LET'S DECLARE WAR ON THE NATIONAL DEBT...AND SAVE AMERICA!

Mr. President and Members of Congress:
Let’s Declare WAR on the National Debt…
And Save America!

By James N. Sites

It’s time for Washington to stop flailing around with failing attempts to balance the Federal budget and go on to a war footing against government deficits and the national debt. This will mean unprecedented cuts in government spending AND higher taxes on those who stand to benefit the most from restoration of a sound, stable economy – the wealthy.

America today stands as Target No. 1 in a vicious war being waged against us by international terrorism. Our political leaders talk torrents about this, but what they have NOT done since 9/11/01 is to ask taxpayers to PAY for this war. They’ve preferred instead to finance it on the cheap, through an ominous, decade-long expansion of debt.

Washington, in effect, has thus been handing the terrorists an indirect victory by setting the USA up for eventual financial ruin.

Another war must, therefore, now be fought against America’s No. 1 domestic problem -- the monstrous overhang of national debt that threatens to crush our economy. Yet, has anyone seen any of our leaders REALLY pursuing this course? With the URGENCY it demands?

Tea Party-backed Members of Congress say they want to see a concrete plan for balancing the Federal budget before they’ll vote for raising the national debt ceiling. So why don’t THEY come up with a plan? Are they and other MCs afraid of the dreaded T-word? After four months of huffing and puffing and trying to cut Federal spending…and making only a dent in this year’s projected $1.5 trillion deficit, is it possible that even conservatives are ready to admit that tax revenues must be increased if the US is EVER to balance the budget?

So why doesn’t the President come up with a plan? After caving in to GOP demands last December to continue the Bush tax cuts, he now finally says that taxes may, indeed, have to be raised, that the Bush tax cuts for the wealthy of 10 years ago should be repealed.

Fine, Mr. President! But you can’t just proclaim a goal like a professor addressing an economics class. YOU’VE GOT TO GO OUT AND FIGHT FOR IT!

It appears that everyone in Washington is hanging back, waiting for the “Gang of Six” to stick its neck out with a plan first. These six Members of Congress – three Democrats and three Republicans -- will soon report their views on what should be done. One can only wonder how effective their plan, born of endless compromises between the two major parties, will be.

This leaves the way open for an ordinary citizen to offer a plan – one with real TEETH in it. Here it is:

The first requisite for any plan is to base it not on wishful thinking or bankrupt policy approaches but on reality – on what is actually happening not in Washington but within the economy itself. In this regard, three portentous structural changes in the economy stand out:

1. Runaway executive compensation among US businesses. In 1960 CEOs were making 42 times the average worker’s pay. This is now 344 times! Backed by compliant corporate Boards, new CEOs are literally plundering their firms, hogging for themselves earnings that used to be divided more evenly among employees, customers, investors and the communities the firms are meant to serve. The vaunted marketplace has, in effect, failed to control these excesses, leaving government tax policy itself as the public’s only recourse.

2. Bloated financial sector/Wall Street bonuses. Ordinary people cannot understand how any executive or expert of any kind can so contribute to the common weal or general public interest as to justify handouts of 20 or 50 or 100 million dollars a year, especially when one sees 15 million people out of work and our nation floundering in gathering financial distress. Can recipients possibly consider their uncontrolled gobbling up of national resources fair and equitable -- not to mention moral or ethical?

3. The disastrous Bush tax cuts of 2001-3. These brought the top marginal tax rate levied by IRS down from 39.6% to 35%, with the rate on dividends dropping all the way to 15% and the rate on capital gains going from 20% to 15%. These cuts were -- and remain -- DISASTROUS because they came while government spending was rising sharply to pay for the war in Iraq and, later, Afghanistan. This led to a decade of record-breaking Federal budget deficits and year-by-year increases in the nation’s debt – which now hangs over our heads like a deadly sword of Damocles. The real difficulty will come when economic recovery begins to push up interest rates. Indeed, interest payments of the national debt could then become the dominant -- and eventually intolerable -- part of the Federal budget..

