As I recently wrote I’m not feeling good about my family’s tax bill this year. Here are some further thoughts on the matter as my checks go out in the mail.
1. All sense of fairness has been thrown out the window. The fact that Goldman Sachs, the Fed Chairman, CEOs, legislators (I’m looking at you Barney Frank and Chris Dodd) who oversaw the great financial calamity since the Great Depression have gone unpunished and are still in power would mystify the thugs of Tammany Hall. These people profited from the bubble they created and worse, from the tax payer funded bailout of the mess afterward. The problem is that they didn’t really clean up the mess; they just pushed it out a couple of years by kicking it into the future. Congress even made the situation worse by hiding the pain from the taxpayer. Instead of making the cuts necessary to pay for the bailout and causing the immediate taxpayer pain, they put it on America’s “credit card”: the national debt.
Had the American taxpayer felt the pain of the bailout directly, s/he would not have allowed Bernanke, Geithner, and the partners of Goldman Sachs to avoid paying for their mistakes. The bailout would have become like an economic 9-11, and the calls for justice would have been just as great as they were in Sept. 2001 when America couldn’t seem to get Marines to Afghanistan fast enough to find al Qaeda and exact revenge for the pain of 9-11. But Congress short-circuited this. It just added the sum to the debt, while promising to hold hearings into the matter. In the end nothing changed, and the people who weakened the world’s largest economy remain in positions of power and wealth – where they continue to do damage to the economy.
2. The term American taxpayer has become an archaic expression. It seems that taxes are for the little people judging by how large American corporations like GE don’t pay any, and Treasury Secretary Geithner and now Attorney General Eric Holder can’t pay the full amount owed. Meanwhile 47% of Americans paid no income tax at all – not even a token amount – while the super-rich saw their tax rates decline as a percent of their income.
So we have a system whereby the wealthiest game the system to avoid taxes and half of the population pays no tax at all. This leaves a large percentage of Americans bearing the weight of a state showering largess on the economic rungs above as well as below them. In fairness the majority of that 47% probably doesn’t understand that they aren’t paying any taxes at all. The details of withholding aren’t easy to understand, and most people overpay. So they see a hit on their checks every week – but the difference between their gross and take home pay also includes social insurance taxes like Medicaid/Medicare taxes, Social Security. This system gives the impression of fairness but that is only on the surface.
The IRS estimates that calculating and complying with the tax code is a process that consumes 6.1 billion hours. That is because the system isn’t about spreading the tax burden across all citizens equally; over the past century the federal income tax system has been hijacked to become a tool of social policy. Then that hijacking was in turn shanghaied by lobbyists to protect particular constituencies or businesses. Is it any wonder that something that costs billions of man hours can’t fund the government properly yet still manages to upset everyone – including the 47% of people not paying federal taxes?
3. S&P “downgrading” US debt. A good explanation is here.
What’s interesting to me is that the S&P thinks that politics will prevent meaningful deficit reduction before the 2012 election. Not a bad idea considering how low both parties think of the American Public. I think that the Public could handle the truth if the messenger was credible. Donald Trump isn’t that messenger although his frank demeanor could force another Republican to gather up his courage and talk in specifics – in contrast to Obama’s soaring rhetoric that means nothing.
The downgrade is bad news for the Obama and the Left. Krugman and other hard core Lefties have been calling for MORE deficit spending. Even one of my good friends threw Cheney’s quote “Deficits don’t matter” at me last week; this move by S&P proves they do (Cheney was wrong then and is even more wrong today). I think that Obama himself sides with these lefties and has only been pulled to the right to pay lip service to the deficit by his political advisers. This downgrade undermines their resistance and shifts the political ground towards the Tea Partiers and others who have been warning about rising deficits for years (since the “W” administration – there was a civil war in the Republican party against the expansion of government under his watch that was missed by the Left and the mainstream media infatuated with Iraq.)
The S&P is another tool of our banker overlords. All the ratings agencies were too happy to grant AAA ratings to toxic waste (mortgage-backed CDO’s) and should have paid a price for their failure. They didn’t, and now they are rattling the chains of the politicians again. What is their motive? Probably to prevent the government from inflating away its debt by more Qualitative Easing (QE3 had been bandied about by Krugman et al). I’m not sure though; I don’t believe in conspiracies as a rule but given the fact that the financial wizards who caused the meltdown haven’t paid any sort of price for their malfeasance makes open minded about a conspiracy here.
UPDATE: Here is a harsher take (and I’m tired of the comparisons to Rome):
Simply put, it is this: those responsible for the nation’s financial crisis and its catastrophic after-effects are not paying for the consequences of their actions—it is the innocent, those who were not responsible, who are paying the price.