Buffett states, "my friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice."
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.
"The test of our progress is not whether we add more to the abundance of those who have much; It is whether we provide enough for those who have too little." -FDR
With the 2004 presidential election come and gone, many citizens will tune out the various debates that our lawmakers continue to engage in. Both sides will retire to their blue and red corners of this polarized nation with a sigh of relief, the red for their victory, the blue for their participation in the democratic process. The red will declare that moral values of the voters will continue to hold this country together, while the blue argues this very subject tears this land apart. Both sides are blinded by the hypocrisy of their own parties as they view their prospective leaders as figures of deity.
In retrospect of last month's elections, voters returned President Bush to the White House due to his moral agenda. Depending on the media outlet, the win came through miniscule proportions or a cataclysmic majority. At any rate, President Bush will unveil his outline for the upcoming years and this author is skeptical that those same moral issues the won him the white house will be anywhere near his agenda. Why is this? Americans, as a whole, skate the lines of morality. When America went home for Thanksgiving, Desperate Housewives was the highest rated show (27.2 million viewers). In the back corners of society, pornography is the most lucrative media industry in the country. Divorce rate is an astounding 50%, and is it even possible to track infidelity numbers?
Look at morality amongst our leaders. Bill Clinton tarnished every positive decision made in office by succumbing to moral temptation. Mayor Giuliani will forever be remembered as a hero of 9/11, but his infidelity decisions will forever be on his constituents mind, What about the New Jersey governor who had an extra-marital affair with another man? Two of the largest media personalities, Rush Limbaugh and Bill O'Reilly, have also taken heat for their moral choices. And the list goes on…
Some thoughts on the issues:
Abortion is one topic which stirs strong confrontation between both parties. Republicans look at the argument as right vs. wrong, as Democrats view it as a challenge of government-protected rights. Republicans argue that abortion destroys life while Democrats believe that government-regulated abortion destroys civil liberties. Now Republicans would like to believe that Democrats support this malice practice, while Democrats cry that Republicans are undermining the constitution. The most interesting part of these perspectives is that both sides believe their opponent is closer to the extreme. For instance, a small percentage of Democrats actually support this inhumane practice, while the majority believes this is an issue of government influence. This is why they are labeled pro-choice instead of pro-abortion. Looking from the other side, Democrats try to label Republicans as a majority who want to challenge constitutional rights, when in reality they believe that abortion is an immoral act. Both parties use extreme stances to justify why the opposing party is out of the mainstream, when in reality, their implications only identify small percentages.
Another issue is Gay marriage. Republicans would like to believe that Democrats support gay marriage when polling demonstrates over and over again, that the majority opposes the practice. Again the issue revolves around government's responsibility within personal arenas. Should a gay individual have access to the same privileges as heterosexual citizens of the United States? Democrats group the Republicans as religious zealots who demonstrate little tolerance to diversity. Yet Republicans widely accept diverse groups, and believe that gay marriage should not receive marital benefits due to the lack of family experience. Republicans like to believe that Democrats are morally inept, while Democrats like to believe that Republicans are ignorant.
Perhaps this is where the hypocrisy sets in:
If one was to ask a pro-choice Democrat why they follow such a belief, their response would be to the tune of protecting civil liberties. Ask that same Democrat concerning civil liberties of the embryo, and their response is strained. They will protest time and time again regarding the woman's right, but do not spend an ounce of effort regarding the unborn's rights.
Ask a Republican why they oppose abortion and their response will most likely depict a graphic reconstruction of the inhuman procedure. They also will counter with discussions of morals and ethics regarding the unborn. Ask that same Republican if the government should take responsibility of uninsured toddlers, abused infants, or homeless children and their response will be less then adequate. Republicans will fight tooth and nail to outlaw abortion, but when that child comes into the world, responsibility is waived.
The same hypocrisy can be witnessed in homosexual rights. The Democratic left desires to legalize civil unions or gay marriage. The same individuals will also point to the destruction of the family as one of the challenges of moral America. However, they fail to recognize the connection between the two. The conservative right is equal in their belief that the family unit is being challenged. However, with their fight to deny the rights of marriage to gay couples in full swing, the real destroyer of family is left to expand. Moderate Republicans (the staunch conservatives refuse to tamper with the constitution) seek to outlaw such a union by amending the constitution, yet they do not fight with the same vigor regarding adultery. Who can argue that infidelity is a far greater threat to moral America then gay marriage? Why not petition with the same tenacity toward an amendment outlawing adultery? Seems ridiculous, right? Possibly. But the point could be made.
