By Neil deMause No sooner had the unemployment rate dipped from its January high of 10 percent than the media drumbeat began: What will the Obama administration do about looming deficits?
The danger, it was made clear, was both imminent and mammoth: The federal deficit, warned the New York Times (2/2/10), was on pace by 2020 to “equal 77 percent of the gross domestic product, the highest level since 1950.” The Times (1/26/10) even alluded to “perceptions that government spending is out of control” as a cause of Obama’s falling poll ratings among independents.
The “out-of-control spending” theme, in fact, dominated news coverage of the deficit panic, with numerous news outlets drawing parallels between the government’s rising debt and individuals’ irresponsible spending. “We’re going to talk, this morning, about what happens when you put off paying the bills,” began an NPR report (3/5/10) on the deficit.
CNN Your Money host Ali Velshi (2/13/10) declared:
We begin today by examining when debt becomes dangerous. For your personal debt, we’ll show you exactly what the new credit card rules will mean to you, but first we want to look at what it means for the United States to be spending trillions of dollars that it doesn’t have.
Velshi then brought on U.S. News’ David Gergen to observe that “the deficits that are out there are just gigantic” and “recent projections show that the United States will never balance its budget on the course we’re on.”
Gergen was not alone. Pundits from center-left to the right wing—the standard spread available from most news outlets, in other words—insisted that pain was necessary, and must be shared by the less-than-wealthy. Michael Kinsley (Atlantic Monthly, 4/10) griped about the stimulus package: “This cure has been one ice-cream sundae after another. It can’t be that easy, can it? The puritan in me says that there has to be some pain.”
Isabel Sawhill, a Brookings Institution economist and former Clinton administration budget staffer, wrote in the Washington Post (2/12/10): “From 2001 to 2003, Congress reduced taxes for just about everyone.…The message to the public would be simple: If you want to keep taxes low, you have to forgo some benefits. As my parents used to say, no dessert without the spinach.”
What very few news outlets mentioned, however, was exactly who had eaten the dessert. Most coverage blamed overall “spending”—and particularly benefit programs like Social Security—for the nation’s deficit woes (Extra!, 4/10). But as the Center on Budget and Policy Priorities pointed out in a February report (2/17/10), “the tax cuts enacted under President George W. Bush, the wars in Afghanistan and Iraq, and the economic downturn together explain virtually the entire deficit over the next 10 years.”
Tax and income records show, meanwhile, that the beneficiaries of Washington’s spendthrift ways have been very few—and very wealthy. As Berkeley economist Emmanuel Saez has documented (“Striking It Richer,” 8/5/09), income inequality in the United States has skyrocketed in recent decades. After remaining steady for roughly 40 years, the share of the nation’s total income going to top earners began a steady rise in the early 1980s. When President Ronald Reagan first took office, the top 10 percent of earners captured about one-third of all U.S. income; by 2007, the latest year for which data is available, they took home nearly half—”a level,” writes Saez, “higher than any other year since 1917...even surpass[ing] 1928, the peak of the stock market bubble in the ‘roaring’ 1920s.”
What happened in the early ’80s? For one thing, Reagan slashed the marginal tax rate on top earners, from 70 percent to as low as 28 percent. This not only allowed the rich to keep more of their earnings, it also increased their incentive to demand higher salaries, which, Saez notes, have soared in the last 25 years.
As a result, according to Wealth for the Common Good—a group of wealthy Americans supporting more progressive tax rates that’s affiliated with the Institute for Policy Studies—the top 0.1 percent of U.S. taxpayers saw their average share of income paid in federal taxes drop from 60 to 33.6 percent between 1960 and 2004. The group notes that if those taxpayers (who make more than $7 million a year in income) paid federal income taxes at 1960 rates, the government would get $281 billion more a year in revenue.
The effects of tax policy on income inequality were particularly stark during the George W. Bush administration, when the incomes of the top 1 percent of earners grew by 10.1 percent a year, while everyone else saw their earnings increase only 1.3 percent a year—with the result that two-thirds of all income growth between 2002 and 2007 went to the nation’s richest 1 percent (Saez, 2009). The Bush tax cuts reduced federal government by about $2.1 trillion (Citizens for Tax Justice, 9/8/09), almost half of which padded the bank accounts of the nation’s richest 5 percent.
