Swords into Tax Shares

(yeah, I’ve never claimed to be a blog title expert.)

kitty water balloonPeter Schiff wrote an article titled, “Why Not Another World War.” It’s actually an interesting article in which he explains how we all agree that World War II ended The Great Depression and sparked the greatest American economic trend, so why not have another? This Gulf War is too small to do the same thing again. Except, war sucks and has this annoying tendency to be deadly and break things — so let’s make it a great World Water Balloon War!

Go ahead and read the article; it’s short and entertaining. But, then at the end of it he takes a sharp turn into La-La Land.

After laying a good case for describing the World War as the biggest socialized employment program, evah, (major props to Schiff on this — most right-leaners usually berate the New Deal as being evil socialism and shout that it was the war that saved the country… and then conveniently ignore the fact that how the war saved the country was by creating government jobs for millions and spending truckloads of taxes on government programs known as weapons manufacturing), he explains how his proposed Fun War of the same scope of government spending wouldn’t work because the government couldn’t afford such a project like it did 70 years ago: We’re already too taxed and there’s no savings.

“Current tax burdens are now much higher than they were before the War, so raising taxes today would be much more difficult.”

(Keep that in mind for a moment.)

And again, I give Schiff a hand for observing:

“If all of this seems absurd, that’s because it is. War is a great way to destroy things, but it’s a terrible way to grow an economy.

What is often overlooked is that war creates hardship, and not just for those who endure the violence. Yes, US production increased during the Second World War, but very little of that was of use to anyone but soldiers. Consumers can’t use a bomber to take a family vacation.”

It amuses me when libertarians like Schiff and Marxists share the same opinion. 🙂 The base of our modern capitalist economy has been the military industrial complex. Nearly half our taxes go to the Pentagon to help create metric craptonnes of ammunition and rockets and equipment that gets spent out in some foreign land, and in support of politics which makes sure we continue to have a reason to spend massive amount of natural resources and labor in sending stuff overseas to help kill people and get left there.

OK, so, war is bad. Got it. We’re on the same page. But what suggestion does Schiff have to revitalize the economy? Well, after spending paragraphs outlining a doomed-from-the-start Global Liquid-ular War, and then more to explain how we can’t afford it, his plan is explained in his final paragraph:

“What we need is more savings, more free enterprise, more production, and a return of American competitiveness in the global economy. Yes, we need Rosie the Riveter – but this time she has to work in the private sector making things that don’t explode. To do this, we need less government spending, not more.”

Why, of course! Let’s just do that! Here we go– oh, wait… How? See, I left my magic wand at the dry cleaners, and my Genie isn’t returning my calls.

Look, first of all, you, Schiff, already agreed that it was government spending that pulled us out of the Depression, so already we can establish that theoretically, yes, government spending can be an answer. What it gets spent on is important, and it’s better that it gets spent on infrastructure, for example, and not eternal war. But where is this magic savings, production, and private sector making-of-things going to come from? If it were as simple as saying, “Hey, let’s do that now,” it’d be done. But the problem of why Schiff’s hand-waving solution can’t work is the very reason we’re stuck in this economic melt-down in the first place:

High unemployment means less people with jobs to have money to spend on consumer goods, and lowering wages means less money for people to spend on consumer goods. The excuse of “We’re overtaxed!” is utter nonsense and here’s why:

U.S. citizens are already one of the lowest tax payers in the developed world.

tax shares


And yet, some of the most taxed countries have higher rates of general “happiness,” and higher standards of living on many criteria. Based on other examples around the world, there’s no reason why we in the U.S. couldn’t pay a little more in taxes. Most modern nations do pay more and are getting their money’s worth.

In fact, the current average tax rate for the average middle-income wage-earner is between 25% and 28%. During World War II, the lowest tax rate for anyone was 39% with middle-income tax rate in the 50% region. So where Schiff gets this idea that our current tax burden is already greater than it was for WWII and we couldn’t stand any more, I have no idea. Convenient since he provides no numbers or sources and just seems to pull “facts” out of his… hat.

But you know what, it’s not even necessary to raise taxes on the middle-class. There’s another group is not only not at any kind of breaking-point, but is so far away from the tax rate they were paying in the 40s and 50s that they can’t even see it from where they are: The top 1 to 5% of the wealthiest in the country. Back during WWII, the 5% of the nation who owned 80 to 90% of the nation’s wealth, were paying 80, 90, even 95% in taxes! Can you imagine? Now, guess what they’re paying today? 60%? 50%? Try around 35%. Mr. Schiff claims we’re already taxed to death, beyond WWII levels, and yet the people who own nearly all of the nation’s wealth are paying a third in taxes from what they were paying during WWII and throughout even the 50s!

