Two More Debt Ceiling Facepalms

1.  If one didn't know any better, one might conclude that our elected officials don't care whatsoever about the American people.  I know it may sound shocking, but I have this sneaking suspicion.  As evidence, I give you this Washington Post-ABC poll which asked people, among other things, if they would oppose or support certain items in an effort to reduce the national debt.  Here's a summary:

Cut spending on Medicaid:  26% support, 72% oppose

Cut military spending:  43% support, 56% oppose

Raising taxes on Americans earning over $250,000 a year:  72% support, 27% oppose

Gradually raising Medicare age from 65 to 67:  46% support, 54% oppose

Changing the way SS benefits are calculated so they increase slower:  42% support, 53% oppose

Raising taxes on oil and gas companies:  59% support, 39% oppose

Means testing Medicare:  61% support, 36% oppose

Removing SS tax income cap currently at $107,000:  66% support, 33% oppose

Raising taxes on hedge fund managers (essentially changing capital gains taxes to income taxes):  64% support, 25% oppose

The Debt Ceiling Drama Makes Everyone Look Incompetent

The debt ceiling stuff makes me sick to my stomach.  Despite the fact that the warnings about default are clear and dire, our elected leaders seem to be only interested in political showmanship and not actually solving the problem.

On the one hand you have the Republicans who are the party much more responsible for our unwieldy debt, refusing to raise the debt ceiling unless all of their suddenly austere measures are met without any inkling of desire to compromise on any issue.  They are the major cause of the problem, are completely hypocritical about government debt and size now that they believe it is politically advantageous, and are unwilling to negotiate like responsible adults to avoid the catastrophe they precipitated.  They are more interested, it seems, in pleasing their corporate overlords than doing what is right for the American people.  Here is one graph, among many many many, that illustrates the level to which Republicans are at fault for the debt:

Nearly Half of Americans Aren't Paying Income Taxes: Bad But Maybe Not in the Way You Suppose

It has recently exploded all over the internet that nearly half of American households do not pay income taxes.  There are enough deductions and credits for families making around $50,000 and less to avoid the income tax completely, though they still are paying federal payroll taxes, sales taxes, property taxes, and others.

While some see this as a broken tax system, I see it as a broken economy.  While some gripe that half of Americans aren't pulling their weight, I see it as nearly half of Americans are not making enough money to pay income taxes.  They live below the line where we have decided that a person is only making enough to cover basic expenses and should not bear the weight of income taxes on top of it.  Instead of trying to figure out how to get those people to start paying income taxes at their current salary, lets instead focus on how to get these people making enough money to be able to afford taxes after their basic needs are met.

State of the Union Highlights

I was at scouts last night and couldn't watch the State of the Union Address, but as I've browsed through it there are several items that I believe are worth highlighting.  The theme was Win the Future, which I guess is the new Hope and Change.  In both cases, President Obama wants to exude optimism, which is something, as I've said before, we dearly lack around here.  So with optimism in mind, here are a few things worth looking at.

As some of you know, I'm a proud and moralistic environmentalist, so I appreciated the renewed emphasis on renewable energy:

Progressive Taxation

A recent poll showed that over 60 percent of Americans think that the government should tax the rich in an effort to reduce the budget deficit.  Polls also consistently found that a majority of Americans wanted the Bush-era tax cuts for the wealthy to expire.  Conservatives, inexplicably, won that battle in their larger war against progressive taxation.

So with all the recent talk about taxes, I wanted to try to explain why liberals, and a majority of Americans generally, support a progressive tax scheme.  A progressive tax is one where the tax rate increases with taxable income.  So a person making a smaller salary pays a smaller percentage in taxes than a person making a larger salary.  Currently in the US, we have a progressive federal income tax that ranges from 10% for the lowest income earners to 35% for the highest marginal rates.

Mainstream conservatives typically oppose a progressive tax for moral reasons.  They argue that it is unfair to tax the wealthy at higher rates just because they have a lot of money, that it is a form of class welfare, that the poor are getting off easy, and that it disincentivizes hard work.  These arguments miss the point.

