First, the premise that deficit spending is a bad thing is specious. We have a massive economic slowdown, from which the best way out is to stimulate production and economic growth. That requires spending, and if the people can't, and corporations won't, the government must. For example, from 1935 until 1943 the WPA provided government paid jobs to over eight million unemployed Americans and lifted us out of the great depression-- THAT'S how you spend your way out of economic downturn. Altogether, the federal government created over 11 million jobs from 1934 until 1943.
Second, the very notion of deficit budgets is something of a backhanded falsehood. Stick with me here for a minute, please.
We were able to create the WPA and other aspects of the New Deal because the wealthy and their corporations paid progressive taxes until the last couple of decades. For example, during the 1940s and 1950s corporations paid 50 percent more income tax than individuals, i.e. for every one dollar individuals paid in income taxes, corporations paid $1.50. Today the corporate share has dropped to $0.25 for every dollar individuals pay, and of course many of the largest and most profitable corporations pay no taxes at all. The burden of taxation has been shifted from businesses-- many of which are making record profits-- to individuals who cannot bear the extra burden during hard economic times. During the same time, the tax rates paid by the wealthiest people have declined precipitously from over 90 percent of income over $100,000 during the 1950s and 1960s, when the U.S. was demonstrably an economic powerhouse, to the current 15 percent on income from investments. Fabulously rich financial managers pay lower taxes than their housekeepers and secretaries. So the burden of funding government, including funding an economic recovery, has shifted from corporations and the wealthy, who now reap fantastic profits, onto the poor and working class, who sink deeper and deeper into despair.
But that's not the worst of it. Economist Richard Wolff explained it this way on a recent Democracy Now! broadcast:
RICHARD WOLFF: So, over the last 30, 40 years, a shift from corporate income tax to individual income tax, and among individuals, from the rich to everybody else. To deal with our budget problem without discussing that, putting that front and center, making that part of the story, that’s just a service to the rich and the corporations. There’s no polite way to say otherwise. And there’s something shameful about keeping all of that away and focusing on how we’re going to take out our budget problems by cutting back benefits to old people, to people who have medical needs. There’s something bizarre, and the world sees that, in a society that has done what it has done and now proposes to fix it on the backs of the majority.
(snip)
JUAN GONZALEZ: And one issue that you raised, in terms of how the corporations and bank profits have recovered tremendously, but—and many of these companies are sitting on huge piles of cash, that rather than invest in new machinery or bring in new workers, they’re just sitting on their money, and presumably investing it, because they’re not going to put it in at the bank rates or CD rates, so they’re obviously investing the money that they have, rather than create those jobs.
RICHARD WOLFF: Well, even more interesting, and maybe a bit of a shock to folks who don’t follow this, what the corporations are doing when they hold back the money—because it’s not profitable for them to hire—in large part, is they lend it to the United States government to fund these deficits. The United States government refuses to tax corporations and the rich. It then runs a deficit. It spends more than it takes in, because it’s not taxing them. And here comes the punchline. It then turns around to the people it didn’t tax—corporations and the rich—and borrows the money from them, paying them interest and paying them back. If the United States wanted to stimulate our economy in an effective way—
AMY GOODMAN: Pay even tax-deductible interest.
RICHARD WOLFF: Right, also. But if the government really wanted to do something, go get the money from them, stimulate, which will help them, and if you tax them to do it, you wouldn’t have a national debt. You wouldn’t run a deficit. We’re running a deficit because the people who run this society would like us to deal with our economic problems, not by taxing those who have it, the way we used to, but instead by endlessly borrowing (from) them. And now the ultimate irony, we’ve borrowed so much as a nation from the rich and the corporations, they now are not so sure they want to continue to lend to us, because we’re so deeply in debt. And they want us instead to go stick it to poor people and sick people instead. It’s an extraordinary moment in our history as a nation.
So the notion that we have to get our fiscal house in order because of massive deficits is itself a smoke screen concealing the twin facts that government spending is probably the only economic driver that will get us back on track, and more importantly, that the wealthy have succeeding in making us all serfs to their continued profits,
and most Americans haven't a clue how they did it. Instead of paying taxes, they loan their money to government at interest, making a profit and creating debt. That debt leads the government to borrow more, creating more debt, and so on in an artificial scheme designed to wring profits from the entire population using government services, and leading the nation further and further into debt. Ultimately, the government is compelled to tax the poor and cut services to the needy in order to fund the unconscionable profits of the monied class.
That's when we inevitably begin having conversations like this one, about the need to put our fiscal house in order. When the bill comes due to pay the rich.
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