The complexities and drivers of the federal budget are vast and intimidating to understand. However, it is very difficult to have discussions about our federal deficits and national debt unless the process is first understood. I want to initiate this discussion to help readers understand our nation’s budgetary process and to foster more informed dialogue. Hopefully this explanation will dispel partisan rhetoric and break down unfounded talking points.
The Federal Budget: Our nation’s budget can be divided into two major segments; mandatory and discretionary spending. Mandatory spending is authorized by law and not subject to annual review or appropriations. This falls outside of the Executive Branch’s control as the President cannot unilaterally change laws and is incapable of creating spending bills per the Constitution. Mandatory spending is the largest part of our nation’s budget composed of entitlement programs like Medicare, Social Security, and welfare. Mandatory spending is also incredibly difficult to alter given complexities and integration with society.
Discretionary spending is subject to the budgetary process and controlled by the Executive Branch. Over half of our discretionary spending is allocated to the military and the other half is divided according to department need. Since the President maintains control of the discretionary budget he should be held accountable for increasing or decreasing spending. The current discretionary budget today is $1.1 trillion, slightly less than in 2008.
The Calendar: The federal government reports on a fiscal year outside of the calendar year. This is common for many corporations as fiscal years can be planned around inventory fluctuations or revenue patterns. Regardless of the reason, our national budget runs annually from October 1st to September 30th. All accounting procedures are completed shortly after the fiscal year closes and the Office of Management and Budget (OMB) compiles reports made available to the public.
The Basic Process: At the beginning of the year the President initiates the process by submitting a budget to Congress. The budget is typically provided the first week of February. Once Congress receives the budget they send it to the Congressional Budget Office (CBO), a nonpartisan organization, to evaluate assumptions and quantify changes. Once the CBO evaluates the budget a report is published for the public and Congress (typically in March). The House of Representatives then adds any additional amendments, and begins confirmation with the Senate.
The Senate also receives the federal budget and may pass as submitted or add additional amendments. Discrepancies between chambers are typically worked in committee and once aligned the budget is voted on and sent back to the President’s desk. If the President aligns with the changes he signs the budget and it is implemented for the upcoming fiscal year. If the President is not aligned the budget is sent back to Congress for revision.
Continuing Resolutions: As we have seen in previous years the Senate, House, and Executive Branch might not agree on the budget. This lack of cooperation is typically pinned on the Chief Executive unfairly. However, there is a critical secondary process to keep the government operating without an annual budget; continuing resolutions (CR). A CR is passed by Congress and the President to continue operations at the same levels already agreed upon by a previous budget (a de facto budget). There are several CRs that need to pass to sustain spending in the Executive Branch. Simplified, there is a CR for every cabinet department (Defense, Homeland Security, Education, State, etc).
Do you remember when government shutdown in October of 2013? The beginning of the fiscal year (October 1st) came and our government did not have a completed budget or CR to authorize spending. With no authorization workers were furloughed and major departments of the Executive Branch closed. Again this only impacted the discretionary portion of total budget; mandatory spending is not reviewed annually and continued to be spent.
Avoid the Political Spin: No government branch has more control than another when it comes to passing the annual budget. I have often heard explanations arguing either the House or President controls the budget when results are favorable. For instance, when Clinton was president and the Republicans controlled the House, arguments were made justifying either branch's impact on the budget. Once the process is understood, it becomes clear that both branches need to work together to pass a budget.
This explanation might prompt readers to question the House’s role in spending per the Constitution. As directed by our founding document all spending bills must originate in the House. Bills are prelininary laws so new spending is first passed by the lower chamber. Once the bill becomes a mandatory law spending falls outside of the annual budgetary process.
A great example of the House’s constitutional power was witnessed when the Immigration Bill passed by the Senate in 2013. Once passed the bill was retained, waiting for the House to pass their own version and use reconciliation to put the bills together. If the Senate had sent their bill to the House, it would be immediately stamped unconstitutional and discarded.
My last admonishment for readers who have made it this far – know the actual budget and what is driving the annual deficit and the national debt. Although it seems easy to blame any one individual or party, it requires significant compromise and bipartisanship to change either mandatory or discretionary spending. Office of Management and Budget
The United States budget can be broken into two groups, DISCRETIONARY spending and MANDATORY spending. About 7% of the budget is interest paid on our debt – which will only increase, but should also be considered mandatory as defaulting is not an option.
As you can probably guess mandatory spending is outside of the President’s control and is regulated by established laws in place. Mandatory spending includes Social Security, Medicare, Welfare, Food Stamps, etc. The last major bump in Mandatory spending came in 2003 under Medicare Part D which approved an additional $17 trillion in additional spending across the upcoming 50-60 years. The only change that has been made to mandatory spending under President Obama, is Obamacare. However, the CBO calculated the program is deficit neutral due to mandate penalties offsetting increased spending. So when you hear that Obama is responsible for the record recipients on welfare and food stamps, it’s a completely bogus claim as this spending is mandated by laws already in place.
[caption id="attachment_365" align="alignleft" width="300"] Here is the breakdown of mandatory spending:[/caption]
Discretionary spending makes up 31% of our total federal spend but represents the majority of our budget conversations (you can sense my frustration). The discretionary budget is subject to annual appropriations in which the Congress and President have to agree each year. Have you heard the saying that Congress controls the purse? They do – but only for bills that have not yet been signed into law. If a new budget is not passed, continuing resolutions can be approved by congress allowing discretionary spending to continue at historical levels (which is happening currently). The largest part of discretionary spending is military which makes up 57% of the entire discretionary budget. If you take away military the remaining discretionary spend includes education, international support, governmental employees, transportation (PBS, Planned Parenthood, Big Bird, etc, etc) and make up 13% of our total Federal budget. This meager 13% is what our President truly controls and can pull annual levers to grow or shrink.
[caption id="attachment_366" align="alignright" width="300"] Here is a breakdown of discretionary spending:[/caption]
Now (here’s where I get on my soap box), when people call President Obama a big spender or big government, I immediately assume they have no idea what drives our budget or do not understand the budgetary process. Besides the one year spike of stimulus spend (2009 – the vast majority being used to shore up state budgets), President Obama has been remarkable in keeping discretionary spending in check. Discretionary spending has only grown 10% (it's actually declining if you take into account the sequester cuts) in four years but compared to any president since Eisenhower – this is strong. Just to give a point of reference, a 10% increase in discretionary spending only attributes to 4% of total federal spending growth. If we want to hold President Obama responsible for 4% spending growth these past four years, this is a reasonable accusation.
Two of the worst presidents controlling total discretionary spending in the past 30 years? Presidents Ronald Reagan and George W. Bush.
[caption id="attachment_367" align="alignleft" width="300"] Budgetary history of Non-Defense discretionary spending:[/caption]
Now one can make the point that President Obama should be held responsible for not working with Congress to tackle mandatory spending (70% of our total budget) and that’s a fair statement. However, with such backlash around Obamacare – which used marketplace principles to drive down costs modeled after conservative think-tank ideas of the 90’s – there is no way Republicans were going to let anything pass that would be a political win. To overcome any type of political posturing Democrats would need 60 votes from the Senate to beat any filibuster making any legislative fix to mandatory spending near impossible.
