Reprinted from The FUNdamentalist (May 1996)
At recent “town meetings” with 3rd Congressional District Rep Vern Ehlers, attendees received various information about the federal budget. That information (which continues to be passed out despite having become dated) includes a budget breakdown which is shown in a pie chart and a line graph that is supposed to indicate the “path to a balanced budget”.
The pie chart that constitutes graph 1 includes Social Security and other “trust funds” that are supposed to be collected and administered separately from general funds. By lumping those funds together, trust funds are made more vulnerable, and military spending is made to seem like a smaller portion of the overall budget. The government has lumped these funds together in this way since 1968, when Lyndon Johnson wanted to make spending for the USA war against Indochina appear to be less of a drain on funds than it really was.
In addition, interest on the debt seems to be understated. That interest is now over $300 billion annually. According to the War Resisters League, 80% of it, conservatively estimated, is the result of past military spending. When those facts are taken into account and separate trust funds are removed, the military proportion of spending jumps to about half
Vern Ehlers indicated that balancing the federal budget is very similar to balancing a family budget. When there is less Inoireyav3llable, then “tough choices” have to be made.
Getting to specifics, co noted that reductions in Social Security payments have been consistently opposed, though suggested that such things as raising the retirement age (which amounts to a reduction in payments) “may have to be considered”. As for military spending, which Vern’s chart labels “defense”, co said it has already been reduced by 20% and we can hardly reduce it more while expecting to be able to meet the Pentagon’s criteria of being able to wage two simultaneous wars at any given time.
Vern cited the present military activity in Bosnia as one example of why a continued high military budget is needed. It is as good an example as any. With consistent media reporting on how USA troops have reluctantly entered a violent situation in order to mediate peace, it is relatively easy to get away with such statements.
The real situation in Bosnia and elsewhere in former Yugoslavia, however, is that Western powers, led by the USA, worked for years to destabilize the economy there, and especially to crush worker-managed enterprises and social programs. Their success was primarily responsible for bringing existing social and ethnic conflicts to the point of war. USA-dominated international economic. institutions, as they have done in so many other parts of the world, ended up devastating the economy.
That restructuring continues to take’ place, as the sovereignty of former Yugoslavian states bas been stripped in order to allow international banks and other corporations a free band in plundering the area One writer calls such restructuring a “mirror” for what is increasingly taking place now in the USA and other industrialized countries (Michel Chossudovsky, in CAQ, Spring, 1996).
Thus a major reduction in military spending, contrary to the deceitful information that Vern Ehlers is propagating, is not just reasonable, but necessary if the world is to retain any real hope for peace. But that is not the only way the budget can be substantially reduced.
Another way is to raise sufficient revenue to cover the bills. Vern says that the “American” people oppose any further increase in taxes. That, again, is nonsense. There has long been considerable support, despite over a century of media propaganda, for a much more progressive tax structure.
Graph 4 incorporates military spending reductions with changes in the federal tax structure to make it considerably more progressive. It assumes, first, that taxes on individuals in the USA are structured so that no person earns more than 10 times what any full-time working person earns. .It follows recommendations along those lines made by labor writer Sam Pizzigati in cos 1992 book The Maximum Wage: A Common-Sense Prescription for Revitalizing America—by Taxing the Very Rich. Pizzigati’s plan would substantially raise taxes on the top one percent of incomes while reducing taxes for the other 99%. This would reverse the trend of the last two decades, in which the richest 1 % have more than doubled (perhaps tripled) their income, while the majority, despite a continually growing economy have seen their income reduced. At the same time it would add an additional $200 million or more (in current dollars) to federal revenues.
Pizzigati’s plan is incorporated not because it is the only way, or necessarily the best way, to reduce the deficit by making taxes more progressive, but because it is clearly spelled out and seems very reasonable, at least as a starting point. Some other progressive tax schemes on individual income would actually reduce the deficit even faster. For instance, changing the income tax rates to what they were at their highest point – at the end of World War II – would probably raise more money than Pizzigati’s plan. The highest tax bracket at that time was taxed at a rate of 94%, just 6% less than Pizzigati now suggests, while upper income brackets just below the highest bracket were taxed at considerably higher rates than in Pizzigati’s plan.
In addition, various corporate tax breaks can be removed. Yearly totals include S&L bailout costs ($25 billion), corporate deductions for mergers and takeovers ($20 billion), arid numerous other deductions for such things as expanding overseas (thus eliminating USA jobs) that collectively add another $50 billion or more.
Only current military spending is assumed to be reduced, to 10% of its present level. This would save over $250 billion yearly.
Given that military spending is so highly destructive, one may wonder why even 10% is retained. That is because some have argued credibly that, given the present state of the world, such an amount may be needed to actually protect the USA from attack. While some of us reject those arguments, it seems reasonable to bring military spending to that level first, then, as the rest of the world bas opportunity to stabilize, work at eliminating the rest.
At any rate, the combined total of the above savings -amounts to about $550 billion yearly.
