Are we a plutocracy?
Plutocracy : noun, government by the wealthy; an elite or ruling class whose power drives from their wealth
As a nation we are living beyond our means. The current national debt (how much the government has borrowed and owes) is somewhere in the vicinity of $13.4 trillion dollars. I have no idea how many times to the moon and back 13 trillion dollars would amount to; suffice it to say it is a figure that is beyond the comprehension of most Americans. The national deficit (spending more money on an annual basis than it takes in) has been constant since 1969. If you and I were to run our households in this manner it wouldn’t be too long before we were in bankruptcy. As recent demonstrations attest, he fiscal state of our government is front and center in the 2010 mid – term election.
In 2001 & 2003 the Bush Administration passed tax cuts across the board for US citizens. The previous tax code under President Clinton started at 15% for the lowest wage earners and was tiered up to 39.6% for the wealthiest. The Bush tax breaks moved the taxes down on a sliding scale to 10% for the lowest income earners to 35% for the wealthiest in our nation. These tax cuts provided taxpayers $1.7 trillion in additional income through 2008, money that otherwise would have gone to pay for government services and debt reduction. Unless the Bush tax cut is reinstated it will expire at year-end. The question our federal lawmakers face is should we let the tax breaks expire, extend them for two years or make them permanent. How our elected officials choose to vote on this matter will affect each citizen and the long-term health of our nation.
President Obama has indicated he wants to keep the tax cuts in place for the 96% of citizens earning less than $200,000 as an individual or $250,000 for a household. Taxes for 4 % of the population defined as rich would increase. If implemented, the net gain over a ten-year period would amount to $700 billion of additional tax revenue. To set this in an annual context, $700 billion is what we spend on defense. This amounts to $1.9 billion spent 24 hours.
Economists Thomas Piketty and Emmanuel Saez analyzed income between 2002 & 2007. In this period 99% of Americans saw their income grow 1.3 % per year, which is below the annual cost of living increase of 2.8%. For the remaining 1% of our population, the wealthiest, their income increased 10% a year. The Bush tax cuts favored high-income households who saw an increase in real dollar terms and also as a percentage of income. As a result the top 1 % of our population captures 23.5 % of our nation’s total income. Contrast this with the 13.2% of Americans living in poverty who earn less than 1% of our nation’s income. If these tax cuts were such a stimulus to our economy why are we mired in a recession? Obviously this is a very complex equation, yet the tax cuts have not panned out to the economic panacea they were promised to be.
In 2008 the average net worth of our Senators was $13.9 million. Congress checked in at $4.6 million. Increasing the tax 4.6% on the wealthiest (as it was in the 90s) isn’t going to put our elected officials and the wealthiest in the poor house. The additional revenue from those who have benefited most from our free market system will nudge our government closer to fiscal responsibility.
The logical way towards a balanced budget and reasonable debt is to decrease expenditures and increase revenue. Will our elected officials have the courage to raise their own taxes?