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Fixing the Economy and the Budget–for the People

June 29th, 2010 · No Comments · Capitalism, Economics, Jobs, Politics, Taxes, Wall Street

It’s wonk city, folks. If you don’t have any patience, don’t read on. But if you don’t read on, don’t blame us if the Peterson-Pew Commission takes your retirement and your medicine and leaves you with $5.00 gasoline in three years.

Look, finance really isn’t complicated. If you want to work out the financing for a new enterprise or if you want to create a security that will have a period of expanded results before collapsing…perhaps…then you can structure the financial numbers in a complex way. But in the end it is always how much did you make (addition) or how much did you lose (subtraction)?

Government isn’t any different. Simply lose all the zeros and it is easy to figure out. We have a government right now that costs about $3.5 trillion to run. That’s $3,500 billion. So focus on the numbers; they’re all in billions. Don’t panic.

We’re going to blame a lot on Bush and a lot on Cheney for this economy and the national debt. They are like two delinquents on the playground, only the damage they caused was not just broken windows. They smashed up an economy and then ran away, pretending it was someone else’s fault even though there was no one else on the playground. So, get used to it. Bush did it. He should take the blame. They added hugely–$7 trillion–to the debt and left an economy with 15 million unemployed, and a structural deficit of $1 trillion a year.

Bush and Cheney should be happy that they are not in a tribunal in The Hague, begging for their lives. Just because he’s a “good old boy” doesn’t mean Bush shouldn’t be brought to justice. A lot of good old boys, hanged people in the South. And there were a lot of good-old-boy, good-natured types who liked to drink beer and sing songs who led people to gas chambers.

Our “good old boy” Bush pushed and pushed for an illegal war, and lied us into it on a wave of false patriotism and intimidation of politicians who were too afraid to be voted out if they stood on principle. In the latter part of his life, Robert Byrd was a man of principle. He stood up to the war that he knew was wrong. He was right. The war was illegal and immoral. Bush is a war criminal.

Technically? No, he’s not “technically” a war criminal. According to international law, what he did is a war crime. Hundreds of thousands of innocent people died. The Iraqis were not planning war with us, and they died…we don’t even know how many…because of a war that should never have been started. We should be exiting Iraq as fast as we can. We are there illegally. We should apologize profusely, do what we can to make up for what we’ve done…and then get the hell out!

But back to the budget and this group of robbers and looters that we call the Bush Administration.

Right now our revenues are $2,105 b. (“b” for billion.) Our expenses are $3,500 b. Why? Well, under Bush, from 2003 to 2007, we averaged a deficit of $550 b. per year. Then in 2008, his last year in office—whether it was deliberate or not and some think that it was, the Great Recession occurred. Not only did revenues drop dramatically, but 7 million people out of work pushed the deficit for 2008 alone to $1,107 b. Here’s how. We lost $320 b. in revenues from those out of work and we added $320 b in costs for unemployment and other costs due to joblessness. It came to an additional $640 b. added to the aforementioned $450 b. deficit for 2008. That took us over the billion deficit mark.

Because it was not a one-time hit, President Obama had the same problem in his first budget, Revenues stayed the same and costs stayed the same. The financial sector had caused the problem but they were not in a position, even after the net amount we actually gave them, $145 b., to start lending again. So someone had to step in.

President Obama’s stimulus plan, on top of what was now, remember, no longer the Republican $550 b. deficit but a $1,107 b. deficit…added another $400 b. to try to get the economy moving and to stop the falling job numbers which continued well into 2009 in the several-hundred-thousand per month range.

So now we have a $1,400 b. deficit every year for a while, and the grand total of all this, during the Bush Administration raised our national debt from $5,600 b. to $13,000 b.

So we have a financial problem. What do you do when you’re in family financial trouble? Well, you can’t cut your eating, your rent, your lights, heat and gas. And other living costs are smaller. So what do you do? You cut out the luxuries and you try to get another job to raise your income. Does that inhibit your growth? No. When you increase your earning power, everything gets better. You have more money to pay your debts; you have some backup for unexpected medical bills, or auto repair bills or just to keep a rainy day fund in a savings account.

Our economy is no different. When Reagan cut taxes from a top marginal level of 74% down to 28%, he put the economy under stress. We no longer had the money to pay our bills, so he simply borrowed. That is not being Conservative. That is being, well, reckless! We had almost $3,000 b. in debt before he left office. And Bush Sr. had to raise taxes and Clinton had to raise taxes…but they got things under control.

Then came George the Second, the lame brain, the prodigal son, who cut taxes while starting two wars. He also deregulated every thing and hired people who looted everything that was not nailed down. He allowed the digging of 96,000 oil wells in the Powder River Basin and encouraged Gale Norton to turn the national parks into resources for oil, gas, coal and timber exploitation.

