Ugg, Math Sucks

Let's, once again, talk about the mind-numbingly simple to understand and hard to fix problem of budget deficits. The federal government budget deficit is a function of two very easy to understand factors. One is income. The government gets income mostly from taxes and selling certain good and services. The other is spending. Spending is further divided into two catagories, non-discretionary (that's spending that is required by law), and discretionary (that's spending that is not required by law).


Now, for the sake of clarity, let's agree on one simple concept. If you cut taxes, without reducing spending, that reduces revenue to the government, thereby increasing the deficit. If you increase spending, without increasing taxes, that also increases the deficit. There are those who will argue that either of those scenarios are not true long-term because either may lead to economic growth. When we have job growth, we have more folks paying taxes. That new revenue obviously shrinks the deficit, but unless you are capable of seeing into the future, you can't guarantee that.

Certain policies carry greater odds of increasing revenue than others. For example, if the government hired 100 workers to work on building a road, those workers would cost the government money (even as they pay taxes), but the purchase of equipment and supplies to build the road reaches far out into the economy, possibly spurring growth. Those 100 workers having a paycheck would presumably mean that they would buy things, possibly further spurring growth. This has a reasonable chance of growing the economy because there are several mechanisms by which it could work.

The theory behind simply cutting taxes is that citizens with more dollars in their pocket will spend that money, encouraging growth. So far, we have seen that people are using that money more to pay down debt. Furthermore, because this doesn't directly put more people to work, demand doesn't increase for private companies. If demand doesn't increase, there is no reason to hire more workers. So, while simply cutting taxes could work to spur economic growth, it has fewer mechanisms to achieve that goal.

Please, please note that both of these policies INCREASE the deficit. Neither of them cut the deficit. A person advocating more spending and a person advocating more tax cuts are both advocating adding to the deficit. Let's also be clear on that.

Let's take a more simple example. In your own budget, if you take a pay cut at work (in the government's case this equates to a tax cut), you have to spend less money. If you do not, you will go into debt. Likewise, if you increase your spending, you had better increase your income or you will go into debt. We all weigh these types of choices in our lives on an almost daily basis. We also weigh long-term choices. For example, if you decide to go to college and take out loans, you want to choose a career path that allows you to make a salary that will make it possible for you to pay off that debt. However, because we can't see into the future, we have to be very careful with these types of choices. This is really no more sophisticated than a carefully crafted gamble.

Ok, so Republicans ran on a platform that included, almost exclusively, reigning in "out of control government spending". Their message was that the debt and deficit was a threat to our republic and must be addressed immediately. Fair enough. Let's take a look at some ideas put forth by new and old Republicans.

The Bush Tax Cuts

Republicans have made their number one priority extending the Bush tax cuts for all Americans. They claim that those tax cuts are necessary to spur economic growth. This is dubious at best considering we have had those cuts in place for nearly all of the 2000's and we are where we are. However, putting that aside, what will that do to the deficit? According to the Treasury Department, extending the cuts for all will ADD $3.7 trillion to the deficit over the next 10 years.

Most Democrats have suggested allowing the tax cuts to expire, which will happen January 1st if Congress fails to act, only for Americans making more than $200,000 per year or couples making more than $250,000 per year. The tax rates for those Americans would go from the current rate, 33% and 35% for the top two brackets, to the pre-Bush tax cut rates of 36% and 39.6% respectively. To be clear, we are talking about a 3% increase for the 2nd highest bracket and a 4.6% increase for the highest bracket. Extending the tax cuts for the rich accounts for $700 billion of the $3.7 trillion cited above.

So the difference between the two parties boils down to Democrats wanting to add $3 trillion to the long-term deficit by extending the tax cuts for couples making less than $250,000 and Republicans wanting to add $3.7 trillion to the long-term deficit by extending the tax cuts for all. For the sake, once again, of clarity, $3.7 trillion is not smaller than $3 trillion.

Nukes

Back in April, President Obama and Russian President Medvedev agreed on a new START treaty. President Reagan stated the negotiations for START I, which was signed by President Bush in 1991. This new treaty would require us to cut our nuclear arsenal down to a paltry 1500 nukes. I'm not sure how many times that many nukes would destroy the Earth, but it seems rather obvious that if we got to the point where we needed to use 1500 nukes, we've already lost.

