The Solution to the Debt Crisis is an Easy One.

Respectfully submitted by Lawrence Rafferty-Guest Blogger

I have a slightly different take on the debt ceiling discussion started by Mike Appleton earlier.  The Debt ceiling issue is on every cable and broadcast TV channel and on just about every website and blog including here on Prof. Turley’s blog. The debt limit and its feared default has controlled the airwaves for weeks now, and it isn’t going to end soon if the news reports are to believed. The Democrats want increased revenue and the Republicans want cuts only to spending in order to convince both sides to do something that was done about 19 times during the preceding administration without much fanfare from either side. No matter who you support there is an easy solution to the problem and the majority of Americans agree with it. The Hill

A very easy solution to the U.S. Debt problem is to simply tax the wealthy and corporations at 1960 levels and according to one source, the debt would be erased within a decade. “Some numbers — from an Institute for Policy Studies report released this past spring — can help us better visualize just how monumental this political failure has been. If corporations and households taking in $1 million or more in income each year were now paying taxes at the same annual rates as they did back in 1961, the IPS researchers found, the federal treasury would be collecting an extra $716 billion a year. In other words, if the federal government started taxing the wealthy and their corporations at the same rates in effect a half-century ago, the federal debt to investors would almost totally vanish over the next decade.” Our Future

The Center for American Progress has provided additional evidence that corporations in the United States are taxed at a low rate when compared to other nations. I know we keep hearing about that corporations are over taxed and if we keep taxing them they will move their jobs out of the country. Here is a link to a series of charts that proves that US corporations are paying lower taxes than some would admit to.  American Progress.org  

‘ “Conservatives like to claim that our budget deficits are purely a “spending problem.” Said Senate Minority Leader Mitch McConnell (R-KY): “We don’t have this problem because we tax too little. We have it because we spent too much.” ‘ It’s a popular talking point, but it simply isn’t true. Deficits do not stem from spending levels alone. They are the product of a mismatch between spending and revenue. And when revenue is as low as ours is, you end up with big deficits.”  American Progress

Now, it may sound trite or sarcastic, but the facts are clear that our so-called debt problems would be solved very easily without any draconian cuts to socially important programs important to the Left, and without deep cuts to the military budget that the Right wants to avoid. So why is it so difficult to reach this seemingly obvious solution? Why do the wealthy and Corporations have such a tight wrap on the DC regulars on both sides of the aisle? Could the answer be that both the wealthy and large Corporations have the funds to buy or at least ‘rent” Congress and convince Senators and Representatives to look the other way on tax increases?

It couldn’t be the money, could it? And all this time I thought that Gordon Gecko was a fictional character!

Respectfully submitted by Lawrence Rafferty-Guest Blogger.

135 thoughts on “The Solution to the Debt Crisis is an Easy One.”

  1. @rafflaw, regulations were relaxed prior to Bush’s term to enable the poor, minorities and poor-credit risks to afford housing according to Democrat policy desires. Bush merely bought into it.

    The headline of your cited article “Jobs Created and Saved By Stimulus Cost At Minimum An Average of $228,055 Each” tells you all you need to know. These jobs weren;t created or saved, they were bought. Big difference.

    It’s not my word against Krugman, it’s other economists’ word against Krugman. And Krugman’s word has not exactly been reliable indicator or economic success. What happened to the multiplier effect? It failed to materialize.

  2. Max:

    people forget about all of the other taxes which businesses have to pay.

  3. kderosa,
    The Bush bailout was necessary because of the regulations that were relaxed and the banksters took advantage of them. The stimulus did create jobs and protected jobs, just not as much as Obama had predicted. Even though his prediction was too high, you can’t claim that a lot of jobs were saved and produced. You could I guess, but you would be wrong. http://www.cnsnews.com/news/article/cbo-jobs-created-and-saved-stimulus-cost
    With all due respect, I will take Krugman’s word and knowledge over yours any day when it comes to the economy.

  4. @rafflaw, when you say “Bush bailout” Do you mean the bi-partisan supported Emergency Economic Stabilization Act of Oct 2008 in which 108 R’s and only 63 D’s voted against and 91 Rs and a whopping 172 D’s voted for, which candidates Obama and McCain wholeheartedly endorsed. Is that the one?

    Also, the stimulus has not been shown to create any jobs, the unemployment rate still remains far higher than Obama predicted would be the rate without any stimulus.

    Breaking the financial sector was a bi-partisan effort, by mostly Dems like Frank and Dodd. Krugman hasn’t met a stimulus that wasn’t too small. We’re spent TRILLIONS of dollars with almost no descernible effects on the economy. The stimulus was a failure.

