Myths of Deficits and Inequality

Cut taxes on the wealthy, the "job creators," so they can create more jobs, Republican "conservatives" insist.

Here is a direct refutation: the wealthy are hoarding their cash--the top 1% save 37% of their earnings. Rather than creating jobs, by their out-sized savings rate they destroy jobs.

We should cut corporate taxes argues the Chamber of Commerce incessantly, because (by one measure) US taxes are higher than economic competitors like Japan and Germany.

Corporations are also hoarding cash, again cutting jobs: money not spent on consumption or real (as opposed to financial) investments, is jobs not created and wealth not multiplied.

Higher taxes on the wealthy and corporations would capture some of this excess cash to build infrastructure, improve education and hire people in needed jobs.

The US is the fourth most unequal nation among wealthy OECD nations, having a Gini index of .36 compared to the most unequal nation's Gini of .50 (Mexico). 0 would be complete equality, 1.00 represents complete inequality, where only one person received all the income. According to the Nobel economist Joseph Stiglitz, and even the Economist, inequality is inefficient. Increased inequality drains consumption and investment spending: low consumption drives low investment, drives low job growth.

Repeal Obamacare. The Republican House of Representatives has voted to repeal it 33 or 34 times. Proponents of repeal claim that the program will increase deficits and cut jobs. It's likely that the reverse is true in both instances. While Obamacare will increase some taxes, mostly marginal, it will also save an astonishing amount of money not yet easily calculated. Health care costs, and costs to the government may actually go down, through lower hospital and emergency room costs, and a reduction in treatments needed as people get regular medical care, instead of only going to the doctor (or the emergency room) when a health crisis strikes.

The Congressional Budget Office (not a partisan institution) estimated cost savings from Obamacare that would reduce out-going deficits substantially. In fact, its most prominent recent caveat (reduction of the reduction) was the administration agreeing to a year's delay in the employer mandate (to provide insurance or pay a fee per employee), which CBO estimated to cost the government $10 billion.

So, what's going on here? The Mainstream Media emphasize the Republican message, even though it's the opposite of the truth and makes no economic sense. Higher taxes on the wealthy do not curb growth; they probably stimulate it, up to a point. Obamacare, while far from perfect, does not increase future deficits; it will reduce them.

Why are "conservatives" and Republicans against higher taxes for high incomes? They have high incomes, or are paid by people who do. Ditto the MSM.

Inequality is rising worldwide, in the US faster than most, and the "winners" want to keep it all. They are like Fifth Century Roman Senators, who chose the Fall of the Western Roman Empire, instead of imposing taxes on themselves.

Obama and Class War

In his deficit-cutting address Wednesday, Obama's approach to the Defense budget was vague, but at least he pointed to Defense as a large target for cuts that must be made, some by re-examining the mission and role of our military in a "changing world."

Here's an example of his problem: while the administration considers transferring some Egyptian aid from military to economic programs, "some lawmakers fear that would mean cutting sales of U.S. military hardware." [Just Foreign Policy 4/13]. When there's peace, we can't sell arms. That's one reason why the US sticks its nose in globally: to sell arms. Our adventures are not only investments in future arm sales; they are also driven by the defense industry's insatiable appetite for ever-larger Defense budgets.

The arms dynamic is hard to overcome, as our sudden involvement in Libya demonstrates. Our allies are urging a more active role on the US, after it stepped back, making way for Europeans to lead (and pay the costs). But they want us because our huge Defense budget gives us capabilities no one else can bring to bear--in Libya, or elsewhere.

As a Medicare recipient, I've always felt Medicare should negotiate drug prices, but Bush banned negotiated prices; pharmaceutical corporations charge Medicare outrageous prices because they can. Obama proposes allowing Medicare to negotiate prices as a deficit-cutting measure, a clever move. His vision to change the way providers are paid makes sense, too. Real deficit-cutters should like both reforms: they would cut the deficit considerably. Medicare was set up to be a financial train-wreck by Bush/Cheney's prescription drug and privatization schemes (Medicare Advantage programs, etc.).

Obama's deficit cutting approach is reassuring; his riposte to Republican Ryan's deficit-cutting budget proposal was pointed. He declared he'd never permit Ryan's proposed voucher-ization of Medicare.

Even more heartening was Obama's recognition that the wealthy have done well while others still suffer, and they owe it to the nation to make a proportionally greater contribution (through tax hikes), to enable necessary services and investments in the future. The tax cuts proposed by Ryan, he noted, would take from those who needed help and give to those who didn't: not the kind of America Obama (or I) believe in.

Did Obama blame Wall Street? No, but his DOJ is simultaneously pursuing mortgage fraud by Goldman, JP Morgan, Washington Mutual and others--even possible criminal prosecution.

Obama claimed his proposal would cut $4 trillion from the debt--as much as Ryan, but with high-end tax increases, not draconian slashes to services and tax cuts for the wealthy.

It's class war part II. Who will prevail: the new Roman Senators, billionaires like the Koch brothers, represented by Republicans, or Obama, now representing ordinary people? It's a classic choice: Obama's way maintains democracy; Ryan's would usher in something comparable to Rome's last years, with Senators dominant and everyone else impoverished and powerless.