Are Spending Cuts Really THE Saving Grace to Reduce Budget Deficits?

Ever since Reagan, the G.O.P. has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government “down to the size where we can drown it in the bathtub. But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?

Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.”  – Paul Krugman, The Bankruptcy Boys

In these tough economic times, when personal incomes are shrinking for many and  future prospects of that changing are dim, people are being led to believe the conservative narrative that suggests tax relief, along with spending cuts, are the only real answer to their dilemma.

Regarding tax cuts however, they do little if anything to significantly reduce low and most middle-income family sources of revenue.  Spread out over a year’s annual intake for a family of four with a $50,000 income the tax cuts we have seen from the federal government often amount to less than one hour a day of our labor time.  Though this can amount to a nice tidy sum when accumulated over a years time, it is still less than what it would take if we were left to our own devices to pay for the education and health services those taxes help pay for.

For example, it was estimated that a family of four making $50,000 a year would pay an additional $2678 a year if the Bush tax cuts had ended for them at the beginning of this year.  That amounts to less than $8 dollars a day.  How far would $8 go to help you pay for your kids education if there were no public schools or for security and fire protection if there were no police and fire departments.

Are taxes and anything that resembles a tax increase becoming the scapegoat for our damaged economy?   Taxes and the government services they provide are essential to a democracy.  When fairly applied and equitably distributed they benefit us much more than they hurt.  It behooves us as citizens to make sure abuses and incompetence don’t  corrupt the legal application of taxation laid out in the Constitution.  Sadly though, we are beyond such well-intended efforts.

Corporate welfare, not public welfare, is where most of our taxes go in the form of bailouts, grants, incentives and subsidies to private enterprises.  Huge tax cuts for the wealthiest 2% is also lost revenue that many say would not only eliminate the deficit but easily pay for essential social services that are needed to protect children, the elderly and those who have been racked by economic hard times.  For example:

  • The cost to the taxpayer to pay for Halliburton’s war profiteering during the Iraq war alone cost somewhere around $90 million in the form of overcharges and kickbacks.  SOURCE
  • $4 billion annually in subsidies to profitable oil companies
  • $32 billion each year since 1989 to pay for the Savings & Loan scandal.  Taxpayer will fund this amount for at least 8 more years to fully clear the original $157 billion default.  SOURCE
  • Nearly $10 billion to Defense contractors over 10 years in a Foreign Aid scam to Egypt alone.  SOURCE

This is only the tip of the ice berg.  In one chart here we see other areas where money goes to benefit wealthy individuals and corporate interests that often violate the capitalist credo that rejects government intervention; money that would benefit those segments of society that are often victims of a consumer driven economy seeking even to price some out of affordable health care and a college education.

The legitimate concern about where our tax money ends up and how it impacts our income plays into the fears of many Americans who have lost their jobs recently or whose income has shriveled down to amounts that barely keep them afloat in today’s economic environment.  It’s a contemptible shame that there are those who would exploit this concern to serve their own self-interests.  There are a powerful handful of corporate-friendly astroturf groups like Freedom Works and Americans for Prosperity that spend vast sums to conceal the fact that the taxes which serve the public’s best interest for better schools, parks and income assistance during hard times, are really not the threat we need to fear.

When the Tea Party evolved in early 2009 they took the acronym T-E-A to express their rejection of being “Taxed Enough Already”; a sentiment that rapidly associated itself with the government bailouts of large financial institutions that had failed, giving us what we now refer to as the Great Recession.  The fact of the matter was, there was no increase in taxes to pay for these bailouts.

The Bush tax cuts were still in effect when Barak Obama took office and as a part of his stimulus package that many railed against, further cuts in taxes gave Americans their lowest tax rates in decades.  So what was all this hoopla about being “taxed enough already”?   The point of contention it appears was not that taxes were going up but in order to pay for them the deficit was going up and had been going shortly after the Bush tax cuts of 2001 were implemented and we engaged in two wars in the mideast, which currently have a price tag somewhere around $1.2 trillion dollars.

Essentially we are taking current tax revenue that should be going towards paying down the debt, along with driving it up further through foreign loans to pay for the wars. Instead there are those who support giving it back to taxpayers with the belief that they will turn around and spend it to generate economic growth that will in itself create greater revenue in the future thus allowing us to start paying down the debt then.  Get it?

However, tax cuts to the 95% who make less than $100,000 annually really never wound up stimulating the economy enough to generate revenue to pay down the debt.  The biggest reason for this is that most of this income bracket are in debt themselves and usually take what tax cuts they get to pay down their debt.  On the other hand, tax cuts for the top 5% are pretty significant, especially the top 2%, yet are not entirely used to stimulate significant economic growth in the form of job creation.  Most of this money wounds up getting socked away in their private investments that generates wealth more for them than it does creating jobs for the rest of us.

But the TEA Party advocates and their corporate-funded cronies have created the illusion that our debt is due solely to what we are spending tax revenue on, with their narrow focus centered on the social programs that encompass health, education and Social Security.  This perception serves the need to conceal how tax cuts for the wealthiest are really at the heart of budget deficits.

The tax revenue from these federally funded social programs have been eyed by wealthy interests for decades.  The efforts of anti-tax groups spearheaded by the likes of Grover Norquist appear to have structured a plan of action that channels their energy and financial resources towards convincing a naive and poorly educated public that once we eliminate these programs they will see great gains in their personal wealth.

