Let’s talk about the real problem, shall we?
Lately, our national body politic has become largely fixated on the soaring budget deficit and what awful consequences it will have in the imminent future. I do not in any way dispute the gravity of this problem, but I almost without fail disagree with the solutions that the people on TV offer.
The reason I disagree is the other deficit, the one that gets effectively no air time at all. You may not be aware of this other deficit, because very few people seem to know it exists. The horror of it is, this other deficit is the very reason that we have the budget deficit, year by year piling more and more on to our national debt.
I'm writing about the honesty deficit. Politicos, pencil-pushers and members of the press (including those commentators who claim when caught in breaches of journalistic ethics that they are entertainers, not journalists) are collectively failing to muster sufficient honesty to back up their expenditure of claims.
It may be that you thought you knew this, but what far too many Americans believe is a badly inaccurate but similar claim: 'All of the politicos, pencil-pushers and members of the press are dishonest, except for MY guys, who are telling it like it is!'
No. Unless you are a very rare individual indeed, this is almost certainly not true. I can say this because Democrats and Republicans alike, whether moderate or radical, whether progressive or conservative or Tea Party or whatever, are all failing to honestly tell the whole story.
To illustrate, I will use the budget deficit.
If the numbers for the current fiscal year were final, as they would be in a sanely-run superpower, I could use them, but unless I am to use guesstimates, I must go back to FY 2010 (the fiscal year that ended in September of 2010.)
For the record: most of the following numbers come from a web site called http://www.usgovernmentspending.com/ and its sister site http://www.usgovernmentrevenue.com/ because they are far easier to get data out of than trying to tackle the various documents available from the OMB, the CBO and the Treasury Department. However, I've spot checked specific line items and so far I haven't found any questionable numbers.
In FY2010, the Federal government paid the following sums for these five categories:
Pension payments: $749.6B <- This is net, after all the juggling and pencil sharpening. Lion’s share is monthly SS checks. Also includes Fed Employees pensions, etc. Military pensions covered under ‘Veterans’ below.
Medicare payments: $451.6B <- (Same contortionist issues as for ‘Pensions’.)
Veterans: $108.4B <- nearly $100B is simply pensions and medical benefits.
Defense: $693.6B <- Active US Military only. No foreign military aid.
Debt Service: $196.2B <- This is the interest paid on all that debt. This is not negotiable; we pay it or our bonds default.
This is a total of $2199.4B. However, the Federal revenue is only $2162.7B (in the form of Income Tax $1090B, SS/Med taxes $864.8B, and other revenue of $207.9B) which means by the time we were done paying for these five things, we were already into deficit spending. We hadn’t yet paid for other things which cannot be dropped without courting disaster, such as:
Air Transportation: $21.4B <- Mostly the FAA, air traffic control, etc.
Water Transportation: $9.4B <- This is mostly the Coast Guard.
Federal Law Enforcement: $27.9B <- FBI, DEA, etc.
Federal Courts: $17.9B <- Judges and bailiffs don't work for free.
Federal Penitentiaries: $7.7B <- Letting Zacarias Moussaoui and Ted Kaczynski go free would be bad.
…nor had we yet paid for an IRS to collect that $2162.7B in revenue! ($12.1B. Note that I was unable to work this number out from the aforementioned web site but I found it in an old news release. It was for FY 2010 as the rest of the data.)
Now, what we have here is the ultimate lean budget (in terms of budgets that do not cut things people currently will not allow us to cut). It slashes to zero many items that few people call ‘wasteful spending’, because it includes no funds for highways, railroad safety, national medical agencies like the Centers for Disease Control, etc., not even essential national functions like the issuance of passports, the printing of federal documents, checks and bills, and the operation of US embassies abroad. Yet, even doing away with these, we are now spending $2283.3B, without paying for so much as one welfare queen, benefit-collecting illegal alien or pork-laden ‘Bridge to Nowhere’.
We also haven’t paid any salaries to Congress, nor the White House, nor to any Federal employees except those of the Defense Department, Justice Department and IRS (not sure how those Social Security checks are getting mailed out; the ‘pensions’ item didn’t include the administrative costs of social security benefits.)
