Elizabeth Warren, Rephrased

Posted Friday, 23 September 2011, 8:46 pm | 1 comment

It’s been forever and five minutes since I last posted here. Since my readership including myself is almost certainly just one, I figure this is a good place to write something that’s really bugging me, that would be exceedingly unpopular with most people I know – so this way I avoid losing friends, whee!

Elizabeth Warren, who is apparently running for senate in Massachusetts, was videotaped making some statements about ‘the social contract’ which are really resonating with a lot of people, apparently – the quote below is being posted all over the net, with people saying ‘Yeah!’, ‘Right on!’. Her comments were in regard to taxes and the federal debt. Here’s what she said:

“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

“Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

This all sounds just delicious. Most people hate the rich, the rich themselves notwithstanding (for the most part). It speaks precisely to all those who feel like the rich bastards are just rich freeloaders, that they’re just bloody rich and don’t contribute to society.  The problem is, it’s completely wrong, disingenuous, and pandering to the very basic human greed response that if someone has more than me, it’s not fair.

Let’s examine a few of the glaring inaccuracies designed to inflame that greedy glow, but are in fact completely off the mark: 

‘the roads the rest of us paid for’

Well, the problem here is that our federal highways are paid for via the federal excise tax on gasoline, about twenty cents per gallon, not via income taxes. Likewise, states grab their own share of highway taxes on gasoline, here in California, we wind up paying 64.5 cents per gallon in taxes, when you include the state gasoline tax, sales tax, and local taxes on top of the federal tax. Those taxes are used to pay for state highways. Cities and counties pay for roads via property taxes. Again, none of these are federal income taxes. As well, it can be argued that the rich are the least likely to drive fuel efficient cars, and thus pay an even larger share of these taxes due to their higher gas consumption. And those goods they use the roads to deliver? Every gallon those semi-trucks consume generate more highway taxes. So, suggesting ‘the rich’ aren’t paying for our roads is really just ridiculous.

‘you hired workers the rest of us paid to educate’

Another disingenuous claim. Our public school system is paid for via local property taxes. True, state colleges and universities are paid from state income taxes. But again, none of this is paid via federal income taxes. The federal government does subsidize education via student loans; but again, those are loans, a teeny tiny fraction of the federal budget – and they’re expected to be paid back!

‘you were safe in your factory because of police forces and fire forces that the rest of us paid for.’

And again! The exact same disingenuous argument. Police and Fire are funded locally. They are not funded via federal income taxes!

But – let’s say, just for the sake of argument, that all of the above actually are true. That our roads and education and police and fire are all paid via federal income taxes. She’s suggesting that the rich profit from all these government provided services without giving back. In fact, she explicitly says ‘the roads the rest of us paid for’, ‘the workers the rest of us paid to educate’. So quite baldly, she’s saying that ‘the rest of us paid for all these things, but the rich just profit off it without paying for any of it – that they’re just freeloading off of what ‘we’ built and provided.

But, to put it as delicately as i can, that’s a load of horseshit.

Here’s the reality: the rich pay the lion’s share of the money the federal government takes in. The vast majority of it. As of 2008 (but it’s been pretty steady for a good long while, even since before the ‘Bush tax cuts’) the top 10% of earners in this country – those who make $113,800 or more – pay 69.94% of personal federal income taxes that the government takes in. Think about that. ‘The rest of us’ contribute only 30% of the taxes the government uses to pay for all its programs. Sure – basic math, if someone has a ton of money, they’ll wind up paying a wheelbarrow of money in taxes. But that’s the reality nobody wants to really admit to. You simply cannot say that the rich don’t contribute, or that ‘the rest of us’ paid for all these services that the rich got rich using.

The argument I hear back tends to be that the rich dodge their taxes, they pay as little tax as they can, they sometimes don’t pay any taxes at all!! Well, nobody wants to pay more taxes than they have to. For all those who say ‘tax me more’, I see none of them making voluntary contributions to reduce the federal debt, which the Treasury will happily accept. Don’t feel you’re taxed enough? Then why aren’t you making up the difference, eh?

But again, the fuzzy math just doesn’t add up. ‘Those filthy rich get away with not paying taxes’ does not match up with the reality that ‘Those filthy rich pay nearly three fourths of the dollars the government has available to spend’ (ignoring that unpleasant problem we have of deficit spending, which is why we have a $14 trillion dollar debt – not that we aren’t taxed enough). Either we admit that without ‘the rich’ our federal government would be paralyzed and bankrupt (hold the jokes on that!), or we pretend that the rich are freeloaders on the system, scooping up all the moneys! and leaving nothing for anybody else. It’s a load of nonsense.

Now, the question is, why is everyone now clamoring that we need to tax the rich more? Is it because suddenly they’ve stopped paying what they should, and the government is now paralyzed? Nope. As far back and 1999, during the last years of the economic boom, the top 10% – those with a then adjusted gross income of $87,862 or higher – contributed 66.45% of the federal taxes collected. That’s right. back during the boom – when the government was flush with money and "Bill Clinton had a surplus", the rich were contributing a smaller proportion to the federal government than they are now!