But here’e the deceptive part.  The costs to middle-income America for these programs really don’t totally disappear.  They are re-established as vouchers or subsidies to help the poorest of the poor purchase the essentials of a basic education and health care.  Sure we are given the impression that now we can select the schools and health care servers of our choice but the fact remains that costs of services will be determined by the private sector; costs that will not always be in sync with the allotments doled out by the new federal structure in the form of vouchers and subsidies.

These grants will be means tested too meaning that the more you make the less federal assistance you receive.  This makes practical sense unless you are at the middle-income level where you are ineligible for any assistance while the privatized price structure makes it tough for you to buy into those health care and essential educational tools.  Thus this group tends to have to dig deeper into their pocket and as a result have great difficulty saving for their kids college tuition or for their own retirement

The marginally small amounts that we all now pay in taxes for these services is spread across a wide spectrum.  But once this is taken away from you and people have to vie for what the Tea Partiers-types will reduce in grant money, costs that will no longer be controlled through government measures to adjust for inflation are more apt to reflect corporate profit needs rather than a consumer’s ability to pay.

This is the slippery slope that we are headed towards as the pro-corporate, anti-tax advocates convince themselves and other gullible types that all taxation is bad and that all government services are unnecessary.  The belief that you will have greater individual choices with health care and educational needs through the private sector is a canard by those who simply want their higher share of taxes to go away so they can invest it in wealth-generating tools for themselves.  Lowering corporate taxes may reduce consumer costs on commodities but when some or all of it goes back into share holder dividends and CEO bonuses, the costs of education and adequate health care can remain outside the means of many to pay, and this is morally unacceptable.

The private sector feeds our consumer wants and needs; drives that are often conditioned by capitalist interest of the so-called “free-market”.  We are an over-consuming nation and much of what we purchase is junk that has no intrinsic value.  It clutters our homes and eventually our landfills and creates low paying jobs that often go to other labor markets other than our own.

But when it comes to the value of a good education and health care many are at risk of doing without if they have to rely on the private sector.  If your revenue source is inadequate you can be priced out of accessing these markets.  Instead of finding relief through the shared efforts of every citizen ( a progressive tax structure) in the form of government assistance and programs, we become instead dependent on market analyzers and consumer profilers who influence not only our purchasing habits through ads and other marketing schemes but project through risk analysis criteria whether or not it is profitable to offer some people these human essentials.

In the end, when we are swayed to believe that taxes are innately bad, taxes that ensure we all get a good education and financial assistance to access the “greatest health care system in the world”, we are ensuring a return to that life that many in the Tea Party thinks is the America we have lost.  One where there were no government regulations to prevent unsafe, sweatshop working conditions, a minimum wage, diseased food products or a safety net for the elderly and orphaned children.

Once again we would be dependent on the ethical and moral standards of a wealthy class who too often push their own needs for consumption.  The labor by which we helped establish their wealth is weighed in terms of how best they can get their hands on most of it leaving enough for the rest of us to just get by.

RESOURCES:

EXTENDING THE BUSH TAX CUTS IS THE WRONG WAY TO STIMULATE THE ECONOMY



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6 responses to “Are Spending Cuts Really THE Saving Grace to Reduce Budget Deficits?

  1. I think people see tax cuts as the only way to make ends meet now. It is a magic word. I don’t know if paying more taxes would help the middles class either though. Everyone is so strapped as it is. Honestly, to some people $8 a day is a lot. If taxes went to a health care system that did not require more of an outlay of personal income too,you might get people to support it, but with the fear mongering out there, it is difficult to get people to listen. And I know this is a dirty idea, but education should be looked at, not cut. I think more money should be put into programs across the board, but some kind of compromise on teachers’ salary and benefits. In my area, teachers are paid pretty well and it is disconcerting that we all have to pay a portion of our health care costs and they don’t – here anyway. Or that salaries are raised without reviews. I think some things have to change for everyone.

    • I agree Donna that teachers’ salaries and benefits need to to be scrutinized and pared to meet tough economic times, but in comparison to the give aways to many businesses and wealthy individuals, the weight of balancing budgets shouldn’t be focused on teachers or other social services.

      Penny for penny, the taxpayer doesn’t get as much return for their taxes being spent on subsidizing profitable businesses than it does from much of what goes toward the public sector. All expenditures, public and private interests, need to be closely monitored by impartial watch dogs from both conservative and liberal camps.

      • You are right in what you say here. Budge cuts can come from less necessary sources and maybe by raising corporate taxes too. Our future is our children and we need to protect their education and health care at all costs. I will admit that I listen to teacher friends complain all the time about how they might have to pay some of their health care, and I think that attitude is beyond selfish. I have watched so many people lose their jobs and health care along with those jobs and as one teacher actually told me, “Well, that is the private sector’s problem. It should not affect us or come out of our pockets, We are teachers.” Lost some of my sympathy after that attitude was displayed. LOL Just me personalizing everything.

  2. I never understood why people believe that tax cuts to the wealthy creates jobs. Some don’t own companies to create them. Others will just take that money and sock it away in their off-shore accounts. Giving a tax break to Paris Hilton isn’t going to create jobs.

    One where there were no government regulations to prevent unsafe, sweatshop working conditions, a minimum wage, diseased food products or a safety net for the elderly and orphaned children.

    That was awesome.

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