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The Great Neoconservative Tax Fallacy

January 16th, 2011 · 1 Comment · Politics, taxes

Since Ronald Reagan was elected, the whole thrust of the Conservative and now the Neoconservative movement in Right Wing Republican politics is to tell people a huge lie. It is a lie that started out simply as a lack of understanding by Reagan of economics and business. But, because of his popularity, and a severe recession that he both started and survived politically with a certain degree of grace, it was taken over by the Neocons and is now a deadly mantra.

How deadly? We now have a $13 trillion National Debt that was so carefully created by the Right, the Neocons, with such enormous propaganda, that in the face of all the disaster they created, the people were completely fooled into voting them into office once again in 2010, even in the face of clear and obvious evidence that they created the very mess that they propose…falsely….to want to alleviate.

It is a remarkable circumstance and it only compares to one period of recent history…and that is the problem. In the advanced countries of the world, the only time since the modern era, the era of electricity, travel by rail and steam and air, and instant communications…the only time…that countries were persuaded to vote mistakenly for a government that would later destroy them and their neighbors…was in the 1920s and 1930s.

It reached its apex in 1936, when the General who became the dictator of Spain, took over the country in a Civil War and called upon other Fascist countries to come to his aid. By that time, both Germany and Italy were run by Fascist dictators.

In both those countries, the people had voted in Dictators, whereas at the same period in American history, we had elected Franklin D. Roosevelt. Roosevelt did some of the same things as the dictators. He created public projects—roads, bridges, dams—and an enormous number of other public projects. But he did not rule individual lives, nor did he demand, until the country and the world was attacked, military service.

No citizens were demoted, fired, imprisoned or murdered for their beliefs or their ethnicity. There were no loyalty tests or demands that people belong to one political party. It was the Democrats who ran things, because they were getting things done for the common man.

But there were no loyalty oaths nor did most people want the country to become Socialist or Communist over the long term. They simply wanted jobs, food and a place to settle down. It was clear that the Republicans had run things before and clear that it was they who had allowed the collapse of the economy.

For six or seven years Roosevelt and the country struggled to break the bonds of a terrible depression. Not knowing what we now know about government stimulus—although we still practice the pre-depression economics—the country went slowly from one in four out of work to one in eight. And then the war came and sped up the process. .

By the 1960s, industry and the average man were flourishing. The rich were still rich, but they owned only about 78% of the wealth of the country, and income distribution was such that CEOs made about 50 times or perhaps as much as 100 times what the average worker earned.

By the time that Reagan had spent 8 years in the White House, that was changing.

The year before Reagan took office, 1980, the income tax rate for a household on any income they earned over $215,000, was 70%. That year, the last year of Jimmy Carter’s Presidency, with high inflation, high interest rates and a stagnant economy, we had a budget deficit of $73.1 billion dollars.

Four years later and the end of Reagan’s first term, that top marginal rate, now any income earned by a household over $162,000, had been dropped to 50%. From 70% down to 50%. Doesn’t sound too bad. Give the really wealthy and those who had been paying 68% on income over $162,000, a roughly ten percent tax break. Sounds fair.

In 1984, the deficit was $185.2 billion. It had almost tripled, that is 300%, not 1/3 more…3 times more.

By 1988, the last year of Reagan’s administration, ignoring the numbers altogether, the Reagan Adminstration, had by now raised taxes on individuals, with the agreement of the Democrats, to fix Social Security. In what had been and up-and-down, plus-and-minus situation in Social Security trust funds, they suddenly went into overdrive.

Americans were putting more into their retirement insurance than was needed for future projections. Social Security funds exceeded the outflow by $9 billion in 1985, $16.6 billion in 1986, $18.6 billion in 1987 and $37 billion in 1988. (This doesn’t really tell the story, because early Baby Boomers were coming into their peak earning years. Subsequent surpluses ran to over $50 billion in 1989 to $100 billion by 1998. In other words, there were more baby boomers; they were earning more, and the surpluses were skyrocketing. )

In 1986, the Democrats foolishly tried to simplify the tax code and theoretically increase the taxes on business. Well, that never worked. The top income taxe in 1988, the last year of Reagan’s tenure, for households earning over $29,750, was 28%. This tax rate was invented by the same people who put promotions in bubble gum wrappers. To say the least, it did not work.

Corporations found ways to get out of paying taxes. By last year, on sales of $172 billion, Chevron paid just $200 million in U.S. income taxes, or slightly more than one-tenth of one percent. (.1% or .001) On sales of $157 billion and profits of $10.3 billion, GE was actually owed $1.1 billion by the U.S. Government.

“Read my lips. No new taxes!”

With such words did George H.W. Bush, “Bush I,” “Bush the Greater,” “Bush the Smarter” “Bush, the Non-Cowardly,” choose whichever appellation you like…seal his fate in the minds of the Conservatives in the ever-Right-turning Republican Party

For, indeed, being the brilliant man, if not completely upright person he portrays in public, that he is, he knew at one point in his Presidency that, without raising taxes, the country was heading for disaster.

So he raised taxes, drew the ire of Conservatives and lost the election to Bill Clinton. Clinton then raised taxes…because deficits were growing to the half-trillion a year range, and actually, by cutting government at the same time…balanced the budget and had surpluses when business turned up.

But the Republican mantra has continued to be no new taxes. When George W. Bush came into office, the budget was balanced. He cut taxes and within a year we had $300 billion deficits again. Dick Cheney said that budget deficits don’t matter. So he and George W. Bush encouraged spending, started two wars and cut taxes, in other words cut government revenues not once but twice.

Because we had shipped all our industry overseas at the same time, the only place for money to go in the United States was the stock market and real estate. The combination of the two, totally unregulated by the Bush Administration proved to be an irresistible combination for Wall Street crooks.

They created fake investments and sold them world wide. They raised the value of every thing but it was all fake. It collapsed and now we have 15 million people out of work. That costs us $300 billion in public aid, unemployment benefits, etc, and also costs us another $300 billion in lost income taxes that they would be paying.

The consequence is that, with the $400 billion deficits that George W. Bush was running by cutting taxes twice and starting two wars, $1 million dollars per day per soldier in Iraq and the same in Afghanistan, the loss of those taxes and the addition of the benefits pushes the deficits to over $1 trillion per year.

Democrats have been railing against this for years. But the Republicans like the hypocrite Senator from Arizona, John McCain, run web sites that will cut back a million here and a million there and call themselves fiscally conservative. They do this while refusing to end the wars that cost the real money…we spend over $700 billion a year on the military for wars in Afghanistan and Iraq that are totally meaningless…and raise taxes on the rich, who already have made tens of millions in tax cuts alone in the last twenty years.

So there is no such thing as Neoconservative austerity. It does not exist. It is all about cutting government, using the plan of the stooge for the rich, Grover Norquist, who himself has become rich attacking the poor and advocating for more tax cuts for the wealthy.

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