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Edited Date/Time
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Original article
FROM THE ONLINE ASIAN TIMES -- AUGUST 3, 2011
It is self-evident that no sickness can be successfully cured without proper diagnosis of the illness. In their frantic efforts to remedy the plague of national debt and deficit, however, US policy makers tend to shy away from the root causes of the problem and focus, instead, on scapegoats.
What are the root causes of the national debt and deficit? They are, first and foremost, the multi-trillion dollar bailout packages that were bestowed upon Wall Street in order to rescue the financial gamblers, the constantly escalating costs of war and militarism, the huge tax giveaways to the wealthy, and the skyrocketing costs of healthcare, systematically jacked up by the insurance and pharmaceutical companies.
What are the scapegoats? They are the entitlements (Social Security, Medicare and Medicaid) and non-military discretionary spending: health, education, housing, transportation, the environment, community development, science and energy, human services, and the like. I call these items scapegoats because they are not the sources of the continued escalation of debt and deficit.
Take, for example, Social Security. First of all, it is a self-financing insurance program, funded by payroll taxes, not a handout or courtesy of Uncle Sam. Secondly, although it no longer has as big a surplus as it used to, nonetheless it still enjoys a considerable surplus. Indeed, without Social Security's surplus, the federal debt would be bigger than it is. Thirdly, to the extent that the trust fund may face a shortage in the future, it can easily be remedied by, for example, raising the maximum level of taxable income (for payroll purposes) from the current US$106,800 to a slightly higher level.
Like Social Security, Medicare is an insurance program that is funded by payroll tax. (Out of the 15.4% payroll tax, 12.5% goes to fund Social Security and the remaining 2.9% goes to fund Medicare.) Only recently have Medicare expenses come close to surpassing its revenue. This too can easily be remedied if or once the maximum taxable income for payroll funding is raised above the current $106,800.
The financial pressure on the Medicare program (like that on the Medicaid program) is not so much due to the revenue side of the program as it is due to the cost side, for which the pharmaceutical and health maintenance organizations/insurance companies are to be blamed, not the program itself. Indeed, the program itself has been a very successful case of single-payer health insurance programs. There are reasonable suspicions that this is why Medicare has been targeted for destruction by the powerful interest groups that view it as a "bad" example of a cost-efficient and successful health insurance program.
Just as the entitlements are thus not the sources of the problems of debt and deficit, so are not the non-military discretionary spending such as health, education and all other social and infrastructural expenditures.
For one thing, these expenditures (or more precisely, investments in maintaining or building the society's physical and human capital) constitute only a small portion (15%) of the total federal budget. For another, their share of the increase in federal outlays has in recent years been quite minuscule, only 14 cents out of every dollar over the past decade - hardly big enough to be blamed for the astronomical rise in the federal debt and deficit during this period (Economic Policy Institute, Policy memorandum #187, July 13, 2011).
It is obvious, then, that the budget negotiators, posturing and shouting over the debt ceiling, are shamelessly lying to the American people when they blame the entitlements and non-military public spending as sources of the federal debt and deficit. An honest approach to the problems of debt and deficit would, instead, look into the real causes of these problems: Wall Street bailouts, war and military expenditures, tax giveaways to the wealthy, and out-of-control costs of healthcare.
The ruling kleptocracy and the corporate media have created a huge misperception regarding the bailout of the Wall Street gamblers: that the government paid only $780 billion of the taxpayers' money (called TARP, or Troubled Asset Relief Program) to rescue the bankrupt or near bankruptcy speculators, and that once these financial speculators returned to profitability, they paid all they owed the taxpayers back - the end of the story!
In reality, the TARP money was only a small fraction of the government's giveaway of taxpayers' money to Wall Street. Other forms of government handouts, not known to the public, included trillions of dollars in terms of subsidies, backstops, guarantees, loans, purchases of worthless toxic assets at their pre-recession high prices, and a number of other confounding types of plunder.
Here is how Senator Bernie Sanders (of Vermont) put it: "The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the US provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression."
This explains why the federal debt has increased from $9.2 trillion in 2007 to $14.2 trillion in 2011, an increase of nearly 55%.