Now, one might protest the idea of taxing the rich more. I mean, why should they have to pay more taxes? Just because they have more? Well, actually, yes. It’s as simple as that.

Take yourself, your family, everyone you know. It’s a safe bet that you and everyone you know earns less than $1 million a year or so, yes? If you’re earning a middle-class income of $50,000 a year, and 25% is going toward taxes, that’s $12,500. What if that increased by 10%? You’d be paying another $5,000 a year. In your budget, what would that mean? That’s your car payment, or mortgage payment. That’s eating out money for a year. Maybe have to take a part-time job. You would be immediately impacted.

If the top 1% wealthiest had to pay a measly 10% more on their $750,000 income, their 10% would be more than your entire annual income. Honestly, do you think a person making half, a quarter, a million dollars a year has to stick to a grocery budget really close? Has to consider whether they can afford daycare or not? Has to decide whether they can afford to go to Applebee’s this Friday? Yeah, the rich have more they can afford to lose, it is right that they should have a higher burden supporting the social services and infrastructure and military apparatus that they take advantage of to maintain and increase their wealth. As I already pointed out recently, the wealthy already aren’t even paying a fair share of burden off their wealth, much less are they burdened by taxes.

And let’s not forget, this is all assuming they’re paying the percent for their bracket — which they’re not! The wealthiest have tax loopholes, breaks, shelters, and strategies available to them to pay even less-to-no taxes than you or I have available to us. When we have to pay our 25 percent, we’re actually paying our 25%. When the wealthy are told to pay their 35% (remember, as opposed to the 91% they used to pay), their accountants and lawyers are getting them out of paying even that. (Tax law that, by the way, often get voted in by the poor and middle class who will never ever come close to being in the top even 20%, because the conservative mindset is deluded into thinking they will one day earn a quarter of a million a year, if they just work hard enough! So they vote against their own interests.)

There’s that other pesky problem to Schiff’s magic buy-stuff-so-stuff-can-be-made solution: unemployment and lowering wages. Despite what Republicans are spouting, that the unemployed are lazy and not looking for work (yeah, that $250 a week unemployment check is a king’s ransom!), there are more people looking for work than there are jobs. Do the math. But the more significant problem with the economy is even deeper and more entrenched. Labor wages are at best holding steady over the last 30 years while cost of living, cost of education, cost of debt, continues to increase. The value of the dollar for the average household is actually less every decade since the mid-60s (coincidently, the same period in which tax on the wealthy dropped precipitously and GOP-led deregulations and New Deal dismantling began. Odd timing, that.) Meanwhile, capital gains have increased, corporate profits increase, CEO compensations increase… In case you’re just now joining us, what’s going on here the last few decades, and fast and heavy since Reagan, is a destruction of the middle class and elevation of the rich back into a new Gilded Age.

“One of the major trends in income inequality that began in the 1980s was dramatic increases in executive compensation. From the 1980s on, compensation for the average American worker has barely kept pace with inflation, yet compensation for executives running the same companies at which worker’s pay has barely kept pace with inflation have seen their compensation levels increase by orders of magnitude.”
~ R.G. Price; source coming up…

(notice that Schiff wants more productivity, yet, GDP and other indicators of productivity in the U.S. show a constant increase already. Hmm, maybe something to do with labor getting less and less of the pie they are baking, maybe?)

Ever wonder why it was that after WWII, during the 50s, into the mid-60s, the average middle class family had only one working adult and still bought a car and a house and went of yearly vacations, sent their kids off to college, and did so without significant debt? What really has happened since then?

R.G. Price has an extensive, extensive, article explaining the beginning of the end of the middle class in the 60s, and the hammer-fisted pillaging of the middle class and Jaws of Life widening of the class divisions Reagan facilitated, in “How Reagan Sowed the Seeds of America’s Demise“. And his arguments are held together by copious (but easy to understand) charts and graphs and numbers and actual data, as opposed to the fantasy-land wishes of Invisible Market Hand libertarians like Schiff.

“In the 1980s Reagan talked about restoring America, yet his policies were designed to do the exact opposite economically, they were designed to undo the America that middle-class Americans had come to think of as the “good ole days” to which America would be restored. The America of the 1940s and 50s was an America of a strong central government, with a highly regulated economy, built through the extensive use of federal programs and massive federal subsidization of the white middle-class. And that is what it was really all about. “Restoring America” always meant “restoring white dominance”, yet it could never really be admitted that the white dominance of the 1940s-1960s was itself a product of government programs.”
~ Price