The point is, we were into deficit spending before we paid one single cent for any of the items that politicians and talking heads on radio and cable news stations claim to be the reason we have a deficit! We are borrowing money long before we get to the things you thought were the problem. To be specific, we have not yet funded any of the following:
TARP and other bailouts (and ironically, in FY2010 this is a plus, not a minus, because the money paid back outnumbered the money going out by over $85B.)
Welfare (including medical and public health services)
Research (all those weird federal grants?)
And, perhaps biggest of all, so-called ‘Obamacare’, because it was not even passed into law yet in FY2010, so it does not figure into these numbers.
Yes, the cost of two wars is a significant adder, but the equivalent Defense line was $304.8B in 2001 dollars (before Afghanistan or Iraq) which is $378.3B in 2010 dollars. Even if we could magically end both wars immediately, with no transition costs (not actually possible), we would still only get back $315.3B. With this adjustment, we still have only $194.7B to pay for all the above remaining items before we begin to borrow again. Currently they add up to more than a trillion, so while we can certainly reduce the deficit by cutting every cent of Agricultural subsidy or Welfare, we cannot get rid of the deficit this way.
Get it yet? The politicians and the cable channel chatterboxes are not telling you the truth. It makes not one jot of difference whether they are on MSNBC or Fox, whether they are Tax-and-Spend Democrats or Borrow-and-Spend Republicans, First Termers or Long Termers, Beltway insiders or outsiders. Nearly every one of them to a person purposefully and unashamedly lies to you and does so without any concern for the damage their pursuit of personal power and prestige is doing to our nation and our future.
Yes, there are exceptions. No, they are far fewer than you think. And I’m sorry, but they almost certainly do not include that one particular name that came to your mind as the one person you could trust no matter how bad the others might be, because the most popular of these people on both sides of the aisle tend to be the ones who excel at the art of selling their audience a load of deception.
Does it sound like I am saying we just can't do anything, our hands are tied? Or perhaps I am being Paul Ryan, saying we can only fix this thing by taking away future Medicare from anyone currently less than 55 years old (but making them continue to pay the Medicare tax to support those 55 and up, who keep the benefit for life. Gee thanks.)
No, I am not saying this. These claims present a false choice between deficit spending or cutting entitlements. Attention, America! These are not our only options.
I said above that the Honesty Deficit caused the Budget Deficit. Look at the numbers I gave you above once again. Which number more than any other doesn't fit with the rest?
It's very simple. Our deficit does not come from Federal spending (although we certainly find ways to make it a larger deficit through foolish choices.) Our deficit comes from our failure to pay enough in taxes.
I have no doubt you believe you pay too much in taxes, and it is possible that you do. I have no doubt some people actually do pay too much. However, since it is easy to prove that our nation as a whole pays considerably less than a reasonable amount as a member of the industrialized world, I think the odds are against you.
How can I prove this? I simply compare how much we pay to how much everyone else pays.
The data I will cite comes from the Organization for Economic Cooperation and Development. This is not some obscure think-tank or front for some other entity; it is an inter-governmental agency which includes in its membership the United States and most European countries.
We measure tax load by calculating the total amount the nation's taxpayers pay as a percentage of gross domestic product. So that we are not comparing apples and oranges, the OECD's tax data for the United States includes both the revenue of the Federal government and the revenue of all state and local taxing entities, as does the data for other countries that have taxing entities besides their national governments.
Critics of this metric claim that it isn't fair because it includes capital gains tax when capital gains are not included in the GDP. This criticism is smoke and mirrors, utterly irrelevant to the question. Even if the taxing entities assessed the taxes according to one's blood pressure and the sum of all chipmunks on one's property, the only thing that matters is how much load those taxes put on the domestic economy. The GDP is the normally accepted measure of the domestic economy.
Some politicos have made crazy statements as of late, such as 'we have the highest corporate income tax rate in the world!' (I seriously doubt this is accurate; I couldn't find data to confirm or debunk it, but OECD data shows that almost all the other OECD countries raise considerably more in corporate taxes as a percentage of GDP than we do. ) These claims lead Americans to believe they are living in Taxation Hell.
