"Conversation" on the Budget

In response to this column:

http://www.vcstar.com/news/2011/apr/10/paulson-applauding-courage-with-clarity/#comments

Mr. Paulson,

I was intrigued by your Monday column (in The Star) regarding the budget deficit. You quoted Thomas Paine(!): “The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country, but he that stands it now deserves the love and thanks of man and woman.” You omitted: “Those who expect to reap the blessings of freedom must, like men, undergo the fatigues of supporting it” (1777). Paine believed and preached that those of means should sacrifice in proportion to their wealth. “Patriotism” to Mr. Paine meant putting the collective good before private profit.

Obviously you agree, however, with Congressman Ryan that the budget would best be balanced by cutting services to our most needy, instead of taxing those who skim the richest cream off the top of our economy, paying little and often no taxes at all. Either of these measures could accomplish your objective, sir.

Obviously the groups that you and Mr. Ryan have targeted happen to have the least political clout, and contribute the least to the Republican Party.

I’ve looked over your website, finding a long list of impressive credentials that sadly don’t match the persuasiveness of your column. But I couldn’t find any articles from prior to 2008. In particular I was searching for any essay from eight years ago when President Bush was taking our budget from $250 Billion surplus into mountains of debt, that called him to task for budgetary recklessness. Mr. Bush did this during a period of relative economic expansion and prosperity. Please forward to me any column from that period: 2002 through 2006 (before the run-up for election), criticizing Mr. Bush. This would serve to get me on board with the sincerity of your crusade. Absent that, sir your column is vapid, partisan dribble.

Your (Republican) Party engages its base by telling gullible people what the want to hear, then manipulates it with lies and fear. It’s small wonder that the GOP is so hostile to decent public education in this country---it depends upon public ignorance...speaking of which, where did you get your degrees?

Sincerely, Mark Robbins

Mark--

Thanks for writing. I'm sure you speak for many in this country who have legitimate concerns about Republicans in Washington. Yes, I have written many times that Republicans have not always lived up to what they preached. I have criticized Bush and his administration many times for out-spending Democrats when they are supposed to believe in smaller government. Yes, they earned being defeated in the last election. They lost their base. They have been given another chance, and, if they are not successful in walking the principles they espouse, they will invite a third party.

I'm interested in your assessment of Ryan's budget. Are you serious in saying that the wealthy don't pay their fair share? All of the data that the government can provide indicates that the wealthy, the top quintile of Americans, pays the vast majority of taxes, and would continue to pay most of the taxes under Ryan's plan. Even with a flat tax, they would pay more of the taxes.

http://www.cbo.gov/publications/collections/taxdistribution.cfm

Now, granted some of the wealthiest Americans pay no income tax because they are paid no income. Warren Buffett just lives on his wealth and takes no income.

Yes, there are some businesses that pay no taxes--GE, Obama's pet being one.

Ryan wants to do away with deductions, lower the income tax rates, and INCREASE federal revenue. When you stimulate the economy by lowering taxes, you get more income (sic) Kenney, Reagan, Bush...all knew this and used it to increase revenue and help the economy and jobs grow. I share your anger in people not paying taxes and expecting others to pay their share. It's time we make taxes simpler and fairer. There is a chronic poor in America. Past "Bootstrap studies" indicate that over a 15-17 year time span only 5% remain poor. They need help. Not sure where you get the idea that the poorest of poor will not be helped. It's the people who aren't poor but get services--that goes for businesses too big to fail and people who are kept on unemployment for years. I agree with Reagan that a government's success should be measured by how many people no longer need government support than by how many receive it.

Obama said it right the other night. There is a key choice--bigger government or smaller government. The deficit will soon bankrupt our country. We don't have a revenue problem. We have a spending problem. I'm not sure how you plan on dealing with that. I compliment Ryan for doing just that. I sure hope you read his plan.

We face tough choices. To keep trying to make a small segment of wealthy Americans pay more and more will result in what's happening already--they will get out of the game or take their game to other countries. Poor people don't hire anyone.

As to schools, UCLA, Fuller Seminary, Fuller Graduate School of Psychology. By the way, I'm more of a conservative than I am a Republican. They are the viable choice I have, and I'm often disappointed. America lives with some necessary tensions. How do I care, truly care, about helping the unfortunate in our midst without making them dependent? How do I fairly make citizens pay their "fair share?" What should a government do and what should individuals do for themselves? As Dennis Prager loves to say, the bigger the government the smaller the individual. I agree with that assessment. Give me freedom any day. I also believe that the best charity is local--we should care for our neighbors ourselves, not elect politicians who will take from others to do our caring.

You deserve a thoughtful reply.

Terry Paulson

Thank you, Mr. Paulson, for your most courteous reply. I must say I could not find your circumspection within the (Star) column.

