There is a looming double whammy threatening the economy beginning in 2013. These two threats are: 1) the expiration of the Bush tax cuts; and 2) implementation of $1.2 trillion in automatic spending cuts over a ten-year period, an outcome of the 2011 debt ceiling debacle.
These threats raise the specter of driving the U.S. back into recession or depression. Many people might question the phrase ‘back into recession’ since they feel we are still in the Great Recession.
Unsurprisingly, in most of these negotiations over the deficit and long-term debt, corporate-funded pundits and politicians focused on the need for more budget cuts. However, some strong special interests are now raising concerns about the agreed upon cuts. In particular, the Congressional-military-
Instead of the politicians’ focus on budget cutting, numerous polls of Americans support raising revenue by increasing taxes on the wealthy. Despite our clear wishes, increasing the federal revenue has received relatively little attention from the pundits and politicians. However, at least the White House is pushing for elimination of the Bush tax cuts for those making over $250,000. The elimination of this cut would be a start along a path that could eliminate the deficit and shrink the debt.
Most Americans don’t realize how changes in the tax code affected our nation’s fiscal health. For example, the corporate share of federal taxes went from an average of roughly 28% in the 1950s to an average of about 10% over the 2001 to 2010 period. In addition, the top marginal individual tax rate dropped from 91% in 1954 to 35% today. Cuts in the top capital gains taxes for long-term gains from 28% to 15% also primarily benefited those at the top of the income ladder.
These huge cuts pushed by the extremely wealthy have done immense damage to our nation’s financial outlook as well as greatly increasing inequality. For example, the top 1% now hold about 35% of the nation’s wealth compared to the bottom 50% holding about 1.1%.
Some steps that would go a long way towards restoring our nation’s fiscal health and reducing our shameful inequality are the following:
- implementing a small tax on the wealth of the top 1%;
- adding a small fee on financial speculation;
- creating a highly progressive income tax with many categories and a top marginal rate of at least 70% on incomes over $1,000,000;
- restoring the estate tax with estates under $3.5 million exempted;
- removing loopholes in the corporate tax code that allow many large global corporations either to get refunds, to pay no taxes, or to pay effective tax rates far lower than the official rate of 35%;
- eliminating corporate welfare at the federal and state levels that basically benefit large global corporations at the expense of small businesses and the public;
- removing the cap on wages taxed for Social Security and also subjecting unearned income to taxes for Social Security;
- enacting Medicare for all;
- stopping illegal aggression against other nations;
- withdrawing from Afghanistan in a timely manner;
- ending the harmful, costly and failed war on drugs; and
- cutting military spending, particularly for weapons programs, unnecessary military bases and the costly privatization of many tasks.
Some may view these steps as class warfare against the wealthy. However, if you examine these proposals, you can see that the wealthy have already been engaged in class warfare against the rest of us for well over thirty years. According to the media though, it is not class warfare if the wealthy do it. Warren Buffet addressed this idea a few years ago: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
The Congressional Progressive Caucus has also proposed a less daring plan, “The Peoples’ Budget”, as another way of eliminating the budget deficit. For related information, read the just published The Betrayal of the American Dream by Donald Barlett and James Steele.