Boring, Boring, Boring
By Patrick F. Cannon
Here’s a nightmare scenario worth considering: Donald Trump leaves office in 2021 only to be replaced by Elizabeth Warren. Talk about pillar to post or frying pan to fire, or perhaps the devil and the deep blue sea.
I have to confess that I’m becoming almost immune to Trump’s constant blather. But Elizabeth Warren? She simply tires you out with her relentless message of how the rich, the corporations and the bankers are screwing the middle class. I saw her interviewed recently. The poor interviewer tried valiantly to interject a question or two into her tornado of anti-corporate dogma, but finally just gave up. At one point, she got to talking so fast that I was afraid that she would begin spinning out of the studio and end up in OZ.
Now, I have to confess that I think some corporations pay their top executives too much. I also think that it’s their money, not mine or yours. I also think that the top tax rate of 39.6 percent could stand a modest increase, say to about 42 percent. For perspective, in 1986 it was 50 percent; in 1980, 70 percent; and as high as 94 percent during World War II.
With the current top rate, the richest 0.1 percent (yes, that’s the actual number) of taxpayers pay 39.2 percent of the total. The bottom 20 percent of taxpayers not only pay no taxes, but receive cash payments to supplement their incomes. In addition, everyone has to pay the 6.2 percent payroll tax for Social Security and 1.45 percent for Medicare. The Medicare tax has no income limit, but the Social Security tax is capped currently at an income of $118,500 per year. I say, what the hell, remove the cap.
Although it’s not widely understood, the Income Tax generates less than 50 percent of Federal income. The balance comes from the above-mentioned payroll taxes, corporate income taxes (among the worlds highest), fuel taxes (not raised for about 30 years), estate taxes, excise taxes and customs duties, among others.
Add in local and state taxes, and I would say we’re taxed up to our eyeballs, and the rich are paying their fair share and more. Still, our elected leaders (or is that word really accurate?) have chosen in most years since 1930 to run a healthy deficit. Last year, it was $587 billion, a substantial amount, but down from $1.413 trillion in 2009. As of 8:50 am, central daylight time on April 26, the total national debt stood at $19.890 trillion, which was roughly 105 percent of our yearly gross domestic product.
Economists of what I would call the deluded class think this is just fine. Indeed, because interest rates are (artificially) low, they think we should be borrowing even more money to fund, for example, a massive public works program. The government is currently paying an average of about 2 percent interest on its debt. In the most recent fiscal year, it amounted to $223 billion. If interest was permitted to rise to actual market rates, what would those payments be? What if the government had to pay 6 percent interest, not an unreasonable number?
As long as the Federal government is held hostage by ideologues from both the left and right, reasonable legislators will not be permitted to address our fiscal and other problems. I pray that the centrists of both parties will buck up their courage and put the country first. One lives in hope, even as it seems increasingly foolish at a time when we’re governed by fools, with more fools anxiously waiting in the wings.
(Since I wrote this, President Trump has announced his new tax reform plan. While it proposes to simplify many aspects of the code and reduce the corporate rate, the devil is in the details, of which there were few. Let’s see how much of it survives the legislative process, which loves to reward a donation with a tax break.)
Copyright 2017, Patrick F. Cannon