Government Policy


krugman

Economist Paul Krugman

A Discussion About The Discussion

What follows are excerpts of an actual online discussion about the debt ceiling and the notion of minting a coin to avoid allowing partisan extremists to use the nation’s debt obligation as a bargaining chip to implement policies they can’t pass through normal constitutional processes.

Economist Paul Krugman figures prominently in the discussion since he has weighed in on the notion of the presidential use of the treasury (via minted coin) to bypass that scenario.

The Original Post

Paul Krugman is unpopular with many folks…he is not considered to be a “real economist” by many conservative business school academic types, since his Nobel Prize in Economics was given for his work in trade theory. And many call him a “socialist” without understanding the difference between Keynes and Marx.

But here is the hard reality that many people who view economics simply in the here and now generally overlook: In the long run, Krugman has been fairly consistent in being proven to be much more often right than his peers and certainly his naysayers. 

I first noticed him just prior, during and following East Asia’s so-called IMF crisis. And dang it all – he was consistently on target while being dismissed as some kind of liberal gadfly by establishment types who ended up being very, very wrong. I suspect he is still on target and he is most certainly not much more popular by pointing out that the kings of economic policy-making are still strutting about without any clothes.

The following is a decent summary of his minority perspective that may well be viewed by future historians as pleas from our generation’s Jeremiah: The Big Fail (New York Times.)

The Discussion Thread

Commentator A: “The ‘Free Market’ in perspective”
Any time someone recognizes the necessity for rethinking corporate capitalism altogether and exploring ways to democratize the economy with worker-owned cooperatives, and business models like unions that look out for workers, the community, and the environment, he’s labeled something sinister-sounding. In fact, the founders of the United States were liberals who envisioned – not a radical vision of individual rights and gun toting alienated vigilantes – but community. The nation they envisioned was based in philosophy and law on principles of shared responsibility, community, freedom of and *from* religion, and restraint of oligarchs (the Boston Tea Party was in fact an opposition to the monopolization of trade.)

For the principles of the free market (ie. the capitalist system) to function efficiently and effectively, there needs to be competition, as opposed to the anti-competitive oligarchical forces of corporate personhood. Take away competition in enterprise and politics, and you’re left with – what? Let’s look into this further:
Walmart chart
Source: Independent Business

  • WalMart dominates perhaps 25% of retail in the U.S., which has caused the collapse of small business retailers and the suppression of wages and benefits.
  • The cause of skyrocketing U.S. healthcare costs is the domination of the industry by a cartel of about 5 insurance corporations (United, Cigna, etc) and about that many pharmaceuticals, along with the consolidation of community hospitals under large hospital chains. Because these giant corporations have a lock on the industries they dominate, enabled by the failure of government to enforce anti-trust provisions of the law, the competitive forces that conservatives pretend to worship have all but been eliminated. The results: costs that are more than double those of other advanced nations, inferior outcomes, declining quality of service, and poor general health.


If these observations sound radical, they really aren’t. They’re simply representations of core U.S. economic problems – and history shows that the founders, like Jefferson, Washington and Adams, tried to avoid the domination of the economy by such forces. Jefferson, for instance, who was not a wealthy man (he owned land and slaves, which were both quite cheap at the time, and died bankrupt) wrote quite emphatically and eloquently about this. 

What differentiates Krugman from an ideologue is that his observations are based not in opinion and theory, but history. That the supply side economic theory has been quite compellingly discredited doesn’t deter some from continuing to espouse it. Since Krugman calls them on their lack of rigor, dishonesty and intellectual corruption, he is quite naturally villified and slandered.

But never make the mistake of false equivalence – ie. putting the opposing viewpoint on the same level as his scholarship. The “balanced media” fallacy that we see on CNN and other infotainment media does a quite disrespectful job of perpetrating the notion that the right and left are simply having an honest philosophical disagreement, and both deserve an equal hearing. What they fail to do is call out the falsehoods.

Commentator B: “What about that trillion dollar coin idea?”