If the fiscal cliff is not solved, and tax revenues increase, we do not need laws in place that regulate the added income. Any law governing spending would be placed into the mandatory bucket and would be difficult to modify. Increased revenue will be applied to the total budgetary deficit as any incremental discretionary spending will need to be agreed upon by Congress and the President (which it wont). Given President Obama’s track record with discretionary spending, I am confident the money will be used to close the budgetary gap. Now one can argue that legislation could be signed to cap spending and I think that’s a fair conversation. But once again, the problem is our budget issues are being driven by mandatory spending.
One more thought – history does not necessarily mean more tax revenue equals more spending. Under President Clinton, tax revenues jumped and spending was kept relatively in check which is why he left office with a budget surplus. Plus, as I have pointed out our budget problems have more to do with military and mandatory spending and less about the growth of non-defense discretionary spending which the President and Congress control.
Now I know some of these claims fly in the face of widespread perception of President Obama’s fabricated runaway spending habits (and Democrats for that matter). The beauty of everything claimed in this post is that it can be fact-checked and I encourage all to do so. Too much miss-information is driven by media outlets which makes budget conversations more about regurgitated talking points than actual numbers.
(I wrote this in email to a friend about what happens to the increased tax receipts if the fiscal cliff is ignored)
We’re in the home stretch! November 6 will be a relief, I think, to everybody. But before things end I’d like to post three more times, which will hopefully be interesting to any LDS voters who somehow aren’t decided yet. (Share! Share! Share!)
I was working on this post when Joseph went ahead and wrote a lot of what I wanted to say. So I’d like to build on his thoughts and try to explain how my beliefs about the gospel shape my view of economic principles and, accordingly, the best economic policies for governments to pursue. As I mentioned last time, I’m doing so in an attempt to explore a poetics of Mormon political theology separate and apart from any political ideology—although admittedly the general result is that I support progressive economic policies over conservative ones. With economics, I think it’s quite a long road from what the scriptures say to what’s happening in the world right now, but if space allows I’ll try to get into specifics about things like tax rates, government spending, deficits, trickle down theory, etc. My main goal, however, will be to explore what the scriptures say about money, what we do with it, and what it does to us, because our position toward money on an individual level effects how we think it should be handled in the national sphere.
I began this series by discussing how the Lord is above political parties and partisanship. “For my thoughts are not your thoughts, neither are your ways my ways, saith the Lord. For as the heavens are higher than the earth, so are my ways higher than your ways, and my thoughts than your thoughts” (Isa. 55:8-9). I believe this applies to economics as much as to party politics, and that remembering this can help Latter-day Saints who otherwise separate down party lines find common ground.
So, God doesn’t ascribe to any of mankind’s economic theories. Feudalism, capitalism, socialism, Marxism, communism, et al. are all equally irrelevant to the gospel and the Lord’s management of the universe. Knowing that allows us to start from a blank slate, look at what the Lord says, and build from there. As I’ve gone through the scriptures looking at economic teachings, I’ve been surprised and engaged by, first, just how many there are and, second, how deeply and fundamentally they differ from any of mankind’s economic systems, capitalism and socialism included.
I’m not an economist—the closest I can say is that I met my wife in an economics class at BYU—and I can’t really give a full treatise here, just a few thoughts. But let’s look, for instance, at the most fundamental principle of all economic principles: scarcity of resources. As far as I know this is the only thing every economist agrees on: Adam Smith, Karl Marx, John Stuart Mill, Jean-Baptiste Say, Nassau William Senior, David Ricardo, John Maynard Keynes, Alfred Marshall, John Locke, Milton Friedman, and on up to contemporaries like Paul Krugman and last week’s Nobel laureates Alvin E. Roth and Lloyd S. Shapley—I’m not aware of a single one of them who would argue against scarcity as the driving force behind all economic decisions; since there are limited resources we must make decisions regarding the most efficient allocation of those resources.
But it’s a proposition the scriptures seem to refute, both in direct teaching and by example. I cited one of the most prominent examples, from an 1834 revelation, in my last post: “For the earth is full, and there is enough and to spare; yea, I prepared all things, and have given unto the children of men to be agents unto themselves” (D&C 104:17). The preceding sixteen verses make very clear the Lord is talking about economic resources—both natural resources (as implied by v. 14) and financial ones as well. But what does he mean when he says “there is enough and to spare”? Scarcity is so ubiquitously recognized that it’s incredibly hard, even for me as I’m writing this, to take this statement unabashedly at face value, assuming the Lord really meant what he said. But a little reflection eases the doubts: the Lord is omnipotent and is able to supply as many resources of any type as needed at any moment’s notice. Verses 14 and 15 help in this regard: “I, the Lord, stretched out the heavens, and built the earth, my very handiwork; and all things therein are mine. And it is my purpose to provide for my saints, for all things are mine.” If he could build the earth, he can take care of us too.
In fact, if the Lord wanted to provide cash he could do it, as he admirably demonstrated in instructing Peter how to pay tribute with a coin taken from a fish (Matt. 17:24-27). If he wanted to provide fine wine when only water was present, he could do that (John 2:6-11). If he desired to feed fish and bread to a few people (John 21:9) or a multitude (Matt. 14:15-21; Mark 8:1-9) he could do that, even when no food was brought at all (3 Ne. 20:3-7). He empowered Elijah to bless a widow’s meal and oil to last during at least three years of famine (1 Kings 17:8-16) and Elisha to multiply another widow’s oil enough to pay off her creditors (2 Kings 4:1-7); Elisha also fed a multitude on a bit of bread and corn (2 Kings 4:42-44). The Lord gave children to the barren Sarah (Gen. 21:1-3), Hannah (1 Sam. 1:20), and Elisabeth (Luke 1:13, 36)—as well as to Mary, “for with God nothing shall be impossible” (Luke 1:37). He gave the brother of Jared light out of cold rocks (Eth. 6:3) and Moses power to call water from a dry stone (Num. 20:7-11)—and, perhaps most tellingly, he fed the multitude of Israel, possibly as many as two million people, on manna every single day for forty years—over 14,600 days (Exo. 16). It was a free gift from heaven and all they had to do was obey. Even the devil knew Christ’s ability to create resources like bread out of nothing and attempted to use it to defeat him in the desert (Matt. 4:3-4). No limitation of resources—natural or otherwise—is a limitation to the Lord. As the Psalmist says: “…He had commanded the clouds from above, and opened the doors of heaven. And had rained down manna upon them to eat, and had given them of the corn of heaven. Man did eat angels’ food: he sent them meat to the full . . . He rained flesh also upon them as dust, and feathered fowls like as the sand of the sea . . . So they did eat, and were well filled: for he gave them their own desire” (Psa. 78:23-29).
