Sunday, April 24, 2011

As Our National Debt Crisis Looms...

by: Les Carpenter
Rational Nation USA
Birthplace of Independent Conservatism

Remember David Stockman, a former Republican representative from Michigan and the director of the Office of Management and Budget from 1981 to 1985 during the first Reagan term?

I caught the following at Memeorandum this morning. Mr. Stockman presents a case worth considering as he analyses both sides in the debt/deficit issue.

IT is obvious that the nation’s desperate fiscal condition requires higher taxes on the middle class, not just the richest 2 percent. Likewise, entitlement reform requires means-testing the giant Social Security and Medicare programs, not merely squeezing the far smaller safety net in areas like Medicaid and food stamps.

Unfortunately, in proposing tax increases only for the very rich, President Obama has denied the first of these fiscal truths, while Representative Paul D. Ryan, the chairman of the House Budget Committee, has contradicted the second by putting the entire burden of entitlement reform on the poor. The resulting squabble is not only deepening the fiscal stalemate, but also bringing us dangerously close to class war.

This lamentable prospect is deeply grounded in the policy-driven transformation of the economy during recent decades that has shifted income and wealth to the top of the economic ladder. While not the stated objective of policy, this reverse Robin Hood outcome cannot be gainsaid: the share of wealth held by the top 1 percent of households has risen to 35 percent from 21 percent since 1979, while their share of income has more than doubled to around 20 percent.

The culprit here was the combination of ultralow rates of interest at the Federal Reserve and ultralow rates of taxation on capital gains. The former destroyed the nation’s capital markets, fueling huge growth in household and business debt, serial asset bubbles and endless leveraged speculation in equities, commodities, currencies and other assets.

At the same time, the nearly untaxed windfall gains accrued to pure financial speculators, not the backyard inventors envisioned by the Republican-inspired capital-gains tax revolution of 1978. And they happened in an environment of essentially zero inflation, the opposite of the double-digit inflation that justified a lower tax rate on capital gains back then — but which is now simply an obsolete tax subsidy to the rich.

In attacking the Bush tax cuts for the top 2 percent of taxpayers, the president is only incidentally addressing the deficit. The larger purpose is to assure the vast bulk of Americans left behind that they will be spared higher taxes — even though entitlements make a tax increase unavoidable. Mr. Obama is thus playing the class-war card more aggressively than any Democrat since Franklin D. Roosevelt — surpassing Harry S. Truman or John F. Kennedy when they attacked big business or Lyndon B. Johnson or Jimmy Carter when they posed as champions of the little guy.

On the other side, Representative Ryan fails to recognize that we are not in an era of old-time enterprise capitalism in which the gospel of low tax rates and incentives to create wealth might have had relevance. A quasi-bankrupt nation saddled with rampant casino capitalism on Wall Street and a disemboweled, offshored economy on Main Street requires practical and equitable ways to pay its bills. {Read More}

On balance Stockman acknowledges that we are in serious trouble, we are one the verge of class warfare, and that a combination of spending nuts and tax increases on both the wealthy and the middle class will be required. His point that Washington has kept dodging the looming debt crisis by apply quick fixes and pushing the problem off into the future is spot on.

I certainly do not agree with everything Mr. Stockman says, but perhaps President Obama and Paul Ryan, as well as Congress ought to consider employing him as they work out a hopefully successful budget/spending cut/tax process.

After all, in all reality our nation's economic future depends on it. And that means the economic future of each and every one of us.

Cross posted to the Left Coast Rebel

Discussions @ Memeorandum


  1. We have to raise taxes bu the GOP House will refuse to do it. For the time being, we're screwed.


  2. We have to SIGNIFICANTLY CUT SPENDING AND REIGN IN ENTITLEMENT GROWTH, as well as DRASTICALLY CUT FOREIGN WELFARE, but the democrats {socialists}will refuse to do so.

    The republicans will refuse to compromise on defense outlays, a mistake.

  3. I'm just not seeing 1.5 trillion in budget cuts. I actually think that Stockman is probably right, and that we probably need to rescind all of the Bush tax cuts. I'm just worried about what a decrease in purchasing power by the middle class would do to a fragile recovery.