Rant Time: Pres. Obama is No Liberal

And he's certainly no socialist, despite the popular conservative argument otherwise.  Here's what we have seen so far:

1. He gave away the public option before the debate even began.  Health care reform ended up being a huge win for the health care industry which will soon be flooded with new customers thanks to the mandate.
2. The stimulus was too small and included too many tax cuts for corporations at the Republicans' behest.
3. He has failed to follow up on, pursue, and prosecute Bush Administration illegal activities such as torture and illegal wiretapping.
4. The war in Afghanistan, which pretty much everyone agrees we can't "win" militarily, has been escalated instead of ended.
5. The financial reform bill was watered down in the face of the powerful financial lobby to the point of likely being completely ineffectual to prevent the sort of the economic meltdown we are currently working our way out of, over two years later and with no end in sight.
6. He is now backing down from his stance of letting the tax cuts for the super-wealthy expire and extending the tax cuts for the vast majority of Americans permanently.
7. And now, reports are that the administration is stepping up covert attacks in Yemen.

Ending the Bush Tax Cuts for the Wealthy

The Bush tax cuts are set to expire at the beginning of the year and the bombs are starting to fall in the political war over this issue.  Democrats want to let them expire for those making over $250,000 while extending them for everyone else.  Republicans want to extend them for everyone.  So, essentially, the argument is whether or not to extend the tax cuts for the very wealthy.  The two top marginal tax rates would go from 33% and 35% to 36% and 39.6%, respectively.

A second area of disagreement also has to do with taxing the wealthy, this time in the form of capital gains, which are disproportionally slanted towards the rich.  Those rates would go from 15% to 20%, and eventually to 23.8%.

Read up on the issues from both sides here, here, here, and here.  Another excellent resource is the Center on Budget and Policy Priorities, which lays out the argument for how letting the tax cuts expire for the wealthy and extending them for everyone else will reduce the deficit ($300 billion per year), almost universally benefit small businesses, and spur the economy and job growth.

Lets Take the Government Spending Rhetoric Down a Notch

In the wake of the recent Tea Party Convention, I infiltrated the Tea Party Nation website by obtaining a username and password. My life may or may not be in danger if I am found. You have to be a member to poke around and see what they are up to. I've made my feelings known before, and I renew those sentiments now, that I will not sully the good name of the original Boston Tea Party with this movement. I fully support the current government protesters' right to organize and protest, but don't equate it with the original Boston Tea Party, they are not similar.

One of the things that I don't understand about the government protesters is how they were overwhelmingly likely to support huge government expenditures to rebuild a foreign, non-threatening nation, but protest like mad against government expenditures to rebuilt our own nation in the worst economic collapse since the Great Depression. The Iraq War has now cost over $700 billion, with much of the cost deferred to where the total cost will end up in the trillions. And yet when a similar amount is spent by our government to shore up the financial system, assist the millions that have lost their jobs, and spur new growth, Sarah Palin has to show up and read off her hand that government is destroying our liberties.

It may surprise you to learn, though, that I am concerned about the spending and debt of the federal government. I don't think this is an ideological concern, I think most Americans are at least uncomfortable with our national debt. Some Americans are downright angry about it, which I don't understand, but I think it is important to understand the problem and react appropriately. Unfortunately, the government protesters, with all the vitriol and hyperbole, have made it difficult to discuss the issue intelligently.

And as far as I'm concerned, here is the problem: Americans don't want to pay for what we demand. As a result, politicians from both parties promise the benefits of government without requiring the requisite sacrifices from the public. This is no shocking revelation, of course, but consider the following facts, taken from a Washington Post article from last year:

• The average family pays only nine percent of its income to taxes (down significantly from previous decades).
• The middle fifth of taxpayers pay only three percent of their income to taxes (again, down significantly).
• A majority of Americans considers their tax burden either too low or about right.
• About a third of all taxpayers pay no taxes at all (excluding Social Security and Medicare).

Here is a nifty image from wikipedia which shows the marginal income tax rate over the years, demonstrating that it is about at its lowest since the years leading up to the Great Depression.

Also note that, contrary to popular belief, corporations in America actually pay less taxes than in the average developed country (average 16.1%, US 13.4%), largely due a graduated tax rate and generous business deductions.

I am among the many Americans that want health care insurance for all Americans, programs to help low and middle income Americans pay for college, Social Security for low income retirees, a safety net for the poor that cannot find any work or cannot find work that pays for the basic necessities of life, etc. I'm a liberal, therefore I want programs that help level the playing field. That is not to say that everyone should make the same amount of money or that we should pay for people to be lazy, but that everyone should have equal opportunity to get ahead if they so desire.

Remember, as we've pointed out here many times in the past, only a very small, minuscule fraction of Americans are intentionally lazy and living off the government for years on end. Most Americans are hard-working and have self-respect and pride, and try their best to survive on their own. But the system (i.e. market) is set up for poor people to become more poor, no matter how hard-working or talented they are, and for the rich to become more rich, no matter how lazy and incompetent they are. The rags to riches story is a heart-warming exception to the rule. So we turn to the government to make some new rules which are more equitable.

