Archive for November, 2010

“PICTURING WEALTH”

Posted in Commentary on November 22, 2010 by Ted Salins

Five people are shipwrecked and stranded on an island. With tools and wood from their beached, wrecked ship, they can rebuild together and sail home in 30 days. Only problem, it’s a desert island and there is no food.

A food supply is dropped on the island by the government. There is enough food for FIVE PEOPLE, THREE MEALS A DAY for THIRTY DAYS – exactly the right amount. One of the five, however, takes ALL THE FOOD and says “I will now have THREE MEALS A DAY FOR FIVE MONTHS insuring that I will be healthy, have the strength to figure how to save you unfortunate people and get you off this island! No matter how weak you are, I will encourage you. Assuredly, I will survive beyond thirty days in case we don’t finish the ship in time”. Two of the four think his plan sensible making a majority of three over the two who object.

That’s the Bush Tax Cuts.

Weighing tax relief towards the wealthy, or “trickle down economics”, has not worked. It’s really more like dropping a dry rag on a puddle. On the contrary, tax hikes on the top 1 – 4% of America’s wealthiest during the Reagan, first Bush and Clinton Administrations caused growing economies and equivalent reductions in welfare payments and crime. And wealthy people did very well. This happened, by his own admission, to Ronald Reagan in 1982. It happened to the first President Bush – Republicans are right that he should get some credit for the economic boom in the nineties attributed to President Clinton – and it is ironic that he lost the election for this very reason of breaking his “NO NEW TAXES” vow. In Clinton’s first term, his 1993 Economic Stimulus Package targeted only the wealthiest 1% and the economy performed in a way in which more people, even in the lower middle-class, owned houses and had jobs.

Most people don’t really understand how much money the top 3% has. Most people don’t know the difference between a million dollars and a billion dollars. Think of it in terms of seconds: a million seconds lasts 11 days, a billion seconds 33 years. Compare a $43,000 salary to 43,000 seconds – one half of a day!

Or convert this wealth to square miles of sea water: The money of the top 3% is the Atlantic and Pacific Oceans. The rest of us share the Great Lakes and The Gulf of Mexico. In the Bush I and Clinton “tax hikes”, the top 3% ceded The Caribbean Sea to the general good of the country. That sea water evaporated over America and rained down as fresh water swelling rivers and creeks irrigating a dust bowl of an economy.

In the Bush II tax “relief and reconciliation” cuts, the bottom 97% gave back The Caribbean, Lake Huron and now has to borrow the Indian Ocean to pay interest.*

Bush I and Reagan raised tax rates on the wealthiest 4%. Clinton only raised taxes on the top 1%. We’re talking about percentage points in the top tax rates – Clinton raised them from a historic low of 35% up to 38.6% but with good accounting and deductions, the aforementioned top 1% paid on average 15% in taxes after 1993 – not as high as the average worker, but a lot of revenue! The Bush II plan by 2003 lowered the top rate back down to 35%, or about 12.29% after deductions – much lower than the average payroll worker. We are suffering our worst economic downturn since The Great Depression.

Is it fair to make the wealthy pay more? Dick Armey once asked on TV “What’s wrong with rich people?” Nothing. Assuring financial security and clout helps everyone. More people had more money during the nineties – but the wealthy made the most and we all paid less in interest on the decreasing deficits. The more money people have, the more they spend it on services and products, often owned and manufactured by the wealthy.

What is this abstract concept? The “no new taxes” mantra is a meaningless political phrase meant to fire up knee jerk reactions and give the impression that the government is giving away YOUR money and being unfair to the wealthy.

Sensibly, it would be better to allot the food to all five shipwreck survivors. The problem is, fixing the economy with sensible and logical economics is not “sexy” and likely to disappoint TV advertisers and “no new taxes” conservatives.

Ted Salins © 2010

* Sea water sizes courtesy of the “The CIA World Fact Book”; Total wealth of the top 400 U.S. families in 1992 WASHINGTON POST 6/23/03; NEW YORK TIMES 5/25/03.

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