Such a treaty requires 3/4 of the Senate voting yes to ratify. The Republicans are lead in this debate by Senator Jon Kyl who has stated that he will not allow this treaty to be ratified during the looming lame duck session because he wants $15 billion in additional spending to "modernize" our nuclear arsenal. Again, that's $15 billion ADDED to the deficit by the fiscally conservative republicans.

Health Care

I think it's fairly clear that Republicans would like to repeal health care. Let's also be very clear by using the Republicans' own media mouth piece, Fox News, to make a point: the health care bill will reduce the deficit, according the non-partisian Congressional Budget Office (CBO), by at least $1 billion over 5 years and "creates absolutely no deficit over that period of time." That FOX NEWS article is found here.

It isn't just the CBO with those favorable projections though. The also non-partisian Government Accountability Office (GAO) noted that the health care bill gives "notable improvement to the debt outlook if fully implemented."

So, to bring our score up to date, the Republican plan to shrink the deficit includes adding $700 billion in the form of extending the Bush tax cuts for the wealthiest Americans, spending an additional $14 billion on nukes when we already have enough to destroy the Earth...well more than once which is all that matters, and repealing the health care bill which is set to shrink the deficit by $1 billion/year in the near term, and up to $1 trillion over a decade.

Defense

The waste found in defense spending is a subject for a whole series of boring blog posts, so I'll let you do some googling yourself, but suffice to say it's a bit ridiculous. For example, the F-35 Joint Strike Fighter (an awesome piece of machinery) currently has an extra engine built for every plane. Defense Secretary Robert Gates has said that we don't need the extra engine, but Congressmen from both parties have over-ridden his request at an upfront cost to taxpayers totaling $4.2 billion.

This is just one example. For their part, some freshmen Republican Congressmen, such as Kentucky's Rand Paul, have said that reducing defense spending should be on the table. He was very quickly rebuked by the completely shameless John McCain who claims that defense spending should be untouched.

Considering the staggering costs of the Iraq and Afghanistan wars, both completely unpaid for and debt funded, in addition to the above mentioned dubious defense expenditures, surely some savings could be found in defense.

Let's be serious here folks. Republicans are the same as they've always been. They talk of being fiscally conservative, but they are not.




Note that the debt increased significantly during the Republican administrations Reagan (Mr. Fiscal Conservative), Bush 41 and 43. The debt did not increase at all as a percentage of GDP under democratic administrations Carter and Clinton. The story is yet to be written for President Obama, although it will likely rise significantly during his 1st term considering we are incurring massive tax revenue loss due to high unemployment, massive expenditures due to two rather stagnant wars, and a totally absurd bunch of proposals by Republicans.

Now, none of this is particularly hard to understand. Republicans SAY they are fiscal conservatives who care deeply about debts and deficits. They ACT by championing policies that add to that debt and those deficits. As always, even in Washington, addition makes bigger and subtraction makes smaller.

Kevlar Bullshit

Way back near the beginning of his Presidency, Barack Obama vowed to created a "deficit reduction panel." The purpose of this panel was to inject some reality into an all-to-unreal conversation. Republicans have been harping for two years on the increasing budget deficit (projected to eclipse $1 trillion for the 3rd straight year). To ensure we are on the same page here:

The "budget deficit" is simply the difference between how much money the government brings in in revenue (i.e. taxes) and how much it spends. This number starts over every fiscal year. The "national debt", on the other hand, is the sum of budget deficits over time. For example, if we had a deficit of $10 for the last 4 years, we'd have $40 in national debt. It is actually, and you better sit down, a bit higher than $40. Try not to be bothered by these large numbers though. While the nuts and bolts of fixing the problem is quite complex, understanding it is as simple as balancing your checkbook. If we spend more than we bring in...we'll be in debt.

The Republicans ran on a platform of "reigning in out of control government spending". Their first order of business is to permanently extend the Bush tax cuts for everyone. Democrats would like to only extend those tax cuts for individuals and couples making less than $250,000 per year, and the 3% tax cut to expire for those making more. The Republican plan would cost the nation $700 billion over the next decade. Put another way, it will ADD $70 billion a year to our budget deficit for the 10 years. I'm no math major, but ADDING $700 billion to something does not make it smaller.