If the world thinks things are scarce, the Lord makes them abundant. And because he has this capacity for unlimited giving—“there shall not be room enough to receive it,” he told Malachi (Mal. 3:10)—it removes us from the restraint that limited resources traditionally impose. It’s not a license to be wanton, as the rest of Doctrine and Covenants 104 and other sections about stewardship make clear, but it does remove that onus of taking needed resources away from one person in order to give to another. There can be enough for everyone without breaking the bank because the Lord doesn’t play zero-sum games: he is willing to give liberally to everyone. As I noted last time, at present not everyone has equal blessings--where we hit problems is with people hoarding the manna, as we'll get to--but that’s our responsibility to rectify (see the severity of D&C 104:18, for instance).
As Hugh Nibley points out in Approaching Zion, if we realize that the Lord is willing to give so liberally to everybody on earth regardless of what they do to deserve it, then we’ll also realize that everything in this world is a free gift; as he says, the truism that “there’s no such thing as a free lunch” is one of Satan’s greatest lies: it’s all a free lunch, in fact, because the Lord has given it to us without condition. Work we must, but lunch is free. After his warning in the Sermon on the Mount about not being a slave to cold hard cash (Matt. 6:24), Jesus continued:
“…Your heavenly Father will provide for you whatsoever things ye need for food, what ye shall eat; and for raiment, what ye shall wear or put on. Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they? Which of you by taking thought can add one cubit unto his stature? And why take ye thought for raiment? Consider the lilies of the field, how they grow; they toil not, neither do they spin: and yet I say unto you, that even Solomon in all his glory was not arrayed like one of these. Wherefore, if God so clothe the grass of the field, which to day is, and to morrow is cast into the oven, how much more will he not provide for you, if ye are not of little faith. Therefore take no thought, saying, What shall we eat? or, What shall we drink? or, Wherewithal shall we be clothed? (For after all these things do the Gentiles seek:) for your heavenly Father knoweth that ye have need of all these things. Wherefore, seek not the things of this world but seek ye first to build up the kingdom of God, and to establish his righteousness; and all these things shall be added unto you. Take therefore no thought for the morrow: for the morrow shall take thought for the things of itself. Sufficient unto the day is the evil thereof.” (Matt. 6:25-34, JST)
Jesus here is saying that money and even financial planning, to an extent, are unnecessary—because we are not in control of that. We cannot think and make ourselves light haired or dark haired, young or old, rich or poor. Only the Lord can. We go to work, we get a paycheck, and that money didn’t come from our boss, but from our heavenly Father. The recent Republican rallying cry of “We built that” just doesn’t sit right with me when seen in this context. Not only do the government and society create an infrastructure and otherwise help support all entrepreneurs and businessmen, but the Lord himself—not some non-sentient invisible hand—is sustaining all our commercial efforts day by day. It's like Orson Whitney's response to "Invictus": we're not entirely the captains of our own souls.
So if 1) the Lord has access to unlimited resources, and 2) he knows our needs and will give us what we need, then it stands to reason that he can also take away those resources (blessings) at his discretion (Job 1:21). Your wealth certainly avails you nothing in the spirit world or resurrection; at least two parables directly contradict this: In Luke 12:13-21, when an evidently faithful man asked Jesus to help him get some money he thought rightfully belonged to him, Jesus responded by telling about a rich man who built himself a bank too big to fail (v. 19) but who, unsurprisingly, saw it fail immediately. (This is followed, by the way, by a repetition of those monetary teachings from the Sermon on the Mount, spoken to all “his disciples” [v. 22], which contradicts those who would use the 3 Nephi version to imply that Jesus was only speaking to apostles or those in the full-time ministry when discussing financial matters, as though the Sermon on the Mount itself didn’t have universal applicability.) A few chapters later, in Luke 16:13-31, the covetous Pharisees took issue with Jesus saying they couldn’t serve God and their bank accounts simultaneously (v. 13), so he responded with the parable of the rich man, who helped himself, and the beggar Lazarus, which means “helped of God.”
All of this is really getting at what Joseph wrote the other day and, I think, the amazing shift in national discourse where the wealthy are now portraying themselves as misunderstood victims. It’s no longer appropriate to call the rich rich; “job creators” has a much more socially beneficial ring to it, just like the business-minded Republican lobbyist Frank Luntz invented the term “climate change” to replace the more troubling “global warming.” It’s simply a scriptural fact that many people genuinely do want to serve God and mammon—they see wealth as a sign of divine approval—but Jesus really is asking us to pick sides. Take the rich man who wanted to become a disciple (Matt. 19:16-26): even when he had done everything else, he still couldn’t enter heaven without giving all his possessions to the poor. There’s no other way to do it; it’s like fitting a camel through a needle. Nibley points out that there was no postern gate to the city known as the “eye of the needle”; the disciples’ astonishment shows they’d never heard of such a thing. This was a fiction invented centuries later by men who also wanted to have it both ways. They also sometimes use that last verse, verse 26, which says that with God all things are possible, to point out that the Lord has the power to get a camel through a needle’s eye. True, but note how Joseph Smith corrected that verse so that it now says that if men “will forsake all things for my sake, with God whatsoever things I speak are possible.” You gotta forsake the cash.
Whenever I get into conversations about money and the scriptures with conservative friends or family members, it seems they always raise Jacob 2:19, which says, “And after ye have obtained a hope in Christ ye shall obtain riches, if ye seek them; and ye will seek them for the intent to do good—to clothe the naked, and to feed the hungry, and to liberate the captive, and administer relief to the sick and the afflicted.” They then follow this with an argument like, “See, my father (or uncle, friend, etc.) has just bought a bigger house, or has a comfortable retirement portfolio, or just took the kids on a tour of Europe, but he pays a large monthly fast offering and gives to quite a few charities, beyond the ten percent he pays in tithing. So he feels like the Lord has given him this money and he’s using it to do good.”
My first response, which is sincere, is that that is wonderful. I am very pleased that this person has chosen to give freely of much of his financial blessings to in turn bless others—that is the first stage in the personal level of redistributing wealth to those who need it most. Furthermore, it’s not a sin, I don’t believe, to desire to care for your family’s wants. Indeed, it’s actually a commandment, and a pretty hefty one at that, to do so (1 Tim. 5:8). The law of consecration and United Orders as practiced early in this dispensation allowed for people’s wants, not just their basest needs, to be covered (D&C 42:33; 51:3; 70:7; 72:11; 82:17; and 84:112). (The problem, Brigham Young said, was when they wanted more than they should have wanted.)
So trying to earn a living for yourself and your family is agreeable to the Lord. But I think it’s a misreading of Jacob 2:19 to say that we are therefore justified in seeking after riches to expand our comfort above what is proper, especially when surrounded by others who have much greater need for it. There are diminishing returns as bank accounts get larger, and all of that increase, 100% of it, belongs to the Lord anyway—if it goes to someone else because they need it more that’s not really any violation of the giver’s property or agency. Just compare verse 19 with the seven that precede it, Jacob’s firm condemnation of the accumulation of wealth and its inevitably resulting inequality, pride, and persecution of the poor by the rich once they are economically enabled to do so. Here’s verse 17: “Think of your brethren like unto yourselves, and be familiar with all and free with your substance, that they may be rich like unto you.” And, continuing past 19, verse 21: “Do ye not suppose that such things are abominable unto him who created all flesh? And the one being is as precious in his sight as the other….” Equality is the goal; anything less is an “iniquity and abomination” (v. 16).
