While it is true that we have added a little under $5 trillion to the debt since Obama took office, it is important (and fair) to remember that most of the massive spending policies implemented by the previous administration did NOT cease to exist the day Obama was inaugurated. The wars, the ridiculous tax cuts for the wealthiest Americans, Medicare Part D (boondoggle for Big Pharma) all continue to contribute to the debt to this day, while adding to the amount of interest that has to be paid on the debt.
The fact is, as a percentage of GDP, new spending by the Obama administration is actually lower than it has been since World War II — lower than the rate of inflation for the past two years. Obama’s actual “new” spending has amounted to about $900 billion over the last 3 years. This, despite the fact that government spending routinely goes up during economic downturns regardless of who is in the White House because more people have to depend on unemployment benefits, welfare, food stamps and Medicaid in order to survive.
According to CNN.Money, it has now been determined that more jobs have been created since the economy tanked than were lost. Obama has managed to achieve this net gain in jobs since 2009, despite having to deal with the lowest rated, least productive and most obstructive Congress since the Civil War, not to mention the fact that this country lost more than 50,000 factories between 2000 and 2009.
Mitt Romey’s and Paul Ryan’s plan would cut taxes 20% and allegedly keep those cuts “revenue neutral” by eliminating loopholes and certain deductions which they have both refused to identify. Most economists agree that their tax cuts would cost about $5 trillion over the next 10 years, and they also agree that eliminating every single loophole and write-off would NOT pay for them. In other words, they are making stuff up as they go along, refusing to provide any details because those details would expose the problems with their ideas.
Romney and Ryan also say that they want to “widen the tax base”. There is only one way to interpret this: they want families to start paying federal income tax who have, until now, made too little money to pay any federal income tax. So, according to Romney and Ryan, low income families would be subject to paying taxes they’ve never had to pay before, while the wealthy would get an average of a $250,000/year tax cut.
Obama 2012 –– Because the alternative is UNTHINKABLE!
Both Romney and his running-mate have repeatedly stated that their intent is to cut taxes 20% for everybody who pays federal income tax. The cost of such a cut over a ten-year period is approximately $5 trillion, yet Romney now denies having ever said anything about this tax cut.
Both Romney and Ryan say that these cuts would be deficit neutral because, at the same time, their plan would eliminate certain unspecified loopholes and write-offs currently in the tax code. The problem is, even if they eliminated every single write-off, including charitable donations and home mortgage interest, it still wouldn’t come close to covering the cost of the $5 trillion tax cut.
HOWEVER, they also say that they would increase revenue by “broadening the tax base”. The only way to interpret this is that they intend to tax low and middle income families who, until now, have no earned enough to qualify for paying federal income tax. Therefore, their stated intent is to cut taxes on the wealthiest Americans and raise taxes on the middle class. You can’t get around that.
By the way, cutting taxes does NOT stimulate economic growth. In fact, quite the opposite is true. Low taxes encourage profit-taking. Periods of higher tax rates show more re-investment. Business owners take less profit out of their companies if they know they’re going to pay higher taxes on that income. In any case, the last eleven years has provided ample proof that tax cuts boost nothing but the wealth of the top 1% of the population. 93% of all gains in the economy over the last two years have accrued to that small group of highly fortunate people.
Romney has also stated numerous times that he wants to increase defense spending by a $1 trillion over the next ten years and $2 trillion over the next 20 years. He would also add more than 100,000 more personnel to the armed forces. He has vowed to do this despite the fact that the Pentagon has said it doesn’t need the additional people or extra money. Romney just wants to be seen as a pro-military leader by his right-wing base. It is a completely disingenuous position.
All that said, I also have doubts about President Obama’s debating skills (although I don’t know what that has to do with being President of the United States). I wish he had been more energetic and assertive in the debate. I also wish that he called Romney on all of his lies and half-truths. That was a major mistake.
Making large spending cuts while the country is still struggling to climb out of the deepest recession since the Great Depression is NOT a smart idea. Here’s what I would do:
1. Cut defense spending immediately by 5%, and 10% over the next 5 years, by closing a few bases in Europe and Asia. Make all defense contracts subject to mandatory competitive bidding, and empower the OMB to audit all defense expenditures. Eliminate the development and production of out-dated weapons systems. (Secretary Gates has already endorsed most of this).
2. Institute means-testing for all Medicare recipients. Benefits should decrease as our income increases. Giving free medical care to a millionaire who makes almost $3,000 per day is obscene. Everybody should get some benefits, but we have to stop throwing money at people who are made of money. (Leave Medicaid alone! The poor, low-income families and the elderly are having a difficult enough time already). Finally, empower Medicare administrators to negotiate drug prices with Big Pharma. This would save seniors and the Medicare program billions of dollars, yet Republicans in Congress are obstructing any move to do this.
3. Raise the retirement age for Social Security to 68, not 70. The current retirement age is not reflective of the world we live in, with people living and working longer. Payroll deductions for Social Security should NOT have a cap for wage earners. Lower the annual tax to 5% from 6.2%, but remove the wage base cap (currently at $106,000) for employees. Retain the wage base cap for employers so that their matching contribution requirement ends when the employee reaches $110,000 in gross wages. Finally, take Social Security out of the General Fund, so that it can’t be stolen from again.
4. Do not touch discretionary spending, which only accounts for about 16% of the budget. I would actually increase this percentage, so that it includes infrastructure projects that would create jobs. All programs should, however, be subject to annual audits to ensure money is being spent where it’s supposed to be spent and there is no fraud or waste.
5. Implement a transactional tax on hedge fund managers and Wall Street speculators that will bring their real tax liability up to the top bracket where they belong. Some of these people are earning 12-figure incomes, contributing nothing to the economy but higher costs for commodities, and their current tax rate is about 11%.
6. Eliminate the tax loophole created by George W. Bush in 2005 which allows corporations to write-off the cost of training foreign workers in this country, as they out-source American jobs to foreign countries. This loophole actually incentivizes out-sourcing.
7. Keep current individual tax rates where they are for people earning between $50,000/year and $300,000/year. Those earning less should also be given a ‘payroll tax holiday’ for the next two years. Those earning more than $300,000/year should see an increase in their tax rate from 35% to 39%. (These rates can all come down over the next 10 years if we’re serious about ending many of the tax avoidance loopholes in the tax code).
8. Leave corporate taxes where they are, but provide some tax incentives for companies who move their manufacturing facilities back into the US. We have lost nearly 60,000 factories in the last decade and our economy will not fully recover until we can get manufacturing back on its feet in this country.
9. Raise the Estate Tax on estates valued in excess of $10 million. Estates valued at less than $2 million should pay no Estate Tax.
10. End the subsidies to the wealthiest industries on the planet — big oil and big agra. It is absurd that US tax payers are helping to finance the operations of these mega-businesses).
None of these ten ideas alone is perfect, but we have to do something. I believe that taking the above ten steps would drastically reduce our deficit with the least amount of pain for everybody. More importantly, it would serve to buttress the middle class, which is the engine that drives our economy.
In concert with these ten steps, we need to address the trade imbalance and its underlying causes. India and China in particular, need to implement worker protections and an acceptable minimum wage. China needs to stop manipulating the value of its currency and subsidizing its so-called ‘private industry’, so the playing field is more level. Otherwise, their exports should face tariffs.