I recently came across an enlightening recitation of the principal beliefs of the Tea Party movement: (1) eliminate excess taxation, deficit spending, and the national debt; (2) protect the free market; (3) abide by the Constitution; (4) promote civic responsibility; (5) reduce overall size of government; (6) believe in the people; (7) avoid political pitfalls; and (8) maintain local independence.
Although I disagree with some of these, there are others I do agree with — subject to how they are interpreted. And as always, the devil is in the details.
Regarding “eliminate excess taxation, deficit spending, and the national debt,” since I am a fiscal conservative, I share in the concern about these issues, particularly budget deficits that are driving our national debt toward $15 trillion. Between 1980 and 2009, the national debt grew from $700 billion to nearly $8 trillion under the Reagan, Bush I, Clinton and Bush II administrations. Of these administrations, the only one during which there was no net increase in the national debt was Clinton’s.
Cutting taxes while engaged in a military spending race with Russia during the Reagan years raised the national debt by $2 trillion, and during the Bush years, spending on wars in Afghanistan and Iraq and unfunded increases in Medicare costs added another $4 trillion to the debt.
The highest our national debt has been in relation to the Gross Domestic Product was after the Great Depression and World War II, when it reached nearly 109 percent. Under President Obama that relation has increased from 54 percent when he took office to an estimated 80 percent, largely due to responses to the Great Recession, unfunded Medicare costs, and lingering wars, all left over from the previous administration.
Reducing our current $14 trillion debt (nearly $45,000 for every man, woman, and child in the U.S.) can only be done in small bites (likely aided by gradual inflation, as in past decades). But that will require future budget surpluses instead of deficits, and therein lies the problem.
The three largest expenses are Social Security, Medicare, and the military, which total $2 trillion of the $3.6 trillion annual budget. Other essential expenses, such as veterans’ services, interest on the national debt, public health, education, transportation and government operation, add up to another trillion dollars, leaving just $600 billion for all other federal activities. Sure, there is some fat in that number, but to make any significant reduction would require cutting muscle and bone, and would pit representatives against each other, unwilling to give up funding of programs that benefit their constituents. A budget surplus cannot be created without trimming the elephants in the room — Social Security, Medicare, and military spending.
The only other option for a balanced budget is to increase federal income and that, perish the thought, means increasing income taxes. Two factors have conspired to shrink the government’s tax income.
First, the more affluent have been successful in keeping the tax rates on all the upper brackets low. The top maximum tax rate is now 39.6 percent (up from a low of 35 percent) compared with top rates in excess of 90 percent in the 1940s and early 1950s, and remaining above 70 percent through 1980 — a period of economic prosperity for all.
And second, the real income of the vast (but shrinking) middle class has been decreasing, resulting in declining tax revenue from that source.
Three major (and consequently unpopular) measures will be necessary to balance the federal budget and pay down the national debt:
1. Apply means testing to cut Social Security and Medicare costs by reducing benefits to those who don’t need the full amount, and critically scrutinize and trim military spending.
2. Increase tax rates on the upper income brackets.
3. Encourage more equitable sharing of the profits produced from growing productivity with the middle class, which will boost the economy and create more income tax revenue.
Increasing tax rates on the wealthy may eventually convince them that it is better to put some of those profits back into the country’s economy through the middle class than to pay it to the government. Restoring more income to the middle class will enable it to pay more taxes, which will reduce the demand for more tax revenue from the wealthy.
The crux of this discussion is what should be the role of government. Shouldn’t it be to do the most good for the greatest number instead of serving the interests of the affluent?
“As I See It” appears on the first and third Thursdays of the month. Hal Sundin lives in Glenwood Springs and is a retired environmental and structural engineer. Contact him at firstname.lastname@example.org.