The changes in tax policy under Bush had stark effects on racial inequality as well. From 2000 to 2008, according to Census data, the gap between the average income of black U.S. taxpayers and white non-Hispanics, which had fallen by 6 percentage points during the Clinton years, reversed course and grew from 27 percent to 29 percent.
One obvious solution, it would seem, would be to tax those responsible for eating most of the cookies from the jar—to roll back the deficit by taking back the money that was handed over to the rich over the last three decades. But much media coverage in recent months has been devoted to finding reasons why this would be impossible.
First off, many outlets argued, the rich are already overtaxed. When President Obama floated repealing the Bush tax cuts—actually just allowing them to expire as scheduled for all earners above $200,000—USA Today wrote (4/7/10), “Fresh from raising taxes on upper-income Americans to help expand health insurance coverage, President Obama and Democratic lawmakers are targeting them again.”
In an article headlined “Obama Sets Sights on Rich to Fuel Agenda,” the Los Angeles Times (4/7/10) wrote, “for upper-income taxpayers, the tab for healthcare is just the beginning.”
“Rich Lack Loopholes to Offset Obama Taxes,” warned a Bloomberg News headline (4/8/10), citing supply-side economics guru Arthur Laffer as threatening that “some taxpayers paying top rates may respond to mounting federal and state levies by moving, like he did.” (Laffer moved from California to Tennessee in 2006, he says, to escape high state income tax rates.)
Since, historically speaking, the current top tax rates are relatively low—and still will be even if the Bush tax cuts are allowed to expire next year—arguments that the rich are overtaxed often rely on tricky mathematical gymnastics. “Despite all the complaints—which were mostly fair—that the Bush tax cuts disproportionately favored the rich, the share of federal income taxes paid by the wealthy continues to rise,”Alan Greenblatt declared on NPR on tax day (4/15/10). But that’s because their income continues to rise as well, even as taxes as a proportion of their income have fallen. The share of federal income taxes paid by the richest 1 percent of earners went from 31 percent to 39 percent between 1996 and 2006, according to the Congressional Budget Office (4/09), an increase of just under one-quarter; at the same time, the richest 1 percent’s share of total income went from 14 percent to 19 percent, a jump of more than one-third.
Still, media argue, hitting the middle and working classes needs to be the centerpiece of balancing the budget. The New York Times (2/2/10) cited “many budget analysts” as believing that Obama’s pledge not to raise taxes on households making less than $250,000 was “a big hurdle to significant deficit reduction.” The Times criticized the president for avoiding the “really hard choices about entitlement programs—Medicare and Medicaid, especially—and about taxes that most budget analysts say are essential to cut annual deficits and to begin paying down an accumulated debt.”
“Taxes on the rich can’t begin to finance the levels of new spending that the current government has unleashed,” wrote the Wall Street Journal editorial page (4/8/10). “Democrats have to soak the middle class because that’s where the real money is.”
In fact, tax experts say that the deficit could be significantly reduced by taxing only the rich—it would just take very high tax rates, something that is much more popular with the public than with corporate media. A March 2010 Quinnipiac poll found that 60 percent of Americans support raising taxes on those earning more than $250,000 to reduce the deficit (USA Today, 4/7/10), while 72 percent, including a majority of Republicans, support higher taxes on those making more than $1 million.
CBS’s MoneyWatch.com (4/7/10), though, scoffed that taxing the rich is “always a popular idea, but the math doesn’t add up.” The program argued that a national value-added tax (effectively a national sales tax) would be necessary, since “top tax rates are already likely to go up to almost 40 percent.” Raising taxes only on individuals making more than $200,000 and couples making more than $250,000 would mean the top rate would need to hit 77 percent, something the Tax Policy Center’s Roberton Williams and Rosanne Altshule, writing in the Washington Post (4/4/10), called “politically untenable.”