Is this the same guy who is proposing a trillion dollar platinum coin to rid us of all our fiscal problems?

coin
Commentator A: “Here’s the coin idea in context”
Krugman doesn’t speak in terms of “rid us of all our fiscal problems.” He’s a wry realist, and sees the larger picture that the national media is turning attention away from. Unlike most prominent economists, Krugman has a wicked sense of humor. He calls the $1 trillion coin idea – which is the subject of a petition – “silly but benign”:

Should President Obama be willing to print a $1 trillion platinum coin if Republicans try to force America into default? Yes, absolutely. He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous.

Bear in mind that if Congress does nothing to deal with the debt limit, the country could lose its ability to meet its financial obligations. The idea of empowering the Treasury to create currency to deposit into its Federal Reserve account to pay off past debts (which the Republicans were happy to create but anxious to push off onto a Democratic administration) is not a solution to rid us of all our fiscal problems, but rids us of the possibility that economic neanderthals to cause another unnecessary crisis.

Commentor B: “Isn’t it all just theoretical?”
Why stop at $1 trillion why not up to $10T or $100T. When does a silly idea become not so “benign?” The problem with Krugman and other theoretical economists is just that, it is theoretical. He has spent his whole career except for a brief stay in the Reagan adminstration in academia. Never made a payroll, never negotiated with suppliers, never endeavored to satisfy customers. I would no more want advise from him than advise from the Pope on my sex life. Interesting enough when factors don’t meet his premises like the potential impact of his $1T coin on inflation and the dollar, or the aging population exponentially increasing health care costs on the charted deficit projections, he dismisses them as of minimal consequence. Kudos to him for mentioning them, but just mentioning them does not make those factors go away.
Commentator A: “Actually, it’s all empirical”
The key point is that this isn’t theoretical economics, but empirical.

The chief advocates for discredited economic policies are self-serving CEOs and other financial and political elites. Those who constitute the “Fix the Debt” coalition are a case in point, as are the CNBC Wall Street voices that harp on the same fallacies in the media day after day.
fixthedebt
To wit, although supply side economics is soundly discredited by the preponderance of evidence spanning several decades now,  it continually gets resurrected under new guises. Today’s term for the fallacy is “the job creator” theory.  The common thread is that these advocates of the so-called “fiscal conservatism” are transaction-oriented self-serving interests whose pronouncements represent conflicts of interest, appeals to authority and fallacious logic.


By contrast, economists like Krugman and others appeal not to confirmation bias, but the ability of people, given these basic facts, to sort out the facts that track trends over time and  allow individuals to draw correlations for themselves.
income-tax-is-getting-lower-and-lower-for-the-rich

Analysis of these facts and figures reveals a clear pattern: Despite the fact that the job creators have had their demands met over the past few decades, vis a vis deregulation on labor, anti-trust and fiduciary practices, and had their taxes lowered, this period has seen record budget deficits, job losses and wealth and income disparities. And if you trace the history of these developments, you can extrapolate a causality between these windfall benefits and the current economic malaise.  So the “job creator” theory hasn’t been borne out in fact.

On the other hand, the facts are also in about Keynesian or demand side economics. Analysis of U.S. economic history shows that the emergence of a middle class corresponds with the rise of economic democratic developments, including organized labor, and that the decline of the same has resulted in a reversal of the fortunes of the working class, a shrinking middle class, and unstable economic trends.

You rightly mention exponentially rising health care costs. This is indeed at the root of the problem, and it is caused by anti competitive forces. As the health care industry is dominated by a few giant corporations that continue to merge and consolidate, gobbling up competitors, prices continue to rise. Privatization of public programs is one of the culprits. The public VA model is the most cost effective one in the economy, but the industry is lobbying for privatization that benefits themselves rather than the consumer. 

For instance, GWB’s Medicare Part B initiative essentially puts drug coverage under Medicare into the hands of private industry, and prohibits the government from negotiating prices. Medicare Advantage plans – which are privatized Medicare providers are more costly than traditional public Medicare (you may recall that candidate Obama was pilloried for cutting back funding to these private providers – it was misrepresented as “stealing from Medicare.”)


