Obama may have won the election, but that is not the end of the story. We have to keep up the pressure on all our politicians — not just Obama but Congress too — to do the right thing.
For example, right now a strong majority of Americans want the Bush tax cuts for the rich to expire, but we aren’t going to make that happen unless Congress knows what we want. It is so easy to write your elected representatives.
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Thats going to be easier said then done. The additional tax on the wealthy will close the gap by an estimated 7% only. The other 93% needs to come from more tax increases on everyone and spending cuts accross the board. We can’t cut enough from any one program to make a difference. We can’t gut social programs any more then we could do away with defense. I think they should do an accross the board 10-15% cut of every program, restore the tax on the wealthy and increase everyone elses by just a little. But the problem we’ll face is all of those are hyper political issues and nobody wants their piece of the pie touched. Here’s a good example of the ridiculousness of trying to cut defense spending with common sense:
http://www.cnn.com/2012/12/12/opinion/gard-johns-military-spending/index.html?hpt=hp_t2
That will be as hard as reforming the social support programs like SS, Medicare or Obamacare. In my opinion, both sides are searching for some compromise that allows them to kick the can down the road. Again.
The deficit is largely a result of unfunded wars started during W’s administration. The problem with income disparity is the result of thirty years of tax policy and can not be solved by a one time trivial increase of tax rates on the upper 2%. Resolving this disparity will probably take decades.
Yeah, we’ll all have to pay higher taxes. I have no problem with that. But the poor and middle class need increases in their wages and we need a stronger economy in general before we can raise much more taxes. The Republicans are still waging war on middle class and working poor wages via attacks on unions and regulations. It’s not only time to keep the pressure on, but also to fight back far more strongly. I’m too old for this.
PPsgt: I generally agree. I have a couple of nits to pick (which follow) but the core point you are making is right – that we really need to have common sense compromises and no one seems interested in actually doing it.
Nits: The 7% number is conservative propaganda. Just do the math yourself – the deficit is approximately $1T. The tax increases Obama proposes on the wealthy will generate 160B per year. That’s 16% of the deficit – not 7%.
That said, the tax code needs to be revised and in the long run more taxes have to increase than just on the top 2% – but while we are in the midst of recovery and at a time when the middle class and below has been losing ground for decades, now is not the moment.
I personally agree with Obama that across the board spending cuts are a mistake. As with the sequester, we need to NOT CUT some areas we need, we need to cut MORE from areas we don’t need (or don’t need as much). Keep in mind that if taxes were at normal levels (~20% of GDP) and we end the war in Afghanistan we would have virtually NO DEFICIT even if we did nothing else. We do need to make cuts in many areas anyway, however, because eliminating the deficit isn’t enough – we have to pay down the debt, and even under ideal circumstances that will be a very long process.
A reasonable compromise (in my humble opinion) would look something like this:
1) Set the tax rates on the top 2% to 37% (not 39.5%)
2) Eliminate special treatment of capital gains and carried interested income over $250,000 per year (tax them at 37% also)
3) Revise the corporate tax code to eliminate all corporate welfare other than research and development credits, and lower corporate tax rates until the change is revenue neutral. Then create a two tier corporate tax rate – tier one is the base and applies to everyone, tier two is for corporations with over 50M in PROFITS and is a couple of percentage points higher – enough to generate a net revenue increase of about 100B per year – which is temporary and expires when the national debt falls below $5T.
4) Accept the MORE ACCURATE cost of living adjustment (the one Republicans keep mentioning) for Social Security and for all other programs that adjust based on cost of living.
5) Agree to implement changes to Medicare and Medicaid to hold the cost growth of these programs PER CAPITA to the rate of inflation, WITHOUT REDUCING PATIENT BENEFITS. This would require allowing Medicare to negotiate for cheaper drug prices and several other changes, and may require some single payer health coverage over the long haul – but it needs to happen.
6) Cut the defense budget by ending the war in Afghanistan and reducing it further over time by an additional 20% – but allow the military, not the Congress, to design the 10 year cost reduction plan. A significant amount of the reduction would come from scaling down foreign troop basing – do we really need 50,000 troops on station in Germany to protect them from Russian aggression?
7) Reduce other discretionary spending, NOT INCLUDING education and direct aid to the poor and middle class, by 20%.
8) Restructure education spending to provide the SAME DIRECT BENEFITS to students but lowering non-direct benefit costs by 20%, and invest he 20% savings in additional direct student benefits including teacher support and modernization. Allow TEACHERS to decide what they need, not Congress.
9) Agree that all surpluses generated from the above must be spent first on debt reduction until the national debt is below $10T, and then at least 50% must continue to be spent on debt reduction.