But even at “almost 40 percent,” the top tax rate would still be fairly low by historic standards. Wealth for the Common Good (4/7/10) wrote: “The tax shift we have witnessed since the 1950s has been enormous. From 1950 through 1963, the federal tax rate on ordinary personal income over $400,000 never dropped below 91 percent. Between 1963 and 1980, that same top rate never dropped below 70 percent.” The capital gains tax rate, meanwhile, which is what applies to much of the income of the nation’s wealthy, fell to 15 percent in 2003, after reaching nearly 40 percent in 1977.
Occasionally, this sort of nuance sneaks into media coverage. In an article on the passage of the health reform bill (3/24/10), for example, Times business columnist David Leonhardt wrote that over most of [the last three decades], government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.
Yet a week earlier (3/17/10), discussing the deficit, Leonhardt wrote that taxes “are no longer rising,” yet “our desire for government services just keeps growing.” Leonhardt called this disconnect “far and away the main reason for our huge budget problems”—calling the wars in Afghanistan and Iraq, recession and stimulus “minor issues in the long run.” As for the Bush tax cuts and the concurrent redistribution of income to the wealthy, they aren’t even on the list of culprits.
Leonhardt’s conclusion: “Spending will need to be cut, and taxes will need to rise. They won’t need to rise just on households making more than $250,000, as Mr. Obama has suggested. They will probably need to rise on your household, however much you make.” He also called for a “modest consumption tax [that] would give households more incentive to save and could raise significant revenue.”
In other words, the rich are too rich, but closing the budget hole by taxing them isn’t the answer.
06-04-2010, 08:31 AM
podfish
Re: Deficit mania ignores growth of income gap
I have no idea why the size of the deficit has become an issue that the average person feels is important. The only theory I can find that has any resonance at all is that many visualize it as some kind of gigantic extension to their own personal credit-card debt, which they now find kind of scary.
I can hear now the responses "that's exactly what it is! they've been spending money they haven't made and the bill WILL come due!". First off, they haven't been spending the money. Average workers have had their increased productivity funneled off into the hands of the 'ownership class' (as Bush called it) for at least thirty years and had it lent back to them. But that's not the source of 'the deficit' anyway, as the article points out. Even so, even if the average American has less sympathy for class warfare than I, do they really accept that the debt is somehow their own responsibility? And really, more to the point, how do they think the existence of a deficit will impact them personally???
Quote:
Posted in reply to the post by Hotspring 44:
.... very few news outlets mentioned, however, was exactly who had eaten the dessert. Most coverage blamed overall “spending”—and particularly benefit programs like Social Security—for the nation’s deficit woes (Extra!, 4/10). ...
Still, media argue, hitting the middle and working classes needs to be the centerpiece of balancing the budget. ....
06-04-2010, 09:07 AM
Hotspring 44
Re: Deficit mania ignores growth of income gap
Quote:
Posted in reply to the post by podfish:
I have no idea why the size of the deficit has become an issue that the average person feels is important. The only theory I can find that has any resonance at all is that many visualize it as some kind of gigantic extension to their own personal credit-card debt, which they now find kind of scary....
...And really, more to the point, how do they think the existence of a deficit will impact them personally???
That depends on whom the, “they” you are referring to are…. …Do you mean the middle class, the ones on Social Security, the un-employed, or the higher income bracket, or the ultra rich?
All answers are (obviously) different depending on the economy for the income bracket and political leanings.
06-04-2010, 10:30 AM
podfish
Re: Deficit mania ignores growth of income gap
different "they"s with different answers are fine. I admit that the 'average person' I refer to is hard to identify - 'average' works fine when talking about numeric values but is a bit imprecise for sociology. Still, I think it's pretty clear what my meaning is. I'm less interested in people who fall into smaller groups, like the ultra rich you mention. Sadly, the unemployed may now be considered pretty damn average! So, what are some reasons, shared by a large part of our population, that cause them to feel passionately about the national deficit??
Quote:
Posted in reply to the post by Hotspring 44:
That depends on whom the, “they” you are referring to are…. …Do you mean the middle class, the ones on Social Security, the un-employed, or the higher income bracket, or the ultra rich?
All answers are (obviously) different depending on the economy for the income bracket and political leanings.