My fear is that verses like Jacob 2:19 and 1 Tim. 5:8 are too frequently used as palliatives by Saints trying to justify their search for wealth. And I include myself in that category: my wife and I both work and scramble hard to earn enough to get by, to pay our New York City rent and our student loans. We always strive to improve our family’s comfort; we dream about vacations to Cape Cod or the gymnastics classes our eight-year-old keeps begging for—things that never seem to be in the budget. So any scriptural pronouncement that seems to say, ‘Hey, it’s okay to want to improve your financial position,’ can be really comforting and take unwitting precedence over the verses that surround it that say, ‘But really you’re supposed to share it with everyone else.’ That’s why President Benson, the most conservative of Church leaders, said that this pride is the great stumbling block to Zion. And while we must remember he warns against the pride of the poor aspiring upwards, the rich are equally or more frequently guilty of despising (1 Ne. 9:30 – Jacob again) and even “grind[ing] the faces of the poor” (1 Ne. 13:15) precisely because their financial power affords them the institutional means and societal approval to do so without repercussion (Hel. 7:5).
More than once someone has said to me it’s not money but the love of money that’s the root of all evil (1 Tim. 6:10), and that’s patently true. But what's the difference? Nibley, on page 237 of Approaching Zion, tells us that Paul’s actual Greek word there is philargyria, cash-loving, the desire for wealth. I’m just pointing out that the Greeks, at least, had a single word for this moneylust precisely because it’s so hard to divorce its two components, the money from the lust. I just think it’s incredibly hard to be blessed with the spoils of Egypt and not turn around and mold it into a golden calf.
Okay, that’s the ideal. But here we sit in this fallen world where Satan is ruling with cash, armies, blood, and horror. So what do we do with what the Lord has given us? In talking about foreign policy last time I introduced a little Hegelian dialectic that, as I said, guides a lot of my beliefs here as elsewhere.
1) We are all children of God, equally valued and equally valuable. His desire is to bless everyone on the earth equally.
2) People around the earth are not physically and temporally blessed equally; there is great inequality.
3) Therefore, it is incumbent on those of us who have been blessed abundantly to use the resources God has given us to bless others.
Thus far I’ve essentially been attempting to prove the first point. Point two is empirically self-evident, and it’s kind of the challenge the Lord is presenting us (or the results of Satan’s management of the accounting ledger). So now we’re at point three. And this assertion, that we’re required to help others by giving them what God has given us, is probably more contentious and controversial in economics than anywhere else because it takes us right to the topic of redistribution of wealth, which I’ve already touched on. The r-word. There’s no viler insult that can be hurled at a Democratic politician than saying that he or she wants to redistribute wealth. It’s socialism! That’s what communists do! It’s patently un-American! Even most Democrats would disavow financial redistribution. President Obama certainly has time and again, probably because Republicans keep hitting him with it. So I now want to ask not whether President Obama, or any government agency or program, currently is redistributing America’s wealth, but whether they should be.
The government’s role is the point of disagreement, I think, between conservative and liberal Mormons. I think we can all agree that we should throw out Korihor’s (and Ayn Rand’s) assertion that “every man fare[s] in this life according to the management of the creature; therefore every man prospered according to his genius, and that every man conquered according to his strength” (Alma 30: 17). That kind of unmitigated free market is completely amoral, and to me that kind of amorality—that begets avoidable human suffering—is immoral. So we agree that whenever economic inequality exists it should be eliminated. What I believe is that if this can be done by the Church under inspired priesthood leadership, that is the best way; but if not that doesn’t mean that it is moral or ethical or even permissible to allow wealth and its attendant blessings like health, food, shelter, and education to accrue for one group or individual more than for any other, and we should use every means necessary—especially government—to achieve that end. For me this is a fundamental principle of the gospel and it’s so emphasized, so central to my conception of Mormonism that I cannot conceive of my faith without it; it’s no more peripheral than the atonement or resurrection.
I know I’m probably overdoing it and my posts are likely too long for anyone to read, but this is very important to me so I’d like to present just a few more scriptures that, to me, support this view of the centrality of the Lord’s economic system of wealth redistribution. The frequency and intensity of scriptures like these are what makes me see moving wealth from the rich to the poor as not just a feature of the United Order, but a litmus test of our humanity in any condition. Here’s a quick sample of a very large population of scriptures:
* Mosiah 18:27: “And again Alma commanded that the people of the church should impart of their substance, every one according to that which he had; if he have more abundantly he should impart more abundantly; and of him that had but little, but little should be required; and to him that had not should be given.”
* D&C 104:16: “…Behold this is the way that I, the Lord, have decreed to provide for my saints, that the poor shall be exalted, in that the rich are made low.”
* D&C 78:5-6: “That you may be equal in the bonds of heavenly things, yea, and earthly things also, for the obtaining of heavenly things. For if ye are not equal in earthly things ye cannot be equal in obtaining heavenly things…”
* D&C 70:14: “Nevertheless, in your temporal things you shall be equal, and this not grudgingly, otherwise the abundance of the manifestations of the Spirit shall be withheld.”
* D&C 51:3: “Wherefore, let my servant Edward Partridge, and those whom he has chosen, in whom I am well pleased, appoint unto this people their portions every man equal according to his family, according to his circumstances and his wants and needs.”
* D&C 51:9: “And let every man deal honestly, and be alike among this people, and receive alike, that ye may be one, even as I have commanded you.”
* D&C 82:17: “And you are to be equal, or in other words, you are to have equal claims on the properties, for the benefit of managing the concerns of your stewardships, every man according to his wants and his needs, inasmuch as his wants are just.”
And so on. Economic inequality and man’s love of money are, in fact, evidently the greatest sin on the earth today: “But it is not given that one man should possess that which is above another, wherefore the world lieth in sin” (D&C 49:20). That wherefore holds a world of meaning.
I’m attempting to prove, just in case it needs proving, that the Lord wants us to bless the poor, to mitigate suffering, and to be equal in worldly things according to what we need and justly want. Now I’d like to add to that and assert that the Lord wants us to do that through any means possible, and that government intervention in the free market can be an incredibly powerful tool given to us by the Lord to do so. Listen to Doctrine and Covenants 134:1: “We believe that governments were instituted of God for the benefit of man; and that he holds men accountable for their acts in relation to them, both in making laws and administering them, for the good and safety of society.” Those are my italics, of course, but I’m emphasizing those phrases because for me that means anything but a limited government in a Jacksonian or a libertarian or a Tea Party sense. God instituted our government and expects us to use it for the benefit of all men, which the free market just doesn’t always do on its own. That’s not just a license, but a directive to employ an activist government that seeks out society’s ills and tries to remedy them. Government is not an autonomous sentient entity any more than the free market is sentient or a corporation is a person: it’s just an organization we the people have put together, with rules to make it run fairly and efficiently, that we can use to help members of our society who haven’t had the same advantages as the rest of us (or to accomplish any other goal, for that matter). It’s a tool from the Lord we can use to help accomplish his designs, including the “temporal” blessing of all his children.
