Want honesty from one member of the Bush administration about America’s
federal tax policy? Then listen to Treasury Secretary Paul O’Neill.
O’Neill can’t be accused of putting people to sleep by talking left and
moving right as President Clinton did convincingly on a regular basis. In a
recent interview with the Financial Times, O’Neill called current U.S. tax
policy “an abomination,” the “very structure” of which must be changed.
As Bob Dylan sang, “look out kids.”
One change that the Treasury Secretary, a former CEO of Alcoa, supports is
the elimination of corporate income tax. This would increase the
competitiveness of U.S. corporations and spur growth, he said.
Income taxes on corporations comprise approximately 10 percent of all U.S.
O’Neill’s view of the corporate income tax as a drag on business growth
neatly sidesteps the factor of excess capacity in the global economy. It
features a glut of products, from cars to coffee and computers, that
consumers can’t afford to buy.
It would be most revealing to hear a journalist ask O’Neill why a
corporation would invest its tax savings to become more competitive by
expanding agricultural or industrial production when the global economy has
a glut of unsold goods. We might be waiting a spell for a member of
America’s mainstream news to put this question to him.
The Treasury Secretary also said in the Financial Times interview that he
wants to eliminate business’ capital gains tax. This policy proposal
reflects the rising role of Wall Street finance in business activity.
O’Neill assumes that what’s good for Wall Street holds for Main Street as
well. That is certainly the prevailing view, but it can change swiftly
given the American economy’s increasing reliance on consumers and
corporations spending more than their earnings, financed by record debt.
The late economist Hyman Minsky coined a term for this trend: financial
Which brings us to O’Neill’s view of public responsibility and the funding
of the American people’s health care and retirement. To this end, he
suggests major changes in two popular public programs: Medicare and Social
Public responsibility for the infirm and retired should instead be replaced
with personal responsibility. Some might call this a version of “tough
According to O’Neill, "Able-bodied adults who have the ability to earn
income have an obligation not to pass part of their own responsibility on to
a broader population." This would, in the case of Social Security,
effectively eliminate a person’s ability to retire as a wage worker.
Here O’Neill’s vision props up the larger claim that Social Security has big
financial problems. Economist Dean Baker takes a different view of Social
“According to the most recent [Social Security] trustees' report, the
program can pay all scheduled benefits until the year 2037, with no changes
whatsoever,” Baker notes. “Even after this date, the program would always
be able to pay a larger real (inflation adjusted) benefit than an average
retiree receives at present.”
In the meantime, Medicare’s ills in the main flow from America’s health care
Thank our corporate Democrats and Republicans for cutting Medicare funds and
forcing seniors into HMOs that are loath to help the aged and infirm. To
say nothing of Medicare’s non-funding of care in a long-term skilled nursing
“Seattle” activism to protest, defend, and yes, expand Social Security and
Medicare could certainly counter O’Neill’s vision of tax policy, expressed
honestly in the Financial Times interview. In brief, the Treasury
Secretary’s deal isn’t yet sealed.
On one hand, the economic class interests represented by O’Neill include the
Republican House, basically a Republican Senate and corporate America. They
understand what’s at stake.
On the other, large numbers of the American people must wake from their
slumber and do likewise. Such activism could well herald the dawn of a more
Seth Sandronsky <firstname.lastname@example.org> is an editor with Because People Matter, Sacramentos progressive newspaper.