  5. “the corporations are paying little or no taxes now and in too many cases, these same companies are getting refunds or credits in the millions when paying little or no taxes”

    Not sure if you’ve actually ever worked in finance at any multi-billion dollar firm, but they pay a hefty amount of taxes. I’ve seen, with my own non-politically affiliated eyes, the amount that two separate multi-billion dollar consumer goods companies pay in taxes. It comes nowhere near your assumption of ‘little to no taxes.’

  6. kderosa,
    Taken over a bailout? do you mean he was stuck with the Bush Bailout of the banks and you are sticking on Obama? You are comparing the Iraq war bill to the economic stimulus? Wow. first of all, the stimulus did create and save millions of jobs. Secondly, most of the stimulus was necessary because of the hole we were left in by President Bush. Actually if anything, the stimulus was too small as suggested by Paul Krugman.
    You also plug in line items for the high speed rail, which is a good way to not only create jobs here, but also rebuild our infrastructure which helps individuals and corporations alike.
    As to the businesses and the wealthy, the number is too low. the corporations are paying little or no taxes now and in too many cases, these same companies are getting refunds or credits in the millions when paying little or no taxes. For ten years the wealthy have been getting a break because they are the “job creators” and guess what, they haven’t produced the jobs. No surprise because it didn’t work during the Reagan years either.
    Was Reagan’s autobiography written before he had dementia symptoms? I seem to recall that he had dementia starting to creep in during his last years inn the White House. I don’t think I would trust anything attributed to Reagan after he left office.

  7. How could police departments possibly turn a profit? That’s just plain silly. It’s also a traditional gov’t function. However, when gov’t takes over an industry and tries to run it, then it should turn a profit. See the post office, Amtrak, and the like.

  8. I couldn’t agree with Lawrence more. A big part of the problem has been the conflation of government with running a business or a household. Police Departments shouldn’t have to turn profits. Building up this mythology of government being run like a business is the work of a corporate media and of a corporate elite constantly congratulating themselves and rewarding compliant legislators with their support. The sickest thing about it is the mythology that large corporations are well run. One example of that absurdity is the corporate jet. the expense entailed in maintaining and running one is stupidly prohibitive. Yet many corporations run fleets, simply because it tickles the egos of their leadership. Also, to me having worked hard all my life, anyone who thinks a day at a posh golf course with its attendant meals and drinks is work, is a self-indulgent fool, not a businessman.

  9. In making his case for tax increases last night, President Obama described past deals in which Democrats promised spending cuts in return for tax increases, and said:

    The first time a deal passed, a predecessor of mine made the case for a balanced approach by saying this: “Would you rather reduce deficits and interest rates by raising revenue from those who are not now paying their fair share, or would you rather accept larger budget deficits, higher interest rates, and higher unemployment? And I think I know your answer.” Those words were spoken by Ronald Reagan. But today, many Republicans in the House refuse to consider this kind of balanced approach.

    Well, yes, those words were spoken by Ronald Reagan (in August of 1982) in reference to TEFRA—the Tax Equity and Fiscal Responsibility Act—which congressional Democrats promised would involve a ratio of $3 in spending cuts for every $1 in tax increases (which they said would consist only of closing loopholes). TEFRA passed later that year, and the tax increases certainly happened but, as Reagan later put it in his autobiography, “the Democrats reneged on their pledge and we never got those cuts.”

    TEFRA was one of Reagan’s great regrets about his time in the White House, and should serve as a warning to Republicans contemplating similar grand bargains. Obama’s reference to it only highlights the fact that he tried to pull off something much like TEFRA. Luckily, he appears to have failed.

    (Source)

  10. In the early months of his presidency, President Obama has shown he isn’t afraid to spend billions of dollars on corporate bailouts or to run up trillions of dollars in U.S. debt to battle an economic crisis.

    But in doing so, he has initiated the largest expansion of federal government since World War II and set up a massive challenge for his administration — one that officials are already warning will be fraught with peril.

    During the first 100 days of his presidency, Obama has signed a $787 billion stimulus bill into law, proposed an eye-popping $3.6 trillion budget for the next fiscal year, taken over a massive $700 billion Wall Street bailout program and created other billion-dollar programs to help grease the economic wheels.

    Analysts call the spending spree “unprecedented” when the nation is not in a declared war, and they say the challenges that accompany it are a logical result.

    (a href=”http://www.foxnews.com/politics/2009/04/23/days-obamas-federal-spending-spree-raises-management-concerns#ixzz1TE2MGBal”>Source)

  11. It was an $800 billion misadventure that will be wreaking havoc on the econ omy for years to come.

    No, not the war in Iraq, where an American combat-troop presence officially comes to an end tomorrow.