Another result of these changes may be the most dangerous aspect of all: An increasing concentration of national wealth in the hands of a fraction of one percent (1%) of the population. This poses profound threats not only for the effective functioning of the US economy but also for the future of American democracy itself. Significantly, consumer spending represents 70% of the US economy. However, as more and more of the nation’s resources go to fewer and fewer people, mass consumption now seems to depend mainly on massive expansion of consumer debt. When this reaches its inevitable limit, economic collapse follows – like NOW!

Yet, almost no one addresses this problem of concentrated wealth. Not the news media or so-called thought leaders. And certainly not politicians. Why? Have our political leaders become so dependent on re-election campaign contributions from the wealthy that they don’t dare do anything to displease them?

The dismal past decade of huge Federal budget deficits also raises questions of the validity of claims put forward by “supply side” and “trickle down” taxation advocates – especially those in the GOP [I myself am a registered Republican BUT this doesn't mean I have to support the party leaders when I feel they are dead-wrong]. These advocates have proclaimed that cutting taxes for the wealthy spurs new investment and economic growth, leading to more revenue than is lost. Would it were so! Instead, the only ones who appear to have gained from 10 years of disastrous deficits under the Bush tax cuts for the wealthy ARE THE WEALTHY THEMSELVES.

An example: Wealthy taxpayers who live largely on investment income can now steer their money into areas yielding capital gains and dividends, thereby bringing their tax rates down to as little as 15%, compared to the pre-Bush top of 39.6% for salaried taxpayers. The Bush tax cuts thus came as an enormous gift to the SuperRich – a gift to capitalists that, ironically, had to be financed by our deficit-ridden government through enormous borrowing from Communist China. Which shows what screwball effects can come from misguided Washington policymaking.

So how should Washington now go onto a war footing to balance the Federal budget and bring down the national debt? By trimming wasteful government spending, of course. BUT new sources of revenue must also be developed, as the President has rightly declared. Especially needed is a return to a national policy of levying taxes on those most able to pay, especially the SuperRich. These steps should be taken immediately:

1. Allow the IRS rate of that portion of a person’s taxable income exceeding, say, $300,000 annually to return from the present 35% to the pre-Bush level of 39.6%. The present giveaway tax rate on dividends should also return to 39.6%..

2. Enact a new top marginal tax of 49.6% on that portion of a person’s taxable income exceeding $1 million a year. ALL of the additional money raised by this tax should then be devoted to CUTTING taxes for those making less than $100,000. per year.

Drastic? Not in view of the nation’s drastic need. Few seem to remember that the top marginal tax rate during WWII was 93%. Even as late as the Truman-Eisenhower-Kennedy years, 1950-1963, it was 91%. Today, however, you hear “experts” talking about “broadening the tax base” and going to a top marginal tax rate of 18%. Incredible! Under present conditions this could only be interpreted as an unjustified further sop to the wealthy and an unthinkable disserve to the nation.

These two steps would not only correct today’s badly unbalanced distribution of tax burdens but they would also stimulate consumer spending and economic recovery AND the flow of general tax revenues needed to start bringing down the government’s huge budget deficits. They would also help rein in on the runaway pay and bloated bonuses of bankers, Wall Street traders and corporate CEOs, returning some of the vast sums they are now plundering from their firms to use by the general public.

As for the controversy over when and how to act on our deficits, there IS a practical, workable approach. Unemployment is the key. Deficit spending may be needed now to stimulate economic activity…but once the national unemployment rate drops below 6%, the public should DEMAND that Congress and the President pass balanced budgets. This must include an extra 5% over and above the annual operating budget directed solely to paying down our horrendous backlog of debt. This action formula can be expressed in this simplified equation;

Minus 6% = Balance Plus 5%.

It CAN be done, Washington. LET'S DO IT!

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