Middle-Class Held Hostage: A second look that is frightfully consistent

This is the program that will encourage you to make sure government becomes we the people.

I wrote the article below for the Kingwood Observer titled Middle-Class Held Hostage in 2011. It is appalling that nothing has substantially changed since then. 

Middle Class Held Hostage

Solving our nation’s fiscal problems in a manner that is fair to every American requires honesty. It requires that we understand the real reasons for our budget deficits and not repeat the mistakes that got us here.

Our national debt is at $14.3 trillion dollars. Currently the average interest rate on that debt is about 3.2% which means before spending a penny this year on any government program, $460 Billion dollars from the American taxpayer will be transferred to the holders of our debt. Contrary to popular belief neither China (8%) nor the combination of all major countries in the world own the majority of our debts, Americans do.

President Reagan came into power in 1981 after convincing Americans that our debt was out of control inasmuch as at that time compared to this year's income, it was at a 50 year low. Republicans and Democrats alike voted for Reagan’s budget that lowered tax rates substantially with the bulk, going to America’s most wealthy (trickledown economics). After Reagan’s 8 years, the deficit was tripled. The deficit grew by another 55% under George HW Bush after he saw the light of fiscal responsibility and broke his no new taxes pledge. The budget was balanced under the latter year of the Clinton Administration and the debt was actually on a trajectory to decline. The budget doubled under President George W Bush after two tax cuts, again mostly to the wealthy, at the same time we were engaged in two wars.

America had its largest employment growth under President Clinton’sadministration and its poorest employment growth under President Bush. Trickledown (supply side) economics simply does not work and most reputable economists will admit as much. It fails especially in times of globalization because tax cuts to the wealthy are likely not invested in America but in countries where growth rates are higher because of slave labor and a lower standard of living.

Over the last 30 years, we have dramatically reduced taxes mostly on the wealthy. This resulted in large deficits that all taxpayers are responsible for. Before a penny of taxes is used for entitlements, defense, and infrastructure, a disproportionate amount must first be transferred to mostly the wealthy owner of the debt. Notice they profit at both ends as they are able to keep more money from lower taxes and then purchase the US debt which pays them a good interest rate over time. That is the ultimate form of transfering wealth from the middle class to the rich.

Sadly Republicans have decided to hold the middle class hostage again. They want to lower the deficit solely by lowering spending. In other words the real genesis of the budget deficits were caused by tax cuts and policies that benefitted the wealthy but the pain of closing the gap must be done on the backs of the middle class. The rhetoric must not be believed. While we must remove waste from our entitlement programs our real problem is that of too low a tax rate on higher incomes. When the top 1% gets more than 20% of the country’s income and owns more than 40% of all of the country’s wealth, there is a problem.

While it is true that 2% of Americans are responsible for a substantial portion of taxes and less than 60% of Americans pay federal income taxes (though they pay social security, Medicare, state, and other taxes) one must ask why. It is not that the top 2% is taxed too high; it is that they own most of the wealth and income. They do not own most of the wealth and income because they are more productive than the average middle=-class American. They own the wealth because of a structural defect in our economy and how wealth grows, how wealth is earned, and how wealth is transferred. After all, the middle class pays social security taxes on all their income while the wealthy do not. The working person pays up to 35% of their income in federal taxes while the investor pays only 15% on his capital gains.

The point is we created an economy that assigns worth arbitrarily and if one looks at one's value to society, those that control capital are the least valuable yet they are the wealthiest. Yet, our teachers who are the foundation of our nation and the middle class must fight for their worth.

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Was originally published at:

No. 1-1
The Happy Hamster
The Happy Hamster

You're right. It's appalling.