Tuesday, July 26, 2011

We have a revenue problem and a spending problem!

I'm tired of hearing the facile slogan, "we have a spending problem, we don't have a revenue problem."   Its a marketing statement unworthy of serious discussion.  We heard it during the Minnesota shutdown, despite the fact that Minnesota's structural deficit grew after the State cut taxes at the same time that it increased spending.  We hear it now from Congressmen, Senators and pundits, with regard to to the federal structural deficit despite indisputable evidence to the contrary.    Listen, you can believe that we should solve our problems with spending cuts only if you want.  But don't deceive yourself into believing the canard that spending increases are the sole cause of our problem.  It's just not true.  We have a spending problem and we have a revenue problem.

 During the Clinton administration, the President and Congress cut the deficit by increasing taxes and cutting the growth in spending.   They eliminated the deficit entirely and began to run a surplus.   At the same time, the economy boomed, unemployment fell, and Americans, including the wealth, improved their incomes.  

Under the Bush administration, the Congress and the President implemented  massive tax cuts while spending increased massively.   The Bush administration paid for the war off budget.   Even today, when Republicans talk about the size of the deficit, they do not acknowledge the off-budget Iraq war spending.  What did the Bush tax cuts accomplish:  they preceded the greatest recession since the Great Depression of the 1930's.  They coincided with a great change in the division in wealth in America, with more and more wealth concentrated in the hands of a few.    Why does a policy which promotes a transfer of wealth to the rich destroy employment?  The answer is very simple.   When the middle class does not do well, people stop buying.  Middle class consumption is the driver of the American economy.   When a country promotes wealth transfer towards its wealthy by tax policy, it is killing off consumer demand.  Higher wages, higher middle incomes, drive consumption.    Transferring wealth through tax policy to the rich at the expense of middle income taxpayers is a job killing policy.

As often as the sloganeers claim otherwise, they cannot deny that our economy went in the tank at the same time that we lowered taxes massively, and lowered them especially on the rich.   This is not a class warfare issue.  Look at the evidence.    Where in these charts do you see the justification for the claim that "taxing the rich is job-killing," or "we don't have a revenue problem, we have a spending problem. 
Charts courtesy of MSNBC.  Click on link to reach the source.

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