Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Here are some excerpts from a truly excellent article in TPM (Talking Points Memo. You can see the entire article here.:
A Taxing Situation: Why The GOP Is Advocating A Tax Increase On The Middle Class
By Benjy Sarlin, 10/13/11
You can almost always count on Republican presidential candidates to be united in their opposition to more taxes for the rich. But this time around, the 2012 field is standing lockstep behind a less traditional idea: the middle class pays too little in taxes.
Thanks to a strange convergence of conservative ideological trends since President Obama’s election, Republicans now are expected to protest the entire bottom half of taxpayers’ contributions as too stingy even while they proclaim Americans are “Taxed Enough Already.” And they’ve yet to figure out a policy that will satisfy both complaints at once.
In recent months, nearly every major Republican candidate has name-checked a popular statistic that 47% of Americans who file taxes paid no income tax in 2009. Given the GOP’s anti-tax zeal you’d think they’d be celebrating. Nope!
“Right now we know that 53% of Americans pay income taxes and 47% do not,” Michele Bachmann told Bloomberg TV on Tuesday. “I think we definitely need to change the tax code. We need to get more in line. Everybody benefits from this magnificent country. Everybody pay something.”
Now stop and think. Who are those people who pay no income taxes? The rich or the middle/poor? Right, it’s the middle/poor at whom she is peeved. The rich? Oh, they pay too much.
Not only do statements like Bachmann’s seem to defy past Republican orthodoxy, but the candidates are explicitly making the argument on the same fairness grounds that progressives like Elizabeth Warren have used to demand greater taxes on the rich. The idea isn’t just that tax breaks for the rich trickle down the poor — it’s that they also deserve them more than freeloading Americans. Rick Perry made this moral outrage a key line in his campaign kickoff.
“We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax,” Perry said in his announcement speech. “And you know the liberals out there are saying that we need to pay more.”
Now the 47% number only tells part of the story: most of those “non-payers” pay payroll taxes, gas taxes, state and local taxes, etc.
In fact, for the middle/poor, those other taxes usually are their biggest tax bill. FICA, for instance, is a profoundly regressive tax. The same is true of sales taxes.
“It’s Republican class warfare,” former Reagan adviser Bruce Bartlett told TPM. “The Democrats say ‘Oh, the millionaires, we need to tax them’ and so they respond in kind.”
Bartlett’s not opposed to the idea of a broader tax code. But the problem is there’s no obvious way to get there without violating other Republican sacred cows on taxes or running into political territory that few politicians dare to tread.
The first issue is that any Republican proposal can’t raise revenue overall — a principle that’s only become more ironclad in the Tea Party era. The obvious solution then is to raise taxes on the middle class but give the money back to the rich and that’s exactly what two of the Republican presidential candidates have proposed. Jon Huntsman would eliminate all tax breaks without exception and use the money to lower income marginal rates — the net effect of which would be a middle class tax hike.
Huntsman’s idea has largely gone unnoticed amid his campaign struggles, but one of his rivals’ proposals is gaining widespread attention this week: Herman Cain’s 9-9-9 plan. Cain solves the non-payer problem by replacing the tax code with 9% income tax, business tax, and new national consumption tax, the combination of which would significantly raise taxes on lower income Americans.
Just when I thought the Republicans had exceeded their allowable limit on nuts, fools and charlatans, with Bachman, Gingrich, Palin, Trump, Paul, Perry, Santorum and Huntsman, they top themselves with Cain. Despite his weird math, taxing poor people 9% on income plus 9% on consumption, and then adding 9% on business, far outweighs any “savings” he dreams up.
(Aside: Like all Republican “stars,” Cain will shoot up in the polls until people actually listen to the nonsense he spouts. Then he will drop, only to be replaced by yet another strange duck. All Romney needs do is smile, shake hands and say nothing, and he will emerge looking like a genius.)
Dean Clancy, Legislative Counsel for Tea Party organizer Freedomworks, who seems like the perfect demographic for Cain’s idea on paper. . . But he’s not on board with Cain, in large part because American voters aren’t ready for that kind of change.
But if Republicans beyond Cain and Huntsman are unwilling to raise taxes on the bottom half of taxpayers or transition to a consumption tax, their hands are tied. TPM asked both the Romney and Perry campaigns how they’d handle the 47% problem they’ve both derided, but received no response.
“If the Republicans are suggesting that it’s bad that some people are not paying federal income taxes, can they please clarify that they are in fact proposing a tax increase?” Steve Warmhoff of Citizens for Tax Justice told TPM in an e-mail.
The Tea/Republicans, and to a lesser extent the Democrats, are in a logic trap. They want to reduce the deficit, but that requires taxing somebody more (a Tea/Republican no-no) or spending less. But while “spending less” seems nice in the overall, the devil really is in the details, because Americans want, and should have, Social Security, Medicare/Medicaid and the protections from the military, Homeland Security, FEMA, food & drug inspection etc., etc.,etc. In fact, spending on the biggest budget projects really needs to increase, substantially.
So what’s a debt-hawk to do? The economy needs more federal spending just to recover, let alone to supply real growth and security, and tax increases are out of the question. I suspect that, as usual, when every other bad idea has been tried and found wanting, eventually Congress and the President will be dragged kicking and screaming into the sole good idea, an increase in deficit spending — and (gulp) a big one — as the remaining economic solution.
Cain has done the nation one service, however. Debate about his 9/9/9 plan has exposed the Tea/Republicans as having no viable economic plan whatsoever. They are solidly the “Party of ‘No,’ with nothing to offer but austerity, especially for the lower classes.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings