deficit from Bush; Republicans immediately condemn Obama’s fiscal irresponsibility.

2009: Congressional Democrats unveil several domestic policy initiatives — including health care reform, cap and trade, DREAM Act — which would lower the deficit. GOP opposes all of them, while continuing to push for deficit reduction.

September 2010: In Obama’s first fiscal year, the deficit shrinks by $122 billion. Republicans again condemn Obama’s fiscal irresponsibility.

October 2010: S&P endorses the nation’s AAA rating with a stable outlook, saying the United States looks to be in solid fiscal shape for the foreseeable future.

November 2010: Republicans win a U.S. House majority, citing the need for fiscal responsibility.

December 2010: Congressional Republicans demand extension of Bush tax cuts, relying entirely on deficit financing. GOP continues to accuse Obama of fiscal irresponsibility.

March 2011: Congressional Republicans declare intention to hold full faith and credit of the United States hostage — a move without precedent in American history — until massive debt-reduction plan is approved.

July 2011: Obama offers Republicans a $4 trillion debt-reduction deal. GOP refuses, pushes debt-ceiling standoff until the last possible day, rattling international markets.

August 2011: S&P downgrades U.S. debt, citing GOP refusal to consider new revenues. Republicans rejoice and blame Obama for fiscal irresponsibility.

There have been several instances since the mid 1990s in which I genuinely believed Republican politics couldn’t possibly get more blisteringly ridiculous. I was wrong; they just keep getting worse."

A socioeconomic theory:

(Big shout-out to "Ishkur" at FARK.com for this - Spot-on, IMO)

I have a theory. A socio-economic theory. This theory explains all the crime, all the corruption, all the social and moral decay, all the ills and pitfalls in a system that plague us daily, from crooked cops to white collar criminals to homeless drug addicts on the street. I call it Ishkur's General Theory of Inequitable Distribution of Affluence.

It's a basic premise. In every system, there are rich people, and there are poor people. And there is a gap between these two. The wider this gap, the more problems you have. Everything evil, immoral, degrading, corrupt and criminal stems from the size of this gap. The smaller this gap, the better everything is.

Now, that doesn't mean the goal is to eliminate the gap completely. You can never get rid of the gap, and for economic prosperity's sake you don't want to get rid of it. That's socialism/communism, and it leads to stagnation, misery and despair. We've all been there. Likewise, you don't want the gap to get too large. That leads to feudalism, human property, and more misery and despair (except for a chosen few). We've all been there too.

The trick is to find a happy medium by which the rich can stay rich enough to foster investment, growth and employment, but not too rich that they suck up all the money and the poor are literally dying of starvation in the streets (see France, 1789).

Now, the poor: They may be poor, but they need to have money. In fact, poor people should be as well off as possible without driving up the prices of things. When Henry Ford built his first factories, he did something crazy: He paid his workers $8/day, which was an incredible amount of money in those days. His friends in the business sector were aghast, and threatened him to reduce the wages. They feared that he would drive up the median income of workers in all factories across the board, and that just didn't sit well with them. At the next business summit Ford calmly told them, "Gentlemen, if I do not pay my workers $8 a day, there will be no one with any money to buy my cars."

Henry Ford understood that poor people need money to buy the consumer crap the rich people hire them to make. So you want affluence on both sides of the divide, and only the way to do that is to have a really fat middle-class.

In economics, it doesn't matter who has the money or where it's going, so long as it keeps moving. The purpose of money is to change hands; it's supposed to be spent. When money is not spent, it stays in the same place and doesn't do anything useful or help anyone, and that's bad.

This is why supply-side economics (aka Reagonomics) was such an abject failure: The belief that if you give money to rich people, they will use it to build factories and hire labor and make everyone around them wealthy via a model insultingly referred to as "trickle-down". That didn't happen, for a number of reasons. For one thing, money does not create jobs -- demand for work creates jobs. If there is no work to be done, no employer will feel compelled to hire more labor no matter how much money he has (and besides, if the work is out there, no employer has ever not found the money to hire. Even if they are flat broke. They will take out loans, raise venture capital, apply for grants and subsidies, sell shares, or do whatever it takes to find the money to hire, but just giving it to them will not make the jobs magically appear). And secondly, none of it trickled down. Instead, the rich only spent it on each other, re-investing in their own companies, capitalizing in others, and driving the stock market through the stratosphere (contrary to popular belief, a roaring stock exchange is not entirely an indicator of overall economic health; it's only an indication of the wealth of its participants, who number comparatively few to the vast majority of Americans who have little to no net worth or savings to speak of). This widened the gap, which, according to Ishkur's General Theory of Inequitable Distribution of Affluence -- IGTIDA for short -- is bad.

When there's a lot of money at the top, that means there is less money at the bottom -- really the best place where money can do some good and make a difference. There is no change in a person's standard of living between 1 billion and 2 billion dollars. But the difference between $10,000 and $20,000 can completely change someone's station in life.