But we stopped paying for it. We give corporations huge tax breaks and promise the middle and upper classes lower and lower taxes until they are hardly paying any at all. And then we borrow money to pay for the things we want. So we have two choices to lower the debt: we eliminate those playing-field-leveling programs or we require more taxes from Americans.

Liberals and conservatives alike can agree that we should require more accountability and efficiency from the federal government. Pres. Obama has said that he is going through the government now and looking for ineffective programs to eliminate, and I hope that this is true. There should absolutely be pressure on him, once the economy is righted, to balance the budget and eliminate waste, like Pres. Clinton did. But Pres. Obama is right that we first have to stabilize the economy, and that requires spending. Then, in prosperous economic times we should have every expectation that government will scale back its spending, again, like what Pres. Clinton did.

We shouldn't let the government protesters hijack a meaningful and important conversation about government spending and deficits by injecting vitriol and absurd arguments about how government spending equals a lack of personal liberties. Everyone can agree that fiscal responsibility is best in the long term, but right now is the time for the government to build our country up again after a terrible economic disaster. If we are committed to doing it in Iraq and Afghanistan, we should be committed to doing it in America.

Liberalism and Agency

Of all the reasons given for why a person can't be a good Mormon and liberal, the one used most often is that liberalism takes away free agency. This is the one conservative Mormon activists tend to favor. I attempted to refute this argument in my post "Agency and Democracy," wherein I argued that as long as we live in a democracy where we are allowed to vote, we retain our agency. I also pointed out that conservatives have taken a lot of my money and used it for things with which I disagreed, such as torture, the Iraq War, illegal wiretaps, and tax cuts for the wealthy, thereby highlighting the hypocrisy of this accusation.

I continue to encounter the liberals-as-anti-agency accusation, though, and so have thought a little more about it and want to take a different angle. The conservative Mormon activist argument, by the way, is that liberals want to take away our agency by raising taxes to pay for government programs. The person, then, has less agency because she has less money in the bank.

This argument says way more about the conservatives that put it forward than the liberals they are accusing. What it says is that they only think of agency in economic terms, whereas the idea of agency in scriptures and religion is in entirely clothed moral terms. Our eternal progress is dependent on our using our agency to make good decisions morally, not good decisions with our temporal wealth. Do we treat our families well? Do we honor our covenants? Do we live Christ-like lives? The use of our agency in these important areas has nothing to do with taxes, government regulation, or any other temporal, man-made, economic consideration.

Under a system where capitalism is regulated in order to level the playing field just enough to get people out of poverty and have health security, we are still able to exercise our agency completely, fully, unfettered. We are still able to make those most important decisions that will enable us to receive the gift of eternal life.

To suggest that liberals deprive individuals of the full range of their free agency based purely on economic motives reveals, in my mind, a fundamental misunderstanding of the principle of agency and the very purpose of this life. It is time we (including myself, of course) spent less time worried about our money and temporal possessions and more time worried about living Christ-centered lives.

I have no problem with an argument about taxes, social programs, and government regulation in terms of public policy, there is legitimate room for debate there, but I cannot see merit in opposing liberal ideology in terms of deprivation of free agency.

A National Sales Tax

I tend to keep out of tax reform debates because, frankly, I'm not smart enough to keep pace. I used to brag about how I haven't taken a math class since high school, but now that my kids are getting to be school-aged I am beginning to fret about when, exactly, they will surpass me. I'm thinking I have until junior high before I have to start learning (or re-learning) along with them to help out with homework.

So I'd heard of the proposal for a national sales tax, but didn't think too much about it, until I recently heard it boiled down to this: "We should tax consumption, not productivity." Stated that way, it seemed incredibly sensible to me, so I decided to dig a little deeper. You can play along by Googling consumption tax or national sales tax.

Basically, because that's the way my mind has to work in this area, a national sales tax would eliminate the income tax, so you would get the full amount of money you earn, and replace it with a tax on new goods and services purchased.

One of my pet peeves with our society is how consumption-oriented it is. We have to have the bigger house (with higher energy bills), we have to buy the bigger car (with lower fuel efficiency), we feel like our self-worth is measured by possessions and owning more and more. Wouldn't we be better off learning how to live more efficiently and focusing more on the simple pleasures of life? And even though I am a liberal and, as the stereotype goes, love big government, I think we all would love a more efficient government.