To my mind, Tax Hell is actually in Denmark, where (as of 2009, the most recent year for which I could access OECD numbers while writing this) taxes totaled 48.2 percent of GDP! Compared to that, we Americans have it easy, paying a mere 24 percent of GDP.
"Yes, but Denmark is a socialist welfare state! Of course it has double our tax load!"
I agree with that statement without reservation. What I find alarming is the sheer number of other nations that appear on the list below Denmark, but ahead of the US.
Sweden, the next on the list, is no surprise, but some of the others are: Italy, Belgium, Finland, Austria, France, Norway, Hungary, Slovenia, Luxembourg, Germany, Czech Republic, United Kingdom, Iceland, Israel, Canada, New Zealand, Spain, Switzerland, Greece, Slovak Republic, Ireland, Korea, and Turkey.
Yup. I said Turkey.
Twenty five members of the OECD have higher total tax loads on their GDP than ours. Yes, several of these are also so-called 'welfare states' (see France and Canada.) But the one country that stands out the most in my eyes is Germany, with a 37 percent of GDP tax load. Germans as a group pay half again more in taxes than we pay, yet they are one of the most dynamic capitalist nations in the world. So much for raising taxes killing the economy.
Who are the countries below the US on the list, the countries already living in the tax paradise that Paul Ryan is shooting for?
Only Chile and Mexico have lower tax loads than the US. What a crowd to aspire to.
At the time I was writing this, the OECD data I was referencing did not yet include 2009 data for Portugal, Poland, The Netherlands, Japan or Australia. To include them, we go back to 2008. Thanks to our economic woes that year, we paid 26.1 percent of GDP in taxes, so we moved above Turkey. Only Mexico and Chile paid less than Turkey. Every single nation missing from 2009 is above us on the 2008 list, even Japan, although Japan, with the economy that seems to me the most similar to our own, has only a few percentage points higher tax load than us. They have a national debt worse than ours, by the way. Ours is only roughly equal to our GDP. Theirs is over double their GDP.
Because the database I consulted included a calculation for the same ratio for all members of the OECD (meaning all the countries I've mentioned above) we can see that the average tax load for 2008 is 34.8 percent. This is again much higher than what we pay. It is about a percentage point less than what the folks in the UK pay, and two and a half points less than what Germany pays.
Face it, America. We are NOT taxed too high. Perhaps some individuals are, but in the collective, we are way below the curve.
Somebody isn't paying their share. You probably already think you know who, although your answer depends upon your political leanings. One side says it's the bottom 50 percent of earners, who pay nearly no taxes. The other side says it's the top 1 percent of earners who earn as much as a quarter of all income. Considering that multiple studies have established that the bottom fifty percent of US earners earn between 12 and 15 percent of the total earnings, I personally doubt that they are at fault. Even if you could tax them at a rate of 100 percent of earnings, you would not eliminate the budget deficit.
I don't blame the rich either, except in the sense that I include them when I blame all of us. I feel fairly confident that we could all get by with tax rates ten percent higher than now (which would put us somewhere near the OECD average), while trimming off a few hundred billion from our budget. The resulting budget surplus would be the most debt-reducing, anti-inflationary, pro-Social-Security-and-Medicare-and-other-social-safety-net, fiscally responsible thing we could do. What makes me confident? The fact that so many highly successful economies are already taxing to those levels.
Yes absolutely, it would hurt in the short run. We would go through another belt-tightening period just like the so-called 'Great Recession' we now claim to be recovering from, despite still having nearly 9% unemployment. But it would hurt a lot less than letting our currency descend into hyper-inflation and our government become unable to borrow the funds to cover the deficit. That scenario, which many think we are now headed toward, would make the 'Great Recession' seem like the good old days.
Let's eliminate the real deficit starting today. Let's be honest and stop spouting crap about cutting spending when everyone who wants to cut spending would howl like a mad dog if the real budget busters were cut. We should continue to sniff out the bridges to nowhere and the corporate welfare giveaways, continue to seek more efficient ways to do things and continue to track down tax cheats, but let's be honest. Those things are not the problem. We Americans and our addiction to tax cuts and Reagan-era rhetoric are the problem.