Simpson and Bowles, those two hired pitchmen for budget-cutting hysteria, are still hawking an economy-killing product called “austerity economics,” a product that’s designed to benefit their wealthy patrons at everybody else’s expense. This philosophy provides some (very thin) intellectual cover for the Republicans’ lunatic bloodbath of spending cuts.
Of course, Simpson and Bowles and austerity’s other sales people aren’t really economic thinkers. They’re paid to pitch a product. They didn’t invent austerity any more than Alex Rodriguez invented Pepsi.
But what they’re peddling isn’t a soft drink. It’s a lot worse for you than that.
You don’t believe that Simpson and Bowles are frauds, snake-oil salesmen trying to lure you into a bait-and-switch for the rich and powerful? See for yourselves in Figure 1.
The wealthiest among us captured almost all of the after-tax income gains from the late 1970s up to the financial crisis (which accounts for the sharp drop at the right — a drop that still left them well ahead of everyone else).
And, as Emanuel Saez has shown, the wealthy captured 121 percent of the “recovery” gains since the 2008 crisis. In other words, they were able capture even more of our national income after the crisis, while everybody else fell behind.
With the rich earning so much more of our national income, you’d expect Federal tax revenues to go up. After all, they’re supposed to pay a higher percentage of their income than everyone else. That might be scant comfort for the pillaging of the middle class, but it’s something, right?
Corporations have had it even easier. Take a look in Figure 4.
Total tax revenues have plunged, and corporations are paying far less of the tab than they used to. Does that mean that the wealthy are picking up the slack for corporate tax dodgers?
No. As an analysis originally conducted by the Tax Foundation shows, the effective tax rate for millionaires — the amount they actually pay — fell from 66.4 percent in 1945 and 55.3 percent 1965 to 32.2 percent after the Bush tax cuts. While the recent compromise has shifted those figures slightly, billionaires and other very high earners are still paying roughly half of what they paid during the period of our greatest economic growth. They’re even paying less than they paid under Reagan.
Who does that leave to pick up the tab? Presumably you and me.
And yet, when Erskine Bowles and Alan Simpson make their spiel, they actually combine their “deficit reduction” pitch with an appeal to lower tax rates for the highest earners and corporations.
They call it “Tax simplification that eliminates loopholes, lowers rates and raises revenue.” We call it by a more accurate name: Voodoo.
They claim they’ll make up the difference by closing loopholes, but a) making up the difference doesn’t nearly make things right, and b) who believes that’ll ever happen in a town filled with lobbyists?
I’m willing to bet they don’t believe it. We’re pretty sure their corporate sponsors don’t.
And yet, Simpson and Bowles prattle on… and on… and on. They’ve increasingly revealed their far-right colors — by embracing right-wing extremist Paul Ryan, by endorsing a far-right Tea Party Congressional candidate named Charlie Bass, and by moving their own pro-corporate “bipartisan” plan increasingly to the right.
The Republicans claim they don’t like the sequester. They were particularly upset when it inconvenienced business travelers. (I was one of them.) But, as Howard Fineman notes, that’s how it’s designed. The sequester doesn’t just cut the national budget by 8.4 percent: it cuts hundreds of individual line items, include the FAA’s, by 8.4 percent.
That’s why Simpson and Bowles really do hate the sequester. Their sister organization, “Fix the Debt,” is stuffed with defense contractors who are losing a bundle under the sequester. The austerians who fund them both would rather see steeper cuts to programs that preserve the social contract, and less in defense. That would preserve and expand their tax breaks without cutting into corporate profits.
Runaway Republicans in the House apparently aren’t as disturbed by the sequester — or else they’re just upping the ante for future negotiations. Their only proposals for ending sequestration have consisted of bills that double down on the anti-government jihads of earlier proposals. They included like H.R. 5652, Sequester Replacement Reconciliation Act, and H.R. 6684, the Spending Reduction Act of 2012, both sponsored by Ayn Rand fanatic (and Simpson Bowles darling) Rep. Paul Ryan.
