Constitution Economy Federal Debt Truth

Dear Democrats, Media, Everyone: The Problem is SPENDING

Rod Thomson

Yes, reducing the corporate tax rate on U.S. companies is essential for keeping them competitive with most of the countries who have lowered their own rates considerably below ours. That’s good for businesses, jobs and the economy. Well done.

However, the rest of the tax reform package is largely a sop to class envy and ongoing social engineering, using the tax code to encourage or discourage behavior. Those are not conservative principles and should never have been part of tax policy. And they are not a blueprint for making America great again.

Why should the federal government require some Americans to subsidize other Americans, whether it is home ownership or college tuition? (If you don’t own a home, you are subsidizing those who get mortgage and property tax deductions in funding the federal government because they are paying less than you due to the deduction. Ditto on college tuition and the rest, including no-income tax states subsidizing high-income tax states.)

While this is on Republicans right now to fix, it is pretty farcical to see again just how little Democrats even bring to the debate — almost any debate. With virtually every tax plan of any kind at any stage, Democrats have one response: “It’s a tax cut for the rich.” And so, even when this one is demonstrably not that, it’s still the mantra because they simply have an empty tank philosophically.

Democratic Sen. Chuck Schumer said: “It’s little more than an across-the-board tax cut for America’s millionaires and billionaires.” Democratic Sen. Claire McCaskill told NBC: “This is a tax cut for wealthy people…” Oh wait…That was on the bill to repeal Obamacare. Sorry, they just offer so little they use the same lines for multiple issues.

So it’s up to Republicans to be the responsible adults, and they’re not really making the grade when they fail even to see that Congress should not dictate winners and losers through the tax code.

However, not surprisingly the entire tax package debate misses the central, endemic problem facing federal government finances: It’s not mostly about taxes, it’s mostly spending. And the problem with spending is that Congress and presidents are addicted to it for their own personal gain —political gain, popularity gain and financial gain.

In reality, most Americans are actually damaged right now by the taxers-and-spenders in D.C. And eventually all Americans will be hurt by them when it all collapses. And yet they go merrily on, destroying the prospects for a brighter future for our children so they can get what they want now. They are aided in this charade by a media that — like Democrats — can only report tax and spending issues one way: who loses and who wins. They pretty much mimic Democrats’ vacuous take.

NPR does “thoughtful” reporting by referring to the Tax Policy Center, which found that “nearly three-quarters of the savings from the tax overhaul would go to the top 20 percent of earners — those making more than $149,000.” Well duh, those are the people paying most of the taxes. Pretty sure both the Tax Policy Center and NPR know that. Also pretty sure they never give that context.

There are two sides of the ledger. Let’s go through the numbers on both sides and see if it is a problem of low taxes or high spending.


The unpopular truth: the rich are paying more than their fair share

This is not popular to say — which is why politicians from both parties avoid saying it — but it is factually undeniable: Wealthy Americans are actually carrying the rest of us when it comes to income taxes. They pay so much more than they get from the federal government, it’s almost embarrassing. In a rational conversation not laden with emotions and envy, we would actually be thanking them.

The New York Observer sums up the numbers, a.k.a. facts, this way:

“The latest federal income tax data reported by the IRS shows that the top 1 percent of income earners pay 39.5 percent of all federal income taxes, nearly twice the 20.6 percent share of national income they earn. The entire bottom 50 percent of all taxpayers pay 2.7 percent of federal income taxes, which is only a small fraction (about one fourth) of their share of national income.

“The top 1 percent, indeed, pay a much bigger share of federal income taxes than the entire bottom 90 percent of income earners, who pay only 29.1 percent of federal income taxes, while earning 53 percent of national income. That means as well that the top 1 percent pay a bigger share of income taxes than the entire middle class combined, defined as the middle 20 percent of income earners.”

That’s why the Democrats’ charges of tax cuts for the rich, and the media coverage is just so lame. One unfortunately expects politicians to be dishonest. It’s just a shame the media is also by not reporting the context of “tax cuts for the rich.”

