WE DO NOT HAVE AN ENTITLEMENT PROBLEM, WE HAVE A REPUBLICAN PROBLEM

WE DO NOT HAVE AN ENTITLEMENT PROBLEM, WE HAVE A REPUBLICAN PROBLEM

You do not have to be a Fox News regular to know that Republicans view entitlements to be the economy’s greatest threat. What is more surprising is how many Democrats have bought into that meme—at least in so far as to the necessity of reforming Social Security and Medicare. But, do we have an entitlement problem?

The Social Security trust fund, together with payroll taxes, is sufficient to cover program benefits for more than the next 20 years. Moreover, assuming no additional funding, currently scheduled payroll taxes can provide benefits equal to those now provided, even adjusted for inflation, for the indefinite future. Given all the real economic problems we truly must address now, there is no legitimate argument for even considering Social Security modifications until the economy is fully back on its feet and long-term costs and revenues can be more accurately projected.

The Medicare trust fund was actually “going broke” when Pres. Obama took office, due in large to changes pushed through by the Bush administration. At that time, the trust fund was projected to be exhausted by 2016. However, the ACA (“Obamacare”), rather than taking the much vaunted $716 billion out of Medicare, actually added that amount to the Medicare trust fund; which is now projected to last until 2024. In one fell swoop, two thirds of the Medicare shortfall was eliminated. Eliminating the remaining one third could be even easier; for example, The Senior Protection Plan contains $385 Billion in Health Care Savings Without Harming Benefciaries, http://www.scribd.com/doc/112712580/The-Senior-Protection-Plan. The relative ease of these Medicare fixes, and the fact that the small Social Security issues remaining are far beyond our legitimate planning horizon, why then all the hysteria about entitlements eating our children and grandchildren? In a word—TAXES.

Everyone knows that Ronald Reagan reduced income taxes (more than one half for the wealthy); what is less commonly understood is that he extensively offset this by raising payroll taxes(more than double for most self-employed). Today, most American families pay more in payroll taxes than they do in income taxes. Between 1946 and 1981, income taxes averaged 12(+/-1)% of normalized GDP. Reagan reduced income taxes to near 9%. Clinton increased them back to 12%; and Bush/Obama reduced them again to 9 %( and below). However, on budget expenses (which exclude Medicare and Social Security) have remained 12(+/-1)% of normalized GDP throughout. The deficit in income taxes has been financed by borrowing, largely from the Social Security and Medicare trust funds.  When Clinton raised income taxes back to 12%, this eliminated the on budget deficit. The CBO projected that this, plus the Social Security and Medicare surpluses, was enough to pay off the entire US debt before the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise any taxes to pay for the amortization of those trust funds. Like Reagan before him, Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that income taxes would have to be raised in order to amortize the trust funds. Although the Republicans like to talk about those “47%” who in large part pay only payroll taxes as being supported and subsidized by those who pay income taxes, the truth is the opposite; ever since Reagan, income taxes have been subsidized by payroll taxes; and the failure to raise income taxes to pay back that subsidy, is to steal the money that middle-class workers have had taken out of their income to pay for their retirement.

Hence, the only problem we have with entitlements is paying back the money that we borrowed from the Social Security and Medicare trust funds. This requires that we raise income taxes in the short term to 12% to cover normal on budget expenses. And, as soon as the economy recovers, we must raise taxes above 12% to pay back the trust funds. This is why the Republicans refuse to discuss raising income taxes; they would much prefer to steal workers retirement funds, and reduce the entitlements paid for by them. We do not have an entitlement problem, we have a Republican problem.

Manifesto

MANIFESTO

for the

99 Percent

Prologue

Franklin D. Roosevelt was born into wealth. However, when he was elected President he was hailed as the champion of the working man. But, he was also American capitalism's greatest champion. He knew, by the time he was inaugurated in 1933, that his ultimate opponent would be the Communist Party, not the Republican party. His task was to reform capitalism or lose capitalism. And reform capitalism he did; laws were passed, and regulatory agencies created, all with the objective of eliminating the excesses of capitalism which caused the Great Depression. Where free markets could effectively protect the public interest, they were permitted to operate mostly unfettered. However, where competitive markets neither existed nor were strong enough to protect the public interest, the federal government would. And the next 40 years was to see the greatest increase in prosperity for the American middle class ever; but it also saw increased prosperity for all Americans, as well as the enrichment and strengthening of American capitalism itself.