A national sales tax would seem to be a step toward both. First, it would likely encourage saving and investment over consumption. Here are some quotes from modern-day prophets on staying out of debt and living within our means:

President Heber J. Grant: “From my earliest recollections, from the days of Brigham Young until now, I have listened to men standing in the pulpit . . . urging the people not to run into debt; and I believe that the great majority of all our troubles today is caused through the failure to carry out that counsel.”

President Ezra Taft Benson: “Do not leave yourself or your family unprotected against financial storms. . . Build up savings.”

President Harold B. Lee: “Not only should we teach men to get out of debt but we should teach them likewise to stay out of debt.”

President Gordon B. Hinckley: “Many of our people are living on the very edge of their incomes. In fact, some are living on borrowings. . . I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.”

Americans, as a whole, spend more than they earn. Bankruptcies continue to climb. Very few people had created a safety-net for the current economic crisis (which I have heard many refer to as the Great Recession). A tax on consumption (ranging anywhere from 15-30%, usually pegged at about 23%) might encourage more savings, thus creating a more stable society and economy. It would also encourage investment, leading to greater capitalization of business. Increased savings would reduce stress, interest payments, and becoming beholden to banks.

Second, under the current income tax system, individuals and corporations spend hundreds of billions of dollars every year just complying with the income tax requirements. The code is so long and so complicated that it is astonishing to me that the system even works. A national sales tax would virtually eliminate the tax code bureaucracy, eliminate the need to ever file a tax return again, and some have even suggested it would eliminate the need for the IRS completely under certain conditions.

The downside, and there are always downsides, is that it is inherently regressive. The poor must spend nearly every penny they earn in the marketplace, whereas the rich spend an increasingly small amount of their wealth on goods and services. This means that the poor would spend a larger percent of their money on taxes than the wealthy, which is the opposite of what our income tax has always been.

This alone is enough to torpedo the idea, for me and most Americans, but there are ways around it. The most common is the annual or monthly prebate or rebate check which would eliminate the tax for those living below the poverty level, and lessen it for those making otherwise low incomes. Another idea is to eliminate the tax on essentials, like food and medical expenses, and/or create a higher tax on luxury items.

So I like it because of its simplicity and its propensity to encourage Americans to save and invest. I am leery because it is potentially very oppressive for the poor. I am by no means completely sold on it, but it is an interesting way to look at tax reform. Thoughts?

The Great 2009 Tea Parties

I am going to fight every urge in my body and refrain from turning the subject of today's Tax Day Tea Parties into a verb. I'm not going to do it as it would be crude and puerile. I will, however, point out the ridiculousness and offensiveness of it all.

As of 3:00 pm MDT, KSL wins the award for most mind-numbing coverage in Utah. The story starts off on the right foot by stating, correctly, that as part of the stimulus the vast majority of Americans, 95%, got a tax cut. Then the proverbial train comes off the proverbial tracks:

Not everyone will be seeing those tax cuts though. People making more than
a quarter of a million dollars will be seeing a tax increase, and that is
leading to a number of protests across the country, including several here in
Utah.

Now, either KSL has completely lost its sanity, or the tea protesters have. People would really go out of their way to organize little tea parties all over the country to decry the tax increase for people making a quarter of a million dollars or more? I would be astonished if not every single one of those protesters got a tax cut. So the jist is: get a tax cut, protest against the one who gave you the tax cut. Brilliant. This simply is too good to be true for Democrats.

One such protest is happening in Salt Lake. It's just like the Boston Tea
Party more than 235 years ago. They're protesting taxes, but these people are
upset with the Obama administration.

It is so not like the Boston Tea Party 235 years ago. It is, in fact, diametrically opposed to the Boston Tea Party 235 years ago. The Boston Tea Party was a protest mainly against taxation without representation. The colonists believed it was their right to be taxed only by elected representatives, not the British Parliament which did not allow representation from America. Today tea partiers have no such qualms.

They just don't like President Obama. Which is fine, I didn't like Pres. Bush. They have every right to protest, that is the American way. In fact, we should encourage more peaceful protests to raise public awareness on certain important issues. But please don't insult us by equating today's highly organized, weak turn-out* protests with one of the most iconic patriotic acts in American history.

*I'm fully aware that the pathetic turn-out in Utah is at least partly due to the horrendous weather. I like to think it was a higher power crying over the lameness of the event, but it could just be dumb luck. But turn-out was weak all over the country, so maybe it was just a contrived idea that failed to meet impossibly high standards.