This chart from the American Enterprise Institute puts it visually, explaining the net amount of taxes each 20 percent (quintile) of tax-paying households pay after taking out what they receive from the federal government in direct benefits. The bottom 60 percent of American taxpayers receive more than they pay in taxes, meaning only the top 40 percent even pay net taxes. And most of that top 40% is paid by those at the high end.

Suffice to say that the squawking from the left on tax cuts for the rich is because it is only the rich who are net income taxpayers to the federal government. You can’t give tax breaks to people who are not paying taxes.

But resentment and envy are emotions not easily remedied by facts, and so this trudges on.


The problem is spending other people’s money

An intrinsic risk at every level of government is that politicians spend taxpayer money to essentially buy voter support. This risk is magnified as government grows and expands both its authority and its responsibilities. When that magnification happens with the government overseeing by far the largest economy on the planet, we have a problem. And when that is happening in a dynamic of diminished personal moralities, greatly diminished Christian influence and epically bad leadership — we’re headed for disaster.

This concept was well understood by a wise, older Tennessee farmer with “incorruptible integrity” who upbraided then-Congressman Davy Crockett for voting to give public money to help victims of a natural catastrophe. The farmer made the point that regardless of the merits of helping the people — which he believed Congressmen should do personally — it was wrong for Congress to do. There was no (and still is no) Constitutional authority for charitable giving by the federal government. Crockett was so convinced by the farmer that he regretted his vote and promised never to do it again. Here is the invaluable original story from 1867.

Unfortunately it is a totally foreign concept to modern American ears.

A Heritage Foundation study of the federal government’s unsustainable spending programs plots out this phenomenon over the past 50 years: “The continuous level of deficit spending has increased public debt, which…rose from 33.7 percent to 73.6 percent of the gross domestic product (GDP).” Measuring as part of the Gross Domestic Product is a way of making it apples to apples over time in terms of affordability.

If we took every penny earned and generated in the United States’ $19 trillion economy, which is one-fourth of the entire world economy, we could not pay off our nearly $21 trillion debt — half of which was run up during Obama’s two terms.

Pew Research broke down the broad federal government spending nicely:

“In fiscal year 2016, which ended this past Sept. 30, the federal government spent just under $4 trillion, and about $2.7 trillion – more than two-thirds of the total – went for various kinds of social insurance (Social Security, Medicaid and Medicare, unemployment compensation, veterans benefits and the like). Another $604 billion, or 15.3% of total spending, went for national defense; net interest payments on government debt was about $240 billion, or 6.1%. Education aid and related social services were about $114 billion, or less than 3% of all federal spending. Everything else – crop subsidies, space travel, highway repairs, national parks, foreign aid and much, much more – accounted for the remaining 6%.”

Most of our spending is entitlements, and that is the category growing the fastest. Not a good recipe.

So we see that while tax revenue continues to increase to the federal government, spending increases even faster and most of that spending is on some form of transfer payment from some Americans to other Americans. Remember up higher we pointed out that the bottom 60 percent of income-earners pay no net income taxes after factoring in direct benefits from the federal government (and, of course, those who do not work at all obviously do not pay any taxes) and we see the problem at the ballot box. Recipients of the government’s forcibly taking money from some to give to others are able to vote for the small-minded politicians who will continue taking and distributing that money in exchange for votes.

Alexander Fraser Tytler, was a Scottish judge, writer, historian and Professor of Universal History, and Greek and Roman Antiquities at the University of Edinburgh during the early years of the infant American Republic. He reputedly said:

“A democracy cannot exist as a permanent form of government. It can only exist until the people discover they can vote themselves largess out of the public treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the public treasury, with the result that democracy always collapses over a loose fiscal policy — to be followed by a dictatorship.”  

It is possible we have reached such a point. If we cannot find and elect honest, principled people who will put the good of the republic and its future above their immediate self interests, then it seems a likely path to our eventual downfall or minimization will be financial collapse.

The roots of that will not be hard to trace.

Rod Thomson is an author, TV talking head and former journalist, and is Founder of The Revolutionary Act.

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