The Republican philosophy of “borrow-and-spend, and tax benefits-to-the-wealthy” has created a problem that won’t be easily solved. Although the mainstream media will report the FY 2008 federal deficit as $455B, in actuality it is over $1T, as noted in the excerpt from Wikipedia on the subject of federal budgets.
“Using 2008 as an example, the “On-Budget” deficit of $638 billion is reduced by the “Off-budget” surplus of $183 billion to arrive at the “Total” deficit of $455 billion. It is this latter amount that is often reported in the media. The national debt increased approximately $1,017 billion in 2008, which is the $638 billion on-budget deficit plus an additional $379 billion of supplemental appropriations or otherwise non-budgeted expenditures, primarily the Economic Stimulus Act of 2008, the wars in Afghanistan and Iraq and earmarks.”
The current discussion on bail-out plans overshadows the root causes of our economic stress. It is important that we address these issues otherwise any economic package will amount to no more than a band aid to our problems.
We are too much a nation of wealth consumers, instead of being wealth generators. We are now living of the wealth generated in the past, and by too few industries currently. Until we reverse this course we will continue our economic decline.
In my opinion, the following actions should be undertaken:
To provide some historical insight and other opinions, I have taken excerpts from the papers of others (links included) that I believe should contribute to this discussion.
There are instances of high income persons manipulating the system to convert ordinary income into Capital Gains, thereby reducing their tax rate from 35% to 15%. This loophole must be closed, and the Capital Gains tax rate should be modified to be 10% less than the income tax that would be paid on total income, thereby making it fair, yet still providing an incentive for investment.
And the tax policies govern international investments and businesses favor the displacement of American workers by shipping the jobs overseas. Harvard Law has a good description of the policies and recommends changes that would be more fair to the American worker.
http://www.hlpronline.com/2006/07/kvaal_01.html
Let's get these changes made to reverse the maldistribution of wealth in this country that is the hallmark of the Bush Administration, and that John McCain not only plans to follow, but to double down on these tax breaks for the rich.
Bush isn’t running for reelection, but McCain has sold out to the same crowd that pulled Bush’s strings for the past 8 years. And what has that got us?
1. An increase in federal debt in excess of $4 trillion.2. A Trade deficit exceeding $9 trillion, increasing at over $700 billion per year.3. A reincarnation of “stagflation”, where the economy goes down the tubes and prices accelerate upwards.4. A change in foreign policy to advocate the concept of preemptive war, and executed under false premises.5. “Borrowing” (robbing) the Social Security Trust Fund of $200 billion a year, with no realistic chance of paying back this now $2.3 trillion debt.6. Taking the money they “borrowed” from future Social Security recipients and providing excessive tax breaks to the rich, one of the great wealth transfer sins in our history.7. Tax policies that enable our rich investors to launder their money through the Cayman Islands, making that small nation the 4th biggest creditor of the United States.8. Quadrupled the price of oil, while asking for more drilling, yet not validating the existing supply reports which are used to drive up prices.
If the ordinary people don’t speak up now and throw these bums out for good, we can kiss the American dream goodbye forever.
Why we need a change
We must be prepared to put aside our prejudices, reject the lies and innuendo that are being spread by surrogates for the status quo, and elect Barack Obama as the next President of the United States. We cannot afford a continuation of the policies of the past eight years. Although John McCain has the reputation of a “maverick”, it is clear that his campaign has been absorbed by the Party that has brought this country to the brink of ruin. His impetuous decision on the Vice President running mate is touted as another “maverick” moment, but is nothing more than a desperate attempt to recover the right wing base of his Party. The policies of the past eight years have brought our economy to the edge of ruin, and we cannot afford more of the same.
For example, our Federal Debt - $5.6 trillion when George Bush took office, has increased to $9.6 trillion. He has swelled the borrowing from the Social Security Trust fund to over $2 trillion, with no realistic way to pay that back. No wonder they want to change the rules to “personal accounts”, so everybody is left to fend for himself.
Our balance of Trade increased dramatically during this Administration’s tenure, and has gone over $700 billion for 3 years running, so that now our debt to foreign nations exceeds $9.7 trillion. Japan and China are now our top bankers, but the little Cayman Islands ranked number four, and likely will be third when 2008 numbers are available. Why the Cayman Islands with nothing real to offer, other than tax havens for shell corporations? Ask George Bush, John McCain and Mitt Romney.
We “crossed the Rubicon” with our foreign policy when we “cast the die” for preemptive war, only to later find it was done so under false premises. For over 5 years we have spent blood and treasure, and only now is the Administration conceding that we must have a plan for withdrawal. In recent discussions with Maliki the Bush Administration wanted to wait until 2015 to leave, the Iraqi Government pushed for 2010 (same as Barack Obama), and they eventually compromised on 2011. Yet John McCain is willing to make a long term commitment well beyond that time to a place we should never have been in the first place. How much more will that extended occupation cost us?
