Some of my favorite articles to write deal with the economy. Today I’d like to take a very brief look at three issues that could be filed under fiscal policy. We seem to debate the heck out of them in America yet the solutions are simple.
Of late the rumors of Social Security going broke have again resurfaced. The current scare is that benefits will be reduced because revenue, diminished by the “COVID recession”, will be less than the monthly payout. If a shortfall does occur, and that is far from an inevitability, the need for more revenue in the system is a simple fix: end the current ceiling on individual contributions. Why should the social security tax be a regressive one in a nation that has (or at least contends to have) a progressive tax system?
The debt ceiling debate has reared it’s head again with Republican Senate Minority Leader Mitch McConnell stating that no Republican Senate votes will be available to raise it. If it is not raised America will unnecessarily default on its financial obligations which will have profound both domestic and global repercussions.
Problem number one is that most Americans do not understand what the debt ceiling is. It is the limit on how much the Treasury Department can borrow. On the surface that sounds like a sound fiscally conservative idea. Here is the reality; the underlying spending has already been approved by the same Congress that is charged with setting the debt ceiling. It is like you buying a car on payments and then not authorizing the check when you have the ability to borrow the money to cover your financial obligation. The underlying spending has already been approved and the United States owes the money whether or not it “writes the check”.
To my knowledge we are the only country that even has a debt ceiling. It’s existence, while it may sound good, doesn’t make any sense. Each party uses it as a political football when it is not in power and it is simply a waste of resources. The simple solution is to abolish it. When a country as wealthy as America makes a financial commitment it should honor it, period.
There are a plethora of other good proposals that are being attacked as to expensive. The old question, “How are you going to pay for it?” gets recycled. The answer is to plug a bunch of tax loopholes that do nothing to further the national progress or address inequity but simply benefit a few rich and powerful people. Study after study shows that the top wealthiest individuals pay a lower percentage in taxes than low wage and average Americans. Time and again we see major corporations paying zero in federal income tax (and sometimes actually getting a refund) despite record profits. This happens because of the influence of money in American politics. In effect the wealthiest individuals and corporations write the tax laws. Is it any wonder they do it to their benefit?
The counter argument is that if we effectively raise taxes we will provide a disincentive for making money. That is laughable on two fronts!
Many of the wealthiest individuals are simply members of the Lucky Sperm Cell Club and don’t actually do any labor; they just let their inherited money make money for them and almost always at a lower tax rate than ordinary income. What are they going to do, give away their inherited millions and take jobs at minimum wage in protest?
A few high income earners actually work, usually in sports or entertainment. I remember when Obamacare raised taxes on extreme high earners golf pro Phil Mickelson threatened to quit the tour because of the effect the tax increase would have on his bottom line. That didn’t happen, did it? Of course not! What was he going to do: take a job as a club pro?
I especially have a problem with those who want to eliminate the Estate Tax. First of all, the vast majority of Americans don’t even know anyone who will be affected by the tax. Presently the Estate Tax exemption is $11,700,000. How many people do you know that inherit that much? When you get the family farm argument ask for the name of even one family farm that had to liquidate because of federal estate taxes. If you get an answer with a name you have almost undoubtedly been lied to.
The simple bottom line is that the money exists but all of one political party and possibly a small portion of the other lacks the will to make good changes happen.
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