The message to the 12-member congressional supercommittee to “Do Nothing!” received its widest publicity through an article published in the Washington Post by E.J. Dionne Jr. Dionne credits New York Magazine writer Jonathan Chait for originating the idea in an article in The New Republic.
Dionne calls his do nothing proposal a “surefire way” to cut $7.1 trillion from the deficit over the next decade. Dionne arrived at his figure through consultation with an analyst from the Center on Budget ad Policy Priorities. Dionne’s figure of $7.1 trillion assumes that the Bush tax cuts will be allowed to expire — that will account for roughly half of the total — there will be $1.2 trillion in additional spending cuts and other tax cuts will go away.
I don’t know if E.J. Dionne Jr.’s do nothing proposal was inspired by fear, but I support the proposal due to fear. I fear that the Democratic members of the supercommittee would agree to a bad deal. Already a majority of the Democrats had floated the idea of $3 trillion in deficit reduction, with the ratio of spending cuts to tax hikes at six to one. This ratio would have been regressive because any tax increases the supercommittee Republicans would have agreed to would have spared the wealthy much of the pain.
When the Republicans made a proposal to accept $300 billion in tax increases, some Democrats reacted positively; however, when they found out that the proposal merely eliminated some loopholes and cut deductions, while lowering tax rates and permanently extending the Bush tax cuts, those easily suckered Democrats backed away.
Supercommittee Democrats have already put Social Security, Medicare and Medicaid on the table, and there is no doubt in my mind that these Democrats would have agreed to even more spending cuts if the Republicans had proposed tax hikes well below $1 trillion, as long as the Republicans had accepted some tax increases for the wealthy. Democratic co-chair Senator Patty Murray is still speaking of “shared sacrifice,” while most Americans have been sacrificing for years, while the wealthiest Americans have been eating high on the hog.
E.J. Dionne Jr. writes of the “fake deficit hawks” who contend that military spending is so important that reducing it would endanger the nation, but aren’t willing to finance it with “slightly higher taxes.” When Dionne says “slightly higher taxes;” when President Obama says “a little bit more;” and when Senator Murray speaks of “fair share” without defining it, I believe that they are setting the taxation bar too low. Nirvana will not arrive when we raise the highest marginal tax rate to 39 percent. Robert Reich would raise it to 70 percent and I previously presented an income tax structure in which the graduated rates would run from 16 to 60 percent. That tax plan would not have just “soaked the rich,” it would have raised the tax rates for most Americans in conjunction with enacting a single-payer health care plan.
I also pointed out that the years from the end of World War II to 1980 were possibly the most economically prosperous in U.S. history, yet the highest marginal tax rate was never below 70.45 percent.
My 16 to 60 percent tax plan is paired with the adoption of a single-payer plan. Public Citizen, which has made single-payer a major program priority, acknowledges that many taxpayers should receive a financial windfall, but no specifics are given. I propose to pay for single-payer out of general revenues in my 16 to 60 percent plan. An example will show that these windfalls could be very substantial: A family of four (two minor children), has an annual health care premium cost of $8,000 and a deductible of $4,000. On their taxable income of $75,000 they pay a tax of $4,516. Their total liability is $8,000 + $4,000 + $4,516 = $16,516, using 2010 taxation provisions. Under my plan they pay no health insurance premium, have no deductible, and would pay $7,960 in federal income tax. The family’s windfall would be $8,556 in the first taxable year.
Regarding deficit reduction, I previously detailed massive cuts in spending to be achieved by major cuts in military spending, ending the modernization program for nukes, significantly scaling down our intelligence empire, and closing the Social Security shortfall by raising the cap on the payroll tax to $190,000, raising the payroll tax rate to 6.7 percent and using a 0.25 financial transactions tax to create a “rainy day” fund to cover future shortfalls in Medicare and Social Security.
Much of our budgetary deficit is based on an irrational fear of an enemy that either doesn’t exist, or can be handled through nonmilitary means.