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More tax breaks for the rich will not cut the national debt

Eric Griego

Last week was a tough one for Wisconsin Congressman Paul Ryan and the Republicans in Congress. First there was the stinging defeat by Kathy Hochul in a Republican congressional stronghold in New York. Then, the next day, the U.S. Senate rejected the budget plan crafted by Congressman Ryan.

This was the plan that guts Medicare by converting it from a program that pays medical bills for seniors to a program that gives them inadequate vouchers to go out to buy their own health insurance.

The Republican House of Representatives passed this plan and then went home to a firestorm of criticism from constituents who like their Medicare. But this plan was terrible in lots of other ways besides undermining Medicare.

The plan featured drastic cuts of some $4 trillion over 10 years. Besides ending Medicare as we know it, the plan would also deeply cut health care for poor children, the disabled and the elderly; food stamps; housing programs; Pell grants for low-income students to attend college; and every other federal program you ever heard of, such as the FBI, national parks, homeland security, interstate highways — you name it.

The House Republicans who passed this budget said these severe cuts had to be made to save our children from future budget deficits. They said, “We all need to sacrifice to reduce the national debt.”


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Read the fine print

That all sounds very noble until you read the fine print. Because at the same time the House Republicans voted to cut $4 trillion out of programs that help ordinary people, they voted to give the same $4 trillion in tax cuts to the very rich.

First, the Ryan plan would have permanently extended all the Bush tax cuts, including those for taxpayers making over $250,000 per year. That alone would add about $1 trillion to the national debt by 2019.

Second, a huge new cut would reduce the top tax rate (paid only by the richest 2 percent of taxpayers) from the current 35 percent down to 25 percent — for both individuals and corporations. This alone would cost the treasury almost $2 trillion.

Finally, other miscellaneous tax cuts — all targeted for the rich — make up the last $1 trillion.

If you cut middle-class programs on the one hand, but then also cut taxes on the rich at the same time, what impact do you make on future deficits? None. They just cancel each other out. This is using fears about deficits to pull a fast one on the American people.

Robin Hood in reverse

Congressman Ryan claims his proposal would make up $3 trillion of this lost revenue by closing tax loopholes and “broadening the tax base.” But he and other Republicans have declined to name a single loophole or specific change to broaden the base, which has to make you wonder how serious they really are about reducing the deficit because you would need new revenue to balance the budget after so many tax cuts.

According to the Center on Budget and Policy Priorities, there is only one way to balance out a revenue loss of $3 or $4 trillion — raise taxes on the middle class. So in the guise of “putting the nation’s fiscal house in order,” the House Republicans are trying to sneak through a massive transfer of tax responsibility from the rich to the middle class. This is not serious deficit reduction; it’s Robin Hood in reverse.

President Obama’s proposal takes deficit reduction much more seriously. It goes after future deficits by finally allowing the Bush tax cuts for the richest 2 percent to expire, and it also cuts almost $3 trillion in program spending over a 12-year period. Many of these cuts would be very painful, and personally I don’t agree with them all, but at least they would all go to reduce the deficit, and at least there would be no tax increases on the middle class.

The bottom line is that Congressional Republicans, including Congressman Pearce, have made a lot of noise about the dangers of future budget deficits. Unfortunately, that now looks like little more than a smoke screen behind which they will transfer income from the middle and working class to some of the richest people on the planet.

Griego is a state senator, executive director of N.M. Voices for Children, and a candidate for Congress in the 1st Congressional District.

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20 comments so far. Scroll down to submit your own comment.

  1. I think a closer look at the financial reports is needed. Thank you Mick and IP for your comments.

    First there is no 2010 report. Why not?
    Second, the report provided is not an audited report? Why not provide an audit on their web site. At least 3 years would be great..
    Third. In 2009 it looks like the NM Voices for Children lost over $12 million of about a $50 million endowment by making poor investments? What kind and who was managing the money? Did they do better in 2010? How about this year? Can someone verify this please. They start with $50 million and end with about $38 million..The report is hard to read.
    Fourth, Looks to me like they spent about $1. 4 million on salaries and benefits….but to who?

    I think we need to know much, much more about this organization that seems to get money from federal, state and local governments as well as other non-profits and private donors.

    Can you tell us where we should look Mr. Griego.

  2. IP and Mick Thanks for your input.
    IP when I invest in a company I like to see what the management makes. And yes it is always available in the filing of public companies. Bernalillo County provides this information too on what they pay employees. When individuals suggest or demand a transfer of dollars from one group to another as Mr. Griego does suggest, I like to see what the money goes for. I just think it is prudent to take a look under the hood.

