The Difference Between the GOP and Democrats

The fundamental difference between the way the GOP and Democrats think boils down to the answer to one single question: who bears the cost of prior governing mistakes?

From the years I spent working for Fortune 500 companies or large law firms, I learned that the one thing they have in common is a basic principle that Crisis Management is all about burden sharing. The larger the pool from whom to draw people, the less each individual is adversely affected.  Every single political disagreement in the history of our country seems to boil down to some sort of variation on this odd theme.

And as my grand-daddy used to tell me:

“Boy, there are givers and there are takers in this world. The takers eat better, but the givers sleep better. One day you gonna hafta decide which you are. Choose wisely boy.

Generally speaking, I sleep very comfortably, thank you very much.

Given that the Supreme Court finally ruled on the constitutionality of the Affordable Care Act, I suppose it could be mere coincidence that the people that were most prominent in screaming “Foul” were Justice Antonin Scalia, Rush Limbaugh, and Joe Scarborough.

One of those three eats very well. The other two appear to eat as if they have tapeworms…but, in fact, do not.But “those boys swallow a lot of hate“, as my mom used to say about self-absorbed, bloated haters.  In the interest of decorum, I won’t go into analyzing New Jersey Governor Chris Christie under the above truism.

Ok, On to Economics  

Long-term Problem: The single biggest source of our long-term fiscal imbalance is Medicare. As it’s costs grow with an aging population and the fast-rising price of health care for everyone, Congress should be attempting to come to grips with the most equitable way to pay for it.

Unfortunately, if it’s not little Grover Norquist tying the Republicans in knots with his asinine pledge that he blackmails all Republicans in Congress to signing, it’s the NRA blackmailing Republicans so it’s members can blast Bambi to kingdom come with a Rocket-Propelled Grenade launcher. All the while, our economy continues to slip away from solvency.

So, politicians are attempting, unsuccessfully, to address the long-term imbalance and the short to medium-term imbalances simultaneously. Each by itself is difficult, but when egos, bribes and threats of political sabotage get involved, it’s become impossible.

Our medium-term fiscal imbalance, the deficit over the next five to ten years, is not primarily the product of higher Medicare spending, or even government spending overall. Social Security and Medicare are currently running surpluses.

This imbalance is principally the result of a tax code that generates far too little revenue. And a big reason the code isn’t doing its job is because the wealthy are paying an ever-smaller share of their income in taxes. This is a fact that Republicans do not even bother to dispute any more.

2011 was the third year in a row that total federal revenue amounted to less than 15% of gross domestic product. That is the lowest level of tax revenue in 60 years. The ongoing economic weakness is partly to blame for such low levels, but so too are the countless tax cuts enacted over the past ten years.

The Bush tax cuts, in particular, reduced federal revenue by nearly $2 trillion over the past decade, and directed most of the benefit to the top of the income spectrum. The bulk of the tax cuts went to the wealthiest, yet U.S. employment has fallen throughout the period, but for a brief window in 2004. So much for the “Tax Cuts Create Jobs” theory.


In fact, overall tax rates for the wealthy have been declining rapidly over the past several decades, and the Bush tax cuts are one big reason why. In the mid-1990’s, households with more than $1 million in annual income typically paid an average income tax rate of over 30 percent. By 2007, that rate was down to 23 percent. The mind-bogglingly rich have fared even better. The average income tax rate for the 400 wealthiest taxpayers dropped all the way down to 17 percent.



English: This is a chart created to demonstrat...

English: This is a chart created to demonstrate graphically the historical tax rates for the lowest and highest income earners in the United States. (Photo credit: Wikipedia)


During the same period that employment has been falling, tax rates for the rich have dropped dramatically and their incomes have skyrocketed.

Republicans naturally argue that, despite all this, the wealthy still pay higher rates than the middle class and poor. That’s true, on average, but because of the explosion of special tax breaks that are skewed toward the wealthy, and because of artificially low tax rates on certain kinds of income, some very wealthy households (and corporations) are able to get away with paying lower rates than middle, low and very-low income Americans.

Moreover, since the income gap between the richest and everyone else has been increasing, it would be only fair if the gap between their tax rates increased as well. But that is not what’s happened. The tax rate gap has been narrowing with the top income rates coming down while everyone else’s remained the same or even higher.

Republicans then suggest ominously that raising tax rates for the wealthy could have negative economic consequences. The only problem with this theory is that there’s no actual evidence for it!!!!

Here Are the Facts The GOP Doesn’t Want You to Hear

  1. Both overall economic growth and job creation were faster during periods when the top marginal income tax rate was high.
  2. In the 1950’s that rate was over 90%, and it didn’t prevent an economic boom.
  3. More recently, in the 1990’s the top rate was almost 40%, the same rate to which President Obama now wants to return when economic performance far outstripped that of the following decade with its lower tax rates.
  4. The tax code is riddled with special deductions, credits, exemptions and rates that benefit some people much more than others.
  5. Most of these have dubious policy justifications.

If this is the tax “game” that we are going to be forced to play (rather than a sensible approach like my One Penny Solution to America’s Economic Crisis), then so be it, but:

  • We are not going to balance the budget solely by raising taxes on the wealthy.
  • But neither can we balance the budget without doing so.

Over the past several decades, the truly rich have gotten truly richer, while simultaneously enjoying the benefits of tax cut after tax cut. Asking them to pitch in an additional fraction of their income to do their part to help close the budget deficit, a deficit produced partly by those very same tax cuts they’ve enjoyed, isn’t punitive or affectation.

It’s just fair damnit.

Harvey Gold

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