Today’s commentary:
http://www.zmag.org/sustainers/content/2006-05/03parenti.cfm
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ZNet Commentary
The Hidden Politics of Deficit Spending May 11, 2006
By Michael Parenti
When government expends more than it collects in revenues, this is known
as deficit spending. To meet its yearly deficits, it borrows from wealthy
individuals and financial institutions in the United States and abroad.
The accumulation of these yearly deficits constitutes the national debt.
Conservative leaders who sing hymns to “fiscal responsibility” have been
among the wildest deficit spenders. The Reagan administration in eight
years (1981-88) tripled the national debt from $908 billion to $2.7
trillion. In the next four years, Bush Sr.’s administration brought the
debt to $4.5 trillion.
The Clinton administration (1993-2000) slowed the rate of debt
accumulation, and even produced a substantial budget surplus in its last
three years, projecting a huge surplus that supposedly would retire most
of the debt within a decade.
But the Bush Jr. administration reversed that trend with massive tax cuts
and record deficit spending, increasing the national debt from $5.8
trillion to almost $9 trillion in less than six years. The debt should
stand close to $10 trillion by the time Bush leaves the White House in
January 2009.
In 1993, the federal government’s yearly payouts on the national debt came
to $210 billion. By 2006, payments had climbed to about $430 billion.
Several things explain the national debt:
First, the billions of dollars in tax cuts to wealthy individuals and
corporations represent lost revenue that is made up increasingly by
borrowing. The government borrows furiously from the big moneyed interests
it should be taxing.
Second, there is the budget busting impact of military spending, also the
added operational costs of actual wars. Thus in 2003-2006, Bush Jr. was
spending $5 billion a month on his war in Iraq in addition to the standard
military budget that had climbed to over $420 billion for fiscal 2006.
Third, the growing national debt itself contributes to debt accumulation.
As the debt increases, so does the interest that needs to be paid out.
Every year, a higher portion of debt payment has been for interest alone,
with less for retirement of the principle, the debt itself. By 1990, over
80 percent of all government borrowing went to pay for interest on money
previously borrowed. Thus, the debt becomes its own self feeding force.
The interest paid on the federal debt each year is the second largest item
in the discretionary budget (after military spending).
Fourth, the greater the debt, the more excuse do rightwing rulers have to
defund human services. So we hear that with such a big deficit there just
isn’t enough money for such frills as hospital care, housing and
education.
To borrow money, the government sells treasury bonds. These bonds are
promissory notes that are repaid in full after a period of years. Who gets
the hundreds of billions in yearly interest on these bonds? Mostly the
individuals, investment firms, banks, and foreign investors with money
enough to buy them. Who pays the interest (and the principle)? Mostly
ordinary U.S. taxpayers. Interest payments on the federal debt constitute
an upward redistribution of wealth from those who work to those who live
off personal wealth.
It is a hidden form of private taxation. As Karl Marx wrote almost 150
years ago: “The only part of the so called national wealth that actually
enters into collective possessions of modern peoples is their national
debt.”
The debt serves the capitalist class well. Instead of capitalists
investing their accumulated wealth in new production that would glut the
market and remain unsold, they invest in U.S. Treasury notes. Lending
money to the government becomes a relatively risk-free but profitable
investment.
Predictions of large budget surpluses also overlook the additional but
hidden deficits that exist. First, there is the “off budget” deficit, an
accounting gimmick that allows the government to borrow additional
billions outside the regular budget. A nominally “private” corporation is
set up by the government to borrow money in its own name.
For instance, monies to subsidize agricultural loans are raised by the
Farm Credit System, a network of off budget banks, instead of being
provided by the Agriculture Department through the regular budget.
Congress also created an off budget agency known as the Financing
Corporation to borrow the hundreds of billions needed for the savings and
loan bailout, instead of using the Treasury Department. These sums are
taken out of the general revenue, compliments of the U.S. taxpayer.
Another hidden deficit is in trade. As we consume more than we produce and
import and borrow from abroad more than is exported, the U.S. debt to
foreign creditors increases. Interest payments on these hundreds of
billions borrowed from abroad have to be met by U.S. taxpayers.
Social Security also is used to disguise the real deficit. The Social
Security payroll deduction a regressive tax soared during the Reagan
years, and today produces a yearly surplus of over $120 billion. By 1991,
38 percent of U.S. taxpayers were paying more in Social Security tax than
in federal income tax. Many Americans willingly accept these payroll
deductions because they think the monies are being saved for their
retirement. On paper, the Social Security surplus fund was about $1.8
trillion by early 2006.
But all those funds have been used to offset deficits in the regular
budget, paying for White House limousines, wars, FBI agents, corporate
subsidies, interest on the debt, and other items in the federal budget.
Since the surpluses are not invested, but are expended on behalf of other
purposes within the federal budget, some politicians maintain that the
Trust Fund is “empty” or has been spent. Bush himself says nothing about
the existent (or nonexistent) of the $1.8 trillion.
U.S. political leaders have assiduously ignored the surest remedies for
reducing the astronomical national debt:
(a)Â Â Â Â Â Â Â Â Â Â Â sharply reduce individual and corporate tax credits, deductions, and
shelters,
(b)Â Â Â Â Â Â Â Â Â Â cut back on the huge subsidies to big business and agribusiness that
do little to create jobs and much to fatten the coffers of the very rich,
(c)Â Â Â Â Â Â Â Â Â Â Â reintroduce a progressive income tax that would bring in hundreds of
billions more in revenues, and
(d)Â Â Â Â Â Â Â Â Â Â greatly reduce the bloated military budget and redirect spending
toward more productive and socially useful sectors of the economy.