It is now common knowledge that a major contributor to the rising debt and deficit is the escalating spending on war and militarism, nearly doubled over the past decade (from $295 billion in 2000 to the current $560 billion). While the official Pentagon budget for the 2011 fiscal year is $560 billion, the real figure is nearly twice as much as the official figure.
The reason for this understatement is that the official Department of Defense budget excludes not only the costs of the wars in Iraq and Afghanistan, but also a number of other major cost items. These disguised cost items include: budgets for the Coast Guard, the Department of Homeland Security, nuclear weapons, veterans' programs, most military retiree payments, interest payments on money borrowed to fund military programs in past years, and more.
Once these misplaced or disguised expenditures are added to the official Pentagon budget, total "security"/military-related budget items would amount to slightly more than $1.1 trillion, which absorbs about one-third of the entire 2011 federal budget of $3.4 trillion.
Another major contributor to the rising debt and deficit has been the huge tax breaks granted giant corporations and the very affluent layers of the society. For example, according to Citizens for Tax Justice (CTJ), known for its accurate reports on taxation, the combined amount of taxes paid by the following 12 corporations for the 2008-2010 period was zero - no, it was less than zero! Collectively, they got $2.5 billion in refunds.
The 12 corporations were: Exxon Mobile, Wells Fargo, DuPont, American Electric Power, Boeing, FedEx, IBM, General Electric, Honeywell International, United Technologies, Verizon Communications, and Yahoo. CTJ reports that "from 2008 through 2010, these 12 companies reported $171 billion in pretax US profits. But as a group, their federal income taxes were negative: –$2.5 billion." (It must be pointed out that although the total federal income taxes for the group of 12 as a whole was negative, four out of 12 paid some federal tax, but the little tax that those four paid was more than offset by the other seven companies' not having paid any.)
This is an indication of how major US corporations pay - or avoid paying - their tax liabilities. The extremely rich and powerful interest groups have (since the late 1970s and early 1980s) deliberately used a combination of raising military spending and lowering their tax obligations in order to redistribute the national resources from the bottom up. As this combination leads to increases in debt and deficit, it then forces cuts on non-military public spending.
This represents a cynically clever strategy on the part of the ruling plutocracy that benefits from war, militarism, debt and deficit: instead of financing their wars and military adventures by paying taxes proportionate to their income, they give themselves tax breaks, finance their wars of choice through borrowing, and then turn around and lend money (unpaid taxes) to the government and earn interest. The wealthy have thus successfully converted their tax obligations to credit claims, that is, lending instead of paying taxes, which is in essence a disguised form of robbery.
It is obvious from this brief analysis that Washington's political dogs howling at the non-military public spending as the source of the escalating national debt and deficit are barking up the wrong tree. As long as the out-of-control spending on war and militarism is not contained, the multi-trillion dollar corporate welfare handouts (in the form of tax giveaways and costly rescue/bailout packages) are not curtailed, and the skyrocketing costs of health care are not restrained, the national debt and deficit are bound to continue their upward trend.
It is also obvious that the American people are lied to when they are told that all the wrangling that is going on in Washington over the debt ceiling is to reduce national debt. In reality, the national debt will continue to rise even if the corporate government takes a few trillion dollars out of it by further reducing the non-military public spending, that is, by further reducing the people's standard of living.
Ismael Hossein-zadeh is Professor Emeritus of Economics, Drake University, Des Moines, Iowa. He is the author of The Political Economy of US Militarism (Palgrave-Macmillan 2007) and Soviet Non-capitalist Development: The Case of Nasser's Egypt (Praeger Publishers 1989).
(Copyright 2011 Ismael Hossein-Zadeh.)
FROM THE ONLINE ASIAN TIMES -- AUGUST 3, 2011
It is self-evident that no sickness can be successfully cured without proper diagnosis of the illness. In their frantic efforts to remedy the plague of national debt and deficit, however, US policy makers tend to shy away from the root causes of the problem and focus, instead, on scapegoats.
What are the root causes of the national debt and deficit? They are, first and foremost, the multi-trillion dollar bailout packages that were bestowed upon Wall Street in order to rescue the financial gamblers, the constantly escalating costs of war and militarism, the huge tax giveaways to the wealthy, and the skyrocketing costs of healthcare, systematically jacked up by the insurance and pharmaceutical companies.
