Why The Democrats Are Losing Out And Why A Goverment Shutdown Would Have Been Necessary

A government shutdown was averted and the federal government will be funded until the end of the FY 2011. The costs have been $39 billion in cuts to non-defense discretionary spending 1, which essentially means that there will be less funding for Head Start, Pell Grants, LIHEAP and other programs that fall squarely on the backs of the working and middle class people in this country. 2 The debt will still hit the $14.29 trillion ceiling next month, and the deficit exceeds a trillion dollars. 3 Where is the sanity behind a token $39 billion cut when the deficit stands at 40 times that amount? What kind of political decision is this? What kind of ludicrous decision is this, when the Republicans, who are completely run by the rich corporations and the Tea Party, call the shots and frame the debate the way they like it? They demand cuts to the Social Security Administration? Let’s give it to them. Seniors will suffer? Who cares? They have no money to support my campaign, eh? They demand cutbacks in EPA funding? Sure bet. Who cares about clean air and water? The rich people live in gated communities or in some nicer place abroad. The framing of this whole budghet debate has been skewed toward one direction and that is to implement cuts in the programs that people need to survive on.

The other side of the coin is that a lot of other wasteful expenditures are not addressed at all. For example, a study released by independent Senator Bernie Sanders revealed that the Pentagon had spent $285 billion to defense contractors who had defrauded the taxpayers. 4 Defense spending is completely overblown. In the aftermath of 9/11 this country has doubtlessly spent trillions of dollars in ramping up national security and executing two major wars in the Middle East that increased insecurity and antagonism, more dead people and more social conflicts. This fiscal year the Pentagon will receive over $700 billion in funding and next year at least $670 billion 5 – on Stiglitz and Bilmes line this would not cover many other hidden costs such as veterans health care or their absence from the regular workforce- the middle class people are paying for the war, while the infrastructure remains structurally deficient and the public schools in poor areas are left to further decline (discussing the various state education budget cuts warrants another blog entry including devastating news for parents, teachers and students). The oil and gas companies have received $41 billion in federal subsidies. 6 And the way they have thanked the taxpayers was raising gas prices (for which they were not solely to blame, but I do note their outrageous profit margins and the wrong incentives the government is giving those speical interests, who certainly contribute to the politicians’ campaigns; also gas prices may be higher but only if they are used for direct research for renewable energy, because that is an investment that will solve our problem of oil dependence).

So at the same time as we have these terrible spending issues going on and are not being discussed by the Republicans or Democrats, the politicians don’t address the revenue losses the government incurs not only as a result of the recession, but also the tax policies going in favor of the big corporations and the rich. General Electric has reported $5.2 billion in US profits, pays no corporate taxes and receives a refund of $3.2 billion thanks to its savvy accountants. Bank of America holds over $2.2. trillion in assets and pays no corporate taxes. Verizon has reported $24.2 billion in profits, paid no taxes and received a $1.3 billion refund. Citigroup received $476 billion in bailout funding and paid no corporate taxes over the last four years. 7 Furthermore, we are sustaining the Bush era tax cuts, which hold the marginal income tax rates to 35% instead of 39% (many treat their incomes as capital gains anyway) and the capitals gains tax at 17% instead of 35%. The continuation of the Bush tax cuts will cost the government $4.4 trillion over the next decade. 8 A mllionaire now pays an effective tax rate of 32.4%. 9 The corporate tax rate is currently 35% (which is fine), but the effective tax rate is far lower than that considering all the loopholes (in the 20s). 10 Two-thirds of the major US corporations don’t pay any corporate taxes. 11 Corporate taxes now consist of less than 10% of the federal tax revenues, most of which is carried by individual income and payroll taxes, both of which disproportionately affect middle class taxpayers. At the same time the rich have gotten richer. In 2009, average executive salaries stand at $9.25 million. In that year the CEO of Bank of America, Thomas Montag, made $29,930,431 in compensation, the CEO of Citigroup, John Havens, made $11,276,454, the CEO of JP Morgan Chase, James Simon, made $15,518,794, the CEO of Morgan Stanley, Walid Chammah, made $10,021,969, and the CEO of Wells Fargo, John Stumpf, made $21,340,547. 12 It is little surprise that these bankers have not protested against a government bailout, since they knew they were not the ones paying the taxes. The average income of the bottom 90% is $31,244, the average income of the top 1% is $1,137,684, for the top 0.01% it is $3,238,386 and for the top 0.01% it is $27,342,212. 13 Small surprise that they keep on making more money when they pay less taxes. Even Warren Buffett complained that he as one of the wealthiest people on earth paid less taxes (17.7%) than his receptionist (30%). 14 So the working-class people are shafted via higher taxes and a higher burden in terms of being able to take care of their families, while the superrich have found ways to escape the taxman and to bring the government to cut tax rates for them.