  3. @ MJM

    You asked Mr. Griego:

    Would you please disclose the salaries of your top staff members at N.M. Voices for Children and what services they provide? i would like to know who funds this organiztion. Can you tell me? I think I will be a waiting for this infromation for a while…Any one care to venture how long that wait will be?

    It take’s about 3 minutes to find a Financial Report for NM Voices for Children. The 2009 report can be found at:

    http://www.nmvoices.org/attachments/annual-report-09.pdf

    The report is pretty clear about who supports NM Voices for Children. There’s a list of donors and so forth. Not many organizations are going to publish the salaries of their individual staff members. Yes, the tone of the mission leans a little to the left, but then again, it’s one of those do gooder organizations. Doesn’t look like a big conspiracy to me. I’ll let Mr. Griego speak for himself as to salaries. The report does give a total for salaries paid, but in the two or three minutes it took me to find this information I didn’t see that break down. You could, of course, read the report yourself, and then comment.

    As ever,

    Michael J. Flynn

  4. MJM:

    Zero seconds, perhaps? Their funding sources and staff member duties, at least, are public record…

    As for their salaries, do you typically demand this information of private organizations?

  5. Mr. Griego.

    Would you please disclose the salaries of your top staff members at N.M. Voices for Children and what services they provide? i would like to know who funds this organiztion. Can you tell me? I think I will be a waiting for this infromation for a while…Any one care to venture how long that wait will be?

  6. @ Stever, commenting on Mick

    In your first comment you said “lax regulations during the Bush years allowed Enron, the oil companies, and big pharma to take abnormal profits while shifting the risks away from themselves” does not apply to Enron. It was bankrupt by the end of 2001. I’m not saying the bulk of what you are saying doesn’t have some validity. Please elaborate on Enron’s profits over the “Bush years”.

    1. I agree, Enron’s infrastructure had already punctured on the iceberg of their fraudulent business model (to use your Titanic analogy) by the time Bush was inaugurated in January 2001.

    2. What happened next? As I said, the very business friendly Clinton FERC Chairman, Republican Curtis Hebert, just wouldn’t play ball with Ken Lay/Enron. So, just as our New Mexico Republican United States Attorney, David Iglesias, was purged by the Party, so too was Republican Curtis Hebert replaced by Pat Wood, who then ignored complaints to the FERC about the Enron behavior that, I agree, manifested itself late in the Clinton Administration.

    3. By the FERC giving carte blanche to Enron when Western States appealed to the FERC for relief from the fraudulent practices of Enron; that would be the lax regulations I was talking about.

    4. I stand corrected; I should have, in this case, said lax regulators, since the FERC regulations, had they been enforced, would have allowed relief for the Western States.

    5. And finally, I agree; Bush years (with respect to Enron) was, perhaps, an exaggeration. It was just that one really big year while Enron was imploding.

    6. As to big pharma and big oil, I think they got the full monty for the full eight years of the Bush Presidency.

    Respectfully, Michael J. Flynn

  7. Mick,

    In your first comment you said “lax regulations during the Bush years allowed Enron, the oil companies, and big pharma to take abnormal profits while shifting the risks away from themselves” does not apply to Enron. It was bankrupt by the end of 2001. I’m not saying the bulk of what you are saying doesn’t have some validity. Please elaborate on Enron’s profits over the “Bush years”.

  8. @ Stever

    Mick, Bush, FERC, Enron, Ken Lay etc by 2001 was rearranging deck chairs on the Titanic. I know it makes for a good story to augment the standard bad/evil/stupid/(fill in the blank) Bush criticism but that’s a story that doesn’t need the Enron stretch to work

    .

    It’s not about Bush being evil. It is exactly about the Bush Policies and the Bush Cronyism leading directly to the Enron ripoff of Energy Consumers in the Western States. Clinton and California actually set the stage for what could have been a place for honest brokers to come in and sell unregulated energy. The FERC, under Bush/Cheney, refused to roll back energy contracts that were obtained through deliberate and predatory manipulation of energy supplies (also known as fraud).

    The money that was taken from Consumers made a big hole in Consumer Savings and in Consumer Purchasing of goods and services provided at real market costs. Enron’s profits were a Crony Tax on Consumers. That is, inflated energy prices robbed legitimate businesses of Consumer Spending since Consumer Discretionary Spending instead went to artificially (not Market Based) high energy prices.

    Again, I was not and am not a fan of unregulated energy markets (especially while the Free Market is hobbled by cartel behavior that breaks the Supply and Demand Relationship). Similar speculation in the Energy Futures Market has distorted the Price Discovery Function. No credible Oilman will invest in new drilling based on expecting $100/barrel for price, yet speculation has allowed the price to be driven that high and higher. And don’t give me that drill baby drill slogan; there is no shortage of $75/barrel oil and I am pretty certain that Saudi oil is still profitable at $20/barrel.