Those proposed budgets were recipes for anarchy. Republicans don’t want to trim the fat from government. They want to slash the muscle and eviscerate its innards. At least it’s an ethos, as John Goodman’s character in The Big Lebowski might say — an ethos of virulent government hatred. That’s exactly what voters rejected decisively last November. The Republicans even lost the House — in the popular vote — by one million votes. Only gerrymandering has left them in a negotiating position today.
But their proposed budgets aren’t negotiations. They’re ransom notes made from cut-up pieces of newsprint. As we’ve seen in the sequester, their hatred of government is so severe that they would even cut the military and police functions that seem to arouse such… enthusiasm in their ranks.
And, despite their professed outrage over the Benghazi deaths, the GOP budget actually cuts funding that provides protection for our diplomats overseas. And, as Markos “Kos” Moulitsas points out, they want to cut those funds even more in future budgets.
Why have we had this big stand-off, anyway? Why have we been saddled with the sequester at all? Because the Republicans don’t want to accept any tax increases for the wealthy and corporations.
Mind the Gap
A lot of liberals, like Josh Marshall, are celebrating the fact that the deficit is plummeting so rapidly. But it’s actually going down too quickly, in a way that undercuts long-term stability and growth. It even undercuts long-term deficit reduction.
Let’s go back to the figure that shows receipts vs. outlays (see Figure 5):
The gap between the red line and the blue line represents the deficit. You can close the two by lowering the red “spending” line, by raising the blue “revenue” line, or by combining the two. But Republicans don’t want their wealthy and corporate patrons to pay a nickel more in taxes.
When you hear them talk about changing “tax expenditures” as if it were some sort of compromise, that means that — like Simpson and Bowles — they’re willing to have the middle class pay more by eliminating some of its much-needed deductions, like those for mortgage interest and employer health insurance.
But we could — and should — emphasize raising revenue through millionaire taxes and corporate tax hikes instead. That money could be used to create jobs and grow the economy — moves which would lead to more tax revenue from re-employed Americans (which raises the blue line) and less demand for government assistance (which lowers the red line).
The American people understand that, which is why they support job creation and proposals such as the millionaire’s tax. Apparently they’re too smart to buy the snake oil.
Go Big or …
Simpson and Bowles raises the volume on their demands with every new piece of evidence of their foolishness. Europe’s austerity mess, our GDP shrinkage after past budgets, the discrediting of economic theorists Ken Rogoff and Carmen Reinhart … with each setback they seem to get a little smaller and their vocal pitch seems a little higher, something like Rod Steiger’s General in Mars Attacks!
Case in point: The Washington Post’s Lori Montgomery reports that Bowles and Simpson have a new plan that “seeks far less in new taxes than the original, and it seeks far more in savings from federal health programs for the elderly.” That’s exactly what voters rejected, and it’s an approach which polls show voters widely despise across party lines. And yet, somewhat strangely, Montgomery describes this rightward tilt as “a concession to political reality.”
The other austerians are starting to shrink, too. The “Center for a Responsible Federal Budget,” another Pete Peterson front operation which usually has more sophisticated patter, keeps moving the goalposts in defense of their pro-wealthy, pro-corporate position. And Bill Clinton, who struggles mightily to retain liberal support while serving as a dyed-in-the-wool Peterson pitchman, is now skirting the borderline of gibberish by saying things like “I think Paul Krugman’s right in the short run, and Pete Peterson and Simpson-Bowles and all those guys, everybody’s right in the long run. And the question is timing.”
That makes no sense, because Krugman and the other common-sense Keynesians have said all along that it’s a matter of timing. Their position is diametrically opposed to the self-serving cynicism of Peterson and Simpson-Bowles (which is a redundancy in any case, since Simpson and Bowles serve Peterson), so Clinton’s making no sense. He’s just trying to have it both ways — but what else is new?
“Go big or go home,” bellow Bowles and Simpson, and for once they’re right. Go home, all of you, and take the sequester with you. Then the grown-ups can start working on real ways to fix the economy, with jobs and growth and other things that really work.
Republished from Huffington Post with the author’s permission.
Thursday, 16 May 2013