Debt ceiling
The impact of fiscal policy (including this coin) on inflation is a canard, a red herring in the debate. The hard fact is that the debt ceiling – which Republicans raised several times under GWB to deal with unnecessary, unjustified, and unpaid-for military adventures abroad and corporate giveaways – is simply a matter of honoring past debts, incurred by that administration. The chief difference is that Obama actually pays for his spending whereas Bush just passes the costs on to the next administration.
Commentator B: “What about inflation?”

I don’t see how dismissal of the inflationary impact of his coin folly and avoidance of the tremendous fiscal impact of the aging population is anything less than a honest discourse.

Inflation_rate_in_the_United_States_n
Commentator A: “Inflation is a red herring.”
Inflation is a side effect of economic growth, and I doubt that any economist would dismiss it when it arises. The fact is that it simply isn’t an issue today, which the Fed’s Ben Bernanke acknowledges. It is therefore a red herring argument, a false dichotomy. Here’s an analogy: Would you fail to rescue a cancer patient because saving his life raises the possibility that he might later suffer a heart attack as the result of the medicine prescribed – simply because there is a minor statistical chance of such a side effect?

The debate Krugman highlights is refocusing on the root issue: that a group of ideologues are attempting to use the debt ceiling as a leverage tool to effect a radical political agenda. That radical agenda justifies itself as “reducing the deficit, but in fact has nothing to do with the deficit. The fact that Republicans voted 19 times to raise the debt ceiling under the historical deficit spending of GWB exposes that dishonesty.

What is really going on is a politicized rhetorical cover ploy, which I call “whack-a-mole.” Keep the Democrats busy defending against red herring after red herring to distract attention from the underlying issue.The underlying issue is, of course, an attempt to redistribute wealth upward via legislative policy, allowing oligarchs to enjoy greater tax breaks and more lenient regulations that enable them to strengthen their position at the expense of the working class.

The debate then becomes a false dichotomy: whether or not to cut programs that encourage economic competition, strengthen small businesses rather than large conglomerates, and provide policies that allow the working class (which is 98% of us) to flourish.

The areas that could be reformed sufficiently to reverse the deficit are by designed barely mentioned, such as corporate welfare to all of the industries that benefit from special favors and privatization (such as the security industry, oil and gas, big agriculture, big hospital groups and pharma, etc.) 

Or as Krugman puts it:

It’s easy to make sententious remarks to the effect that we shouldn’t look for gimmicks, we should sit down like serious people and deal with our problems realistically. That may sound reasonable — if you’ve been living in a cave for the past four years. Given the realities of our political situation, and in particular the mixture of ruthlessness and craziness that now characterizes House Republicans, it’s just ridiculous — far more ridiculous than the notion of the coin.

In other words, returning the balance to a reasonable discussion requires a reset, but when “conservatives” are engaging in rhetoric, gerrymandering, filabuster, whack-a-mole, voter disenfranchizement, huge injections of corporate capital and influence, factual distortions and other strategies to game and rig the system, it’s easy to get wrapped up in discussions like the one we’re having here, which just attempts to teach people how they’re being influenced by power. However, it’s a discussion I’m glad to have as it can help raise awareness of the game.

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The Red Herring Discussion That Dominates the Media

Somehow, the national media has turned an important discussion about economic revival into a single-minded referendum on the wrong issue: the budget deficit alone. Furthermore,  by identifying the budget with “entitlement programs,” it has created a false causality.  Could the framing of the issue in such a singleminded, simplistic and ideological manner be mere coincidence?
An article by titled The fraud that is ‘Fix the Debt’ and a New York Times story expose it as collusion of self interest. The “Fix the Debt” coalition is exposed as:
a coalition of extremely well-heeled and well-connected former politicians and current CEOs masquerading as a public interest group. The organization, headed up by our foremost catfood pushers Alan Simpson and Erskine Bowles, is replete with old white guys who get paid very well by a number of industries to make sure that any budget cuts don’t hit them.

