The larger question is this: Do we try to balance budget deficits just by cutting antipoverty initiatives, college scholarships and other investments in young people and our future? Or do we also seek tax increases from those best able to afford them?
And when Congressional Republicans claim that the reason for their recalcitrance in budget negotiations is concern for the welfare of ordinary Americans, look more closely. Do we really want to close down the American government and risk another global financial crisis to protect the tax bills of billionaires?
Those are the final two paragraphs of Taxes and Billionaires, Nicholas Kristof’s New York Times column this morning. Kirstof is not an economist, and tax policy is not his usual subject, but he provides a column that puts things in clear and understandable English. I urge you to read and pass on his column.
Carried Interest is currently taxed at the Capital Gains rate of 15%. John Paulson is a hedge fund manager who made almost $5 billion last year. Hedge fund managers receive bonuses of 20% or more of the profits they make, and it is treated as carried interest. Were it ordinary income Paulson would pay 35% on it. I am a teacher who makes well under 6 figures. Each additional dollar I make is taxed at 35.65%: 28% income tax and 7.65% payroll taxes – unless the payroll tax cut gets extended (which will then be argued by Republicans as Social Security increasing the deficit). I would argue that in teaching young people I contribute more value to the economy and the nation than does John Paulson. Hedge funds create no jobs for ordinary people, add no skills to the workforce, but they surely manage to transfer a great deal of wealth to those who are already wealthy. And, as Kristof points out, Paulson makes as much as 184,000 average Americans.
Kristof is prepared to go further. After all, the carried interest provision would represent only a couple of billion a year. Only. That exceeds the entire budget of Prince George’s County Maryland, where I teach, which according to the 2010 Census has a population of 863,420. That’s schools, fire, police, parks, libraries, senior centers, etc.
The richest 1% of Americans has a net worth equal to that of the bottom 90%. Our tax policy encourages even further shifting of wealth to those already wealthy. They are further now able to use funds of corporations they control to further distort the electoral process to ensure that those elected are beholden to them and thus they maintain their stranglehold on our economic and tax policy. Then they turn around anduse their excessive wealth – gained by having manipulated the tax and economic system to their advantage – to drive social and other policies without voices of the ordinary people necessarily being equally heard.
This MAY at time have sanguine outcomes: certainly it was wealthy Republicans from Wall Street who helped drive the vote in NY State for Marriage Equality. I don’t deny that. But as a teacher I look at the wealth of Gates and Broad and the Waltons and their foundations controlling so much of the apparatus driving education “reform.” I look at the likes of Whitney Tilson (who is NOT, David Brooks, an educational blogger, but rather a hedge fund operator) and others at the badly labeled “Democrats for Education Reform” and see how in its desire for Wall Street money first the Obama campaign in 2008 and now the Obama administration has pursued a path that has excluded the voices of the ordinary people most affected by educational policy decisions: students, parents, teachers.
Our economic policies, of which tax policy is but one part, are destroying not only our own economic base, but have infected those of other nations: what we did with mortgage-based derivatives helped destroy banks in a number of other countries.
Other countries long ago learned that unfettered capitalism is not healthy for national economies. As Kristof points out, they have taxes on financial transactions such as those proposed by Nobel economist James Tobin. They also have much more meaningful social safety nets than we have ever approached.
Social safety nets – they also have lower percentages of children in poverty than we do. They also have more complete coverage of medical – and dental – care than we do. As a teacher and as an educational policy wonk I can tell you that things like these account for all of the difference on performance on international tests such as PISA in 2009, which when adjusted for percentage of children in poverty shows US students performing as well as those in any other nation.
We have a choice, and we will not have it for long. We can begin to move right now to correcting the flaws in our economic and tax policy that are threatening the middle class with downward mobility and destroying economic security for the vast majority of Americans or we can kiss our democratic republic goodbye.
We have had two successive Democratic administrations that have failed to confront this burgeoning crisis. In between we had a Republican administration that made things far worse by deliberately pursuing policies that were detrimental to our nation not only economically but also morally. We cannot get our economic house in order while we continue to waste so much on military and intelligence activities that neither make us secure nor benefit the vast majority of our population.
Of course, we are so desperate for jobs that to propose cutting back military expenditures will be countered with arguments of how many jobs it produces. And for those with no other job opportunities, that is a powerful counter. We do not think of the jobs it costs elsewhere in the nation. We ignore the cost of lives and economies destroyed overseas.
And meantime we watch as our civil liberties are eroded in the name of security. Our Courts give ever greater power to the corporations and the elites that run them. Corporations play bookkeeping games so that their profits are somehow considered to be overseas and not taxable by the United States government, so that when combined with other tax policies our effective corporate tax rate is among the lowest in the industrialized world.
Meanwhile school teachers are being laid off, and those who are not are seeing their salaries frozen or cut, their health care premiums skyrocket, and their contributions to their pensions significantly increased. Corporations scream that any increase in taxes makes it difficult for them to plan, it changes the terms under which they operate. What about the planning of the ordinary American, about paying for her kids’ college and planning for his own retirement?
Read the Kristof. It is a start. Understand the issues he addresses, because they shine a bright light on the cancer of greed that is destroying our economy, and thereby destroying our society.
Remember that to give tax breaks to the already wealthy and powerful means that the rest of us will pay – our taxes will be increased, the services we receive from government will decrease, and our progeny will see ever increasing parts of their taxes go to interest on debt, interest that goes right into the pockets of the very wealthy.
This is not Denmark, but the words of Hamlet are appropriate: there is something rotten.
I realize the risk of what a default might be, although I would also point out that hedge fund operators thrive on risk, and may well have protected themselves by taking short positions. After all, Goldman Sachs demonstrated how easy this was to do when it used AIG as a means of betting against its own customers and thereby profited when the financial instruments it was pushing on its customers turned out to be near worthless.
Then again, maybe all my words are pointless, because it is already too late? If so, why do we bother with blogging, with political activism? Why do I bother teaching young people about an American government that exists only on paper, because it has lost control to the wealthy, the transnational corporations and those that run them that are increasingly beyond the control of any and all national governments?
I remember church history, perhaps an odd comment. At one point in the 4th Century Athanasius was yet again in exile, his point of view on the nature of God being scorned and suppressed and worse. The best description was the Latin phrase Athanasius contra mundum: Athanasius against the world. Yet he persisted in what he believed was correct, and eventually the Church came around to his point of view.
If we are right, do we not have an obligation to persist, at whatever cost, not merely to vindicate our thinking but also to give voice to the voiceless who are being crushed by what is happening?
It is so tempting to throw up one’s hands and give up. It is tempting, but wrong.
So I write another perhaps pointless blog. And use the words I type as motivation to try to persuade others, to hope – and pray if you do – that those of like mind can come together and try to convince enough people to stop the madness before it destroys us all.
I feel no peace today.