    This may not fit your narrative, but these are the facts.

    We could discuss how a Windfall Profits tax would put abnormal profits into the US Treasury instead of into Corporate Coffers (corporations are entitled to legitimate profits; abnormal profits are those above the level that would be attributed to genuine, non-cartel, non-predatory, market forces).

    Michael J. Flynn

  9. Mick, Bush, FERC, Enron, Ken Lay etc by 2001 was rearranging deck chairs on the Titanic. I know it makes for a good story to augment the standard bad/evil/stupid/(fill in the blank) Bush criticism but that’s a story that doesn’t need the Enron stretch to work.

  10. @ Stever: Mick, I read thru once and will go back if I feel I to understand more in depth. Please tell me how lax regulations in the “Bush years” had anything to do with Enron’s collapse, which was years in the making and started welll before 2001

    My apologies to Skeptic, I thought this was Skeptic’s remark and it was the one I didn’t answer in my previous remarks to Skeptic.

    Stever,

    The overwhelming majority of Enron shenanigans occurred under the friendly watch of the Bush Federal Energy Regulatory Commission (FERC).

    Yes, Enron was already buying politicians before Bush was elected president (Enron was, if not Bush’s largest benefactor, very near the top of that pile) and Enron certainly lobbied the Clinton White House. Bill Clinton definitely was a friend of business with NAFTA and leading the way in deregulation. By the way California led the nation by deregulating their own energy markets, which were promptly manipulated by that Crony Capitalist, Ken Lay ,and the rest of Enron.

    Can’t you see that Enron was an attack on the Free Market and not an exercise in Free Market Capitalism?

    Back to Bush, and lax regulation. Upon what many observers think was direct advice from Ken Lay, the Bush White House replaced the FERC Chairman, Curtis Herbert, with a new chairman. Curtis Herbert is a pro-business Republican who was, yes, appointed by Clinton.

    I could go on. Anyone who wants the facts can easily get them. Search Enron, FERC. For further evidence of lax regulations by the Bush Administration, read Alan Greenspan’s book that he wrote after being Fed Chairman, especially the later edition with his reflections on the market meltdown.

    As ever, Michael J. Flynn

  11. Skeptic,

    @ Mick

    You make some good points and you ask some relevant questions, which deserve answers. I’ll answer a few now, and get back to you on the others.

    1. First, a minor correction. I said Social Security collects more than 6% each year. That’s not always correct. The 2009 numbers, which were the easiest for me to retrieve, showed SS collected $807.5 Billion while GDP for 2009 was $14,088 Billion. So, that would be more like 5.7% (as you all know, I thrive on facts, so shame on me for that).

    2. As to structural deficits, you are correct that our current entitlements contribute much to the present structural deficits, but a structural deficit is found in any budget that spends more over time than can be reasonably expected to be balanced by current and future revenues. Revenues are made up overwhelmingly of taxes. Yes, revenues are taxes. Hence, my criticism of spend and spend budgets as opposed to tax and spend budgets. The Clinton Budgets were going in the right direction of balance. I will give credit to the bipartisan efforts of the Congress, which included some adult moments from Newt G. And, yes, I agree that much of the Clinton Surplus was illusionary if you consider total committed funds over time. Paul O’Neil covers that quite well in his writings. It’s a shame Bush fired him.

    3. As to Enron; I will come back to that in a subsequent post.

    As ever, Michael J. Flynn

  12. Skeptic, what magic mathematically-tenuous hole are you pulling your $400,000/$100,000 numbers from? You are vastly exaggerating both of those numbers…

    Unfortunately, you’re only slightly exaggerating the ratio, which is closer to 3:1 than 4:1.

    Also unfortunately, the net benefits numbers are in the right ball park also.

    The study was one I heard referred to on Bob Brinker citing a study in the NY Times, but can’t find a reference to.

    This Urban Institute analysis will have to suffice:

    Singles with a $200,000 net,
    Non-working spouses with a $400,000 net,
    and the worsening problem going forward ( not including the increase in the elderly ).

    The majority of the uneducated public believes we don’t have to do anything about Medicare ( or Social Security ).

    That’s why the politicians are loathe to do anything.

    But it’s also why Bill Clinton said Democrats can’t ignore the Medicare problem.

    This spending scenario is as big a threat to Democrats as the nation as a whole because it is already
    squeezing out the available budget for EPA, education, ‘green jobs’, and all the other things democrats
    want to spend on.

    I will observe this, only the party out of power seems to care about the deficit.