For MY solutions, I look deeper than the income tax. You spoke of the rich paying “their share,” and of a flat-tax. Income tax is our only “progressive” tax---and even that, of course, is only on paper. We have a regressive tax system. Sales taxes, use fees, property taxes (or their counter-part, rent) are all wildly regressive; the income tax is the only vehicle in place to try to rectify that imbalance. When you advocate a flat (income) tax, you propose that the poor will pour an even greater share--percentage--of their income into taxes. I assume you’re aware of this; and even though it’s hidden from our political dialogue, you can’t blow it by me.

We enjoy, at times, looking back on the prosperity and relative tranquility of the Eisenhower years (except for disgusting civil-rights issues.) The country seemed to work; in fact we were the industrial engine of the world, admired by all. You and I are old enough to recall that marginal income taxes were in the 80% range for the wealthy, and our middle class was robust and prosperous. Democracy thrived---under Republican leadership. We had a healthy distribution of wealth across class lines. You and I had every reason to believe that our lives would be good and prosperous. I went on to graduate from UCLA, as you did, in ’67, paying around $650/semester for a fabulous education.

Oh, life is good, now, if you’ve got it! I retired in ’03, and live on savings and remnants of a terminated pension plan. Considering all that this country GAVE me on the road to prosperity, and generally over-compensated in my career, I paid ridiculously low income taxes.

Now the rich complain about marginal rates of 25 to 30%. The Bush tax cuts were absurd and are the primary cause of our budget dilemma. Actually I don’t really hear the “rich” complaining about their taxes---it’s the Republican Party that makes all the noise. This is their primary handle. “Flat tax” is bogus. Furthermore, with all the leverage that the wealthy have on investments, it’s unconscionable to contend that they should pay less on capital gains than a working man on the job. The “death tax” issue is absurd. 90% of wealthy people gain their wealth from manipulating our economic and tax systems---they draw their wealth from society and should be happy to return it when they die. If they give it to their kids, it messes the kids up. The statistics on third generation hand-downs are appalling. Our democracy is threatened by the wild disparity in income between the rich and the rest. The middle class is disappearing and draped in despair from dismal prospects for the future.

You state: “When you stimulate the economy by lowering taxes, you get more income (sic) Kenney, Reagan, Bush...all knew this and used it to increase revenue and help the economy and jobs grow.” I’m afraid, Mr. Paulson, that this canard is---and has been shown time and again to be--completely untrue. I expect to see this in your columns, but I’m surprised that you’ve dropped it on me. President Reagan gave us “credit card prosperity”, while President Bush used it to give us “bubble” prosperity, three wars, skyrocketing debt and a shocking zero increase in employment.

I have looked into the Ryan plan, and find it ingenuous and equally laughable.

MY solutions are pretty simple. Start by eliminating the Bush tax cuts. Simplify the tax codes, to eliminate almost all deductions except for personal exemptions and charity. End farm subsidies; end subsidies to industry. All of this amounts to “welfare for the rich”, of which we don’t hear the Republicans complaining. Our disgusting, bloated “defense” budget could, and should be cut by about a half-a TRILLION dollars a year. We have seen over and over that this is a euphemism, as reckless adventurers like George W. Bush use our might for offensive objectives. A significant portion of our “defense” budget goes into the Middle East---keeping the oil flowing. This is a glaring subsidy for the petroleum industry. That portion of the defense budget should be covered by taxes on petroleum---gas at the pump, which could be phased in over 5 to 8 years. Mortgage interest deduction should be ended, or reduced to cover only the first $60,000. As it is, poor people subsidize housing for the rich. They also do this by spreading out the cost of police and fire protection, which is concentrated in wealthy neighborhoods.

If we removed ourselves from the Middle East, most of our international problems would disappear, including, probably the threat of terrorism. Those people have shown the world that they’re prepared to tackle their own problems. “Supervision”, as such, should be tackled by their neighbors (Europe) through the United Nations, as has been done to some extent in the recent crises.

If we want to get serious about our world and the future, we could significantly reduce income taxes and replace the revenue with hefty carbon taxes to accelerate our rehab from an oil dependency which will end one way or another with symptoms of paroxysm and withdrawal. We could legalize drugs, which would empty out our prisons, cut police budgets by probably 50% and shatter the market for drugs which fuels violence, cartels and revolution all over the world. Tax the drugs, like alcohol, to fund free rehab for all, as well as general budgets.

I hope these ideas are specific enough, Mr. Paulson. While relatively simple, they would require great political leadership, and, unfortunately, cooperation among our disgusting legislative branch (whose dysfunction is backed up by an out-of-control, politically partisan Supreme Court!)

