The United States’ Gross Domestic Product (GDP) last year was a whopping 11.75 trillion dollars. We are the largest economy in the world, as I’m sure most of you know. To sum up an economic policy on this huge market in just a few paragraphs is impossible, but there are several differing views on how to direct and manage the U.S. economy.
Traditional Republicans view the government as a very small player in the economic health of America. Their views stem from efficiency of the free market. They are correct in their views that government meddling in the free market creates inefficiencies, which are then passed along to the consumer in the form of higher prices. Higher prices mean slower sales, slower sales means fewer jobs, fewer jobs means less money to spend, less money to spend means slower sales, ad infinitum. In the perfect world, competition is widespread to keep prices lower, increasing sales, growing faster, hiring employees, ad infinitum.
I agree with Traditional Republicans in many respects in terms of the economy. The Republicans in the stripe of Eisenhower and Nixon tempered their economic policy with the understanding that faulty products can kill people. They also understood that in a purely free market, monopoly is the only long-term economic outcome. Decreasing business taxes grows our economy and jobs and ultimately increases revenue for the federal government from higher sales. Fewer bureaucratic hoops to jump through to start up and grow increase competition and lowers prices for everyone. There are several ways to do this that I won’t bore you with, but keeping small business vibrant and innovative should be a top priority in this country. However, we must insure that oversight is not lost on new technology.
Neo-cons, on the other hand, believe all taxes are evil and every government regulation should be eliminated. Reagan and Bush 43 fit this mold. Grover Norquist, the Godfather of the neo-con movement wants “a government so small you can drown it in a bathtub.” You’ve probably heard the term “trickle down” or “supply side” economics. This theory says that the more taxes cut on the most productive people in the economy, the more they will be inspired to create more production and therefore, create jobs to supply this new production. Bush 41, interestingly, called this “voodoo economics”. With 17 years of history (13 is more appropriate since Bush 41 wasn’t along the neo-con vain), this isn’t working.
Democrats believe the government does have a role to play in the economy. Apart from simple safety issues in the workplace, they also believe our society should be protecting the environment, making sure stock is traded fairly, our drug supply is safe, our children aren’t exposed to porn on television, keeping dangerous weapons off the street, it goes on and on. These services cost money, which our government pays with taxes they collect. There is waste in government, no doubt about it, but private companies cannot offer the services our government does at the same price.
The real problem exists where people don’t want to pay for government services that they don’t use. Medicaid and food stamps are the favored whipping boy of the tax cutters. “Why should I pay for these people who won’t work?" No doubt, these folks are a drain on the economy. At the same time, is it not also a drain on the economy to give farmers subsidies to NOT grow food? Is it not a drain on the economy to employ some of the best and brightest minds in the country designing weapons and not creating more efficient ways to manufacture automobiles?
So the real solution lies in the understanding for different people’s situation. The millionaire investor wants the SEC (that is the securities and exchange commission, for those of you who might be a little behind the times) to make sure he/she isn’t royally screwed over by the Tyco’s and Enron’s of the world. The laborer on the assembly line wants to make sure that the work place is safe. Cops want to make sure they have more firepower than the suspects they are chasing. The middle class wants to make sure that public schools are safe and managed effectively.
My point is, the government didn’t get huge because somebody decided they wanted a huge government. These departments were created to address problems that many American’s saw and wanted addressed. These issues were important at some period of time and they still are to someone. Personally, I don’t give a damn about our strategic helium reserve, but someone in our government does.
The real point is in terms of the economy, over the last twenty-five years, we have 17 years of neo con economic policy. Does anybody want to guess how many of those 17 years our government has balanced the budget? I’ll answer it for you. One. 2001. Our country had a projected surplus of 4.8 trillion dollars over ten years. But by 2002, we were running a deficit again. Over the three years of a balanced budget, our economy grew faster than at any other three year peacetime period in our history. Taxes were higher, but everyone was making so much money, the extra $300 the average family paid per year in taxes wasn’t an economy killer, like so many Republicans claim.
In 1993, President Bill Clinton pushed for and signed into law the budget reconciliation act of 1994. President Clinton, despite a “no” vote from every Republican in the House of Representatives (this was before the 1994 Republican Revolution), created and invested in attacking the continuous record setting deficits those 12 years of Reagan/Bush economic policy wrought on this country. By 1998, this country had balanced its budget and was facing surplus for many years to come. President Clinton in the 1999 State of the Union address stated quite simply what should be done with this surplus, “save social security first”. Everyone applauded. By early 2005, we suddenly had a crisis and the answer was to spend 2 trillion more to establish private accounts.
But Al Gore was denied his 2000 election win and in two short years, our country was again breaking records on deficits. Traditional Republicans and fiscally conservative Democrats were livid. During the first four years of Bush 43, despite huge tax cuts and the promised economy boosting properties there of, this country lost jobs and, in typical neo-con style, the rich got richer and the poor got poorer. In contrast, President Clinton’s economy added 22,000,000 new jobs over his eight years and real income among the lower middle and middle class (that is income adjusted for inflation) went up for the first time since the early 1970s.