He sent Chris Cox into Wall Street to assure the crooks that the SEC would not prosecute them. SEC attorneys left by the dozens and the financial system collapsed. The rest is history…the history of a country damaged deliberately by a bunch of greedy bastards. As a direct result of Cox’s deliberate lax attention, the Stock Market collapsed and we fell into a serious recession.

So this is where we are. We now have $300 b. less revenue and $300 b. more costs for the unemployed. Don’t want to pay unemployment? That’s fine. Then let’s take $200 b. and create the 5 million jobs. We’ll get taxes. People will be working and creating a better infrastructure or helping states in areas where they’ve had to lay off workers.

That is part of what we did in the stimulus that we now know kept the country from falling into a Depression. The stimulus finally pulled us out of the nose dive of 700,000 jobs lost in January 2009, then almost the same in February, then a few less in March, when the stimulus started to take hold and then a steady progression into more jobs created than lost, where we are now.

A more important reason for creating the 5 million jobs for one year is this. It will give us a year to change our financial structure. It will give Democrats and the President a period of time to persuade the Republicans that it will not be better for them to let the country slide into a Depression, or reduce government to the size that they can then “drown it in a bathtub.”

We need legislation to encourage manufacturing in the U.S., tax legislation that will put the very, very rich into the tax picture again, and make corporations pay at least a minimum of 10% no matter how many corporate tax deferments they have.

Because we lost an additional 7 million jobs in Bush’s last year, and it carried over into the first half of Obama’s term, we spent and additional…$1,000 billion. People were paid lots of unemployment; taxes on small businesses were cut (big businesses, like EXXON, don’t pay taxes).

States, who thought they could just “pull a Reagan” and keep cutting taxes while expanding services got a real shock. They had to balance their budgets by law or cut services. Since they had already cut taxes, they did not have enough revenues. That was part of the Obama stimulus and it cost the Federal government about $234 billion. And, since the economy is still bad, it will come around again this year.

But here is how we can get out of this, gradually. Instead of paying $320 b. for unemployment, let’s spend $200 b. to create 5 million new jobs for one year. Those 5 million jobs and the 5 million service jobs in the private economy that they will create, because that’s how it works, will bring in about $50 b. in taxes. So if we cut the unemployment and we instead spend a net $150 billion, that is a move in the right direction. It is a net swing from $600 b. cost/revenue loss to a net $350 cost/revenue loss. In addition we could make these cuts and increases. Other mandatory spending $607 to $600, military $758 to $600, Medicare, Medicaid and Social Security from about $1,350 down to $1,200, and so on…a few other cuts. The net would still be large, spending of about $2,980 b. But we could raise revenues by simply raising taxes across the board by about 10% and by raising payroll taxes by 5%, by making all corporations pay at least 10% on any profits before tax breaks, and raising duties and tariffs from about 3% of revenues to the equivalent of about 5%. This would give us an income of about $2,450 b. and a deficit of $530 b. That we could do right away.

But we need to make structural changes. We need to raise the top marginal rate to something like 70% with substantial incentives for investing in U.S. manufacturing. The key to solvency is to return to a much larger economic base rather than farming out jobs all over the world. It should be noted that, right now, 50% of the people of the country make the income to pay 97% of taxes. So we would be taxing just half of the people in the country. The bottom half of the income scale, those making less than $31,000, would not pay any increased taxes.

We need to make the import duties at the port of entry substantial enough so that it becomes a serious question whether manufacturing in China is worth it for U.S. manufacturers. We need to go back and start collecting royalties from the companies using federal lands for the extraction of coal, timber oil and natural gas.

We need to give incentives to corporations to start up alternative energy companies and make the tax policies, carbon taxes, worth the investment. That we must do not only to develop an economy but because we must protect ourselves from some foreign suppliers of oil.

If our idea is just to cut government spending and not increase government revenues, then we will be on a downward spiral from which we will not emerge in several generations. If we restore our economic revenue base, we can return quickly to something like the Clinton years.

In the Clinton era 20 million private sector jobs were created, and unemployment in November 2000, the month Bush was elected was 4%. Clinton was able to pay down about $360 b. of the public portion of the national debt and restructure some of the interest payments. While the economy was booming, Republicans tried repeatedly to cut taxes and Clinton vetoed the effort. As soon as Bush was elected, he gave virtually all the surplus needed to reduce the debt in a $1.2 trillion tax cut to the wealthy.

If we simply act prudently and for the long haul, we need not make any huge cuts in social services. Don’t forget that and don’t let them take away any of the benefits that you have worked hard to earn and have paid for in your taxes.

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