Zion has an internal and an external component. On the one hand, it’s the pure in heart (D&C 97:21), a description echoed in describing Enoch’s city: “And the Lord called his people Zion, because they were of one heart and one mind, and dwelt in righteousness,” but now listen how the sentence turns to include the external component, “and there was no poor among them” (Moses 7:18). We are seeking for the internal component of Zion, the purity in heart, in our missionary work, our service, our teaching, our counseling, raising our families, and even—hopefully—in our discussing religious issues in online forums like this. But that doesn’t preclude us from seeking the temporal equality—that complete eradication of poverty—that is the external measure of Zion. Hence within the Church we pay our fast and other offerings, we tithe, we serve, and we provide humanitarian aid, disaster relief, and other measures to our neighbors of any faith—thus attempting to be inclusionary of everybody, as much like the Good Samaritan as possible. Why then, if we will send trucks of aid to victims of poverty regardless of their religion, do we sometimes complain bitterly when the government uses some of our money to aid the very same people?
It comes down to agency. I quoted Mosiah 18:27, about a progressive fast offering program, above. This is the next verse: “And thus they should impart of their substance of their own free will and good desires towards God, and to those priests that stood in need, yea, and to every needy, naked soul.” Alma was setting up a civil government here, but it was a theocracy or perhaps what Joseph Smith fleetingly called a theodemocracy, based on religious principles and a willing populace. So Alma’s goal, like Enoch’s, was that his citizens would be pure in heart. I don’t know when we gave up on that being a goal for American society, but many in the Church seem to think that that kind of giving program should not be carried out at the national level, generally through taxes and spending, because each and every citizen has not approved of the ways the government is going to spend the money it taxes. They claim—and I’m not trying to be vindictive or sarcastic in describing this—that a government taking your money and using it on programs you don’t approve of is somehow a violation of your agency.
Here’s an example, a review of Approaching Zion by Duance Boyce for the Maxwell Institute. In sum, Boyce claims that Nibley has a reductionist view of the law of consecration and that it is the will of the people in how their money is given and distributed that is paramount to forming Zion; the relief of the poor and the suffering is secondary to the protection of the agency of the givers. (I realize I’m being reductionist too; please read it if you want his full argument—but please read Approaching Zion in its entirety as well.)
Here’s another one, a blogger commenting on a now removed YouTube video of President Benson talking about how “‘redistribution of wealth’ is socialism,” with the connotation, in case we missed it, that socialism is bad and capitalism good. Again, I’m not trying to sound snarky: under capitalism individuals are supposed to have control over their private property, and under the worst abuses of communism—not so much socialism, I’d say—that right is taken away. (The United Order, by the way, retains private property even while redistributing it; check out Jim Lucas and Warner Woodworth’s Working Toward Zion for a great comparison of all these systems.) But listen to what this blogger says, in his own boldfaced type: “Today’s socialists—who call themselves egalitarians—are using the federal government to redistribute wealth in our society [he’s been talking about all federal taxes], not as a matter of voluntary charity, but as a so-called matter of right.” (Read the comments too, where someone says, “The kind of socialism we are talking about is forced charity in an attempt to equalize economic differences in a population. Taking wealth from one individual and giving it to another is a violation of liberty. The government should not have the right to take money from one person in order to give it to another.”)
So the emphasis is on the voluntary nature of the giving, not on the benefit the gift will give to the recipient. Given the importance of agency in our mortal experience and its potential vulnerability in the war in premortality, it makes sense that it receives so much attention in LDS thought; that President Benson and others spoke so much about it during the Cold War, followed by the general cessation of political statements by Church leaders (meaning that Elders Benson, McConkie, etc. essentially had the last doctrinal word vis-à-vis political philosophy) shows why it remains such an important topic for many Latter-day Saints today.
But in 1999, when I was a student at BYU, I heard Dallin H. Oaks give a great talk about agency and abortion in which he said this:
“Few concepts have more potential to mislead us than the idea that choice or agency is an ultimate goal. For Latter-day Saints, this potential confusion is partly a product of the fact that moral agency—the right to choose—is a fundamental condition of mortal life. Without this precious gift of God, the purpose of mortal life could not be realized. To secure our agency in mortality we fought a mighty contest the book of Revelation calls a ‘war in heave.’ This premortal contest ended with the devil and his angels being cast out of heaven and being denied the opportunity of having a body in mortal life.
“But our war to secure agency was won. The test in this postwar mortal estate is not to secure choice but to use it—to choose good instead of evil so that we can achieve our eternal goals. In mortality, choice is a method, not a goal.”
In terms of economics and charity, this shows something important to me. Yes, agency is important, but no one is violating your agency by using some of your money allegedly without your consent. First, I include “allegedly” because it is with your consent, at least if you consent to the contractual relationship the Constitution and Declaration of Independence set up with the American people. Without looking at individual clauses, which is where we start to bicker, the overall contract is that we agree to live here in this country and uphold its laws as long as they remain in force, and in return we receive the protection and the benefit of an organized society as administered through the government. We receive the benefits of the society/infrastructure/economy that this type of government can help create, but we do so by agreeing to remain part of that society.
The whole thing is a choice, subject to agency, and we can, if we so choose, use our agency to rebel or emigrate if we no longer approve of the contract. But my point is that income tax and a great many government programs are now part of the contract, and we receive the overall benefit of all the government’s activities, even if we don’t agree with all of them. And how could we ever agree with all of them? Who among the founding fathers or ancient Greeks would ever expect a democracy to please all the people all the time? That’s not the point; the point is that we receive great blessings for living in this country with its protections and infrastructure and political process, even if we don’t think subsidies should go to Planned Parenthood or Solydra—or Blackwater or General Electric.
Besides, even beyond the fact that we are all choosing to be part of this society, money has never equaled agency. The Supreme Court recently ruled that money is speech, which is nonsense. If money were speech we could buy groceries by reciting poetry in the checkout line. And we can’t. Money can purchase time on television in which speech may be disseminated to mass audiences, but if you take away my money you don’t take away my ability to speak. And if you take away my money—through legitimate taxation or outright theft—you haven’t taken my agency. Money is just a thing, and the Lord, as we’ve seen, is urging us to get rid of it all the time. Look at Elie Wiesel: he’s written that no matter how bad things got in the Jewish concentration camps, no matter how many possessions or family members or how much human dignity the Nazis stole from him, they could not take away his spirit, his ability to choose who he was and how he would lead his life. As Elder Oaks said, the battle for agency was won, and even in the most depraved of conditions, even when all our physical freedoms have been stripped away, we still maintain that agency to choose who we are, what we believe, what we stand for, and who we will follow through mortality. And that, not 20% of our income, is what Satan was vying so strongly to destroy.
