Of Budgets, Taxes and Deficits (Oh My)
by LUPA Advisory Council Chair John Davis
These days the media is filled with talk of the deficit and ways to correct the problem. The deficit is and should be a concern to all Americans. However, the conservatives have been hawking the evils of the deficit and pointing fingers and screaming cuts. However it is important to understand the real cause behind the deficit. To understand the issue fully, we need to go back to where the issue began.
In 2000 the non-partisan Congressional Budget Office reported a surplus of over $40 billion dollars – after the over collection of Social Security was factored out. It is important to remember that every year since its inception Social Security collected more each year than was paid out, with surplus being set aside to handle the retirement of the Baby Boomers. When 2010 began, the Federal Deficit was $13.3 trillion dollars with $2.5 trillion of that being Treasury Bonds (money the federal government owes the Social Security Trust Fund because of past administrations skimming money out if the surplus.) In ten years we went from a $40 billion surplus to a $13.3 trillion deficit. So where did the money go?
A budget is simply an accounting method to balance your income against your expenses. Most households have one. To make it work it is simple- calculate your income and then deduct your expenses. From 2000 to 2008 there were unfunded wars, a Medicare prescription drug plan that ballooned cost for seniors and the Federal government while padding the pockets of the big pharmaceutical companies and most importantly the tax cuts to the wealthy. So while spending increased during those years, the reduction in revenue led to the huge gap between income and spending, erasing the surplus and replacing it with a $10.7 trillion dollar deficit by December of 2008.
The government tracks the deficit by calculating the amount we owe compared to the gross domestic product (GDP). The GDP is the market value of goods and services produced in the country within a given period of time. The ideal situation is when the debt grows at a lower rate than the GDP, with 3% being the goal. The Congressional Budget Office currently projects the percent of debt to GDP would be 6.1% by 2021. However, the CBO also states the deficit percentage of the GDP would only be 3.6% by 2021 by doing nothing but allowing the Bush tax cuts to expire. David Stockman, President Reagan’s Budget Director recently was quoted as saying “In 1982, we were looking at the jaws of the worst recession since the 1930s. We overdid it in 1981, cut taxes too much. We came back with a big deficit reduction plan in 1982. Unemployment’s at 10 percent, the economy is in dire shape, and we raise taxes by 1.2 percent of GDP, which would be $150 billion a year right now — not 10 years down the road — but right now.”
Medicare and Social Security
One of the targets of the current “Fiscal Hawks” is Medicare and Social Security. The architect of the proposed Republican budget, Wisconsin Congressman Paul Ryan, says “we need to dismantle Medicare and replace it with a voucher system.” Every legitimate study including the Congressional Budget Office has said this is a terrible idea. For the record Ryan wants to take the money the government spends on Medicare and use it to fund further tax cuts for the wealthiest 2%. The next thing on his hit list is Social Security.
Since its inception, Social Security has taken in more every year than it paid out. If this is the case, where has the surplus gone? The federal government has used Social Security as a private trust fund for years, going back to President Johnson. The surplus has been used time and time again to supplement government spending. President Johnson began tapping Social Security to cover some of the cost of the Vietnam War, but nothing to the extent that President Bush did to cover the war in Iraq. As a matter of fact, of the $13.5 trillion dollars the federal government owes, $2.5 trillion is treasure notes of money owed to the Social Security Trust Fund. The bulk of that money was spent on the war in Iraq with most going to military contractors.
The money that has been robbed to be given to companies like Halliburton has been taken away from working class Americans who have paid it in for their retirement. Now Paul Ryan and his buddies want to cut your benefits and give that money to the wealthiest 2% and corporations.
The concern for years has been the retirement of the baby boomers and the extra strain to the program. However the Congressional Budget Office has repeatedly reported that Social Security was in better shape than some politicians would have us believe. As a matter of fact, projections show the surplus to continue until 2020. Recent reductions in Social Security collections are the result of higher unemployment and less people paying payroll and Social Security taxes. As unemployment improves, those numbers should stabilize and boost Social Security further. Lastly, we need to remember that Social Security is pass through funds and do not add anything to the federal deficit. The only part of the federal debt that includes Social Security is the treasure bonds the federal government owes for raiding the Social Security Trust Fund during President Bush’s years in office.
When Paul Ryan made his pitch for the proposed Republican Budget he stated that “domestic spending had to be cut because the President had increased the deficit by 85%.” Not true. According to the Congressional Budget Office, the, the federal deficit has gone up 27% in the past two years. Remember, President Bush took office in 2000 with a $40 billion surplus and we ended last year with a $13.3 trillion dollar deficit. President Obama can claim responsibility for 27% or $3.5 trillion dollars of it. That money has been spent on the stimulus package which at last count as been responsible for over 570,000 jobs, saving the auto industry which will be paid back once all the GM and Chrysler stock the government owes has been paid back, extending unemployment benefits to the millions of laid off workers in this country, helping families avoid foreclosure and to reform a broken health care system that will provide health care for all Americans and in the long run, according to the Congressional Budget Office, actually lower the deficit.
With that said, 73% of the current deficit belongs to the Republicans, or $10.7 trillion dollars, which was used to bail out banks, a Medicare Prescription Drug plan that moved the cost efficient program to private companies increasing cost to seniors and the government, giveaways to military contractors – mostly Halliburton-- and tax breaks that for the most part went to America’s wealthiest 2%. Now, they want to dismantle Medicare to give even more tax breaks to that same wealthiest 2% . %. The Republicans stole trillions from Social Security to give it to wealthy corporations; now they want working class Americans to take cuts to pay for it their money being given away. The deficit is something that should concern us all, but it requires a common sense approach to correct the issue. The people who benefitted from the events that led to the deficit need to step up and help correct it. Allowing the Bush Tax Cuts to expire on the wealthiest 2% would go a long way toward correcting the issue. Don’t be fooled by Paul Ryan and his “tea party pals.” Their idea of budget cuts are nothing more than a continuation of eight years of redistribution of wealth, with it being distributed up the food chain to those at the top.