However, the malefactors of great wealth had been required to yield the majority of their income to serve the public. And they resented the burdens the federal government had placed on them, notwithstanding that they too had prospered. Their enemy was the federal government; and they possessed sufficient funds that they were ultimately able to convince the majority of the electorate that the federal government was their enemy too. Hence, the last 30 years have seen a wholesale attack on the laws and regulations which protected the public from corporate excess, the decimation of the middle class, and more of the increase in real national wealth accruing to the top 1% than the entire 99% combined.

Occupy Wall Street has produced a manifesto which rails against recent corporate excesses. However, corporations by their very nature are opportunists who will seek out profits wherever they can find them. It makes no more sense to rail against them, than condemn the lion for failing to lie down with the lamb. What we must identify and eliminate are the mechanisms by which the 1% have accomplished their wealth grab, taken control of the federal government, and permitted corporations to run roughshod over the public.

1)     Wealth Grab

        a)   Taxes:  Just about every Republican politician alleges that: "we do not have a taxing problem, we have a spending problem;" but this is a lie. Everyone knows that Ronald Reagan reduced income taxes (more than one half for the wealthy); what is less commonly understood is that he extensively offset this by raising payroll taxes(more than double for most self-employed). Today, most American families pay more in payroll taxes than they do in income taxes. Between 1946 and 1981, income taxes averaged 12%(+/-1%) of normalized GDP. Reagan reduced income taxes to near 9%. Clinton increased them back to 12%; and Bush/Obama reduced them again to 9 %(and below). However, on budget expenses have remained 12%(+/-1%) of normalized GDP throughout. The deficit in income taxes has been financed by borrowing, largely from the Social Security trust fund.  When Clinton raised income taxes back to 12%, this eliminated the on budget deficit. The CBO projected that this, plus the Social Security and Medicare surpluses, was enough to pay off the entire US debt before the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise taxes to pay for the amortization of those trust funds. Like Reagan before him, Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that income taxes would have to be raised in order to amortize the trust funds. The failure to do so simply permits the 1% to steal the money contributed by workers for their retirement. Everything about not raising taxes or limiting expenses, is about stealing the 99%'s money. The national debt has been caused primarily by income taxes which were reduced far below their historic 12%(+/-1%), not by on budget expenses, which have remained at their historic 12%(+/-1%) throughout. These taxing games have transferred $ trillions from the 99%'s payroll taxes to subsidize income taxes.

     b)   Healthcare:  Healthcare has been the primary mechanism for redistributing income and wealth upwards. But for increasing health care costs, over the last three decades median US real wage increases would have more than doubled. US healthcare costs are twice, or more, than those of virtually every other industrialized country; and consistently, the incomes of physicians in the US are over twice theirs. Because our competitors’ healthcare costs are so much lower than ours, our manufacturers and workers suffer huge competitive disadvantages. Our healthcare system transfers an almost unbelievable $1 trillion per year from the the middle class to health care providers, without delivering superior care.  Hence, the single easiest way that we can reverse the upward redistribution of income is to adopt a truly socialized healthcare system (similar to those of our competitors, and the Veterans Administration--which is this country's highest rated healthcare system). This is also the primary reason that the 1%  and their Congressional allies so strenuously resist attempts to reform healthcare.

2)    The Courts, Corporations, and Control of the Federal Government

In Europe generally, judges are civil servants; they are basically academicians who are selected by merit without political interference. In the United States generally, a judgeship is a political reward; and the higher the court, the greater the reward's value and political control. Politics have corrupted our judiciary; and the courts have returned the favor by corrupting politics. Every authentic constitutional scholar knows what a travesty Bush v. Gore was (The Court ruled, inter alia, that counting the Florida votes would constitute an irrevocable injury to Bush; but not counting the votes would not constitute a similar injury to Gore). Subsequent to that decision, the "non-activist" Court has been on an orgy of overturning accepted precedent and law, including those restricting corporate funding of elections. As a result, virtually unlimited corporate money has been let loose into our political process. To most politicians, the power which comes with being elected is their most valued possession. And, those in high office who support the interests of the 1%, can now count on virtually unlimited funds to help them obtain/retain that most valued possession. This reciprocal corruption between the courts and politics is really what has brought us to where we are today.

3)    The Remedy

Directionless railing against corporations and injustice will not produce a remedy, because it doesn't identify the corrupt forces which have brought us to where we are. Only when we fully understand what has produced the corruption of our politics, the destruction of the middle class, and the redistribution upwards of almost all the wealth created here in the last 30 years, can we fashion a remedy. We do not need constitutional amendments; we need to get politics out of judicial selection and make sure that we have the highest quality judges with the humility to realize that they are public servants who must respect precedent and the law. We do not need to destroy corporations; we need to re-regulate them so that they will serve the public interest again. But most importantly, we must rise up together and not yield until everyone understands why we must wrest control of our government back from the corporations and the 1%.