Saturday, September 20, 2008

More Political Outrage

If you are paying attention - you need to be outraged by this election. I am sick sick sick of hearing politicians running on platforms of tax cuts. You know why? It's a gimmick that works because most Americans are either 1) too dumb to figure it out or 2) too selfish to care about the consequences of continuing our tax cuts. I am all for getting government spending in check and cutting out the "pork" - however ignore all of that because it is too small to matter. We are on a path where by 2030 ALL taxes collected at our current rate won't cover mandatory (non-discretionary) spending (Some estimates put it closer to 2044 before this occurs - but does it really matter? It's bleak!).

This means if we want to keep Social Security, Medicare and Medicaid dolling out the same benefits as we are today, we won't have any money left over for ANYTHING ELSE in 2044. We won't have money left over from taxes collected for a military, education, interest on our mounting debts, we won't have money for ridiculous government bail-outs, NASA, transportation & infrastructure (want a bridge repaired in the next 50 years? Even if it goes to nowhere?), unemployment benefits, congressional salaries and perks, etc. In my opinion we need to step up and say "we F-ed up our calculations" and start cutting social security benefits - but imagine running on a platform of taking money away from retired seniors!

Our government is running a company that brings in 2.4 Trillion dollars per year (that's $2,400,000,000,000.00) and they can't figure out how to balance the budget. Forget about AIG - Someone ought to bail out the United States! And I am paying into social security (and P&G is matching it) and all of that money is being spent by the government instead of being put aside for my retirement. You may have heard that our national debt is now over 9 trillion dollars, but I just read that it's really only 5 trillion as debt held by the public. The remaining 4 trillion wasn't borrowed as debt, it was taken from previously collected social security payments with a 4 trillion dollar IOU from the government!

So back to the campaign. When either politician says "I want to cut taxes" you should be booing. Why? Because we are just literally robbing money from future generations and it's a joke that American voters are not informed enough to impact this with their votes. All a candidate has to do is promise tax cuts and people flock to them with their votes. Imagine if the democrats (traditional tax raisers) had Obama go out there saying he'd raise taxes because it's the responsible thing to do as a country? The very next day McCain would slam him for being non-patriotic and a tax and spend liberal - and then win the election in a landslide. Well - the problem has been that the conservatives have been tax and spend liberals just without the taxes! (OK maybe not the liberal part too - but you get the idea - Tax and Spend panderers to the Wealthy!).

So I'll end my rant with the recent analysis of McCain and Obamas tax plans. Remember how McCain keeps saying Obama wants to raise taxes - an effort to scare people into voting for McCain. Well that is true but only for the top 1% of wealthy income earners. If you make under $100,000 per year you really need to ask yourself why you'd vote for a Republican because they have continually cut taxes predominantly for the wealthy. In that case I can only imagine that the middle class voting republican are doing so for more of the social issues than their own personal economic situation. I don't have a problem with the Republicans making the rich richer - especially since they keep convincing 50.5% of the country to agree with them. Americans get what they vote for in my opinion - here's the recent data of how the rich are getting richer.

Source: Congressional Budget Office, Historical Effective Federal Tax Rates: 1979 to 2004, Table 1C, December 2006.

Source: Economic Policy Institute, State of Working America 2006-07, Table 5.1, citing Wolff (2006).

What's funny is that this data doesn't outrage me either. In fact I may shock some people by stating that I think this trend would be true regardless of what the government was doing - only maybe to a lesser extent if we weren't continually putting tax plans in place to favor the rich. But then again I am not sure we should be taxing the rich at a higher rate to begin with but the flat tax will be another blog all together.

Back to the candidate's tax plans. Read 'em and weep.

To balance my argument - I think Obama's plan of raising taxes for the wealthy while cutting taxes for most americans (90-95%) is an interesting spin on a Democratic position because they could get the majority to decide to Tax and spend with the rich footing the bill! And the rich are too small a voting pool to stop it - so the rich they smartly hold onto social issues with broader appeal (or continue to lie and have people think Obama is raising taxes on everyone) in order to gain favor of their economic agendas. Obama's plan - however - in my opinion is still irresponsible and continues to push the burden back to later generations.

That being said - given the fact that in my opinion the current econimic crisis fundamentally is due to the fact that the middle class can no longer spend enough to grow our GDP. And we have probably tried for enough years to see if any money trickle's down from the top. I'd rather give a better tax break to the middle class and have the rich get richer selling them goods through their businesses than through taxes. In my opinion the rich know how to make money, so if you empower the middle class with a little more money to make them feel better off - they will then spend it at the rich people's businesses (if you think this is some generalization, just know that 80% of the wealthiest americans have some amount of busines ownership contributing to their income. Find me someone in the Forbes 400 that isn't a business owner (though a few in there inherited the money from a business owner - see the Walton family).

It is funny to think that when politicians talk about wasteful earmarks and spending, the fact that they can say that one party is asking for a BILLION dollars in pork spending - and it sounds terrible (he said BILLION), but it's really invisible (most people estimate all pork barrel spending at ~1% of the budget) compared to the 9 Trillion dollar debt.