Anyway, back to the "deficit reduction commission". Confronted with the reality of such absurd proposals, Mr. Obama decided to use a Republican idea and created the commission (composed of civilians and government officials and equally divided between Republicans and Democrats). The Republicans, of course, quickly filibustered their own idea to protect against being seen doing something. President Obama created the panel by executive order. That panel came out with their initial suggestions yesterday. Let's go over the proposals and see how badly poor people are getting screwed by the latest "ideas" coming out of Washington. Quickly, let's again remember that historical irresponsible lending and investing by Wall Street banks got us into this mess. Remember also that our budget deficits are NOT ONLY THE RESULT OF SPENDING, but also the result of less tax money coming in. That's what happens when unemployment is almost 10%. That's 10% of the workforce not paying taxes. On to the proposal.

Reform the Tax Code

This is a good principle to start with. Many correctly note, and my buddy Brody can attest, that the tax code is too complex. It is probably fair to estimate that if you have to hire outside help for doing your taxes, it's too complex. It is riddled with deductions in this special circumstance, but not that. It has tax loop holes for companies and rich folks that poor folks don't have access to. This panels idea is to...wait for it...cut taxes! Yes, while we are bringing in such low revenue, the panel suggests the historical unsuccessful at doing anything good technique, cutting taxes.

But wait, they say, we are going to eliminate some of those loopholes and deductions so that we will still raise more revenue. Ah, ok. So which ones?

Mortgage Deduction: Let's see, who will this screw? Middle and low income families are struggling to stay in their homes as it is. In case you've been, well probably you'd have to have been dead, foreclosures are a problem, to say the least. If you take away the mortgage deductions many of those families may not be able to stay in their homes. This is truly one of the few major tax breaks that comes for middle and low income families. Ok, 1 for 1.

Employer Health Insurance Deduction: Now, at first this seems like it would hurt business owners. However, a moderate amount of thinking will make you realize that this would provide the political cover for companies to stop offering employee health insurance. Even with the new health care bill, buying private insurance will be more expensive and more difficult. Again, screwing the middle and low income folks. 2 for 2.

Social Security

The plan here to to lower the "cost of living" (COLA) increase that comes to seniors. Who needs that COLA? Certainly not folks who have a nice retirement portfolio. Also, the plan would gradually raise the retirement age. It is also here that you can make an argument that poor people aren't getting screwed as much, as the plan suggests paying out more social security to lower income folks and less to higher income folks. A bold step indeed considering the fact that most wealthy folks don't depend on social security much, if at all, because they have their own nice retirement accounts. Also, remember that many companies are rolling back pension plans for their work-force, so those old "middle class" jobs are not providing that service as often as they used to. However, raising the retirement age screws poor people. Studies show that people working in lower income jobs don't live as long as those working in higher income jobs. There are a lot of sociological reasons for this that I'm sure you can imagine, but the point is, by raising the retirement age for all, you are, again, screwing the poor people the thing they look forward to the most, quitting their shitty job, until it may be too late. 3.5 out of 4 for the race to screw poor people the most.

Medicare

The plan here suggests that seniors pay a co-pay for their services. Now this sucks for all seniors, but if you have the "extra" cash to pay for it, you'll be pissed but live. If you don't have the "extra" cash, then what? Again, screwing poor people. 4.5 out of 5.

This proposal is supposedly a "starting point" for discussing the "painful" choices that we have to make about our budget future. We all must "sacrifice" they say. If by "we", I think the rich guys mean "us". The panel really made those 5 main suggestions along with some other less drastic ones. Out of those 5, 4.5 screws poor people. Some starting point. So let's set the picture again for you:

Wall Street bankers and rich government officials game the system since 1980 deregulating banks, making bad loans, "creating" financial products that mean nothing but cost everything, commit fraud on a historic scale both in foreclosing on people's homes and the "investment" packages they sold containing those mortgages. In addition they lobbied Congress for the Bush tax cuts, which overwhelmingly favored them and apparently did nothing to improve the economy or create jobs like conservative dogma suggests. Fact is, they were in place through most of the 2000's and we are still where we are. Fact is, they have been, and are, in effect right now and we have almost 10% unemployment. The argument Republicans are making is, "let's keep doing exactly what we are doing and maybe we'll get a different result."

All that is true, plus the fact that our tax dollars bailed out those banks and auto companies. Plus the fact that those same banks are still foreclosing on those people who bailed them out by circumventing the law. And now they put forth a plan that calls for "shared sacrifice" that appears to only be shared by us.

President Obama, for his part, has waited to make comment until the official report is released, which should be around Dec. 1st. What he should of said..."Poor people are not going to pay for our sins. This report is complete bullshit, and go fuck yourself."

Or something like that...