06-04-2010, 03:36 PM
Hotspring 44
Re: Deficit mania ignores growth of income gap
quote=podfish;115255]different "they"s with different answers are fine. I admit that the 'average person' I refer to is hard to identify - 'average' works fine when talking about numeric values but is a bit imprecise for sociology. Still, I think it's pretty clear what my meaning is. I'm less interested in people who fall into smaller groups, like the ultra rich you mention. Sadly, the unemployed may now be considered pretty damn average! So, what are some reasons, shared by a large part of our population, that cause them to feel passionately about the national deficit??[/quote]
I don't know if you know it or not, but your question implies you're falling into the trap that the corporate media has set-up.
What I mean by that is, if you take anything out of the equation like the ultra rich, or social security recipients, etc. (for example), then you're not going to come up with any of the correct answers.
How many of the links did you read?
Did you follow up on any of the other parts of the link and do any of the search/s that I suggested?
I sort of doubt that you did, because if you did, I think that you would have had a better idea to an answer to those questions.
The vast majority of the media that the so-called average person has access to (or chooses {to}) and/or listens to because of the sheer amount of stations, radio, television, newspapers and such are owned and operated by large corporations in one way or another; so therefore there ends up being a spin by way of omission; because the employees in the newsroom, or in the field investigative reporters, who's news report/s or article/s would potentially make the owner's (Rupert Murdoch, for one example) or the sponsors look bad or put in a bad light, would (potentially) get fired and (potentially) join the ranks of the unemployed.
Then of course, as has been mentioned in other threads, there are well-financed and politically powerful lobbies, so therefore, if it (the news article) makes certain factions of such look bad; (the) people in the newsroom or in the field either get fired, or sent somewhere else in that organization to prevent them from doing that again, or not financially compensated for their work, and/or the whole article or part of it somehow (usually because some form of financial or other threat) ends up getting thrown in the trash or omitted because of that too.
That is the main premise, and my whole point in starting this thread.
So to make a long story short; corporate, (and/or) special interest strong-arming, bribery, and/or cronyism (is) causing the vast majority of the spin!
Also, I think “average” is a subjective term in this case because every single one of those groups that I mentioned, including the ultra rich are concerned about the “deficit” for their own individual reasons.
However, I do get your point about the borrowing and spending, and the psychology of people that use credit cards and (them) equating that to borrowing and spending the government does, and getting overwhelmed when it (the so-called deficit) goes to the trillions of dollars because that is so hard for an individual person to comprehend coping with.
The biggest difference with that I see is that the Government is the only one that can print (or electronically make out of thin air) more money!... ...I am referring to the Federal Reserve system.
BTW, since the topic of psychology has been mentioned, the ultra rich are playing with the money system like it's a sport, they do it for fun, for them it's kind of like playing cricket, safari hunting, gambling etc. and also unfortunately for the rest of us, they are addicted to it!
06-04-2010, 05:38 PM
Debunker
Re: Deficit mania ignores growth of income gap
Quote:
Posted in reply to the post by podfish:
...really, more to the point, how do they think the existence of a deficit will impact them personally???
I'm puzzled by your question. We're now paying half a trillion dollars a year just for the interest on our debt, caused by deficits covered by massive borrowing.
That's an unimaginable sum of money out of the taxpayers pockets that could otherwise be used for education, healthcare, infrastructure, scientific research and on and on and on.
Borrowing to pay the bills is ridiculously expensive. I've read that for every dollar we borrow, we pay back two over 20 years. It would be much cheaper to pay as we go.
06-04-2010, 06:17 PM
podfish
Re: Deficit mania ignores growth of income gap
The interest payment on the debt is about 6% of the federal budget. That's real money but it's not seriously impacting any other major programs today.
I'm really confused by Hotspring's reply, though. I've asked a really simple question: why does the size of the deficit have any resonance at all to the average person?
Unless you're trying to say they care because the media tells them that they do. I don't dismiss that, if that is indeed what you're saying. You said "if you take anything out of the equation like the ultra rich....", but it's not the ideas of the "ultra rich" I'm interested in - I can guess why they'd care. I just don't see why people whose jobs are threatened, or who have little capital investment, or who are small businessmen, or even are just hangin', doin' fine, seem to think the size of the deficit is highly relevant to them personally.