Economic Paul Reality Check

Economist Paul Krugman, in his New York Times commentary continues to point out some fundamental economic truths that can scarcely be found in mainstream media. He cites the Center on Budget and Policy Priorities  graph shown above. The chart measures the projected ratio of federal debt to GDP. Note that the continuously rising blue line  represents the projected path as of early 2011. The discussion of the nation’s debt ratio in the national media focuses on that line – even though it no longer holds. Krugman writes:

But a lot has happened since then. The orange line shows the effects of those spending cuts and tax hikes: As long as the economy recovers, which is an assumption built into all these projections, the debt ratio will more or less stabilize soon. CBPP goes on to advocate another $1.4 trillion in revenue and/or spending cuts, which would bring the debt ratio at the end of the decade back down to around its current level. But the larger message here is surely that for the next decade, the debt outlook actually doesn’t look all that bad.

True, there are projected problems further down the road, mainly because of the continuing effects of an aging population. But it still comes as something of a shock to realize that at this point reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting.

So you heard it here first: while you weren’t looking, and the deficit scolds were doing their scolding, the deficit problem (such as it was) was being mostly solved. Can we now start talking about unemployment?

Conclusions: Cooked Books

In other words, the media and Washington, led by influential business leaders and their shareholders, have cooked the books to narrowly reframe the larger economic issue as a simple call for austerity. The narrowminded economic policies that have suppressed the demand side of the consumer economy and culminated in the Great Recession aren’t something that originated with the Bush Administration; they have been rolled out over several decades, and continue to gather steam as the media and congressional representatives roll over and engage in the kabuki theater debate over austerity.

Surely, it doesn’t take a Noble laureate like Krugman to start asking questions?

chart-usDeficit

The Budget/Bust Cycle

A shout out to   for getting the story right.

Is it any coincidence that deficits repeatedly get created under Republican administrations and cut under Democratic ones? Or is the pattern indicative of a deeper strategy?

The general effect of this pattern is that the Democratic Party ends up catering to the Republican proclivity to spend, spend, spend on corporate socialism, and the Democrats then get held accountable for those Republican excesses and then frantically work to implement the Republican agenda of making the most vulnerable Americans pay for the excesses of the wealthy Republican donors.

This pattern emerged even before the Reagan presidency, although it became pretty clear during his administration as President Reagan created the first structural deficits to funnel money, often illegally, into military boondoggles that made the fortunes of companies in the defense and related industries, as well as numerous others. The strategy of not paying for things is a Republican one, and the can is then kicked down the road until a Democrat is elected and has to take it out of the hides of the middle class and poor.

tax breaks

Dave Johnson points out that the equation is quite simple – as well as verifiable:

  • Low taxes on the rich = less money to use to do things that benefit We, the People.
  • Higher military budget = less money to use to do things that benefit We, the People.

He documents that, as we went from a large surplus under President Clinton to huge deficits under President George W. Bush, this was

 characterized by Bush himself as “incredibly positive news” because, he said, it continued the plan to use debt to force the government to cut back. He also documents that this was the plan

under Reagan as well, back when he called it Reagan called it “strategic deficits”:

The Reagan people said it too, back when they started the massive deficit spending.  It was the plan: force the country into massive debt, “starve the beast,” and use that to force the government out of business, or at least to be “small enough to drown in a bathtub.” They forced the tax cuts and Reagan said this was “cutting the government’s allowance.” The point was to use revenue cutbacks to force government to shrink, to get out of the way of the 1%.

Now that government is very much out of the way of the 1% we are seeing how things work out when the 1% dominate everything.

Be Wary of the Many Faces of the Beast

The beast has many faces: Blue Dog Democrats, New Democrats, Obama-esque compromise, today’s mainstream Republicans, the Religious Right, “Fiscal Conservatives,” the “Fix the Debt coalition,” and Libertarians (see the graphic below). It all adds up to one thing: poor economics – literally. It is the economics that creates wealth and income disparity, shrinks the middle class, and adds to poverty and social destabilization. It’s the economics that turns the United States into a warring nation, stirring up terror around the globe and creating an unsafe environment at home as weapons of mass destruction are sold freely without as much regulation as hairnets.