It is time for the people to be represented in this Government, and to turn around the decline in our standard-of-living that has been precipitated by policies that favor multi-national corporations and the persons who run them. Barack Obama offers the best opportunity to do that.
The following link is to a report dated April 2008 listing the US foreign-held debt by country.
http://www.ustreas.gov/press/releases/hp947.htm
I believe more recent data (not yet published) would elevate China into first place, and the Cayman Islands into third place. What have we allowed to happen to our economy when the Cayman Islands holds nearly a Trillion dollars of our debt? It is a reflection of how we have allowed corporations and financial markets to control our country. It is something that must be reversed.
And the bottom line of over $9T of foreign-held debt should be a wake-up call to us all, as it is an economic time bomb.
is not going over too well with the Iraqis. It is past time for a better policy.
Iraqis Condemn American Demands BAGHDAD, June 10 -- High-level negotiations over the future role of the U.S. military in Iraq have turned into an increasingly acrimonious public debate, with Iraqi politicians denouncing what they say are U.S. demands to maintain nearly 60 bases in their country indefinitely.
So what would be an effective policy change to counter the current problems? I have held that the maldistribution of wealth is a leading cause of economic malaise, although modifying that certainly runs the risk of attacks on redistribution of wealth. But despite that risk, it may be advisable to consider a few changes.
1. Modify Capital Gains tax treatment from a fixed rate to a "preferred" rate - I would suggest a rate 10% less than the tax bracket rate that would otherwise be in effect for an individual prior to inclusion of the capital gain.
2. Modify Corporate tax code to eliminate any incentive to move work offshore, and provide tax incentives to businesses based on US employment. After all, when taken as a whole tax entity, both corporation and individual workers, those companies that are rich with US employment contribute far more revenue to the federal government than those companies that primarily pass foreign goods through the system.
3. Actively broaden the tax base by cracking down on tax evasion, particularly by businesses that misclasify workers as independent contractors to avoid payroll tax compliance, while the individual workers leave the income unreported.
4. Return to a more progressive tax rate by changing the 28% bracket to 30%, the 30% bracket to 35% and the 35% bracket to 40%. Retain other aspects of the tax cuts enacted over the past few years that are beneficial to those who can least afford.
5. Restructure how we allocate money for the Defense Department by sunsetting major cost programs that have little use in today's world, and use a portion of the savings for addressing the assymetrical threats that are more probable in the coming years.
6. Extend the income base for payroll taxes, albeit with some offsetting credit to ensure that the principle of limiting tax increases to the "wealthy" is achieved.
In addition to redistribution of wealth, there is a need to grow the wealth in the country as a whole. Here are a few options to consider.
1. Set a course to balancing the federal budget, as repetitive overspending leads to depreciation of currents monetary assets. Use a significant portion of the additional tax revenue obtained from the changes in tax policy to balance the budget.
2. At the same time address the trade deficits, as the outflow of money at the current rates is not sustainable. Modify "free" trade to be "fair" trade, where the workers on both sides of the borders receive equal benefit to the corporations that would otherwise exploit them. Done properly, such deals would not only assist in the account balance of the nations but would also reduce the incentive to illegally immigrate to this country to obtain a livable wage.
3. Stop the misadventure in Iraq which has depleted our military and continues to cost many billions of dollars per month. Use the money saved for investment in our people, infrastructure and alternative energy, the latter to the degree of a "Manhattan Project" to free this nation from the bonds of oil dependency, while reversing the trend on our destruction of the environment.
As Obama has said "this is the time", and applying that motto to our economy requires some clear decisions on policy to be put forth right now.
The Capital Gains tax rate is an issue, on one hand the rate is lower than the marginal rate for middle class taxpayers and mostly available to high net worth people, but on the other hand it purportedly incentives investment in the economy.
An alternate method could be developed that would tax capital gains at the marginal rate of a taxpayer less 10%. So the 25% tax bracket person would continue to pay the current 15% rate on capital gains (or 15% bracket would pay 5% rate), but the 35% marginal bracket taxpayer would pay 25% on capital gains. There would still be an incentive, but there would be some measure of fairness in the tax rate.
The following excerpt from the Economic Policy Institute paper of August 2007 contradicts John McCain's suggestion that the middle class economy has prospered under Bush, except for the past several months of recession. Maybe John has the same rose-colored glasses as George, but that doesn't work for the majority of hard-working Americans who have been left behind by this Administration.
"While both poverty and income have improved over the last few years, it is disappointing that despite low unemployment and strong productivity growth, these measures of living standards have yet to recover to their levels of the previous business cycle peak in 2000. In that year poverty was 11.3%, compared to 12.3% in 2006, an increase in the poverty rolls of 4.9 million persons, including 1.2 million children; median household income in 2006 was $48,201, about $1,000 dollars (-2.0 %) below its 2000 level (in 2006 dollars). In other words, economic growth over the last six years has totally bypassed the typical middle-class household.
