Making Money Now
I had a boss, years ago, whose favorite saying was “Doing something is always better than doing nothing.” That was effective in some cases, especially in a manufacturing environment where a down line is always far worse than a crippled one. And while it might have been used successfully more often than not, it was not fool proof; making bad widgets and passing off production line blunders to the unsuspecting end-user was not a really good business model-one tends to shrink their customer base when they make a habit out of such wrecklessness.
Speaking of wrecklessness, it should be noted that our President (and the ideology that drives the party over which he presides) appears to be suffering from the same disease my old boss did. And while I am tempted to just poke a pointy stick at him and mock his colleagues, I think time would be better spent here taking a closer look at what he has in mind for us in dealing with the mess that Congress has been making for a very long time now; looking for ways to spend and worrying about how to fund them after the fact.
I understand the sensation Politicians must feel when they get elected, sworn in, and set loose in the halls of Congress to do “the People’s business” because it is the righteousness of their principles that inspires them to pursue public service in the first place. Of course, magazine covers, tv appearances, and newspaper headlines are the heady things that keep them motivated (and keep them looking for ever-new ways to justify their re-election bids) and who can blame them? The problem, however, presents itself when those they intended to serve become those upon whom they must prey in the name of their political survival.
We certainly have big problems, and they certainly need attention. And we send our elected officials to Washington to work together do just that. But, as a dear friend and colleague pointed out to me recently, “the problem is not that the political system is unable to deal with the issue(s). The problem is that enough politicians are not willing to deal with the issue(s).”
Fundamentally speaking, Liberals believe Government is the answer to our big problems and Conservatives believe Government (in super-large doses at least) is the cause of them. That no bridge can be built to span this ideological chasm is reflected by the partisan rancor we see every few years as one side takes the majority, squanders it, and hands it back to the other. Our President finds himself at risk of squandering his own majority these days and now frantically searches for ways to appease the growing unrest amongst the American People over real and perceived crises he may (or may NOT) be to blame for.
If you believe President Obama, our biggest issue is that we don’t have enough revenue coming in to the Fed coffers to solve all of these big problems Americans are facing these days. He sees this as a problem requiring new and ever-more creative ways to derive more money from us in order to pay for the things he and his majority have convinced themselves we cannot live without. No grocery list is needed here, but suffice it to say that should our Politicians have to manage their personal checkbooks the way this economy has forced the every-day American to manage his/her own, they would likely not align themselves with some of the loftier goals this Administration has in mind:
“Our real problem is not the spike in spending last year, or the lost, even the lost revenues last year, as significant as those are,” he said. “The real problem has to do with the fact that there is a just a mismatch between the amount of money coming in and the amount of money going out. And that is going to require some big, tough choices that, so far, the political system has been unable to deal with.”
The Obama administration’s budget already takes that route with its proposed $970 billion tax increase over the next decade on Americans earning more than $200,000 a year, largely by not extending former President George W. Bush’s tax cuts for the wealthy beyond 2010.
Even with those revenues — and a proposed three-year freeze on some discretionary spending by the government — the administration still projects a deficit of $752 billion in 2015, equivalent to 3.9 percent of gross domestic product.
Analysts say that middle-class taxes will need to be increased because the government can’t raise enough money from the wealthy alone to close the budget gap. “It’s just not possible to get the revenue you need only from this group,” said Joel Slemrod, director of the Office of Tax Policy Research at the University of Michigan.
This articulates Obama’s conundrum very succinctly, and it’s clear he doesn’t see the flip side of the argument. Rather than pursuing lofty goals and grand ambitions…and looking at how low in the wage-earner classes he can safely go (politically) to increase their tax burdens in order to fund them… Obama could be looking at ways to stop spending (like “we, the People” have been forced to do). It’s a tough choice to be sure, but not an unreasonably requested one.
He could be looking at which of his agenda line items might be eligible for the back burner until more of us are working and contributing the broader share of taxes we’d have to offer if we were collecting a standard paycheck (as opposed to the one from our local unemployment offices). He could be looking, along with his colleagues on the left, at cuts beyond discretionary spending. But he’s not.
And they are not. They promised too many freebies to too many constituents and for some reason believe delivering on them is more important to their political survival than working to improve the overall fiscal health of the general population.
Sometimes the simultaneously easiest and most difficult choice a person can make is to just STOP; just do nothing. Take a step back, assess, recalibrate and restart. We can wait on health care reform. We can wait on climate change. We can wait on a whole host of issues that, while noble and just, do not serve the immediate need of the people on whom our elected officials rely for their daily sustenance…and continued reign in office.
Many of us out here in the hinterland long for the bygone days of politicians who consider themselves having had a good day when they prevent legislative evil versus having voted to make it bearably evil. Choosing to do nothing at all (for a brief moment), in this case, might just be better than doing something.
There has recently been a slew of conservative voices arguing that the Bush tax cuts for the wealthy should be extended because $250,000 in yearly income is really not that much money. For instance, Fox News’ Martha MacCallum said “people who make $250,000 — in some parts of this country, they may not consider themselves rich,” while CNN’s Karin Chetry added that “some would argue that in some parts of the country that is middle class.” Republican National Committee Chairman Michael Steele even said “trust me, after taxes, a million dollars is not a lot of money.”
But this line of reasoning is no longer the sole property of conservative commentators. Rep. Mike McMahon (D-NY), who is one of the House Democrats joining the charge to extend all of the Bush cuts, had this to say:
“I think it is a political liability because it’s a policy right now for the economy and could have a bad impact on jobs,” said McMahon…“A working couple making $250,000 is barely making ends meet,” he said, adding, “If you have a partnership or an S. Corporation you are definitely affected… As professionals or shop owners or restaurant owners, you get hammered.”
Now, to be fair, McMahon’s district — the New York 13 — encompasses parts of Staten Island, where there are sure to be some well-off families. It’s also New York City, so the cost-of-living is one of the highest around. But still, median income in the district is $60,137. So families in his district that are making $250,000 are still doing very well.
In fact, as Daniel Gross pointed out, “$250,000 puts you in pretty fancy company, especially after the collective pratfall the economy took in 2008″:
The Census Bureau last summer reported that real median household income was $50,303 in 2008, down 3.6 percent from 2007. It’s likely that figure fell further in 2009. So a household that’s making $250,000 today is making about five times the median…And even if you look at the wealthiest metropolitan areas — Washington ($85,236), San Francisco ($76,068), Boston ($70,334), and New York ($63,957) — a quarter of a million dollars a year dwarfs the median income.
Less than 2 percent of the country makes more than $250,000, and you literally need to begin looking at individual neighborhoods to find parts of the country where that much money is not going to cut it.
The point here is not to demonize the rich, but to note that, in a time of economic hardship and worrying long-term deficits, we have to look at raising revenue from somewhere, and letting the Bush tax cuts expire for the very wealthiest makes sense. In fact, as the Center on Budget and Policy Priorities found, allowing these cuts to expire “will avert $826 billion in added deficits and debt over the next ten years.”
And as for McMahon’s charge that small business owners will be affected, the numbers haven’t changed: less than 3 percent of Americans who collect any business income at all (whether from a small businesses or a corporation) will see their taxes affected by the expiration of the Bush tax cuts.
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