Ron Paul

The Solution

So why call attention to the problem? Because there are concrete, even obvious solutions. Dave put it quite pithily: stop repeating the cycle that creates these economic problems:

If you are so bothered by the deficits, then fix the things that caused the deficits. And then we can get back to the business of democracy: We, the People doing things for the benefit of We, the People.

Freeloaders or Downtrodden?

chart-entitlement-benefits

According to a Pew Research Center report based on a survey of 2,500 adults, 55% of Americans have received at least one of the following benefits during their lifetimes:

  • Unemployment benefits
  • Social Security
  • Medicare
  • food stamps
  • Medicaid and
  • Welfare.

These are the six largest government safety net programs.  However, when factoring in veterans’ benefits and federal college loans and grants as well:

  • The number rises to 70% of Americans receiving government aid.

Unemployment benefits are the most popular assistance program, with about 27% of Americans having received unemployment assistance at some point in their lifetimes, and Social Security is a close second, at 26% of Americans.

Participation in government entitlement programs has varied across incomes:

  • 70% of adults earning $30,000 a year or less said they had benefited from government aid at some point.
  • 39% of adults making at least $100,000 a year have received some form of aid.

WASHINGTON, DC - SEPTEMBER 13: Chairman of Fed...

Fed’s Dual Mandate

The Federal Reserve was chartered on December 23, 1913, with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907.

Congress established three key objectives for monetary policy in the Federal Reserve Act:

  • Maximum employment,
  • Stable prices, and
  • Moderate long-term interest rates.

The first two objectives – maximum employment and stable prices are sometimes referred to as the Federal Reserve’s dual mandate.

Over the years, the Fed’s duties have expanded to include conducting the nation’s monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions, as well as conducting research on the economy and releasing publications such as the Beige Book.

But it seems that the Fed’s mandate to increase employment has been lost somewhere along the way. Under former chairman Alan Greenspan, employment was hardly mentioned.

bernanke_flashback

To Boldly Go Where None Have Gone Before

On Wednesday, December 12, 2012, Ben Bernanke made history at the Federal Reserve when the FOMC announced more quantitative easing at a rate of $85 billion a month for an extended period of time.  The open-ended quantitative easing policy was already an historical first, and now Chairman Bernanke has made a revolutionary move: for the first time, the FOMC is moving from a calendar-based guidance to one tied to economic factors, specifically, inflation and unemployment (which constitute the Federal Reserve’s dual mandate) The Chairman announced that interest rates would remain near zero until such time as the unemployment rate falls below 6.5% and inflation projections remain no more than half a percentage point above 2% two years out. Here are the highlights:
  • The Fed’s new program will consist purely of Treasury purchases.  Combined with QE3, the Fed will be taking $85 billion in bonds, both Treasuries and MBS, out of the market, and will begin rolling over its maturing Treasuries as of January.
  • The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent.
  • The Committee currently anticipates that this exceptionally low range for the federal funds rate will continue at least as long as the unemployment rate remains above 6-1/2 percent, and inflation between one and two years ahead no more than a half percentage point above the Committee’s 2 percent longer-run goal, with longer-term inflation expectations well anchored.

A Breath of Fresh Air and a Lifesaver

With all the talk of the “fiscal cliff” which Congressional Republicans are using as a cover to promote austerity measures that will single out the middle and low income Americans for sacrifice, Ben Bernanke’s efforts to help the average American are a stand out. As Washington Post’s Wonkblog puts it:

…for five years running, the Fed under Chairman Ben S. Bernanke has had a remarkable track record of moving creatively, aggressively, and quickly to try to ease policy and get the U.S. economy on track — usually more creatively, more aggressively, and more quickly than those who spend their days watching the Fed thought possible.

