Wednesday, May 18, 2011

Shifting The Burden

Caption: A chart of who has benefited from the expanded economy from 1950 to the present. As you can see, folks in the upper one percent or so of the population have reaped most of the benefits since President Reagan changed the tax burden in America. See this article for an explanation of that chart, and some others. [Click on the chart to enlarge.]

Image credit: Critter's Crap

Awhile back I wrote about one of the things that made the current fad for austerity in government budgets, and "balanced" budgets, a popular thing among the folks who really matter in politics:
However, you'd be missing the larger point, which I think perhaps should be printed in bold letters:

The Irish are paying five percent interest!

I don't know about you, but nothing that I can get my hands on right now that is reasonably guaranteed to pay off pays five percent interest. Yet the Irish, and a good many other governments, are offering bonds at rates like this to "balance" their budgets. If I had a few million to throw around, I'd love to have a stable national government on the hook to pay me five percent interest.

A Lesson In Idiot Savant Economics For Economics Professors
Right now U.S. government Treasury bills are paying somewhere in the neighborhood of three and a half percent interest, which is less than the Irish bonds are paying, but that's still a good rate. If you have the kind of money you can put into things like government bonds, they are a pretty sweet deal. That kind of interest isn't available from any of the consumer-level services banks offer in America - you might get a certificate of deposit that will pay half that, and regular savings accounts have little return to speak of.

What I hadn't really considered, though, was how federal government fiscal policy had shifted the burden from the rich to the rest of us. Robert Reich noted that yesterday in his column:
Forty years ago, wealthy Americans financed the U.S. government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money. While foreigners own most of our national debt, over 40 percent is owned by Americans – mostly the very wealthy.

This great switch by the super rich – from paying the government taxes to lending the government money — has gone almost unnoticed. But it’s critical for understanding the budget predicament we’re now in. And for getting out of it.

The Great Switch By The Super Rich
It's obvious when you think about it, really. The way we finance government has changed from having the rich pay their share of taxes, to letting the rich make money from government financing, at the expense of the rest of us.

And no, that isn't just a Republican priority. It was an overwhelmingly Democratic Congress that renewed the Bush tax cuts last year. There are plenty of idiots among progressives who think that somehow this is all the work of Republicans, but it's not. If letting the tax cuts expire had been a Democratic Party priority, they would have expired. Parties have ways of making members who don't play ball on really important issues pay. We've been betrayed by Democrats here just as much as the GOP.

Whether progressives will ever do anything about that remains to be seen.

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