  4. If you guys remember the Bush tax cuts cut everyone's taxes. Lefties like me were outraged that Obama and the Democrats didn't allow all these cuts to expire.

    At least this one was and still is. I'm more than glad to see my taxes raised so my country can pay it's bills and keep it's promises.

    Stockman makes excellent points, although I've been saying the same thing since the Bush tax cuts first came into existence. I wasn't happy about the Reagan tax cut either. It meant I was able to get one more can of soda from the machine a week but led to a culture of spend, borrow and deficits.

    I'll get into the speculator part as the conversation continues.

  5. All make good points. However, I ask, why is it that progressives refuse to talk about any real reform in entitlements, foreign welfare, or duplicative spending and departmental overlap?

    I think I know the answer. However I'll let the progressives speak for themselves.

  6. Les, I don't know why you insist on calling defense spending "FOREIGN WELFARE" since that is most of it is. And of course the GOP will fight any military reduction - as will the Dems. You must just adore military empire.

    So what do we do? How do we all get along and allow, affordably, this military behemoth?

    We have the most technologically advanced military on the planet. We do not need a 2,000,000 man standing army. We could do with a fraction of that. Oh, and by the way, non-military foreign aid of any sort doesn't come at anywhere near the cost of MIC-related spending. Not within a million miles.

    Let's get real.


  7. Whoa there RN. The health care reform bill called for 500 million in Medicare cuts because of duplicity and the repubs went ape do do over Medicare cuts.

    The military is above all else a gigantic socila program. Jersey is correct. Try and close a base or cut a redundant weapon system. Good luck.

  8. I remember after the collapse of the Soviet Union, we had the "Peace Dividend". We tried to close some bases stateside and this Democratic Congressman from California, a guy who normally railed against defense spending, had a conniption because one of the bases was in his district. You're right, gentlemen, it IS hard. But we've got to at least try.......And, besides, a lot of those 700-800 military bases are overseas (Italy, I think, has 3 - Italy!!). Certainly, we can close some of those sons 'a guns.

  9. I was also surprised to learn that we have over 1,800 subsidy programs. There have got to be billions in savings there. In fact, I would get rid of entire programs; ethanol, Amtrak, the Small Business Administration (their track record stinks), NPR - just to name 4.......And what about cutting foreign aid by 20% (say)? There's another 10 billion right there.

  10. @ Dingbat JMJ - Do you read? I think not. You are so frigging chocked on your progressivism you do nothing more than project.

    I will spell it out for you...

    I said, cur foreign welfare, IE: foreign aid.

    And I have repeatedly said, cut defense spending.

    Now, I am getting tired or your projections. Take pill, have a shot and mellow.

  11. Truth - Yeah, I know about the military bases. You have one near you?

    I ain't talking about closing bases primarily. I'm talking about the same stuff Ron Paul is when he dices interventionist foreign policy.

    You guys are good at diversionary tactics.

  12. Will - You make sense. Although I would cut deeper.

    There are what, 190 countries on the face of the globe? We give foreign aid to what, 140 or so?

    Time to stop the foreign welfare. I say cut it 50 to 75 percent.

    Why the H we need bases all over Europe, and elsewhere is beyond me at this point. With the possible exception of area's of high terrorist activity it makes no sense.

    Time to stop giving the rest of the world an American teat to suck on. Lets get serious and use the money to take care of business at home.

  13. the time to raise taxes, if raising taxes is called for, is when people have got their jobs back, not now, during this recession.

    but i see no reason to raise taxes as long as we continue to go along with deficit spending.

    and i agree with closing bases in Europe. they can defend themselves now, especially those nations in the E.U.

    but i still say that getting back to constitutional government is the best way to deal with the national debt.

  14. Will,

    >>I was also surprised to learn that we have over 1,800 subsidy programs.

    I had no idea is was that many! No wonder we are drowning in debt. Oh for the days when we as a Nation cut the helpless loose to actually help them strengthen themselves!


  15. Foreign Welfare... The ultimate altruist's siren song for national destruction.


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