Friday, September 2, 2011

The U.S. Government Is Not Broke

by Beverly Bandler

To tell Americans that the United States Government is broke, as the Republican Party and some Democratic conservatives do, is not only a lie it is irresponsible and just plain idiotic propaganda. Too many Americans believe this hokum that defies common sense.

Having milked it not only brazenly but so successfully for several decades, today’s version of the Republican Party (along with some Democrats, no doubt) wants Americans to believe that the U.S. Government is broke so they can get rid of it. In a May 25, 2001 interview, Grover Norquist (Americans for Tax Reform) told National Public Radio's Mara Liasson, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." Government should be held accountable, but “throwing the baby out with the bathwater” is not the answer. (The latter may offer a suggestion relative to the strident and destructive Norquist, however.)

The Republican Party and the Tea Party zealots keep playing that anti-government tune that can be traced back to Ronald Reagan’s infamous quotation from his inaugural address: “In this present crisis, government is not the solution to our problem; government is the problem.” (It can be argued that it is Ronald Reagan who was, and continues to be, the problem: The national debt nearly tripled during Ronald Reagan’s eight years. By the time he left office in 1989, the entire national debt burden equaled that produced by the previous 200 years of American history.)

Americans need to understand this basic fact: The economy of the United States is the world’s largest economy. It may not be in 2016 when it is believed China’s economy may overtake ours, but it is today. The nominal Gross Domestic Product (GDP) of the U.S. was estimated to be nearly $14.7 trillion in 2010, approximately a quarter of the nominal global GDP.

The United States is a wealthy country with immense resources. There is money, lots of it. We can “fund wars of whim, back bailouts and tax breaks for billionaires.” The total military/security budget is reported to be in the vicinity of $1.1-$1.2 trillion, or 70-75 per cent of the federal budget deficit. As Paul Craig Roberts noted: “Entitlements are funded with a payroll tax. Wars are not funded.” And we have wasted a great deal of money in wars due to poor oversight, lack of planning and corruption. In its report to Congress this past Wednesday, the Commission on Wartime Contracting stated that as much as $60 billion in U.S. tax dollars has been lost to waste and fraud in Iraq and Afghanistan over the past decade due to lax oversight of contractors, poor planning and corruption, according to an independent panel.

We have a long-run deficit problem, emphasizes economist Paul Krugman, one that should be met with long-run budget problems, and expenditures should always be looked at. But our current economic problem is insufficient aggregate demand; our budget problem is that we are not covering our expenditures with the necessary revenues and the money we spend is misallocated. We are currently in the fortunate position of being able to borrow funds at extremely low interest rates. That advantage may not last, but it is one we have now.

It is crucial that we raise revenue from those who can and who should be paying their fair share of taxes, and who are not paying them. Here are a few facts that enlighten relative to the revenue side of the budget:
  • Americans are paying the smallest share of their income for taxes (all federal, state and local taxes) since 1958.
  • Federal taxes today are the lowest since 1950.
  • Three main things happened to the 2001 budget surplus of $127 billion: the Bush tax cuts, the wars in Iraq and Afghanistan, and the Great Recession.
  • In the 1940s, corporations paid 43 percent of all the federal income taxes collected in the U.S. In 2010, that percentage was only 8.9 percent.
  • The U.S. raises less corporate tax revenue than most developed countries.
  • Twelve major corporations made $171 billion in profits from 2008 to 2010, yet had a negative income tax rate of 1.5 percent.
  • In 2010, the tax bill of General Electric, the nation’s largest corporation with reported worldwide profits of $14.2 billion ($5.1 billion of which came from its operations in the United States), was: zero.

Lawrence Velvel, Dean of the Massachusetts School of Law and host of the Books of Our Time program, interviews Robert G. Kaiser, author of So Damn Much Money: The Triumph of Lobbying and the Corrosion of American Government.

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