Quote:
Posted in reply to the post by Debunker:
I'm puzzled by your question. We're now paying half a trillion dollars a year just for the interest on our debt, caused by deficits covered by massive borrowing......
06-04-2010, 06:29 PM
Debunker
Re: Deficit mania ignores growth of income gap
HELLO, that's just the interest! When do we pay the principle? It's more than we spend on education for God's sake. It's projected to be a trillion dollars a year within 10 years. Just the interest. That's far more than most countries entire budget.
We're also not considering the effect on state's budgets, who are all having to borrow tens of billions to make ends meet, again, effectively doubling the cost of the goods and services just like on the national level.
Quote:
Posted in reply to the post by podfish:
The interest payment on the debt is about 6% of the federal budget. That's real money but it's not seriously impacting any other major programs today.
I'm really confused by Hotspring's reply, though. I've asked a really simple question: why does the size of the deficit have any resonance at all to the average person?
Unless you're trying to say they care because the media tells them that they do. I don't dismiss that, if that is indeed what you're saying. You said "if you take anything out of the equation like the ultra rich....", but it's not the ideas of the "ultra rich" I'm interested in - I can guess why they'd care. I just don't see why people whose jobs are threatened, or who have little capital investment, or who are small businessmen, or even are just hangin', doin' fine, seem to think the size of the deficit is highly relevant to them personally.
06-04-2010, 06:37 PM
"Mad" Miles
Re: Deficit mania ignores growth of income gap
Just a little story to try and illustrate the psychology of national debt ownership.
In a corporate training in the early nineties at the alternative greeting card company, where I worked for low pay as a casual security guard / doorman, they used the phrase,
"We're all in the same boat (employees and employers, supervisors and the supervised) and if the boat sinks we all drown."
To which I replied to my confidants,
"Yeah, but while the boat is sailing, some get to hang out on the poop deck, drinking tropical cocktails and resting in sling hammocks while enjoying the sea breeze, while others are housed in the hold, breathing bilge scented air while having to do all the scut work."
I think the "American Dream" is sold on the basis that everyone can aspire to find their way to the poop deck and out of the hold. History, has for the most part, proven them wrong, with certain exceptional periods such as the post WWII business boom, and even then not for everyone.
The structural changes in our economy, particularly the post-industrial era starting in the seventies and the shift to a global economy, with our domestic economy being more and more based on services, military and financial manipulation, have all led to this moment.
Read Paul Krugman for a moderate, liberal mainstream economists views on debt, deficit spending and job creation. One if his main themes is that concern for the deficit may become an excuse to avoid social spending needed to replace lost jobs in this current recession. I think he has a good argument.
"What do you mean, 'we', Kimosabe?"
"There'll be pie in the sky, bye and bye..."
06-04-2010, 06:42 PM
Debunker
Re: Deficit mania ignores growth of income gap
Well said. And to put it in perspective, here is the cost of a few major expenses in 2010... NASA at $19 Billion, education at $53 Billion, Department of Transportation at $73 Billion, interest on the federal debt - $500 Billion. Federal Budget Spending and the National Debt
Quote:
Posted in reply to the post by Mad Miles:
Just a little story to try and illustrate the psychology of national debt ownership.
In a corporate training in the early nineties at the alternative greeting card company, where I worked for low pay as a casual security guard / doorman, they used the phrase,
"We're all in the same boat (employees and employers, supervisors and the supervised) and if the boat sinks we all drown."
To which I replied to my confidants,
"Yeah, but while the boat is sailing, some get to hang out on the poop deck, drinking tropical cocktails and resting in sling hammocks while enjoying the sea breeze, while others are housed in the hold, breathing bilge scented air while having to do all the scut work."
I think the "American Dream" is sold on the basis that everyone can aspire to find their way to the poop deck and out of the hold. History, has for the most part, proven them wrong, with certain exceptional periods such as the post WWII business boom, and even then not for everyone.