While Alan Greenspan did his best to lower expectations of the Fed, Ben Bernanke has applied his sharp academic mind to solving problems.

Of course, monetary easing has its critics – mostly among the very wealthy who believe that money should be scarce and that the government’s job is to circulate it back to them. An analogy is to warn a lifeguard not to throw a lifesaver to a drowning man because it might hit him on the head and kill him. But Chairman Bernanke has rejected that fatalism:

He instead rolled up his sleeves and put his own considerable brainpower and that of hundreds of Fed economists into understanding why the Fed’s earlier stimulus hadn’t packed more punch, and whether a different approach might do the trick. He steered his colleagues on the Federal Open Market Committee through a debate that has lasted more than a year.

This approach sends a message to busi­ness­ peo­ple and consumers that the Fed won’t tighten policy and choke off a recovery until the unemployment crisis is being solved or inflation becomes a real problem. As a result, borrowing costs will fall, helping buffer the effects of bad developments like a fiscal cliff fail. It will give businesses and consumers greater incentive to deploy cash rather than hoard it.

Critics Be Damned

Conservative critics will predictably moan about his “debasement of the currency,” and conspiracists will put forth oddball theories about a banker’s coup, but the simple fact is this: Chairman Bernanke took a great deal of criticism for his part in the bailout of the Wall Street investment bankers who caused the problem, so he really does owe something to Main Street as well, doesn’t he? After all, it’s Main Street that drives the economy, and generates the money that Wall Street gets to play with.

Bernanke made his career studying the errors of central bankers in the Great Depression and in 1990s Japan. He made a strong case that more forceful monetary policy would have lifted those economies. So it seems that he has been driven to avoid repeating the mistakes of history who, according to the Washington Post, “were culpable for unnecessary misery heaped upon their people.”

President Obama may appoints a new person to take over the Fed chairmanship in January 2014. Let’s hope he chooses to keep Ben Bernake, whose legacy will be one of pushing the envelope to bring monetary policy to address great economic challenges.

reverse_robin_hood_cartoon_500

Conservative commentator Joe Scarborough – referencing Steve Rattner’s New York Times editorial, which calls for President Obama to raise the tax rate on capital gains to 28%, agreed that very wealthy Americans should pay more taxes on their capital gains:

You see again this huge divide between the richest Americans and the poorest Americans… and you sit there going, you know what, these people that live in these mansions and have private jets and live an extraordinary life like few Americans live — they can probably deal with a 20 percent tax rate on capital gains instead of 15 percent.

Why are we fighting and risking our majorities protecting billionaires that are hedge fund guys who are paying 14 percent tax rates?

There’s something immoral about these people paying fourteen, fifteen, sixteen percent of their taxes because the tax rates are the way they are while small business owners who make $250,000 a year in Manhattan and may employ four people are paying a 35% tax rate.”

The Washington Post’s Wonkblog also makes a strong case for raising capital gains taxes. Here are the key points:

1. Growing Wealth Inequality Hurts The Economy

The low rate on investment income has greatly contributed to crippling wealth inequality. Wealth inequality suppresses consumer demand, and has thereby resulted in recession.

The wealthiest Americans, the “investor class” who make their living off of the yield of financial instruments, such as stock dividends, as opposed to being productive. are doing very well. Joe Nocera shows this by closely examining the Forbes 400:

Last year, the cumulative net worth of the wealthiest 400 people, by Forbes’s calculation, rose by $200 billion. That compares with a 4 percent drop in median household income last year, according to the Census Bureau.

A large number of the Forbes 400 — “roughly 40 percent,” according to a group called United for a Fair Economy — inherited their wealth. Many others on the list — people who started companies that they’ve since left — are classified by Forbes as investors.

2. Low Taxes On Investments Does Not Create Economic Growth

There’s no evidence that cutting taxes on investment income has ever led to economic growth. In fact,Ronald Reagan raised taxes on investment income in the 1980s, and the economy still did very well. By contrast, George W. Bush’s capital gains cuts did not result in a good economy. Tax expert Len Burman graphed capital gains rates and economic growth, and finds no relationship at all.