Having said all this we know how the political climate in Washington is completely rigged in one direction, and that is how to make “shared sacrifice” and that is how to cut non-defense discretionary funding. The Democrats have already been bought into this side of the argument, wanting to not cut too much, but still agreeing to cuts, how miniscule that might be. Understanding the logic of the Tea Party, of the rich and of the Republican Party would reveal to us that we can not argue on their level. They clamor for a smaller government. Naturally, when it comes to protecting the people via Social Security or Medicare, programs to which they have paid into throughout their lives. They are content with a big government for corporate subsidies and defense spending. But they also campaign on an incompetent government. That has nothing to do with Obama doing a terrible job (as a progressive I can see many things to take issue with what the White House is doing). That would be the purpose of an oppositional party in Congress, to call out the failures of their opponents and propose better suggestions so as to make the government better and more efficient. But the Republicans in all earnesty have campaigned on the slogan that the government is the roadblock to all economic progress. That means no matter who is in charge the government should be subverted, undermined, attacked, weakened, ridiculed, blockaded, hindered, stymied and shut down. On Senator Harry Reid’s line this line of reasoning has become a self-fulfilling prophecy and is circular: “A) Government can’t do anything right, so, B) elect us, and we’ll prove it to you.” 15 The logic is that the government, perhaps, should shut down so people will get very upset about the incompetent government, it’s inability to pay veterans and civil servants, process tax refund checks and pay its bills. But that would be exactly the wrong answer. I am not suggesting to support the current government system, but the embrace one that can work differently. We need a government that takes the matters of the working people in this country more seriously. We need a government, that addresses the rampant income inequality, the high unemployment rates, the deficient health care and education systems and the deteriorating environment.

And here comes my point: we can only beat the Republicans in their own game. We should actually wait on shutting down the government, when it comes to the budget negotiations for FY 2012 this upcoming fall. The Republicans will press very hard to increase middle class pain by cutting a few more billion dollars from the $1.6 trillion deficit. they will not raise the revenue issue at all except when it comes to passing another corporate tax break or prolonging the Bush tax cuts. This is where Democrats should draw a line in the sand, and put forth its own program, since they control the White House and the Senate. Raise taxes on the rich, close corporate tax loopholes, cut defense spending and end the wars in iraq and Afghanistan. If these goals are not reached the government should be allowed to shut down. But that is not the end of the strategy. The Democrats should go out to the public and heavily campaign on who is creating the budget impasse in the first place and then lay out the draconian budget proposals of the Republicans. People should rally in Washington and demand the Republicans to compromise. If the case can be made like in Wisconsin or Michigan, there might be a huge turnout in Washington far greater than anything the Tea Party can offer. In that way, the budget issue can be resolved. I wished my rhetoric would not be so strongly partisan and combative, but the positions from the other side, the complete surrender to big capital, forces onto liberals the combative response or the conciliatory compromise, which seems to suggest cuts to Head Start, LIHEAP, Pell Grants, EPA and every other program the middle class cares about.

Increasingly, I see no other opportunity but taking the issue out to the streets to fight inequality, poverty and lack of opportunity. The upbeat note is that as long as the special interest beholden politicians vote for policies that continue the middle class collapse it unleashes more and more anger among the populace builds up, and no Fox News media or Tea Party can dismiss that. So the rich may feel well right now, but at the expense of social stability, which they so much rely on. The economist Joesph Stiglitz describes the millions of people in Egypt and Tunisia that have taken to the streets to protest the political and economic conditions of their country. These people have nothing to lose but their lives. And so the dictators are toppled. Stiglitz writes, “Governments have been toppled in Egypt and Tunisia. Protests have erupted in Libya, Yemen, and Bahrain. The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next?” 16 Will they be next? In the United States such condition need a longer time to unfolod, because there is still enough people, who feel just comfortable or barely making ends meet with their multiple jobs and declining wages. But tranquility may not last forever if on Alexis deTocqueville’s line self-interest is not properly understood. According to Tocqueville, “When the taste for physical pleasures has grown more rapidly than either education or experience of free institutions, the time comes when men are carried away and lose control of themselves at sight of the new good things they are ready to snatch. Intent only on getting rich, they do not notice the close connection between private fortunes and general prosperity.” 17