You call yourself a conservative, and I see elements of that in your letter. Yet you appear to support, or at least endorse The Republican Party. I (an ex-Republican) can find nothing conservative about that party. They are radicals by almost any standard…unless you call jingoism and gun-happy Bible-thumping “conservative.” I do not believe for one second that the Republican establishment cares one whim about the social agenda that they impose upon society, even encouraging anarchism, as we’ve seen alarmingly in recent assassinations. They use this “social agenda” to manipulate people into supporting their cause---and get them elected. The absolute worst thing that could possibly happen to the Republican Party (aside from the election of Sarah Palin or “The Donald”) is repeal of Roe vs. Wade. This would cause a cataclysm of revolt that would break up the Supreme Court and bring the party to an end. You say you endorse “freedom;” how could you possibly balance that with an endorsement of the Republican Party social agenda?

As far as the “too big to fail” scenario, I agree with you completely. The financial services sector is a leach on our society. They contribute nothing, only re-allocating resources from the poor to those who can afford their services. This industry fuels the disintegration of our democracy by bloating the disparity in income that we now see, all the while stealing our money with fat salaries, bonuses and stock options. Our recent financial disaster was caused by the investment houses with the introduction of such instruments as “credit default swaps” and “co-lateralized debt obligations,” which were nothing but smoke and an excuse for these crooks to pile up huge sales commissions. They backed that up by rating “sub-prime” mortgages AAA. If Moodys, Standard and Poors, etc. had rated these instruments correctly as “D”, the bubble would have immediately burst (and their commissions would have evaporated.) It’s a disgrace that the Obama administration hasn’t thrown the whole bunch into jail---forever. Instead, they’re now reaping bigger profits than ever---while the economy staggers.

I recognize that the social safety net poses the threat of turning into a “nanny-state.” And I agree that this is a flawed model. But poor people are looking at some pretty bleak prospects. “The American Dream” is the “possibility” that any of us might be able to lift themselves from poverty to prosperity. Poor kids in our ghettos right now see the drug culture as the only possibility of escape. This is an extremely frightening outlook, (which could be eliminated by my proposal to legalize drugs.) It is still possible for some to escape the yoke of poverty and despair, but “some” is realistically a staggeringly low percentage. Until we make serious investments in quality public education for all, and adjust our economy to produce quality employment in new industries (like energy production, for example), we will be looking down the barrel of social decay and eventual anarchy, which will be well armed by the plentiful supply of guns provided by The Republican Party. Good luck.

Sincerely, Mark Robbins

Mark,

You can have your theories but the numbers don't lie. Lowering taxes increased federal revenue under Reagan. It doubled. Unfortunately, spending went up even further. Reagan fell for a Democrat promise of cutting the budget $3 for every $1 of tax increases he agreed to. He joined them and increased taxes once, and they never made the cuts.

“It would be more accurate to talk about the ‘Gingrich boom’ and the ‘Pelosi collapse,’ than to rant so endlessly about the ‘Clinton boom’ and the ‘Bush collapse.’ Official U.S. government figures show that the two presidents each experienced decisive turning points that shifted the fiscal fate of the nation when voters in midterm elections rejected the party in power. In Clinton's case, the ‘Republican Revolution’ of 1994 saved his floundering presidency and brought about his reputation for savvy financial management. For George W. Bush, however, the 2006 triumph of Pelosi's Democrats (based largely on Iraq war disillusionment) led straight to disaster, turning a president with a solid economic record into a symbol of catastrophic collapse.” Michael Medved, “GOP vs. Dems: Who's Best For the Economy?”

Gingrich Boom

Average unemployment went from 6.5% to and average of 4.77%

The federal deficit average went from 3.35% of GDP to an average of less than zero with surpluses from 1998 to 2001.

Pelosi Collapse

Average unemployment went from 5.29% to and average of 6.57% (Now 9.6%).

The federal deficit average went from 1.91% of GDP to 4.74% in next two years (Now 10.27%).

The Bush tax cuts helped us bounce back from 9/11. YES, Republicans added to the spending problems and deserve some of the blame, but the Pelosi spending and uncertainty killed the economic growth that still languishes.

Ah, good conversation, but not worth continuing. We both (sic) disagree. That makes America what it is...free to find its way with some conflict. Thank God and our founding fathers that we have the freedom to do so.

Enjoy your (sic) President, I have a feeling that he will be a one-term president. Then again, others may prove me wrong. There are enough employees and people dependent on government who will be fooled into voting for the gravy train to continue. But the true taxpayers have had enough. They are MOTIVATED!

Have a good weekend.

Terry

Thanks, Terry.

Looks like you get the last word, although "numbers" are like citing the Bible: "seek and ye shall find." (I suppose these come straight from The Heritage Foundation.) Seems like all we have to do is eliminate taxes altogether and the government would have so much money they couldn't spend it. The bottom line is that most of us believe what we want to believe. I've enjoyed the conversation. Good Luck....Oh, which Republican hopeful do think could 1) get nominated and 2) get elected? ….

MR