3. Low Cap Gains Rates Feeds The Deficit

Burman also says that a very low capital gains rate incentivizes elaborate tax avoidance schemes:

Since ordinary income is taxed at rates up to 35 percent while long-term capital gains are taxed at a maximum rate of 15 percent, there is a 20 percent reward for every dollar that can be transformed from high-tax compensation, say, to low tax capital gains.”

Without raising the capital gains rate, it’s hard to raise taxes in a way that doesn’t also affect the upper middle class. It’s the very wealthy who pay lower taxes than the rest of us, and a capital gains tax increase is the best way to target them.  That’s why the Simpson-Bowles plan eliminated the preferential rate for capital gains, whereas Romney’s plan, which leaves the capital gains rate alone, has been broadly evaluated as “mathematically impossible.”

4. It Would Encourage Productivity

Without raising the capital gains rate, math shows that marginal tax rates on the rich will need to be raised quite a bit. That raises the question: is it better to taxing their work at 45% or their investment income at 25%?

tax rates
, banker and author writes in the Huffington post about the “Fantasy Cliff: Debunking the Biggest Myths About the Bush Tax Cuts and the Rich.” In it he exposes the three biggest claims made by the rich and explains why they are wrong.

Myth #1: The Rich Pay an Excessive Amount in Taxes

The conservative shills keep telling us that the top 10 percent of households pay 70 percent of the federal income tax in the United States. True, but how can this be when as individuals they pay lower taxes than the rest of us? It’s not because they pay their fair share – they don’t – but simply because of the income inequality that concentrates a disproportionate proportion of wealth in their hands.

For example:

Myth #1.5 : 47 percent, who, according to the Republicans, don’t pay any taxes.

False. Most still pay payroll taxes, sales taxes, and into social programs.

The reason so many can’t pay Federal income taxes, is that they either can’t make a living wage, or are receiving benefits such as Social Security, that they have already paid into.

Myth #2: The Rich Deserve the Bush Tax Cuts

No, they have in fact been getting a huge tax cut for years because they overwhelmingly make a substantial portion of their money from passive income:

And, while the shills would like you to believe that raising the capital gains tax rate would hurt poor little old ladies, it wouldn’t. The average retiree does not even make enough from dividend and interest income to benefit from the capital gains tax break.

And even when the Bush tax cuts expire, the capital gains tax rate would likely only go up to the Clinton-era level of 20%, still far below the 35% that most of us pay on ordinary wages.
Myth #3: Tax Cuts for the Rich Help our EconomyThe figures show that the rich typically don’t spend or invest in job creation but hoard extra cash for future generations rather than spending it  (which is why they are fighting the reintroduction of the Estate Tax). According to Sanjay:

What drives the economy is middle class consumption, not tax policy that redistributes the wealth of the majority into the hands of the wealthiest:

Even if tax savings by the wealthy were to be applied towards investment rather than saving, it would be of little use without increased consumption of goods and services. On the contrary, the additional tax revenues that would be realized as a result of letting the Bush tax cuts expire for the rich would enable the government to lay off fewer federal employees, most of whom actually spend a larger percentage of their income than the rich..

Conclusion
Myths like these don’t just occur by accident. They are planted nu corporate interests in the media – explicitly in the right wing media, and more subtly in the mainstream media.

The argument that the rich should be taxed less because they are job-creators on whom our economy depends just doesn’t jive with the facts of job creation in America. And as Sanjay points out, whatever element of truth there may be in that argument “is still not true enough to justify the arrogance of their stand at a time of national crisis.” A national crisis, may I add, that their greed brought upon us. Sanjay sums it up:

By spinning their tax contribution into a great sacrifice, downplaying the preferential treatment they receive, and misrepresenting what they will do with tax cuts, the rich are trying to game the system…we should stop taking the flawed arguments of the rich seriously, and call it out for what it is. Greed.

 

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