Just How Broke Are We; Ask Amy
This post was originally written for Looktruenorth.com, a Minnesota blog, to ask our ‘moderate’ Democratic senator Amy Klobuchar. But, the facts and ideas presented speak to all Americans with Democratic Senators and Representatives who argue we just need to make the rich pay ‘their fair share.’ This disingenuous argument is faulty from its inception. Hopefully my little number crunching exercise will show just how deeply in the hole we truly are.
Our president and the Democratic Party have been on a spending spree borrowing money we don’t have and adding dangerous amounts to the debt. Some, like Vice President Joe Biden, have argued these deficits are as a result of war policy and spending by George W. Bush. They say these huge ballooning deficits aren’t their fault. However, the numbers belie their argument. We have a budget deficit for this fiscal year that is a monumental 1.65 trillion dollars. For the past two years the 111th Congress, entirely run by the Democratic Party and a Democratic president, have boosted spending by close to 16% from 2008 to 2009, according to the Congressional Budget Office. This entire spending increase more than tripled the deficit from $458 billion in 2008 to over $1.4 trillion in one year. These are not Republican numbers or conservative pundit numbers, these are CBO numbers. 2010 was just as bad. Even without the stimulus outlays, federal deficit spending was $1.29 trillion. So, it is clear from these figures that Bush’s wars and Bush’s spending was not to blame for this fiscal crisis. According to their own numbers, the Obama Office of Management and Budget and the Democratically controlled CBO found Democratic spending out of control with no end in sight.
We are also told by the media that our Democratic senators and representatives are moderate, almost fiscally conservative people who just can’t get a handle on the deficits due to structural problems in entitlement spending. We are told these problems are very difficult and we can’t hold one party to blame for the overspending and debt issues. Constantly, Democrats are held up as reasonable, rational people who are just doing a difficult job and doing their very best.
This is just how bad our deficit spending is today. According to a 60 Minutes/Vanity Fair poll as reported by Reuters in January of 2011, “Sixty-one percent of Americans polled would rather see taxes for the wealthy increased as a first step to tackling the deficit, the poll showed.” There are serious problems with this poll both the questions asked and the polling method, but let’s just take it at face value. Let’s presume the nation as a whole wants to take the screws to the rich people. Let’s pretend Michael Moore spoke for most Americans when he said, “The truth is, there’s lots of money to go around. LOTS. It’s just that those in charge have diverted that wealth into a deep well that sits on their well-guarded estates. They know they have committed crimes to make this happen and they know that someday you may want to see some of that money that used to be yours.” – Michael Moore – Daily Beast, March 7, 2011.
Of course, Moore is not talking about income, he’s talking about wealth, something very different. We tax income, not wealth. (Unless the person is dead and then Reid and Pelosi are digging them up and pulling out their gold teeth to finance their progressive governing schemes.) Other notable exceptions are property taxes, but these have been traditionally closer to the local level and so the relief valve of moving away from overly burdensome wealth taxes has moderated them somewhat. But, on a federal level, a level we cannot escape, we found that taxing income still allowed people to save and accumulate income into investing capital.
This is why we are a wealthy country. If we federally taxed wealth, the capital assets would be all used up in no time. This is evidenced by examples throughout the world of wealth confiscation schemes that eventually bankrupted economies driving everyone into an economic pit. Taxing income allows people to work hard, be a little lucky, and build a nest egg or a fortune.
Once again, we can argue the economic value of socialist schemes like Moore’s Utopian Dream until we are blue in the face, but for the most part the American people would not allow wealth taxation which is really confiscation. So, if we remain with the income tax model, what would it take to balance the budget using these means.
Tax the rich, is the clarion call of the Democratic Party. Okay, let’s try that and see if it works.
Let’s say that everyone who makes more than $1 million dollars a year is rich. Let’s just take all their income for a year. They’re rich so it really wouldn’t be that much of a burden, would it? Obama’s budget deficit is $1.65 trillion. According to the IRS records from 2008, which is not much different from today, those making more than $1 million dollars a year made $1.05 trillion. That would take quite a dent out of the deficit wouldn’t it? Just think, if we could just tax people making a million or more a year, we’d have a deficit that was at least within a reasonable number. Right?
Wrong. They already paid $243 billion in federal taxes so that money can’t be counted twice. Now, we only have deficit reductions of about $807 billion by taking all their income. But, there are more taxes that rich people also paid. They paid local and state taxes as well. We have to subtract that amount as well. They paid over $20 billion in just state and local property and personal taxes. That leaves on 780 billion to take. That means taking every single penny of income that didn’t go to taxes would leave us still in a hole of $870 billion. That is still almost twice the deficit under the spendthrift George W. Bush.
That’s if we just arbitrarily take every bit of income away from the ‘rich’ to fund these spending schemes. We are still in a very deep and very wide deficit hole. To actually balance the Democratic Party’s budget, we’d have to confiscate all income down to people making $150,000 per year. Even taking all income from people making $200,000 and more isn’t enough money. People making $200,000 to $1 million per year only have a total AGI of $847 billion, but that includes money they paid to state and local taxes, so the number isn’t high enough.
So, what are people making $150,000 or more per year supposed to live on? Sand? Gravel? Cardboard boxes? Of course this is absurd. We know really rich people just don’t report their income. They don’t pay taxes because they have evil lawyers and accountants who hide all their income. So, where do they hide all this ill-gotten gain?
Why, they buy government bonds. Oh, no. That would be another category which would lower the amount they pay. Since we don’t tax government interest in the same way as ordinary income, the numbers would sink even further and soon we’d just be taking everyone’s income to pay for these kinds of outrageous deficits. And then, who would buy our debt?
Even if we managed to balance these inflated spending programs through confiscatory taxation practices, that would make our debt unserviceable. Without people to continually buy government debt, since they have no income, the debt service would have to be performed by someone outside our country.
This is making my head hurt because it is just too much spending for too little income. In 2008, we filed forms that admitted we had $5.47 trillion in income. If our income increased by a robust 10% since then, (a completely fictional number since growth has been paltry at best) our entire individual income would be about $6 trillion. But, our 2011 budget is $3.8 trillion in spending. So, the nation would have two thirds of its income appropriated to be doled out by our government. Keynesian schemers insist this would somehow trickle up, out, in, and around to equalize income. Problem is, if the government spends $100,000 on a worker, and they collect even 60% of that income in taxes, they are still in the hole $40,000. That $40,000 may get spent around the economy, but the miniscule amounts it will generate in taxable income pale in comparison to the damage the confiscation would have.
If we took everybody’s income, just to pay off this deficit, nobody could invest. Nobody could save. Nobody would have anything reason to work. Our economy would grind to a halt. Our country would bleed capital to keep some semblance of living afloat. Our debt would collapse the markets. Our factories would stand idle for lack of maintenance and improvements.
And, we’d still have spending programs in place next year that need to be funded. Since there is no benefit to working or investing, these people would just sit on what’s left of their money. They’d have no income and therefore pay no taxes. We’d be in a worse mess than we are now, NEXT YEAR.
Quite frankly, I cannot see how spending this monstrous amount of money will do anything good for the country. I cannot see how people can call Obama or a single Democrat a moderate. This spending is simply beyond belief. There is no end to it in sight.
So, ask your Amy how this will work. Find out if anyone is actually thinking about the implications of our spending spree gone wild.