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Economic facts, fantasies

Hal Sundin
Post Independent
Glenwood Springs, CO Colorado
As I See It
ALL |

In these times of economic woes – high unemployment and a burgeoning national debt – hard economic facts seem to get buried by loudly proclaimed fallacies.

The biggest fallacy of all is that reducing taxes on the rich will create jobs, increase federal revenues and balance the budget. The so-called trickle-down theory just hasn’t worked that way. It was no more successful than the recent bail-outs that were supposed to boost the economy (which at least had one positive effect by saving the auto industry).

The Reagan administration, when tax cuts for the wealthy doubled the national debt to $4 trillion, and the Bush II administration, when further cuts added another $4 trillion, prove that trickle-down is nothing more than a false myth.



There was almost no benefit to the average worker, whose purchasing power during the Reagan years increased by only a fraction of a percent per year, and actually declined during the Bush years. Nor did it significantly reduce unemployment.

Now let’s look at a few facts.



What actually keeps our economy going? Primarily consumer spending.

And what drives consumer spending? Low unemployment and rising wages.

And who provides that? Seventy percent of the jobs are provided by small businesses, not large corporations.

If we cut taxes on the wealthy, what do they do with that additional income? Do they use it to create more jobs? On the contrary, they use it to create more personal wealth for themselves.

And how do they do that? They do it by investing in the stocks of corporations that are increasing their profits and dividends, and consequently the value of their stock. Corporations accomplish that by increasing automation and computerization, thereby reducing the number of employees, which cuts costs and improves productivity.

So the increased wealth of the wealthy is not used to create more jobs. Instead, it does just the opposite. And these same corporations are also busy cutting costs and increasing profits even further by shipping many of the remaining jobs overseas.

A real oxymoron is the dual objective of the Tea Party to shrink the size of government and increase employment. Don’t they recognize that millions of fired government employees become millions of unemployed?

The most recent monthly employment report from the U.S. Labor Department showed an anemic job growth of only 18,000. But during that same month, more than 200,000 local, state, and federal government jobs were lost as the direct result of federal funding cuts. Duh!

It is a hard but unavoidable fact that it is going to take more than trimming government discretionary spending to balance the federal budget. Budget deficits are so large that even if the entire government shut down, excepting Social Security, Medicare and Medicaid, the military, and interest on the national debt, spending would still exceed income.

The deficit problem is so large that it is going to require a full-court press to have the required effect. This means a combination of cuts in both discretionary and military spending, reducing the cost of entitlement programs, and increasing government revenue, as unpopular as these may be. However, cuts in discretionary spending must not be so draconian that they create such hardships as to undermine the economy.

Significant savings in military spending can be achieved by critically analyzing the military needs of the future and challenging the wish list of the entrenched military establishment, as recommended by retired Defense Secretary Robert Gates.

Major savings in Social Security and Medicare can be achieved by modifying the programs to focus on those who need them, and phasing out – by income – those who do not really need them, as recommended by the Heritage Foundation, a conservative think tank.

And finally, we are going to have to recognize that we cannot balance the federal budget solely on spending cuts. Increasing revenue must be a part of the equation.

Until the economy recovers sufficiently to do the job (and that may not happen for many years), tax income will have to be increased, not on the hard-pressed middle class, who are the foundation of our economy, but on the wealthy, who are now taxed at the lowest rate in almost a century, and can most afford it.

We’re all in this together, and for the future of our country, we all have to be willing to accept some sacrifices.

– “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 asicit1@hotmail.com.


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