One negative trend persists: The share of Americans without health insurance coverage once again increased, from 15.3% in 2005 to 15.8% last year. There were 47.0 million uninsured Americans in 2006, up 2.2 million since its 44.8 million level in 2005. Since 2000, the share of the population without health coverage has increased 2.1 percentage points, an increase of 8.6 million uninsured Americans."
Unfortunately, his proposal is the confluence of two bad policies, the tax-cuts funded by debt and the increased incentive to consume energy. The winners - the oil companies, the losers - the dollar, the environment and ultimately, the people.
This is election year pandering at its worst, and is one more example why we cannot afford to let this election slip away.
The Clinton lobbyists run deep.
Lobby for Colombia Trade Pact Casts a Wide Net By ERIC LIPTON and STEVEN R. WEISMAN
...
"To help make its case, Colombia had already hired at least three firms on Capitol Hill, in addition to the work by Mr. Penn's firm, Burson-Marsteller, paying out from $15,000 to $40,000 a month. Collectively the Colombian government has paid more than $1 million to firms that have negotiated or lobbied on behalf of the deal.
They include the Glover Park Group, the fast-growing firm set up by former Clinton White House aides including Joe Lockhart, who was chief spokesman for the president. (Howard Wolfson, Mrs. Clinton's campaign communications director, was a partner at the firm but has taken a leave of absence.)
The firm has approached more than a dozen members of Congress, focusing on moderate Democrats who the lobbyists believe might be persuaded to disregard their party leaders and vote in favor of the deal.
Lobbyists at Johnson, Madigan, Peck, Boland & Stewart - whose partners include another former aide in the Clinton White House, Bill Danvers - have separately met with pro-business Democrats like Representative Joseph Crowley of New York. And Andrew Samet, a deputy secretary of labor in the Clinton administration, has been hired under yet another lobbying contract."
John McCain is more of the same when it comes to the 3 Trillion dollar war, and the economy to follow:
http://www.youtube.com/watch?v=x4OOCReeLWo
The George Bush way:
"UNITED NATIONS - In the months leading up to the US-led invasion of Iraq, the Bush administration threatened trade reprisals against friendly countries who withheld their support, spied on its allies, and pushed for the recall of UN envoys that resisted US pressure to endorse the war, according to an upcoming book by a top Chilean diplomat."
He only succeeded in making more enemies. And it is another slap in the face of the American people, as he not only disregards the workers in his trade deals, he tried to use them to exact support for his unjust war that has cost thousands of lives and trillions of dollars.
Although some would like us to put the past out of the conversation, I’m afraid the Iraq debacle is akin to the Humpty Dumpty syndrome, where it will be difficult to put the egg back together. We should not let the wisdom shown by too few of our politicians in 2002 go unnoticed now. One big point for Obama!
And part of the problem caused when we broke the egg is an economic one, maybe the only part of the problem that the majority will lament. Whether it is $600B, $1T, $2T or more, it is having devastating consequences on our economy. Whatever the total bill is, we should all recognize it is being paid for with borrowed money, assets that really don’t exist. The ultimate payers of this economic failure will be the people who have to pay their bills in depreciated dollars. When George Bush took office oil was $27/barrel, and it recently topped 4 times that amount. The “trickle down” of that inflation will hit us all, not only in the price of oil, but gasoline, electricity, food and many other essentials of our modern life. The only way the federal measurement of inflation is being contained is the bargain basement shopping for workers that our international corporations are engaged in now. For example, Dell just announced that it will spend $52B in China to acquire all its electronic components.
Now the federal government is involved with bailing out corporations (Bear Stearns to start with), again with borrowed money. And while we effectively pay for that, you can be sure that the senior management of Bear Stearns will collect bonuses to stay with Morgan Stanley, or large separation settlements to leave.
We absolutely cannot afford more of the same.
And Cheney continues to propogate the idea that Iraq was tied to the 9/11 attacks through its support of terrorism. And now McCain (mistakenly, apparently) makes a reference to Al Qaeda in Iraq today. Enough is enough.
The real connection between Iraq and the US is the George Bush debacle is a major player in the economic malaise the besets our country today. That is the issue that must be brought to light in the campaign to come.
BAGHDAD (Reuters) - U.S. Vice President Dick Cheney on Monday declared the 2003 U.S.-led invasion of Iraq a "successful endeavor," pointing to security and political progress on a visit ahead of the fifth anniversary of the war.
"If you look back on those five years it has been a difficult, challenging but nonetheless successful endeavor ... and it has been well worth the effort," he told a news conference in Baghdad after meeting Iraqi leaders.