What are the scapegoats? They are the entitlements (Social Security, Medicare and Medicaid) and non-military discretionary spending: health, education, housing, transportation, the environment, community development, science and energy, human services, and the like. I call these items scapegoats because they are not the sources of the continued escalation of debt and deficit.
Take, for example, Social Security. First of all, it is a self-financing insurance program, funded by payroll taxes, not a handout or courtesy of Uncle Sam. Secondly, although it no longer has as big a surplus as it used to, nonetheless it still enjoys a considerable surplus. Indeed, without Social Security's surplus, the federal debt would be bigger than it is. Thirdly, to the extent that the trust fund may face a shortage in the future, it can easily be remedied by, for example, raising the maximum level of taxable income (for payroll purposes) from the current US$106,800 to a slightly higher level.
Like Social Security, Medicare is an insurance program that is funded by payroll tax. (Out of the 15.4% payroll tax, 12.5% goes to fund Social Security and the remaining 2.9% goes to fund Medicare.) Only recently have Medicare expenses come close to surpassing its revenue. This too can easily be remedied if or once the maximum taxable income for payroll funding is raised above the current $106,800.
The financial pressure on the Medicare program (like that on the Medicaid program) is not so much due to the revenue side of the program as it is due to the cost side, for which the pharmaceutical and health maintenance organizations/insurance companies are to be blamed, not the program itself. Indeed, the program itself has been a very successful case of single-payer health insurance programs. There are reasonable suspicions that this is why Medicare has been targeted for destruction by the powerful interest groups that view it as a "bad" example of a cost-efficient and successful health insurance program.
Just as the entitlements are thus not the sources of the problems of debt and deficit, so are not the non-military discretionary spending such as health, education and all other social and infrastructural expenditures.
For one thing, these expenditures (or more precisely, investments in maintaining or building the society's physical and human capital) constitute only a small portion (15%) of the total federal budget. For another, their share of the increase in federal outlays has in recent years been quite minuscule, only 14 cents out of every dollar over the past decade - hardly big enough to be blamed for the astronomical rise in the federal debt and deficit during this period (Economic Policy Institute, Policy memorandum #187, July 13, 2011).
It is obvious, then, that the budget negotiators, posturing and shouting over the debt ceiling, are shamelessly lying to the American people when they blame the entitlements and non-military public spending as sources of the federal debt and deficit. An honest approach to the problems of debt and deficit would, instead, look into the real causes of these problems: Wall Street bailouts, war and military expenditures, tax giveaways to the wealthy, and out-of-control costs of healthcare.
The ruling kleptocracy and the corporate media have created a huge misperception regarding the bailout of the Wall Street gamblers: that the government paid only $780 billion of the taxpayers' money (called TARP, or Troubled Asset Relief Program) to rescue the bankrupt or near bankruptcy speculators, and that once these financial speculators returned to profitability, they paid all they owed the taxpayers back - the end of the story!
In reality, the TARP money was only a small fraction of the government's giveaway of taxpayers' money to Wall Street. Other forms of government handouts, not known to the public, included trillions of dollars in terms of subsidies, backstops, guarantees, loans, purchases of worthless toxic assets at their pre-recession high prices, and a number of other confounding types of plunder.
Here is how Senator Bernie Sanders (of Vermont) put it: "The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the US provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression."
This explains why the federal debt has increased from $9.2 trillion in 2007 to $14.2 trillion in 2011, an increase of nearly 55%.
It is now common knowledge that a major contributor to the rising debt and deficit is the escalating spending on war and militarism, nearly doubled over the past decade (from $295 billion in 2000 to the current $560 billion). While the official Pentagon budget for the 2011 fiscal year is $560 billion, the real figure is nearly twice as much as the official figure.
The reason for this understatement is that the official Department of Defense budget excludes not only the costs of the wars in Iraq and Afghanistan, but also a number of other major cost items. These disguised cost items include: budgets for the Coast Guard, the Department of Homeland Security, nuclear weapons, veterans' programs, most military retiree payments, interest payments on money borrowed to fund military programs in past years, and more.