To summarize: In almost every enterprise, government has provided business
with opportunities for private gain at public expense. Government nurtures
private capital accumulation through a process of subsidies, supports, and
deficit spending and an increasingly inequitable tax system.
From ranchers to resort owners, from brokers to bankers, from auto makers
to missile makers, there prevails a welfare for the rich of such
magnitude as to make us marvel at the corporate leaders’ audacity in
preaching the virtues of self reliance whenever lesser forms of public
assistance threaten to reach hands other than their own.
Michael Parenti’s recent books include Superpatriotism (City Lights), The
Assassination of Julius Caesar (New Press), and most recently, The Culture
Struggle (Seven Stories Press). For more information visit:
www.michaelparenti.org.
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Today’s commentary:
http://www.zmag.org/sustainers/content/2006-04/29gonsalves.cfm
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ZNet Commentary
Can You Do The Hustle? May 10, 2006
By Sean Gonsalves
The word for this week is “death tax,” which is the loaded term used by
opponents of what is properly called the estate tax.
The estate tax is the only institutionalized check we have to stave off
concentrated power, which is exactly what the founders of this nation
hoped to guard against. Yet, we’ve got folks who supposedly cherish
“Constitutional originalism” and sneer at the centralized illusions of
“socialism,” who still call it the “death tax.”
In making a preserve-the-estate-tax case over the years, some readers have
asked: “Sean, are you a Marxist?”
If it’s Marxist to observe that the estate tax is what keeps this
400-year-old experiment in democracy from turning into a land of peasants
and serfs being lorded over by a class of aristocrats with “impervious
piles of wealth” (Bill Gates’ words, not mine), then call me Karl,
comrade.
So-called “death tax” opponents have penchant for red herring polemics —
the estate tax punishes success, hurts “small” family businesses and has
even led to the farm being taken away from “small family farmers.” Gasp!
I’ve yet to find an ounce of evidence for this alleged large group of
working people harmed by an estate tax. Meanwhile, I got in touch with
actual multi-millionaire members of Responsible Wealth to find out how
“Marxist” they are.
Darius Ross, for example. Ross, a 41-year-old entrepreneur with 19 years
of experience in real estate sales, construction, acquisition and
development, is the founder and managing partner of D. Alexander Ross Real
Estate Capital Interest, LLC — a boutique of high net worth investors
involved in real estate private equity and commercial acquisitions.
Of the approximately 5,000 top commercial real estate asset holders in
America, who control about $400 trillion in assets, only 100 are black.
It’s just one stark example of the extreme concentration of wealth and
economic disparity that exists in this country, Ross said.
“Our people are talking about buying their first home and (the wealthy)
are talking about buying mega-developments,” he said.
Because most Americans don’t own estates and are in the
looking-for-their-first-home class, Ross pointed out, many people
mistakenly think they’re not directly affected by the outcome of the
estate tax debate.
“But tax money is what funds needed programs, including first-time home
buyer programs. If we lose the estate tax, there won’t be that mother
buying her first house. She’ll be renting for the rest of her life. This
would create a permanent underclass,” Ross said.
I asked him if he felt his success was being punished by the estate tax.
“How do you punish successful people? That’s not the way the game works. I
can always come back (financially) because I understand the hustle. That’s
true of anyone who has been economically successful in this country.”
“It’s like having a privilege pass. Somewhere along the line some investor
is going to put up money to get you started again. That’s how it works.
It’s knowledge capital, which is more powerful than money. I call it The
Hustle,” he said.
The estate tax doesn’t punish the rich. It spreads economic opportunity.
The rich will always be able to make millions.
As you read this the Senate is preparing to vote on the proposal to
permanently repeal the estate tax, as if we aren’t facing record budget
deficits.
Currently, only those who leave estates greater than $2 million, or $4
million for couples, must pay the tax. In 2006, it is estimated that 0.27%
of all estates in the U.S. will pay estate tax, meaning 99.73 percent of
Americans can pass 100 percent of their estates to heirs tax free.
Repealing the estate tax is estimated to cost $1 trillion over the first
ten years of full repeal.
“We are currently facing a large list of multi-billion-dollar obligations,
including up to $1.3 trillion for the cost of the war in Iraq, $3.3
trillion in interest on the national debt, and $797 billion to pay for the
Medicare drug benefit,” says Steven C. Rockefeller, chairman of the
Rockefeller Brothers Fund.
“To reduce the nation’s revenue stream by $1 trillionÂ∑in order to enrich
a small group of multi-millionaires and billionaires, is fiscally
irresponsible and bad social policy. The estate tax could be reformed, but
it should certainly be preserved and the revenue used to pay our national
bills.”
Rockefeller is a signer of the Call to Preserve the Estate Tax, a project
of Responsible Wealth (http://www.responsiblewealth.org), spearheaded by
William Gates, Sr., head of the Bill and Melinda Gates Foundation and
father of the richest man on the planet.
Sign up. Get involved. Or get hustled.
ZNet commentator Sean Gonsalves is a Cape Cod Times reporter and
syndicated columnist. He can be reached at sgonsalves@capecodonline.com
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