What's the point of all this? I guess I just want to raise awareness that in order to be elected, politicians use gimmicks to get your vote that are really only hurting the country. These gimmicks could be lowering taxes, gimmicky vice-presidents (couldn't resist), or blocking free trade (but that's a whole other blog too!).

Isn't this just a symptom of the broader issue Americans have of not being able to save money? I mean really - the fact that people too often focus on short term gratification versus long term well-being is why these gimmicks work, and why personal spending rates outpace personal incomes.

You just want to yell STOP THE MADNESS...


Ivette said...


ddting said...

Two points:

1. We should create regulations like Wall Street where candidates hafta provide financial statements with everything they say... i.e. if a candidate says they're cutting taxes, they hafta disclose what gov't programs they're gonna reduce to pay for the tax cuts

2. A democracy, although arguably the best form of government out there, is far from perfect.

Karen said...

i really really like when you write political blogs. First because you back up your opinion with facts and graphs from reputable sources and 2) because i think you're smart enough to have your opinion heard.

Let me elaborate on point 2 - i think that the idiots out there who think they are owed so much stuff for doing essentially nothing are the most annoying people on the planet. To see someone in your position who has done what it takes to be successful - these are the people that the rest of the country needs to strive to emulate. Therefore, when you say something, i appreciate it and listen as i know i have a lot ot learn.

Can't you get a nationally syndicated column or something i can promote?

PS - i like dale's point 1. it seems so obvious- why isn't it happening?

Jim said...

Dale makes a very valid point, and in corporate america it's known as a 'reconciliation'.

Basically, the government needs to show the bottom line this year (-$9.?trillion) and then the forecasted bottom line next year (-$8.? trillion) and then reconcile the difference - what levers did you move up/down to get from pt. A to pt. B. Lump spending into major categories as Tom did and simply show the +/-'s.

Hats off to everyone who a) reads this, b) thinks about it, and c) authors it (ok, maybe just one hat tipping here).

Finlands finest said...

I agree with Dale as well.

I really appreciate you pulling al of this together. Honestly I knew little about the economic plans of the candidates until recently and this helps put things into perspective for me!

Martha said...

I disagree with CANDIDATES having to statements of where they'd cut spending. They're not elected officials yet (well, they ARE...just not to the position they're campaigning for at the moment). I would, however, expect Congress to have to number crunch before announcing tax cuts that actually go through. Candidates just need to make themselves seem like sunshine on chocolate cupcakes and don't actually have to say anything definitive. Actually, the more vague they are, they better for them and their ploys to become ruler of our country. Plus, it's not like one individual - even the President - gets their way all the time - still has to go thru both Senate and House of Reps. Really, it just makes it very difficult to make an educated decision.
Some of the ideas thrown out sound a little too close to the Robbing Peter to Pay Paul concept. And even though I am on the "poor" side (not top 1% or whatever), I will not support taxing the rich more so that the money can then be spent frivolously. In my mind, it is not the taxation that is the issue - it is govt spending that needs to be addressed. Imagine how nice it would be if they could control spending AND lower taxes for all.

Katharine said...

Karen's blog recommended checking your blog out. I think your posts are intelligent, well thought out, and interesting.
Some thoughts on this blog and the previous, and similar topics:
1) I like the FERS program and benefitted from it giving pony rides in high school (i.e. Congress aren't the only ones to benefit from it) I find it superior to SS, particular for those entering into the system decades before expected retirement...and even in HS couldn't understand why all Americans, not just Federal employees (or Public for PERS, and all the other similar programs) couldn't have at least a similar retirement plan.
2) The Obama and Mccain Tax proposal plans are also interesting when you read the versions adjusted by the actual population in each group. As a researcher I'm all too aware of the various ways data can be spun.

3) An interesting quote I heard recently was: "The biggest problem with the Republican party is that they have not been acting like Republicans." The statement was made by a non-party member primarily referencing their recent lack of "financial responsibility"
4) Why is it that it seems like the same people who complain about tax cuts to big companies and profits of big companies being unfair also want to keep companies in the US for jobs and the economy, etc? Does it not occur to them that these tax cuts and high profits may help keep them from seeking relocation to somewhere else that will give them those benefits?
5) Overhaul the income tax system in favor of a national consumption tax. By its very nature, people will have an incentive to save instead of spend. Think of how that will that affect individual debts, mortgages, credit cards, loans, and retirement planning, among others.
6) It amuses me when politicians from Washington discuss the desire to clean up Washington, particularly when their tract record doesn't show they behave any better than those they are accusing. Isn't it kind of hard to be part of the problem AND the solution? (Although I guess one could argue with an analogy that my Hybrid is part of the problem with the gas engine, and part of the solution with the electric there may be room for debate about that if you can show the Hybrid is a fair metaphor for a DC politician)
7) What is so bad about rich people being rich that other people feel they deserve a piece of their wealth? Where does this entitlement come from? I fall into probably about the bottom 25% or so of the taxpayers brackets. Although I would like to have more, I do not feel I am entitled to more. Believe it or not, I do not find internet use at home, cable tv, latest technology, barhopping or steak dinners to be necessities. I think a lot of people, regardless of income, confuse necessity and luxury.