Back in the 1920s, John Keynes, the economist that drove Franklin Roosevelt’s economic policy, suggested the policy of government intervention during times of economic downturn. Every President forward adopted this economic policy until Reagan. The basic assumption of Keynes suggested the economy in aggregate would benefit by putting money into the hands of those who are more prone to spend it. The perfect example of this was the 2003 $400 per child tax credit that arrived in the mailboxes of tens of millions of Americans during the summer. This country saw an 8.3% growth over that quarter, the largest quarterly growth in almost 20 years. This tax credit sprung the economy out of its doldrums and we’ve seen average to strong growth ever since. So in spite of the Bush regime’s promise that cutting taxes on the capital gains, eliminating the estate tax and eliminating the dividend tax at the investor level, it was putting money into the hands of the people who would spend it that ultimately grew the economy. Millions of American’s took that $800 check that we got over the summer of 2003 and spent it! Eight hundred dollars to me is a lot of money. Eight hundred dollars to Rupert Murdock is a tip. So really, why would American’s believe that growth would come from cutting taxes on the Walton family and Bill Gates would help them? But so many did, and we get another three years of twisted, counter-intuitive economy policy.
The neo-cons suggest that it is intrinsically unfair to tax the wealthy at a higher level than anybody else. Remember the “flat tax”? This is neo-con policy to its ultimate conclusion. However, I submit to you, the rise of the middle class in America was a direct result of the progressive tax structure started after the first world war. I give you as defense of a progressive tax structure the same defense that the first neo-cons gave for Reagan’s massive military build up, and the huge budget deficits they incurred, in the 80’s. That defense was quite simply, “Our children will live in a safer world without communism and they should have to bear some of the burden of living in that safer world.” My defense of the progressive tax policy is,” the wealthy became wealthy because of the freedom of all Americans and our capitalistic economic policy. They should have to bear some of the burden to live in the country that offers them that opportunity.”
So what do we do?
1. The most difficult hurdle to overcome is changing the average American’s voting practice away from wedge issues (woman’s right to choose, gun control, gay marriage, etc.) toward voting their pocketbook. The average tax cut Middle America saw in 2001 as a result of Bush’s income tax cut was around $1,000 per household. The average CEO’s tax cut in 2001 was $29,256. This is just on the SALARY, not the stock options, company cars, etc. That wasn’t good enough, so in 2003, we eliminated all the taxes on the dividends these folks received from their stock, we drastically reduced the capital gains taxes so these guys could sell their assets without paying nearly as much in taxes and the passé dé Resistance, the elimination of the estate tax, dubbed the “death tax” by the millionaires who wanted it gone, to insure that these poor rich folks could pass on wealth and power to their children, thereby creating a permanent aristocracy in this country. But why does Middle America care? They don’t have this wealth and power so why do we worry about it?
2. Because the wealthy can pass along their riches and wealth to their children, their kids will benefit from these enormous giveaways, and their kids will and their kids will. But the middle class in 50 or 100 years will face staggering debt and the brunt of the tax burden will be on them and taxes must go up to pay for just the interest on the debt. It is not a moral value to leave this earth and our country better than when we found it? The neo-cons want to bankrupt this country and return to the heady days of fiefdom. The aristocracy and the church (don’t forget the church!) will control everything, and everyone else shall be a peasant forced to follow their rules, which continue to strengthen their grip on power. In 1789, our fathers in one simple document shattered the worldview on government. Let’s not return to 18th century Europe.
3. Tie taxes into services. Public servants raise families too. They attend church. They are active members in the PTA. Their kids go to public schools. They, like everyone else in the private sector, want a raise in pay every now and again. However, their pay is based on voting by the public, not on performance. If a teacher wants a raise in pay, the milage has to pass. If it doesn’t, there are no raises and the kids have to finance their own sports. The reason our country has taxes is because we all want clean water to drink, we all want the cops to show up when we are in trouble, we all want our children to achieve the best education available, we all want to make sure our drugs are safe. These services cost money.
4. The truth is, our country offers the lowest taxes on its citizens of any industrialized country in the world. We have it very good. We can be better, but our taxes are very, very low. We get a lot of bang for the buck in this country in terms of taxes for services. There is waste, but by and large, cutting funding for particular departments leads to cutting services, not for trimming fat.
5. In the last twenty-five years, our country has balanced its budget three times, 1999, 2000, and 2001. One of those years was a Republican President coming off of the biggest surplus in the history of the U.S., but after one year, we were in deficit. The first six years of the only Democrat President were spent offsetting 12 years of Republican deficits. The term “Tax and Spend Liberals” is still out there and is used persuasively and pervasively by Republicans. Let’s offset this attack with “Not tax and spend more Republicans”, which is exactly what Republican Presidents have done in the last 25 years.