Once these misplaced or disguised expenditures are added to the official Pentagon budget, total "security"/military-related budget items would amount to slightly more than $1.1 trillion, which absorbs about one-third of the entire 2011 federal budget of $3.4 trillion.
Another major contributor to the rising debt and deficit has been the huge tax breaks granted giant corporations and the very affluent layers of the society. For example, according to Citizens for Tax Justice (CTJ), known for its accurate reports on taxation, the combined amount of taxes paid by the following 12 corporations for the 2008-2010 period was zero - no, it was less than zero! Collectively, they got $2.5 billion in refunds.
The 12 corporations were: Exxon Mobile, Wells Fargo, DuPont, American Electric Power, Boeing, FedEx, IBM, General Electric, Honeywell International, United Technologies, Verizon Communications, and Yahoo. CTJ reports that "from 2008 through 2010, these 12 companies reported $171 billion in pretax US profits. But as a group, their federal income taxes were negative: –$2.5 billion." (It must be pointed out that although the total federal income taxes for the group of 12 as a whole was negative, four out of 12 paid some federal tax, but the little tax that those four paid was more than offset by the other seven companies' not having paid any.)
This is an indication of how major US corporations pay - or avoid paying - their tax liabilities. The extremely rich and powerful interest groups have (since the late 1970s and early 1980s) deliberately used a combination of raising military spending and lowering their tax obligations in order to redistribute the national resources from the bottom up. As this combination leads to increases in debt and deficit, it then forces cuts on non-military public spending.
This represents a cynically clever strategy on the part of the ruling plutocracy that benefits from war, militarism, debt and deficit: instead of financing their wars and military adventures by paying taxes proportionate to their income, they give themselves tax breaks, finance their wars of choice through borrowing, and then turn around and lend money (unpaid taxes) to the government and earn interest. The wealthy have thus successfully converted their tax obligations to credit claims, that is, lending instead of paying taxes, which is in essence a disguised form of robbery.
It is obvious from this brief analysis that Washington's political dogs howling at the non-military public spending as the source of the escalating national debt and deficit are barking up the wrong tree. As long as the out-of-control spending on war and militarism is not contained, the multi-trillion dollar corporate welfare handouts (in the form of tax giveaways and costly rescue/bailout packages) are not curtailed, and the skyrocketing costs of health care are not restrained, the national debt and deficit are bound to continue their upward trend.
It is also obvious that the American people are lied to when they are told that all the wrangling that is going on in Washington over the debt ceiling is to reduce national debt. In reality, the national debt will continue to rise even if the corporate government takes a few trillion dollars out of it by further reducing the non-military public spending, that is, by further reducing the people's standard of living.
Ismael Hossein-zadeh is Professor Emeritus of Economics, Drake University, Des Moines, Iowa. He is the author of The Political Economy of US Militarism (Palgrave-Macmillan 2007) and Soviet Non-capitalist Development: The Case of Nasser's Egypt (Praeger Publishers 1989).
(Copyright 2011 Ismael Hossein-Zadeh.)
I wish others would take note.
On the other hand, it's clear that military spending is off the charts, and it's clear that we're supporting a world-wide deployment of military personnel and equipment that is outrageously expensive for a country that's struggling to put teachers in schools and firefighters in fire trucks. That has to stop, and soon.
And it's obvious that health care costs are unsupportable. And it's obvious that Social Security will likely have to be adjusted for pure actuarial reasons (people live longer, more people retire than enter the work force, etc.). Medicare doesn't need fixing as much as our entire health care system needs fixing - fix one of those and you fix both.
And it's clear that our tax rates are simply too low. We had a balanced budget, Bush cut taxes twice, and the wheels fell off. If I hit a jump at half throttle in second and case it, and I do the same thing the next lap, and the next...you'd be stating the obvious if you said, "Maybe you need third gear". We haven't come close to balancing a budget with this tax structure, and we never will.