So I simply cannot believe that my money going to government programs I disagree with is a violation of my agency (and I wish I didn't have to agree with Eric R.'s earlier assessment that so many conservatives are only interested in agency when it concerns their pocketbook, not their fellow citizens' ability to live free from pollution or free to make their own medical decisions). “Forced consecration” may not be true consecration in the Zionistic sense, but it not only doesn’t harm any of us one single bit, it can actually help us get a little bit of the spirit of the giver in us. It is not now and never has been a violation of liberty; you’re nowhere near that until the government takes away your vote or habeas corpus rights. And we’re nowhere near a 1984 or a Soviet or a Cultural Revolution society; the federal government has never considered anything remotely similar to taking away all our possessions and spreading them out even-Steven, or re-educating us, or setting up death panels, or anything like that. It’s not on the table, so why make such a bugbear out of it? It's just progressive taxation that we're talking about, often just the closing of loopholes or end of the Bush tax cuts for the wealthiest and most able to give. President Eisenhower maintained the marginal tax rates for the highest earners above 92% (compared to the less than 14% capital gains tax Governor Romney paid in 2010) and even Alma the Elder knew those who had been blessed more should give more—and that there should be a base, maybe up to 47%, that shouldn’t be required to give at all.
So not only is it not a violation of agency to be compelled to give cash toward the maintenance of a stable society or the leveling of the playing field for the disadvantaged, but I’d like to point out that sometimes—often—the potential good that can be achieved through “forced” redistribution of wealth far outweighs the damage it does to the givers—remember those diminishing returns. The Lord sometimes compels us to do things we don’t want to do—and it turns out much better for us for having done it. That’s why Alma says, “because ye were compelled to be humble ye were blessed” (Alma 32:14), for instance, and even the grumbling Israelites were better off under Moses than back in Egypt, as he repeatedly had to remind them. Laman and Lemuel were compelled to leave Jerusalem, and they lived long and healthy lives because of it. What of the government? No one is complaining that it compels us not to kill each other, or dump nuclear waste in the reservoirs, or even drive on the wrong side of the road (that one’s from an old seminary video explaining the necessity of laws for agency to even exist, by the way). So it stands to reason that the government can require things for the greater good. That means it can tax and it can spend, and we are all better off because of that, regardless of the Solyndras or other programs (Iraq, for instance), that go awry. And if we always wait for the market or generous individuals to step in, a lot of needs will go unmet--more than now--with very real consequences for real people. I know Obama's extension of unemployment benefits kept a roof over our heads a couple years ago, and I wouldn't have been able to receive that much assistance from family or Church.
So that’s a very long way to answer whether governments should have the ability to redistribute wealth. Yes they can and yes they should. We live in a country where that’s already the rule. We have the opportunity, through government spending and programs like Medicaid and Medicare to combine our resources and give a gift that otherwise might never materialize because it doesn’t have a direct commercial value. We are already the givers, so it’s barking up the wrong tree to remain evil or grudging givers; “wherefore it is counted unto him the same as if he had retained the gift; wherefore he is counted evil before God” (Moro. 7:8).
I haven’t spoken much about the free market alternative, so I’ll just add that no one’s trying to get rid of that either. Joseph Smith kept it, Brigham Young kept, Franklin Roosevelt kept it, and President Obama really wants to keep it. Neither it nor private charity are disappearing. The invisible hand just needs some guidance every once in a while because power and wealth tend to aggregate around where they already are; it’s okay for a government to break up feedback loops like that, as a trust-busting Republican like Theodore Roosevelt proved. (Would that the banks that are too big to fail today would receive the same treatment as the railroads that were too big to fail during his administration.)
So that’s my religious philosophy on economic principles, or at least the most important points. Where does that put us in this election? Although none of the Church’s warnings against unnecessary debt are meant to apply to businesses or governments (where liabilities have to balance some of the assets), we are in a long-term situation where too much deficit spending can lead to a fiscal situation that’s untenable. Democrats aren’t denying this any more than Republicans, and President Obama’s helped get our total debt to a six-year low, even in a recession, besides strategically shrinking government employment and spending. Of course, we’re still in a recession so worrying about long-term debt is not the right concern; deficit spending is on order and in this case Obama and Congress haven’t done nearly enough, although stimulus spending has helped and intervention in the auto and energy industries has been in cases remarkably successful. Governor Romney is proposing less stimulus—just like he proposed a managed bankruptcy for Detroit before taking credit for how President Obama ignored his advice and saved it—an austerity program akin to the UK, Germany, and other EU countries, which could be compared to LDS teachings about living within our means, teachings which are intended for families and individuals only, not governments. As Nicholas Kristof pointed out in the New York Times earlier this week, since Europe represents exactly the kind of program Republicans including Romney and Ryan have been advocating for, we can look at what kind of results Europe--and New Jersey--have had to judge how the Republican plan will work out here. (Spoiler: not nearly as good as America under President Obama; we're the only ones growing instead of stagnating.) Romney has proposed nothing to really differentiate himself from Bush or Reagan or any of the deregulatory tactics of his predecessors that created the recession, and he’s been famously vague, even in the debates, about how he’s going to make all of his proposals add up. President Obama should be clearer about some of his economic policies in a second term, but we’ve already seen his policies do wonders over the past four years. We’re not out of the hole yet, but we never fell as far in as we could have had an austerity program been put in place instead of stimulus.
I think that how we handle money and other natural resources are central to the gospel and that we can find a lot of common ground between conservative and liberal Latter-day Saints when discussing it. Right now on the ground, I think that a progressive Keynesian approach to handling our current economic crisis, with an eye toward long-term sustainability through reform (not elimination) of programs like Social Security, is the right way to go, because I'm most concerned about what the government as the agent of the people can do to benefit the most vulnerable--and I see that not as the government violating our rights but as part of our God-given stewardship over the government, for which we'll one day be answerable to him. Thus on economic issues more than anything else, my beliefs as a Mormon make me support the Democratic party and President Obama.