    We’re talking about President Obama’s economic-stimulus program.

    Remember the stimulus? The miracle cure Obama said would boost the economy and save millions of jobs?

    Well, the president’s panacea turned out to be an $862 billion bottle of snake oil — and it cost $100 billion more than the entire Iraq campaign to date.

    According to the Congressional Budget Office, the total Iraq tab comes to $709 billion this month, a costly engagement in terms of treasure.

    (Source)

  12. Here is President Obama’s budget for fiscal year 2012 (and outlook through 2021). And here is a look at some of the numbers that stand out:

    $3.73 trillion — total spending this year (25 percent of GDP, highest levels since World War Two).

    $46 trillion — total spending over the next decade.

    $8.7 trillion — total new spending over the same period.

    $26.3 trillion — Total new debt, including entitlement obligations, predicted by 2021.

    $7.2 trillion — Total deficit predicted by the end of the decade.

    $1.1 trillion — How much the White House estimates the proposal will reduce the deficit over the next ten years.

    $4 trillion — How much the president’s deficit commission recommended reducing the deficit over the next ten years to avoid financial catastrophe.

    $1.6 trillion — The projected annual deficit for 2011 (11 percent of GDP), up from $1.3 trillion in 2010.

    $2 trillion — Amount the budget will raise taxes on business and upper-income families over the next ten years, which includes letting the Bush-era tax rates expire in 2012 (for incomes $250,000 and up).

    $50 billion — Amount the administration plans to spend this year on infrastructure and transportation “investments.”

    $30 billion — Amount dedicated to a “National Infrastructure Bank to invest in projects of regional or national significance to the economy,” including the much-touted high-speed rail initiative.

    $77.4 billion — Funding allocated for the Department of Education, a 22 percent increase from 2010 levels, and a 35 percent increase from 2008 levels.

    $29.5 billion — Total spending on the Department of Energy, a 22 percent increase from 2008 levels.

    $9.9 billion — Funding allocated for the Environmental Protection Agency (EPA), a 30 percent increase from 2008 levels.

    $150 billion — Total amount the White House plans to spend next year on research and development programs.

    8.2 percent — Predicted unemployment rate in 2012.

    Zero — Political risk the president was willing to assume by proposing meaningful reform to entitlement programs. That said, Republicans haven’t exactly been willing to stick their necks either, at least not yet.

  13. “This was Obama’s big spending spree(kderosa) …Fractured Fairy tales … teabaggers love this kind of stuff … they even pay to hear it … suckers

  14. “The national debt-ceiling law should be judged by what it actually does, not by how good an idea it seems to be. The one thing that the national debt-ceiling has never done is to put a ceiling on the rising national debt. Time and time again, for years on end, the national debt-ceiling has been raised whenever the national debt gets near whatever the current ceiling might be (see chart above, courtesy of today’s “The Gartman Letter”).

    Regardless of what it is supposed to do, what the national debt-ceiling actually does is enable any administration to get all the political benefits of runaway spending for the benefit of their favorite constituencies — and then invite the opposition party to share the blame, by either raising the national debt ceiling, or by voting for unpopular cutbacks in spending or increases in taxes.

    The Obama administration is a classic example. When all its skyrocketing spending bills were being rushed through Congress without even being read, the Democrats had such overwhelming majorities in both the Senate and the House of Representatives that Republicans had all they could do to get a word in edgewise — even though their words had no chance of stopping, or even slowing down, the spending of trillions of dollars.

    Now that the bill is coming due for all that spending and borrowing, Republicans are suddenly being invited in to share the blame for either raising the national debt ceiling or for whatever other unpopular measures will be legislated.

    Many years ago, someone said, “If you didn’t invite me to the big take-off, don’t invite me to the crash landing.” This was Obama’s big spending spree, but “bipartisanship” requires Republicans to either split the bill or be blamed if the government shuts down or defaults.

    What would happen if there were no national debt-ceiling law?

    those who got the political benefits from handing out trillions of dollars of the taxpayers’ money (plus borrowed money) would also get the clear and sole blame for the resulting skyrocketing national debt and all the unpopular consequences.”

    (Source)

  15. The beauty of static scoring — how to lie with statistics and have the rubes fall for it.

    The Top 10% (AGI=$113,799+) already pays 69.94% or all federal income tax. How much more would you have them pay?

  16. We need a redistribution of wealth . We need it to move from the top 1% downwards.

  17. Blouise,
    You are correct. The war on the middle class started with Reagan and has continued to date.
    Swarthmore,
    Thanks for the link!

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