So again – why now, this clamor to tax the rich more? It’s not because we don’t tax them enough. It’s because our government spends without limit. Our elected representatives do not have any constraints on their spending, unlike ‘the rest of us’. Our government cares not a bit whether it’s ‘earning’ enough to pay for what it wants to spend on – it merely accumulates debt. A staggering debt. A debt that is at near catastrophic proportions. A $14 trillion dollar debt, the interest upon which well exceeds a billion dollars a day. Can you even fathom that? I can’t. I looked up what you can buy with a billion dollars. Just a couple of examples –

  • Two years’ worth of AIDS research at the Centers for Disease Control in Atlanta, or a year’s worth of the drug AZT for 333,000 HIV-infected people.
  • Just a little more than one day’s Social Security benefits paid by the federal government (that’s a nice neat symmetry right there).

 Nice! Every single day we throw away more than we spend on Social Security benefits.

So. What we really have is that our government servants have dug a hole of debt so deep that now they want ‘the rich’ to bail them out of it. To be perfectly honest – I could actually go along with that. Tack on a few percent higher taxes on the super rich, and it could make a serious, meaningful dent in that debt.

Except for one problem. The government wants the rich to bail them out, but refuses to stop spending like a drunken sailor on shore leave. No cuts! We can’t cut critical services! It’ll hurt people!

The problem with that line of thinking is that it’s completely out of whack with what we – the rest of us – are expected to do when the economy takes a downturn. When I’m hurting for money, yeah, I may rack of some credit card debt. But for the most part, the average individual will cut back on their spending. Hell, it’s exactly why the economy continues in these doldrums – poor economy, people are reluctant to spend, that keeps the economy down, it feeds on itself. 

Here’s another way to visualize just how staggeringly screwed up our federal government is.

  • U.S. Tax revenue: $2,170,000,000,000
  • Federal budget: $3,820,000,000,000
  • New debt: $1,650,000,000,000
  • National debt: $14,271,000,000,000
  • Recent budget cut: $ 38,500,000,000

Now, just remove eight zeros and pretend it’s a household budget:

  • Annual family income: $21,700
  • Money the family actually spent: $38,200
  • New debt on the credit card: $16,500
  • Outstanding balance on credit card: $142,710
  • Total budget cuts made: $385 !

The government doesn’t play by that same social contract that the rich are being hectored about. If the government doesn’t have enough money, it should cut back on spending just like ‘the rest of us’ are expected to do. And at the very least for crying out loud – if you want to dump a tax hike on the rich, then make the good faith gesture of freezing spending at whatever the current rates are and applying all of those new tax revenues to the debt. So that they can actually make a dent in the debt.

Otherwise? Well, we know what that means, and what the reality almost certainly will be. Taxes on the rich will be increased. The government will spend those ‘extra’ revenues without restraint. The debt will increase. And there will be yet more calls to increase taxes on those evil filthy rich who ‘won’t feel anything’ if we take more of their money. 

Without spending restraint, taxing the rich will be nothing but an exercise in…cue Jaws theme…class warfare. Because those higher taxes won’t solve the debt problem, people will just agitate further. Raise the taxes on the rich to 40%! 50%! 80%! Take it all, that’ll solve the problem!

Sigh. I haven’t yet gotten around to actually rephrasing Elizabeth Warren! So, here goes, I’ll end it with this.

"There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you. You, as a wealthy person, are responsible for 70% of the revenue the federal government takes in, even though you amount to only about 18% of americans.

So i want to be clear. You moved your goods to market on the roads that you largely paid for yourself. You hired workers that you largely paid to educate. You were safe in your factory because of police forces and fire forces that you largely paid for yourself.

Now look. You built a factory and it turned into something terrific or a great idea — god bless! Keep a big hunk of it. And the rest of us thank you for paying for most of the government services that we use, for paying the lion’s share for our entitlements, our defense, our security, our education. Part of the social contract is that when someone pays most of what it costs for the roads and education and police that you also use – you thank them for it, you don’t start class warfare over it."

Addendum: Having mulled over some of the less finely tuned ideas above, I realize I also left out a bunch of others. Chief among them the disturbing problem (for those agitating about the rich, mind you) of the rich – you know, the ones that Liz is talking about who build factories, create great ideas, hire those people we all educated – all those people they hire, what do they do? They pay taxes. Taxes they wouldn’t pay if they weren’t working. Do we factor that into this formula that the rich don’t pay their fair share? No. It’s an inconvenient epiphenomenon.

Sure – there are rich people out there who do nothing for society. There are middle-class and poor people who do the same. We focus on the extremes to the exclusion of the mean. Demonizing the wealthy is demonization first – it doesn’t illuminate, it only divides. Likewise demonization of the homeless, the Republicans, the Democrats, the religious and the areligious.

Hopefully the one thing we can agree upon is that $14 trillion dollars of debt is beyond the pale. That’s a $44,000 debt on the head of every one of the approximately 310 million men, women, and children in this country. Since small children rarely file a 1040, it’s actually a $97,000 debt on the head of each of the approximately 144 million US taxpayers.  Even if we dump massive taxes on the super rich, it will take decades to bring it under control – even if we stop all new spending today. 

 

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