When President Barack Obama took the oath of office on January 20, 2009, the U.S. economy was in free fall. During the preceding year and half, some of the nation’s largest and most important financial institutions went bankrupt, including Bear Stearns, Countrywide, and Lehman Brothers, as risky loans and other investments failed. Many other large banks were on the verge of collapse. The downfall of the financial sector had been preceded by a spectacular end to a massive speculative housing bubble that almost instantly wiped out trillions of dollars of Americans’ net worth. When Lehman Brothers and AIG went into bankruptcy during the same weekend in September 2008, panic ensued all across the economy. It felt like 1929 all over again. The Troubled Asset Relief Program (TARP), which was signed into law by President George W. Bush and was implemented by President Obama, stopped the bleeding in the financial sector, but the damage to the broader economy had already been done as other sectors of the economy continued to rapidly deteriorate. The stock markets plummeted, losing more than half of their peak market capitalization just six weeks after Obama took office. Many retirees and workers nearing retirement saw their investment portfolio lose much of its value. Millions of people lost their jobs due to no fault of their own after the U.S. entered a recession in December 2007. Over 1.2 million Americans were laid off between the election and Obama’s inauguration. All told, the Bureau of Labor Statistics estimates that 8.7 million jobs were lost due to the Great Recession. No president since Franklin D. Roosevelt has begun their tenure in the White House under such dire circumstances. An evaluation of each segment of the economy around the time Obama took office compared to now shows that we are definitely better off four years later.Read more
More has been added to our national debt under President Obama than all the other presidents combined. Partially true. However, of the $5.1 trillion added to the National Debt from 2009 to 2012, only $1.5 trillion is due legislation signed by President Obama. Of that $1.5 trillion, only $500 billion in incremental spending carries past 2010. The rest of the debt, or $3.6 trillion, can be directly attributed to legislation passed under previous administrations.
On January 20, 2009 President Obama walked into the oval office and was handed a negative annual deficit of $1.3 trillion. This was a stark contrast from his predecessor, who began his eight years in office with a $200 billion dollar surplus. However, through healthcare entitlements, unfunded wars, wealth redistributing tax cuts, and TARP that surplus had turned into the largest fiscal deficit our country had ever experienced. Obama was handed this budgetary disaster, coupled with a collapsed economy with the expectation of immediate change. Little did he know three years later, he would be held responsible for the gap he inherited, and full blame for the skyrocketing debt. Before we can understand what Obama was expected to fix, we need to first understand where our government spends money.
The federal budget is broken into five major categories; healthcare, defense, social security, interest, and everything else. The first four categories equate to 80% of the total federal budget consistently over the past 20 years. The “everything else” category includes spending from education, governmental programs, appropriations, earmarks, federal departments, etc. The “everything else” category dominates 90% of federal budget debates and discussions, and is leveraged in political perversions of reality. Here is the last 20 years of governmental spending broken down by category:
President Obama signed two major pieces of legislation that grew short and long term spending. In 2010 President Obama signed the American Recovery Act. This legislation accounts for $800B of new debt through $224b in entitlement spending, $275b in grants, and $288b in tax cuts over 2009 - 2010. You can see these amounts reflected in the 2009 and 2010 budget lines as the “everything else” category spikes and then declines the following years.
The second piece of legislation that President Obama signed into law was the Patient Protection and Affordable Care Act, also known as Obamacare. In crafting the legislation, House Democrats worked closely with the Congressional Budget Office (CBO) to ensure the new legislation would remain deficit neutral. The potential increase in spending was offset by penalties due to mandates and some additional taxes directed at the super wealthy like "cadillac" healthcare plans. The CBO produced a report confirming President Obama’s claims. The only credible report opposing the neutral claim came from the highly conservative Heritage Foundation, providing a high side of $75 billion annual increase around the legislation (roughly 8%). Since Obamacare was created to be deficit neutral, repealing Obamacare has a negligible impact on our Nation’s budget.
The rest of the budget growth relies on legislated “stabilizers” that kick in based on marketplace conditions. For example, spending on Social Security will continue to increase as more individuals reach the threshold, unless we restructure the program. Defense will continue to increase unless we make changes to our policies. Medicare costs will continue to skyrocket as more individuals reach the required age. Welfare costs should hold flat unless unemployment grows, and interest expense will continue to rise as more debt is issued to pay for all of these programs. This entire group has little to do with any of President Obama’s policies, and would be growing at the same rate regardless of who sat in the Oval Office.
One of the most overlooked causes of our budgetary problem is due to governmental income, or receipts. Like our own household budget, when our income stays flat, so should our spending. Over the last decade this has not been the case. From 2000-2009, budgetary spending increased almost 96% and our nation’s receipts (income) only increased 3%. Imagine doubling your household spending after receiving a 3% pay raise! In 2000 receipts were roughly 20% of GDP. In 2009 receipts were 15% of GDP. If the 2009 receipts were equal to 2000 levels, our annual deficit would decline by $700 billion.
What caused this shortfall in income? The collapse of the economy and the 2002/2003 tax cuts. In 2002 and 2003, tax cuts were signed into legislation based on the premise that the red hot economy of the 1990’s would continue through the next decade. The collapse of the housing market and war spending were not part of the equation, nor was TARP funding and other bailouts. Even more problematic was when President Obama extended these tax cuts compromising with the Republicans to avoid a governmental shutdown. Declining receipts due to the economic collapse is straight forward; less income tax is being collected due to unemployment and less is being spent by the consumer.
As we go into the 2012 elections voters beware. You might be inclined to blame President Obama for the rising National Debt. However, if Governor Romney takes office in 2012, he will have four years of continuing rising deficits unless the big four spending categories are re-legislated. Why? Because minimal has been proposed in controlling rising spending, and any additional tax cuts will only expedite the problem. Of course the desire will again be to blame President Obama, but that will fall on deaf ears due to lack of rhetoric consistency.
If you still believe President Obama is to blame for $5 trillion in new debt, feel free to comment below identifying what legislation he signed to deliver such a disastrous fiscal decline. Whatever your belief, cut through the media’s rhetoric and read the actual budget. http://www.whitehouse.gov/omb
After losing the South Carolina Primary to Newt Gingrich, possibly in part due to his waffling at the pre-Primary debates about releasing his tax returns, Mitt Romney released his tax returns for the past two years, which show that he paid about 14% in federal taxes on income of nearly $43 million. The timing of Romney's tax return release was impeccable- for Democrats. For months, President Obama and Democrats have been attacking Republicans for wanting to maintain tax breaks and loopholes for the super-wealthy. Last August, Warren Buffet pointed out in an op-ed that he paid a lower federal tax rate than his secretary in 2010. He paid about 17.4%, whereas his office staff paid an average of 36%. Buffet rightly pointed out that this simply isn't fair. He added, "it’s time for our government to get serious about shared sacrifice."Read more
Conservatives often invoke our country's Founding Fathers as well as prominent historical figures like economist Adam Smith, whose ideas about the "invisible hand" of free markets helped form the theoretical foundation of modern capitalism, when they advocate far-right economic policies. Lately, there has been a lot of talk by GOP presidential candidates about creating a flat tax system in the U.S., particularly from Texas Governor Rick Perry and Godfather's Pizza founder Herman Cain. Ironically, you'll never hear a conservative pundit or politician point out that Adam Smith and Thomas Jefferson, among other historical figures, were strongly in favor of progressive taxation.Read more
Written in response to a challenge for privatized education and protection:
Public schools would be replaced by private institutions driven by profit. In order to meet the demands of capitalism, the only admitted students would be those who can pay. Obviously the quality of education would be directly tied to the amount one could pay, as the most expensive schools could afford to recruit and pay the very best teachers. Currently, the average costs for K-12 grade is roughly $8500 spent per student per year. Let’s assume that through capitalism greater efficiencies are realized and the cost drops by 30% (this is very generous). This would equal about $5900 per student. Let’s say since education is now privatized we now spend half on property taxes (savings of $800 on a $300,000 home in AZ). This would equal a net cost of $4900 for one student, $10,800 for two students, and $16,700 for three students.