All these problems are easy to solve. I sense that the American people largely want to see them solved in a rational manner. But I do question whether Congress has the will to solve them, or even to discuss them in any reasonable manner. Congress only listens to the crazy fringe movements like the Tea Party, and as long as that's the voice they hear, they'll just keep repeating the kind of lunacy you heard about the debt ceiling.
It's time for government to listen to the center. But the unintended result of gerrymandered Congressional districts is that Congresspeople only care about winning primaries (since, by design, the opposition party has no chance in that district), which are largely voted on by ideological activists.
The only way the center is going to get attention is to march in the streets.
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This is my single biggest frustration with these wars plus it is my personal opinion (take it for what it is worth) we can positively impact the Islamic extremists angst with the US by not being a passive spectator to the Middle East peace process.
We allow Netanyahu to do say one thing and do another over and over. He says he's open to restarting the peace talks while continuing to proceed with settlement expansion.
Israel has clamped down on free speech in their county by making it illegal to publicly say anything negative about the settlement issue. How can the US give billions to Israel when their people are no longer allowed to criticize the settlement policy.
For the record I do not want US aid to Israel to stop but I also don't want draconian measures like Israel's no criticism policy to go unnoticed either.
Our military exists for the defense of the United States of America. They do not exist as a tool of the State Department or corporate interests. You can't find a more expensive way to conduct diplomacy or insure overseas corporate investments than sending a carrier task force to park off somebody's shore. Return our military's mission to defense, and you'll have a lot more money for teachers and fire fighters.
"What are the root causes of the national debt and deficit? They are, first and foremost, the multi-trillion dollar bailout packages that were bestowed upon Wall Street in order to rescue the financial gamblers, the constantly escalating costs of war and militarism, the huge tax giveaways to the wealthy, and the skyrocketing costs of healthcare, systematically jacked up by the insurance and pharmaceutical companies."
When your second paragraph is this full of shit, I have no no reason to read any further.
Multi trillion dollar bailouts for the bankers: The treasury has recovered almost all of the TARP money, with interest. The bottom line cost to the deficit is tiny. You cant even fucking see it on a chart.
Constantly escalating cost of war: We are withdrawing from Iraq and eventually Afghanistan. Costs are not escalating, they are decreasing.
Huge tax giveaways to the wealthy: The wealthy pay BY FAR the lions share of income taxes.
Cost of healthcare: Here's another fucking idiot that thinks that the insurance companies are responsible for healthcare inflation.
Why do you people bite off on stuff that is this bogus?
http://blogs.forbes.com/merrillmatthews/2011/07/13/what-happened-to-the-2-6-trillion-social-security-trust-fund/
it is also your opinion there is not one true statement in that paragraph. Please tell us what is behind skyrocketing costs of healthcare since you disagree with that statement. I'd like to hear your take please.
Will close by saying because I read or post something doesn't mean I live my life by it or say it is the absolute gospel
WhKnuckle-I am not in a hurry to see my cell in a FEMA detention center so won't be marching in the streets anytime soon. We're so far beyond being able to effect change IMO it is depressing if you dwell on it too long. I keep telling myself to tune out and stop wasting my brain cycles thinking about things I have no control over.......but it obviously isn't working.
On September 10, 2001, Secretary of Defense Donald Rumsfeld held a press conference to disclose that over $2,000,000,000,000 ($2 trillion) in Pentagon funds could not be accounted for. Rumsfeld stated: "According to some estimates we cannot track $2.3 trillion in transactions." According to a report by the Inspector General, the Pentagon cannot account for 25 percent of what it spends.
Pit Row
That's one reason why our healthcare costs are so high.
Another reason is that Americans do not shop for healthcare. I can give you personal examples of saving 50% to 75% on procedures because I shopped. I shopped because I have no insurance.
Politicians target insurance companies as the villains in health care because that's who the average voter deals with, their insurance company. Politicians have learned long ago that they don't have to tell the truth to get elected, they just have to tell people what they think people want to hear.
Is this really difficult for you to understand? If so, you should just stop posting about these things. You aren't even qualified to balance a checkbook if you don't understand this stuff.
Sounds like you need some help sifting through the bullshit you have been bought hook line and sinker.
https://youtu.be/kETGgP-Pq5s
Post a reply to: Debt posturing....truth hurts