September 2010

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Are We Going Broke?

by Toni Seger


I think the short answer to that question is definitely ÔYesÕ and though it isnÕt set in stone, I think itÕs becoming more and more likely. I havenÕt come to this conclusion because of the recession or because weÕre running such a large deficit. I didnÕt just become concerned about the deficit under Obama and, in fact, I wish his stimulus program had been larger because much of the governmentÕs investment under Obama was well thought out, created jobs and returned cash. IÕm reconciled to the bankruptcy of our government because, for 30 years, weÕve refused to tax the wealthy. It started under Reagan and grew to outlandish proportions under George W. Bush and, inexplicably, continues under Obama as we convince ourselves that multi-millionaires should not have to put up with paying taxes. Ultimately, (which is coming sooner and sooner) such petty greed will destroy us just as it brought down the once mighty empire of Rome.


IÕve been concerned about the governmentÕs deficit since Ronald Reagan put a hole in our budget almost 30 years ago. Large deficits illustrate fiscal irresponsibility and produce a society with shrinking options, especially for its less advantaged citizens. I think, with a country as wealthy as the United States still is, giant deficits should invite the query; ÔHow did we get here?Õ But, I never hear that question raised. Instead, we continue to pursue policies that will, in fact, break us at some point.


As with most people who go broke, the answer to how they got there is, one bad decision at a time. Today, we have a highly ironic situation because weÕre struggling with a sluggish economy thatÕs causing pain to untold numbers of people, but at the same time consumers have finally gotten scared enough to pay off their personal debt and thatÕs compounding the problem. Living more prudently would otherwise be laudable behavior, but in the consumer based economy weÕve built over the years, the effect is to stall a recovery trying to take hold.


Of course, the roots of our problem go much deeper than that. Since the election of 1980, this country has made a series of very bad financial decisions which, I believe, will eventually bring this country to its knees and whatÕs most disturbing is the reptitive nature of these decisions. It is true that if you donÕt learn lessons from the past, youÕll just keep repeating the mistakes, but itÕs still mystifying when we do it. The best example of this is the much discredited Laffer Curve. During the 80Õs, the exciting bold idea for curing all economic ills was the Laffer Curve which translated into massive tax breaks for the wealthiest Americans which caused a huge federal deficit for the rest of us. At the same time, support programs for those less fortunate were slashed while the poor were blamed for taking advantage of the system and, it was implied, causing our deficit.


Of course, cutting taxes for the wealthy was supposed to result in a such much economic stimulus, the economy would grow its way out of any shortfalls. ItÕs no surprise it didnÕt happen. If you threw away all the money in your bank account, would it make you rich? The Reagan and George W. Bush tax cuts made as much sense as the doctors who kept bleeding the poet, Lord Bryon, in a desparate attempt to save his life when they were actually killing him. Anyway, the idea of giveaways to the rich was discredited as a genuine economic theory for all but the greediest, before the first George Bush was forced to raise FICA taxes against his own pledge and incurred the ire of virtually everyone by doing it. When Bill Clinton took office in January 1993, the country had a huge deficit (annual shortfall) and major debt load (total amount of money owed by government). At the time Clinton left office, however, we had a budget surplus (annual budget came out ahead) though we still carried a major debt load. Unfortunately, because of all the focus on the deficit, a lot of people thought we were out of debt which was not the case.


Under George W. Bush, we completely squandered the opportunity for some measure of fiscal sanity by slashing taxes for the wealthiest and launching two wars. For the first time in our history, in fact, we went to war and cut taxes at the same time. We also threw out financial regulation and invited people to get money (I wonÕt say earn it), any way they could. This is sort of like doing drugs and drinking, at the same time. Initially, it may feel like fun, but at some point youÕre going to get really ill and eventually we did. By the end of the Bush administration, the worldÕs economy was collapsing under the weight of such innovative entrepreneurship as pushing houses on people who couldnÕt possibly pay for them. I doubt the rest of the world will ever follow our lead again, but apparently, weÕre the ones who havenÕt learned anything.


Enter Representative Tom Ryan; the flavor of the month these days. Ryan has come up with an economic plan being hailed as ÔboldÕ and Ôforward thinkingÕ when itÕs really the same tired nonsense that has gotten us into so much trouble for the last 30 years. i.e. Slash taxes on the wealthiest and the economic stimulation produced will be so great, it will cure the deficit and weÕll all be prosperous. Except it is this very policy that gave us our massive deficit, a near economic collapse and the widest gap between rich and poor in our history. The nonpartisan Tax Policy Center says RyanÕs plan would cut revenue over the next decade by nearly $4 trillion and it would do this while cutting taxes for the wealthiest 1% in half while raising taxes and cutting benefits for 95% of the population.


The gap between rich and poor in this country is already the largest in our history. On its face, that sort of inequity is unethical and should be remedied, but in pure economic terms itÕs deadly and presages our decline. Henry Ford who enjoyed a great deal of wealth also believed in paying his workers enough money for them to be able to buy the cars they were making. Ford reasoned narrowing the gap between rich and poor would bring more prosperity for everyone and he was right. Of course, a lot of environmentalists believe getting the common man into a car was the first environmental disaster and thereÕs a lot of truth in that, but this isnÕt an essay about the environment. ItÕs an essay about stupid, greedy leadership and what it means for the rest of us.


WeÕve been borrowing from our future for a long time and Tom Ryan represents the ultimate in charlatan practices. I donÕt believe for a minute that any of the people praising Ryan have really forgotten the failure of the Laffer Curve, they just donÕt care and thatÕs what causes pain for everyone else. ItÕs also the part that reminds me of ancient Rome the most.


Co-owner of a media/communications firm, ProseWorks(tm) Associates since 1992, Toni Seger has been a professional writer for four decades. Seger is the author of "The Telefax Box", the first in a satiric trilogy about our overly mechanized lives available here. She has produced and directed original plays for stage and television and is an award winning film maker with endorsements from Maine Public Broadcasting. Her film, The Force of Poetry is also available.