Obviously households would have to be in the upper middle income bracket to afford the average education premiums, and for the best education, they would need to be an upper income household bracket. With half of the American households making less than $50k a year, paying little to no taxes, this incremental cost would solicit very tough choices. You could send you child to a below average school, at a lower cost, with poor quality teachers, shorter hours, and little to no resources. Or you could elect to forgo substantial costs like healthcare for your family which will then be reflected in emergency room costs skyrocketing (not to mention a poorer quality of life). You could also choose to educate from home, if there is a non-working parent willing to make the sacrifice. In any of these scenarios there is a guaranteed certainty that crime will spike given the lack of education and time spend in a productive environment.
Ultimately privatized education will drive increases in poverty, widening social class divides, and the absorption of the middle class. Even more unfortunate you will not see children from broken homes in Arkansas, become Rhode Scholars, and Presidents of the US. There is a reason that every advanced industrialized nation offers education in a socialized, not capitalistic, manner. Even for-profit institutions like The University of Phoenix rely almost exclusively on government subsidized student loans to generate 80% of their revenue (think about that for a second, your tax dollars are going right to the pockets of UOP shareholders).
Now, there is also the subject of vouchers which mixes government capital with private institutions. However, based on our current conversations about governmental spending, I am guessing government funded vouchers are not the ideal scenario.
There would be similar consequences for privatized protection. Imagine getting charged $200 every time you called 911. If you couldn’t afford the premium then calling 911 for help wouldn’t even be an option. Police wouldn’t even respond if you did not have a payment form on file, and those in danger would weigh whether or not the calling risk is worth the cost. Sounds like potential anarchy to me.
With Obama’s plan to let the Bush Tax cuts expire in 2010, there has been an onslaught of media attention concerning his budgetary decisions. Phrases like “socialism”, “re-distribution of wealth”, and “tax hikes” are being associated with President Obama’s fiscal policies to discredit his approach. Obama has been open and direct concerning who his tax policies are targeting. The interesting part of the situation? There has never been such an uproar from the middle class fighting for the benefits of the wealthy.
Now to be clear I have little issue with the wealthy, or their personal incomes. Athletes, actors, stock brokers, and executives are all paid based on market conditions. I do believe that the wealthy are the largest benefactors of governmental regulation. We live in a mixed market economy, not a free market. The government regulates trade, blocks monopolies, and protects intellectual property. Almost all of the bailout money went to save the shareholders of large corporations and free up credit markets which have the largest impact on the wealthy.
The richest Americans have been the largest recipients of tax cuts over the past 30 years. Starting with Jimmy Carter’s administration, the highest tax rates have been cut in half to present day levels (70% to 35%). The wealthy have also seen the largest jump in income. From 1992 to 2004 upper class income rose from 111,000 to 154,000 (+39%). Over the same time period median wages only increased from 39,000 to 43,000 (+10%). So, over the past 30 years the wealthy have seen their taxes decrease by 50%, and their incomes increase by 39%. (Inflation adjusted for all above examples)
What many Americans do not realize is the vast redistribution of wealth over this period. Whenever tax rates are cut disproportionately, tax burden shifts among classes. Regarding the 2002 and 2003 tax cuts, families making $60,000 saw their tax payments drop by $1,000. In contrast, the wealthiest 1% saw their annual tax bill drop by $58,000. This resulted in a dramatic swing in tax burden to the middle and lower classes and redistributed wealth to the upper class.
President Obama’s plan is to close the gap on the federal deficit by allowing the Bush tax cuts of 2002 and 2003 to expire. This would increase the tax bracket of the wealthiest (single taxpayer making more then $357,000) from 35% currently, to 39%.*** This would return some of the tax burden back to the wealthy, and redistribute the wealth back to the middle class. Before the middle class rejects Obama's policies, they should remember upper class Americans never asked for the Bush tax cuts, and certainly didn't need them.
***Now, before you drop your jaw regarding these figures remember this is a bracket, and tax brackets can be misleading. A family of four with household income of $365,000 claiming $100,000 in deductions actually pays about 17% in income tax. In comparison, an average family of four with income of 150,000 and deductions of $30,000 falls into a 25% bracket, but only pays about 12% in tax. An average family of four with income of 70,000 and no deductions falls into a 15% bracket, but only pays about 5% in tax.
Tax and Spend Liberals. If I had a nickel for every time I heard this phrase, I would be writing this post from an exotic hut with glass bottom floors somewhere in the French Polynesia. This negative connotation has been associated with the Democratic Party for several decades, and will be an effective talking point for elections to come. The irony: I would much rather be a tax and spend liberal, then a free charging conservative.
Recently I had a conversation with a friend whose number one disagreement with the current Democratic candidate was his commitment to let the Bush Tax Cuts expire (one might ask, why were the Bush tax cuts passed with an expiration date?). This, in essence, would be raising taxes.I followed up with a question regarding the consequences of deficit spending; their response, “government needs to be cut.”
There is not one current presidential candidate who shares this conservative ideology. Although Obama’s proposals are beyond McCain’s in cost, McCain’s proposals will increase deficit spending much faster that of Obama ($5.7 trillion to the national debt over the next decade -- source: CBO). Why?McCain is proposing vast tax cuts including voiding the AMT, doubling child credits, and lowering the corporate bill. This would be like cutting my salary by 20%, and not changing my spending habits. Needless to say I would rack up vast amounts of debt forcing me to leverage every asset I could to support my current lifestyle.
Think of the national debt as one giant Black American Express. Where does this limitless credit card come from? This is the scariest question of them all.We are currently expanding our money supply by borrowing from foreign countries. We are allowing Saudi Arabia, Japan, and China to become our shareholders. So, during this Olympic season when you are complaining about China’s human rights violations, just remember they are making our mortgage payments.
Looking at the last four presidents, government spending increased 36% under Reagan, 17.2 % under Bush I (only 4 years – 34% for 8 years), 21.2% under Clinton, and 32.4% under Bush II. What is most interesting from this comparison is that the economy was expanding at the fastest rate under the Clinton administration, providing them with the strongest justification to increase spending (higher tax revenues). Yet it was the tax and spend liberal who balanced the budget and kept the National Debt basically stagnant his final year in office.
Two major consequences of a rapidly expanding money supply (national debt) are declining currency value and inflation. When your two dollar milk now cost three, or the gas prices skyrocket at the pump, thank deficit spending and a weakening dollar. This is exactly why economists call inflation “the hidden tax”. However, we should take comfort that the current administration has passed sizeable tax cuts to off-set these cost to households making more then 250,000 a year.
In the upcoming election when sizing up candidates, don’t be so quick to dismiss the tax and spend liberal. Just remember over the last 30 years it has been the tax and spend liberals who have made the most progress on limiting governmental spending, keeping the national debt in check, and maintaining responsibility with America’s money.