Another major problem with Vern Ehlers presentation was the total failure to acknowledge the USA’s social/ economic debt to people in various exploited areas of the world. That this failure is common even among progressive-minded people in no way excuses it. Any talk of relieving the debt burden should not fail to include that debt.
As this debt is directly due to USA robbery of assets in those areas, it seems reasonable to tax a portion of that stolen wealth as a means of starting to repay the debt. A reasonable way to do this is to tax wealth concentrations over $1 million in two ways: first, a 2% yearly tax on that wealth, which would raise roughly $30 billion yearly, and second, a 100% lifetime gift tax on such estates, which would raise roughly $40 billion yearly:
The latter tax would have the added benefit of breaking up estates of wealthy families and eliminating the present gross unfairness of a relative few getting millions of dollars simply for being born into the right family while most people’s inheritance amounts to little or nothing.
Numerous people, from radical to ultra-conservative politically, have made suggestions along this line. Liberal/radical thinkers cite. the gross unfairness of the existing tax structure. Ultra-conservative thinkers cite the need to protect inequality. An example of the latter is Paul Fisher, who claims cos suggested wealth tax would be enough to eliminate th~ federal deficit all by itself, and who writes: “Such a tax on wealth is a reasonable charge for the service which the government should supply. No one can hold on to great wealth without the protection provided by the government through its laws, its courts; its police, its diplomats and military defense, and the other few necessary services which government should supply.” Unfortunately (but probably necessarily), such public honesty is rare on the “conservative” side of the political spectrum.
The total of those wealth taxes would be about $70 million, or approximately 1% of the USA’s GNP. Considering the incredible extent and depth of damage done to exploited peoples, this is clearly totally inadequate as a matter of justice. And, of course, no amount of money can makeup for most of the social damage already done.
But $70 billion is no small change, and could serve as a starting point for making such reparations as are possible. And making a commitment to begin those· reparations, even if insufficient at first, would bring the issues involved to the forefront rather than allow them to continue to be buried.
These suggestions are reflected in graph 4 which reflects not just the current year’s federal deficit, as does Vern’s graph, but the total federal debt (as defined by the federal government itself).
The solid line starting at the lower left, indicates the increase in the federal debt from 1980 to 1995. Note that, while it had been increasing up to 1980, after that year it increased at a sharply higher rate. In the 12 years during which Republicans held the Presidency, it increased from under $1 trillion to over $4 trillion.
The intention all along was not to balance the budget, as Reagan and Bush both claimed, but to undermine the social economic safety net that supports so many US Americans, just as has been done for decades in Third World countries with the aid of military coups, death squads, IMP restructuring, etc. David Stockman, Reagan’s budget director, admitted this long after co left that position: “the deficit was a deliberate creation of conservatives to cripple the public sector, making either redistribution or improvements in domestic programs almost impossible.
Now Vern Ehlers, another Republican, is suggesting we ba1ance the budget, as before, in large part on the backs of those in the USA who can least afford it Vern’s painful and unfair means of doing so (short line segments extending from 1995) would result in a leveling, but not a reduction, of the total federal debt by 2002. Obviously, that is better than allowing the present situation to continue (long line segments extending from 1995 and quickly reaching the top of the graph), which simply could not be maintained for too much longer.
For all Vern’s comparison of the federal budget to a family budget, the graph makes it clear 1bat co is not even sensibly using cos own analogy. In a family budget, if one incurs substantial debt, a reasonable person devises a plan not just to keep the debt from increasing, but to eventually eliminate it.
The solid line from 1997 to 2015 incorporates the above-mentioned strategies that Vern has failed to even consider in order to do just that. It should be noted that once progress is made in reducing the total debt, further progress becomes easier, because interest charges (which are now a substantial part of the deficit) are reduced. Though that interest goes mostly to those who are already wealthy, and therefore is hard to justify, i have assumed that it will, in fact, be paid off. It would be quite reasonable to restructure that debt, as bas been done for numerous Third World nations, cutting payments by, say, 50%, and thereby allowing reduction of the debt to zero even faster.
The short solid line at the upper right represents a reasonable guess that, if the USA/corporate debt to exploited peoples elsewhere in the world is attacked head-on as suggested, by the year 2050 we may actually be able to see our collective way to settling that debt. At present, and certainly for a long time to come even with such an effort, that debt will remain out of sight.
While it may be argued that such a rapid turnaround in federal indebtedness is politically unrealistic (i.e., the wealthy are too powerful to make it feasible), it is even more likely to be politically unrealistic as long as our elected representative to Congress fails to even raise· the relevant issues. And as long as the extreme inequality which fuels that debt is allowed to continue, it is also politically unrealistic for us to expect to retain any semblance of real democracy.
Former Supreme Court Justice Louis Brandeis once said: “We can either have democracy in this country or we can have great wealth concentrated in the hands of a few, but we can’t have both.” Empirical surveys by researcher Edward Mulier strongly bear this out,· indicating recently that democracy has always broken down in countries with the most extreme income inequality, while that has never happened in those countries with the most egalitarian income distribution.
The evidence cannot get much stronger than that, and the message cannot be much clearer.