The tea parties: a further look
Glenwood Springs, CO Colorado
Picking up where we left off in my previous column concerning the Tea Partiers’ demands for reducing government spending and lowering taxes – if we are going to make any meaningful cuts in federal spending, they will have to come out of the big ticket items: Social Security, Medicare, and National Defense. Every year half a trillion dollars is paid out to the military-industrial complex. Much of it is gravy for high-cost weapons systems (many of which are of questionable need and not even requested by the Pentagon) doled out by Congressmen as subsidies for their States and Districts. Critical scrutiny of these expenditures could save $100-200 billion dollars annually. Still more billions could be saved by ending the wars in Iraq and Afghanistan.
That leaves the two sacred cows, Social Security and Medicare, which together account for more than a trillion dollars of federal spending. They are what are driving our budget deficits, pushing our national debt ever higher, and consequently offer the best opportunity for reducing those deficits. Congress could discontinue these “entitlement” programs, but the result would be catastrophic for a majority of the 42 million senior Americans currently receiving these benefits. And future increases in the number of recipients will only further expand the national debt. A growing number of economists are suggesting that the only feasible way of dealing with this problem is by “means testing”, which would reduce Social Security and Medicare payments to those with higher incomes, in proportion to their income. How badly would millionaires suffer if they no longer received that $2,200 a month social security check or had their Medicare coverage reduced?
If we are really serious about paying down the national debt, it is unrealistic to expect that savings from reduced military spending and Social Security and Medicare payments would be sufficient to also allow any reduction in people’s income taxes. Historically, just how unrealistic is the current 35-percent maximum tax rate? It is true that when the income tax went into effect in 1913, it was only 7 percent, but in 1918 it was increased to 18 percent to pay some of the cost of World War I. With the adoption of a graduated income tax, a much higher maximum rate on higher incomes was adopted: 90 percent from 1945 through 1963, reduced to 70 percent for 1964, but increased to 77 percent from 1965 until 1981, when President Reagan cut it to 50 percent. We are constantly bombarded with the claim that higher taxes would stifle growth and that the only way to stimulate the economy is to cut taxes. I raise two questions in rebuttal. First, what was so bad about the robust economy from 1946 through 1981, when the maximum tax rate averaged over 85 percent? And second, how can we possibly get the national debt under control if we shrink federal revenue by cutting taxes? The last two times we enacted tax reductions, the national debt jumped by 2 trillion and 4 trillion dollars, respectively.
It is true that the above two measures would place most of the burden of reducing our national debt on the wealthy. But where else is there enough money to do the job?
Another issue the Tea Partiers rant and rave about which needs a reality check is “Bailouts”. First, let’s not forget that the huge $700 billion bank bailout program (TARP) was created in October, 2008 under the Bush Administration. A small portion was diverted by President Obama to avert the demise of General Motors and Chrysler, thereby avoiding the loss of over a million jobs in the automotive industry. Although unpopular, TARP did accomplish its objective of avoiding a complete meltdown of the banking system, and probably saved millions of jobs. All of the banks which received TARP money (with the notable exception of AIG) have or soon will have paid back their loans, and if Chrysler and General Motors return to profitability, the government may recoup much of what it invested in them as well.
Next time: Taking back our government.
– Glenwood Springs resident Hal Sundin’s column runs every other Thursday in the Post Independent.
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