(and before you interject, yes, I know that wealth creation is not a zero-sum game, but it also doesn't exist in a vacuum either. If someone makes a lot of money really quickly, that means people elsewhere lost some money, especially after inflation sets in)

The truth is the poor in America don't have any money at all, and haven't had any for several decades or so. The rich solved this problem by lending out credit to the poor so they can continue consuming at their current rate, essentially replacing money with plastic, racking up record amounts of debt. This has been happening since the 80s, and it's going to collapse sooner or later (especially after the Boomers retire, en masse, within the next 10-15 years).

If you want to solve society's ills, stop crime, fix the economy and end corruption, one thing needs to be done: The rich must get poorer, and the poor must get richer. The gap must get smaller. I know that is never going to happen in America, though. Not without some torches and pitchforks.

Gap. Disparity. An inequitable distribution of affluence. The money is in one location for too long, and it is not moving. All problems stem from it."

Just to illustrate the point...

Remember the other day when I said "we don't have a spending problem, we have a REVENUE problem"?
Well this illustration will show you what I'm talking about when I say you and I are being made to pay for GE and ilk:

As David Callahan writes:

But I doubt that there is a single top tax attorney or chief financial officer in the country who was all that surprised. You see, these people are denizens of Loophole Land – a very different place than W-2ville where most Americans live.

In Loophole Land, nothing is quite as it seems. Yes, there is a top corporate tax rate of 35 percent, but it is well understood that nobody actually pays that. On the contrary, many companies pay nothing at all.

How can this be?

For starters, Loophole Land has no national borders and so it is easy to shift money around in ways that avoid taxes. General Electric works all over the world, and under tax law, it isn’t taxed on its foreign profits as long as it says that it is reinvesting those profits abroad. Many companies become expert at shifting profits abroad to foreign subsidiaries in low-tax or no-tax nations. In 2008, Goldman Sachs, had 29 subsidiaries located in offshore tax havens and reported profits of over $2 billion. It paid federal taxes of just $14 million on those profits.

Loophole Land is also a place where past business losses are never, ever forgotten. So, for instance, if you run a giant conglomerate with a profit-hungry credit division that makes a lot of stupid loans to people who can’t pay them back, fear not: you’ll be able to write off those losses – in effect getting ordinary taxpayers to subsidize your gambling debts. General Electric is widely seen as a manufacturing company. But up to half of its profits during the Bush years came from its large consumer lending business, GE Capital, and that business suffered huge losses during the crash – reportedly $32 billion. Now we are all helping GE foot the bill for that unlucky streak.

So, if you're feeling like you're barely able to keep your head above water financially, and you don't have as much money as you used to, you're right! Tax policy over the past 30 years has been designed to shift the tax burden off corporations and the wealthy, dumping it onto - you guessed it -

US.

Now consider that GE got $4B of OUR money in subsidies.

With all this, if you DON'T think our tax structure needs radical reform - YESTERDAY - then I can recommend a good Psychologist for your delusional disorder.

The USA does not have a spending problem -

it has a great big screaming REVENUE problem.
Why do I say this? I say this because my wife and I, (with our low 6-figure income)paid MORE in taxes in 2010 than GE with it's $5.1B in profits (US-based); not only did they pay SWABO in taxes, they got $4B in tax subsidies. Guess who pays for that?
As Chuck Collins puts it:

"Our communities are enduring mammoth state and federal budget cuts because we have, in large part, failed to sufficiently tax America's millionaires and billionaires or prevent aggressive tax avoidance by multinational companies. The rest of us are paying to pick up the slack. (emphasis added)
Congress has blown holes in our tax code, losing hundreds of billions in revenue. Worse, lawmakers have averted their eyes as corporate lobbyists drill new tax loopholes and extract new corporate welfare subsidies."

This is a society that has its priorities seriously bent, as proven by proposals before Congress to cut services for children and the mentally ill while leaving these tax loopholes in place.

Collins proposes $400B/year in new revenues that would impact just under 2% of the nation:

:"There are four revenue raisers that Congress could institute tomorrow that would generate $400 billion a year--or $4 trillion over the next decade. Such programs would restore greater fairness to our tax system and reduce the extreme levels of inequality polarizing our society.

Congress could levy a modest financial transaction tax on the transfers of stock, currency, and speculative investments that do little to strengthen the real economy. This would generate $150 billion a year while exempting smaller investors.

Lawmakers could reduce corporate tax dodging by closing overseas tax havens and requiring companies to pay U.S. taxes on the profits they actually earn in this country. This could generate as much as $100 billion a year.

Congress could establish new top tax rates on households with annual incomes over $1 million, which could generate another $100 billion a year. Under our current tax system, a person earning $374,000 a year pays the same top tax rate as someone earning $10 million a year.

Lawmakers could institute a progressive estate tax on fortunes over $5 million, with higher rates on billionaire estates. That would generate $45 billion a year."