The structural changes in our economy, particularly the post-industrial era starting in the seventies and the shift to a global economy, with our domestic economy being more and more based on services, military and financial manipulation, have all led to this moment.
Read Paul Krugman for a moderate, liberal mainstream economists views on debt, deficit spending and job creation. One if his main themes is that concern for the deficit may become an excuse to avoid social spending needed to replace lost jobs in this current recession. I think he has a good argument.
"What do you mean, 'we', Kimosabe?"
"There'll be pie in the sky, bye and bye..."
06-04-2010, 09:26 PM
Hotspring 44
Re: Deficit mania ignores growth of income gap
Quote:
Posted in reply to the post by podfish:
The interest payment on the debt is about 6% of the federal budget. That's real money but it's not seriously impacting any other major programs today.
A perpetual rising interest successive following years is just an example of how debt never gets paid off.
It's because of that rise in actual percentage (even though the actual percentage may be a decimal) we are paying interest on interest, which is compounding the interest from previous years in addition to more recent debt.. ...= perpetual debt... ...= indentured servitude, extreme poverty, possible famine, and/or eventual slavery of the (less fortunate) masses or some combination of the above.
Quote:
Posted in reply to the post by podfish:
I'm really confused by Hotspring's reply, though. I've asked a really simple question: why does the size of the deficit have any resonance at all to the average person?
Simple questions don't always necessarily have such simple answers.
I will try to answer anyway.
Because they're already pretty much financially tapped out, and the powers that be (through corporate media, industrial complex) are essentially telling them (us) that not only do they (we) have to pay for the rest of their (our) lives (the national debt), so will there (our) great-grandchildren have to pay before it's paid off... ...if ever!
Furthermore, one of the points that I'm trying to get across is that the so-called average person whom I think you are referring, has a sense of that, and they don't like it, they are very uncomfortable with it, to the point where many are pissed off about it but, because of the lack of complete, referenced, information available, they take out their frustration on the weaker entities; primarily the poor and downtrodden.... ...survival of the fittest kind of situation!
Quote:
Posted in reply to the post by podfish:
Unless you're trying to say they care because the media tells them that they do.
That is not exactly what I'm saying but I suppose you could reasonably read into it that way.
What I'm saying is that the corporate media, so to speak, is only doling out bits and pieces of the whole of the information, and because of that and the spin on it (infotainment), the average person only knows what they've been told, and are only familiar with the terms within that limited realm, unless they have the fortitude to check into it deeper. But, the larger percentage of people for a whole slew of reasons, just don't.
Quote:
Posted in reply to the post by podfish:
I don't dismiss that, if that is indeed what you're saying. You said "if you take anything out of the equation like the ultra rich....", but it's not the ideas of the "ultra rich" I'm interested in - I can guess why they'd care. I just don't see why people whose jobs are threatened, or who have little capital investment, or who are small businessmen, or even are just hangin', doin' fine, seem to think the size of the deficit is highly relevant to them personally.
Except for the ones that, (in your words) "are just hangin', doin' fine (I could claim to be confused as to knowing what you mean by that.).
But instead of being confused I realize that you're more likely making conjecture regarding
Because it's them (the average taxpaying Joe), who is paying for the interest on the deficit, and not the ultra rich; in other words, the disparity of wealth. The Wealth Distribution
In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2010). Who Rules America: Wealth, Income, and Power
Note: I omitted table 1 and figure 1 mentioned in this article, but the whole article can be found on the above link.
I think there's an issue with the way you are compartmentalizing by way of separating the primary factors involved with the situation in such a way that you seem to so readily exclude one of them (the ultra rich: the top 1% of households had an even greater share: 42.7% from the equation.
Considering the (corporate) media, and who owns and controls the corporate media news as I mentioned previously; it seems to me that you may have fallen into the trap of following the way in which it is presented by such (various omissions of sorts, media spin etc.)... ...I suggest to reduce such confusion that more thinking instead, may help.
I think that if you're not curious about the mind/s behind the controls of the corporate media, which is highly manipulative, so as to direct public opinion into a false sense of being knowledgeable, I'm not surprised that you're “really confused” about what I said.
