Within the next few weeks, as the budget and deficit ceiling deadlines come closer, conservatives will start unleashing their five standard economic bogeymen so they can call for austerity budgets. Let’s examine their bogeymen, one by one.
Bogeyman number 1: The deficit is exploding and needs to be reined in.
Fact: The deficit is shrinking. Deficit hawks and austerity mongers raise the specter of debts and deficits as if we were in uncharted territory. In fact, we are, but not the territory they warn about. Within the last year and a half, the US deficit has been shrinking faster than at any time since World War II. In fact, one reason our economic recovery has been so anemic is the collapse of public spending, at a time when banks and corporations are shipping money overseas, playing bingo on Wall Street with our money, and hoarding it for CEO bonuses and other non-productive uses.
Bogeyman number 2: Takers and moochers are the reason for the (non-existent) deficit problem.
Fact: Most of the “welfare” and government handouts go to corporations and the uber-rich, not some massive cohort of permanently dependent citizens. For example, the federal Joint Committee on Taxation estimates that there will be $154 billion in special corporate tax breaks in 2013. If you count state and local taxes the total exceeds $230 billion, with much of it going to “needy” companies like Walmart.
Meanwhile, the uber-rich get a whole range of tax breaks you and I can only dream of. Income from stocks and other investments are taxed at only 20%. And the rich don’t have to pay payroll taxes on the vast majority of their earnings because everything above $113,700 is exempt. Then there is the whole hedge fund and equity manager gambit which allows rich financial fat cats to pay taxes on ordinary income at maximum rate of 15%.
The list of white collar welfare goes on and on. Lumber barons, mining companies, oil producers and agribusiness – all are given access to public lands at fire sale prices. The Resource Renewal Institute found that these low-rent leases for fat cats costs the US $600 billion a year.
But hey, let’s stick it to those moochers on food stamps – most of whom work – and collectors of unemployment – most of whom want to.
Bogeymen number 3: Social Security, Medicare and Medicaid are threatening to bust the budget and plunge us into permanent, dysfunctional debt.
Fact: Social Security is not bankrupt and can be fully funded for as long as we can forecast with relatively simple fixes. For example, lifting the cap on payroll taxes – now at $113,700 would make the system whole for as long as we can forecast. Even if we do nothing, Social Security can still pay out 70% of benefits well into the century. Oh, and social security is money we earn and pay into the system, so it has nothing to do with the budget deficit.
As for Medicare and Medicaid, they actually reduce overall debt by slowing down the rate of cost increases. Absent these programs, people would pay far more for medical care. In short, net personal costs would go up without these programs. True ideologues might take comfort that much of their expanded debt is owed to the far more costly, far less effective private health insurance sector, but for most citizens, debt is debt and the less the better. Oh, and there are measures which can bend the cost curve even more – which bring us to …
Bogeyman number 4: Obamacare is going to bankrupt us … in addition to being socialist, fascist … oh, take your pick, but it’s evil, by gum and we hate it. And millions of people are losing their health care because of it.
Fact: Obamacare is the private sector’s wet dream … but as bad as it is, it will reduce the deficit, not increase it. Oh, and far more people were losing health care before Obamacare passed than now. According to a study by Families USA, in the years preceding the passage of Obamacare, about 3.5 million people a year were losing their health care and they had no recourse. These people were losing high-quality coverage, and they were often the ones most in need. They were children turning 25, people with “previous conditions,” people who lost their jobs and people who were too sick to cover. Under Obamacare only about 7 million people will get cancellation notices. But these people have substandard coverage and they will be able to pick up better coverage – often at comparable prices – in the exchanges.
Bogeyman number 5: If we increase taxes on the rich, the economy will stall and unemployment will increase.
Fact: The uber-rich and corporations are money hoarders, not job creators; cutting back on public spending is what is making the recovery anemic. First, there's no correlation between tax rates on the rich and job creation. Second, corporations are sitting on over two trillion in profits, rather than reinvesting it. The fact is, the real job creators are middle class consumers, and as a result of spending the last 30 years running from bogeymen, the middle class is shrinking rapidly.