    That has gone through both dems and rs.

    But that has been a prescription for the real danger we find ourselves in now.

  13. Mr. Griego has an interesting arguement. One that I don’t agree with. Let me explain.

    In my opinion, as somwone who is self employed, not wealthy, but works for wealthy individuals, we need to broaden the tax base. Shared risk as well as shared opportunity.

    You seem to want the wealthy to share quite a bit more risk. There is no way to just raise taxes on the wealthy and assume that there is an equal increase in tax revenues. What is there incentive to work harder? If I took money from your non profit would you work harder? how about your employees?

    As I am now approaching the age where I will use Medicare, to me a Medicare Advantage plan (now covering about 25% of Medicare Patients) makes the most sense Mr. Griego. At least I would have an opportunity to pick between different providers. Rather than have the “one size fits all” approach favored by our current administration.

    Sir, we can not spend more than we take in for tax revenues indefinately, or we will be in fiscal deep doo doo.

    We all know that. Since I am a self employed working stiff and not employed by a non -profit agency like you it gives me a different perspective. I can tell you that if you continue to add additional tax pressure to the regulatory pressures put on most small businessess we will snuff out the entreprenurial spirit of NM and the USA. I and several others will be unemployed. Then, the non profit organizations you work for will have no money and be swamped by individuals needing your services.

  14. Skeptic, what magic mathematically-tenuous hole are you pulling your $400,000/$100,000 numbers from? You are vastly exaggerating both of those numbers…

    Unfortunately, you’re only slightly exaggerating the ratio, which is closer to 3:1 than 4:1.

  15. Go back in time to the good old days at the end of the Clinton era when we had genuinely turned the corner on structural budget deficits

    ???

    Structural means the entitlements.

    No president has done much of anything positive, but it’s pretty simplistic to ascribe blame or credit to
    presidents or congresses when the voters are such willing bribe takers.

    The average Medicare recipient receives $400,000 in benefits but pays only $100,000 in?

    Sweet. Get me in on that but just do it before we destroy America.

  16. Mick, I read thru once and will go back if I feel I to understand more in depth. Please tell me how lax regulations in the “Bush years” had anything to do with Enron’s collapse, which was years in the making and started welll before 2001.

  17. We seniors want our money back!

    The kids probably want the country back that we boomers are destroying.

  18. Ramirez,

    There is no sound reason why social security should not payout more than 6% of GDP, since more than that is collected each year.

    For all us (those over 40 and those not over 40) we have to get over the fantasy that every tax cut is a stimulus. President Bush fired his Treasury Secretary Paul O’Neil when he tried to interject that realism into the Bush Budget (see Dick Cheney’s famous “deficits don’t matter” quote).

    Go back in time to the good old days at the end of the Clinton era when we had genuinely turned the corner on structural budget deficits. We had reasonable and moderate tax reductions from the Reagan levels and we had made realistic cuts in spending.

    What happened next? The Bush Budget was based on the false premise that the Bush Tax Cuts would; (1) expire in 10 years, and (2) pay for themselves by generating larger supply side revenues than revenues that were lost by the tax cut. Even if that plan was honest at the time, the subsequent Bush Budgets made no corrections to that plan when it came time to financing two wars and when the stimulus effect of the tax cuts failed to materialize.

    Democrats may be tax and spend, but the Bush Budget was more like spend and spend. Democrats have been accused of spending like drunken sailors. At least sailors use their own money. The Bush White House spent like drunken frat boys; they used their credit cards. You can’t write a Visa Check to pay down your Master Card balance.

    I could drone on about how much the lax regulations during the Bush years allowed Enron, the oil companies, and big pharma to take abnormal profits while shifting the risks away from themselves. Socialize the risk and privatize the rewards; not good economic policy, nor is this Free Market Capitalism.

    As ever, Michael J. Flynn

  19. Hey Wedum, at least you have a chance at seeing that money, us folks under 40 REALLY won’t. I want MY money back. This the boilerplate arguments Dems will use to strike fear into seniors to distract voters from their monumental failure to fix the economy and pay down the debt.

  20. The victorious Kathy Hochul has pointed out that, due to inflation, the highest tax bracket should be for those with taxable income (that’s line #43, AFTER all the decuctions) above TWO MILLION, not $250,000. Back in the ‘Good Old Days,’ like 1945–1965 or so, taxes on that top bracket were around 90%. Thanks to inflation, what was a $200k and above then is now closer to $2M and above.

    And NO ONE is talking about repaying the what? Trillions? that have been “borrowed” from Social Security for the last thirty or so years. (And used to pay for the tax cuts made during that era.) We seniors want our money back!

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