One of the more fascinating platforms which divides the two parties, can actually be viewed as a contradiction to both. Gun control: government regulation or absence? In following the basic stances on abortion, gay marriage, and personal platforms regarding less government, it is surprising that Democrats are more prone to support gun control. Republicans on the other hand, who so adamantly support government intervention in personal platforms, cry foul when legislation approaches their perception of the second amendment. Democrats might argue that firearms infringe on the constitution's guarantee for life, liberty, and happiness. They also might justify the limiting of arms as a necessary enactment for protecting personal rights. After all, anyone assaulted with a firearm loses their personal liberties. However, it appears contradictory as to when government intervention is appropriate.
Firearms also present a moral dilemma to the conservative right. This past year the assault weapons ban, supported by 70% of Americans and a large percentage of NRA members, expired with little action from the Republican House or the President. On the eve of the expiration over 5,000 police officers from around the country traveled to capital hill to protest the lack of effort from lawmakers. The ban was also backed by every major police organization across the United States, but to no avail. With the power of the NRA lobbyist controlling a major resource, the expiration of the ban brought twenty million dollars of campaign money to various Republican races across the country. The Republican Right refuses to understand moderation in this particular example.
According to the definition, "moral" relates to principles of right and wrong in behavior. As we look though this country with partisan eyes we selectively engage in our own "moral" battles. For the Republican side, the battle revolves around the black and white disregarding the more challenging problems. The Democrats are the exact opposite, focussing on the complex and graying the black and white. Social programs are perfect examples of these accusations. Throughout the 2004 campaign John Kerry spent incredible resources addressing the lack of medical attention in this country for children. Even with good intentions Kerry could not communicate specific details in accomplishing his proposals, or his suggestions seemed fiscally irresponsible. The majority agrees that taking care of the poor is America's moral responsibility, but Kerry's solutions are too complex or expensive, which in turn makes them unreasonable. President Bush, on the other hand, also solidified these accusations by refusing to even present a solution.
What is more interesting about Medicaid and poverty issues is the divide that comes with stated political philosophies. The blue states are labeled as big government and excess spenders of America's tax money. The Republican base also believes that the Democrat's practice of handouts to the poor hinders the motivation of the impoverish. The Democratic base describes the Republican's small government as self-serving. The irony of these two statements is apparent after studying the 2002 census reports. The states with the highest percentage of citizens without healthcare are New Mexico, Texas, Alaska, Oklahoma, and Louisiana; all red states. The states with the lowest are New Hampshire, Wisconsin, Pennsylvania, Connecticut, and Iowa; all blue. The states with the highest poverty percentages are Mississippi, Louisiana, New Mexico, West Virginia, and Alabama; all red. The lowest are New Hampshire, Minnesota, Connecticut, Maryland, and New Jersey; all blue. Even more interesting, in averaging 10 surveys (see attached) ranging from education, to teenage pregnancies, to crime rates, to federal aid per capita, the top five states are Connecticut, New Hampshire, Minnesota, Vermont, and Wisconsin; all blue. The bottom of these averages are Mississippi, Louisiana, New Mexico, Arkansas, and Oklahoma; all red.
What this data implies is the two divides are not catering to their particular needs. It can be assumed (given California and New York alone) that the blue states generate the largest percentage of the federal income tax receipts, with the least per capita need of federal aid. With the difference between the two parties being the theoretical size of government, it is amazing the positioning of the blue and red states. Red states vote for candidates who support smaller government, and blue states vote just the opposite, defying the best economic interests of both.
Throughout this election the war on terror overshadowed the ongoing debate concerning the reform of socialistic programs. Yet the social programs we refuse to address, most directly affect the soldiers keeping our country safe. It is no secret that the largest percentage of military personnel originates from America's poorest communities. Recruiters refuse to enter upscale neighborhoods as such trips would prove unsuccessful. Ask a lawmaker if they have ever been directly affected by welfare or Medicaid and a story might be generated concerning a distant relative. Ask that same representative how many family members or neighbors they know in IRAQ and a distant corner house might be referenced. These policymakers maintain the same moral responsibility to the hidden parts of the United States, and citizens need to push accountability.
As this country tries to tear down the polarizing wall generated through partisan politics, we need to understand that each side has not escaped moral challenges. America will not progress as a divided nation anchored by two extremes. Citizens and lawmakers need to unify and work though social and personal perspectives, and strive for the common good of man, not the slim majority.
Download Full Text Here
Perhaps one of my passions (and an intragal part of politics and policy making) is economics. This paper was written three months before the 2004 election.
(First two paragraphs of the article)
Perhaps one of the most partisan debates today is the economics of monetary and fiscal policy. Many administrations in the past have implemented their own beliefs in regards to this subject. In studying various administrations of both parties, I have come to various conclusions:
- The Federal Reserve and the chairman have a greater power of controlling the economy then the president.
- Economic policy is a misguided reason to side with any candidate.
- Each president in the last 100 years has sided with variations of two economic theories, Keynesism and Supply Side.
- National debt and deficits need to be maintained with judgment as both can enable detrimental effects in regards to our money supply.
Download full text here