Obviously the devil is in the details and everyone would scream – but everyone in Congress screaming is part of the goal. Bottom line – set the reduction levels and let the front line people that have to make them work decide what to change.
This will never happen – but it would be a good starting point for a real discussion 🙂
Arthanyel – I like your proposals especially 1-5, but lets face it that would be a tough sell and getting congress to actually save surpluses and put them towards debt is wishful thinking. Isn’t SS chock full of IOU’s already?
Here is a link I like because it simplifies things for a simple man like me.
http://www.usgovernmentspending.com/federal_budget_estimate_vs_actual
Interestingly the defense budget has increased around 30% with Obama in office, which I would not have guessed. The one that scares me most is if you click on the Budget Pie Chart, which takes current budget estimates out to 2017 and projects a 21T deficit with 1/2T in interest payments or just 100 billion less then the defense budget in 2008 (with both wars still raging). If we don’t address debt, it will take over as the #1 budget item within 10 years.
On the taxing the wealthy I remember #’s last year of it raising 70B then this fall 85B so I’m not sure and don’t know if the CBO has scored it and then with what assumptions. Either way it’s not enough.
Psgt: The only reason the defense budget has increased o much under Obama is because Bush kept all the war spending off the books. Obama added it back in and stopped hiding it. The war spending accounted for approximately 30% of the primary defense budget while we were still in Iraq.
As for the taxes on the wealthy, just expiring the Bush tax cuts without any other changes raises $85B. Changing capital gains and carried interest rules and the rest of the proposed changes in Obama’s proposal raises the other 75B.
And yes, we MUST deal with the deficit and debt. Its heartbreaking that everything that makes sense is rejected.
Hit enter too soon.
It’s also wishful thinking the Congress would pass legislation that earmarks surpluses only to debt reduction until certain targets are hit, but we have to do it.
We need more political parties and campaign finance reform to fix this country. It’ll make the electorate smarter too. Put the (smart) people back in the driver’s seat, or at least riding shotgun. Right now we’re stuck in the u-haul attached to the back of the car with the special interests behind the wheel. Even if you miraculously get everything back on a good track, you know that some new administration is gonna eventually come along (due to our own apathy) and drive it back into a ditch again. It happened before, it’ll happen again.
Sorry for taking that analogy a little too far; there’s probably a political cartoon in there somewhere 😉
Arthanyel, not mentioned was tax on dividends which saves me $4000 a year. on a 55K income. I should pay that money. Capital gains: That is a different story. We could increase the time holding back to two years where it was before Reagan. I bought a farm for 15K=40 acres. Sold it years and years later for 40K. That 40K buys what that 15K did before.
Today I’m putting a stove in my living room for 3K, I bought my first car new for 2K. Capital gains takes in that factor of inflation. Dividend break just isn’t fair, and my dividends should be taxed. I agree with PatriotSGT. It is the low middle working people who need the breaks.
The problem with reducing troups in significant numbers is that they come home and cant find jobs.
I’m old so my memory is sort of flaky but I was reading about a proposal to have a 1 or 2 percent tax on all, or maybe it was almost all, financial transactions. seems like a good idea to me.
Also I keep hearing talk about cutting exemptions. I’m pretty sure the exemptions are those on households. So how about some major cuts in corporate exemptioms. Don’t they get to write off things like golf tournament sponsorships, corporate retreats, advertising, and a host of other things like corporate jets?
Gotcha Arthanyel good call I forgot about the war bills they all stuffed with so much pork into to give him his war money.
Wildwood -I’d be in favor of a transaction tax like you said, I think it’s a good idea. On the defense cuts if we got rid of programs we don’t really need now like the F35 and proposed increases to the nuclear programs we probably wouldn’t have to reduce the number of troops. But they won’t, they’ll keep the unneeded programs and gut the rest of the military to pay for it.
Ebdoug- your also right on those dividends vs capital gains. I think a tiered tax on those is in order. Capital gains are for long term investments, short term (under 2 years) should be taxed as regular income as they don’t really provide any investment that helps the country.
My Congressman told me that implementing the transaction tax would cause trading to move over seas. The EU has approved the idea. So moving trading there would impose the tax. Others, claim it would be too hard to administer as there are millions of transactions per day. These are simply excuses for not doing anything. The reality is that a .1% tax would simply make it unprofitable to trade in $.000001 increments and thus would slow trading on the markets. This would help to make the retail trader more able to participate as well as raising funds to pay for more SEC oversight. I suspect that fear of oversight is the real reason for resisting the tax.
dikct_cal, The amount of bullshit spewing out the mouth of the average bought-and-sold politician is mind-numbing.