Notes

1 Knickerbocker, Brad. “Government Shutdown 2011 Avoided with 11th-hour Budget Deal.” The Christian Science Monitor. 09 Apr. 2011. Web. 12 Apr. 2011. http://www.csmonitor.com/USA/Politics/2011/0409/Government-shutdown-2011-avoided-with-11th-hour-budget-deal.
2 Whoever likes to watch people, who go off on a rant against the unfair distribution of wealth and the plight of working and middle class people in this country should watch one of Senator Bernie Sanders’ (I-VT) videos. http://sanders.senate.gov/
3 West, Paul. “Government Shutdown: Budget Battle Foreshadows Larger Fight.” Los Angeles Times. 09 Apr. 2011. Web. 12 Apr. 2011. http://www.latimes.com/news/nationworld/nation/la-na-budget-assess-20110410,0,6334121.story.
4 Terkel, Amanda. “Pentagon Paid Billions To Contractors Suspended For Fraud.” The Huffington Post. 02 Feb. 2011. Web. 12 Apr. 2011. http://www.huffingtonpost.com/2011/02/02/pentagon-billions-contractor-fraud_n_817682.html.
5 USA. CFO. Office of the Under Secretary of Defense. United States Department of Defense Fiscal Year 2012 Budget Request. Feb. 2011. Web.
6 Clayton, Mark. “Budget Hawks: Does US Need to Give Gas and Oil Companies $41 Billion a Year?” The Christian Science Monitor. 09 Mar. 2011. Web. 16 Apr. 2011. http://www.csmonitor.com/USA/Politics/2011/0309/Budget-hawks-Does-US-need-to-give-gas-and-oil-companies-41-billion-a-year.
7 “Infographic: Corporate Tax Cheats Are Bankrupting America.” US Uncut. 07 Apr. 2011. Web. 16 Apr. 2011. http://www.usuncut.org/blog/infographic-corporate-tax-cheats-are-bankrupting-america.
8 “Tax Cuts: Myths and Realities.” Center on Budget and Policy Priorities. 09 May 2008. Web. 16 Apr. 2011. http://www.cbpp.org/cms/?fa=view.
9 Gilson, Dave, and Carolyn Perot. “It’s the Inequality, Stupid.” Mother Jones. Mar.-Apr. 2011. Web. 17 Apr. 2011. http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph.
10 Hatch, Joshua. “Comparing National Corporate Tax Rates.” Sunlight Foundation Reporting Group. 28 Mar. 2011. Web. 17 Apr. 2011. http://reporting.sunlightfoundation.com/2011/comparing-national-corporate-tax-rates/.
11 “Effective vs. Nominal Corporate Tax Rates.” Scarabus. Web. 17 Apr. 2011. http://agrippinaminor.com/scarabus/?p=649.
12 “Executive PayWatch 2010.” American Federation of Labor and Congress of Industrial Organizations. Web. 17 Apr. 2011. http://www.aflcio.org/corporatewatch/paywatch/.
13 see 9
14 Tse, Tomoeh Murakami. “Buffett Slams Tax System Disparities.” The Washington Post. 27 Jan. 2007. Web. 17 Apr. 2011. http://www.washingtonpost.com/wp-dyn/content/article/2007/06/27/AR2007062700097.html?hpid=sec-politics.
15 Reid, Harry, and Mark Warren. The Good Fight: Hard Lessons from Searchlight to Washington. New York: G.P. Putnam’s Sons, 2008. Print. p67
16 Stiglitz, Joseph. “Of the 1%, by the 1%, for the 1%.” Vanity Fair Magazine. May 2011. Web. 17 Apr. 2011. . p2
17 Tocqueville, Alexis De, Harvey Claflin Mansfield, and Delba Winthrop. Democracy in America. Chicago: University of Chicago, 2000. Print. p540

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One Response to Why The Democrats Are Losing Out And Why A Goverment Shutdown Would Have Been Necessary

  1. Pingback: Politics Democrats Support Corporate Tax Cuts ‘Cause They Need It, Of Course « THE STR

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