The Krugman Equation and Ending Political Theater To Save A Nation's Economy

Paul Krugman's OpEd in The New York Times yesterday, titled "Willie Sutton Wept," makes a few very important points for anyone who's truly interested in learning about the factors affecting our current budget 'crunch' and the ongoing debates on what to cut. (Read it here.) He makes three points about the current "budget debate" right off the bat, summarized in my bullet list below:

  1. It's essentially fraudulent
  2. Self-proclaimed deficit "hawks" ~aren't~
  3. President Obama deserves a lot more credit for fiscal responsibility than he's been getting

Most of this boils down to the reality that the current budget "crisis" is ignoring the realities of what is impacting the economy the most, while the kabuki theater that the GOP is performing (and not performing alone) in the Potemkin village of our nation's capital isn't just for show -- it's also damaging our meager recovery. Krugman reiterates what we've already seen from looking at the CBO's numbers and from additional sources -- that the core costs which will rise sharply over the next few years will be from health insurance programs, not Social Security. And the lack of revenues from the additional taxes that we lost due to the tax cuts are making the whole situation much worse.

 

Quoting Mr. Krugman,

What would real action on health look like? Well, it might include things like giving an independent commission the power to ensure that Medicare only pays for procedures with real medical value; rewarding health care providers for delivering quality care rather than simply paying a fixed sum for every procedure; limiting the tax deductibility of private insurance plans; and so on.

And what do these things have in common? They’re all in last year’s health reform bill.

That’s why I say that Mr. Obama gets too little credit. He has done more to rein in long-run deficits than any previous president. And if his opponents were serious about those deficits, they’d be backing his actions and calling for more; instead, they’ve been screaming about death panels.

Krugman's piece ends by identifying (and defining) a problem with having a long-run deficit, and he proposes a realistic but unpopular solution: raising taxes. Or, more simply put (Krugman doesn't specify this), my preferred method of "raising" taxes) -- let the tax cuts for the rich expire.

But more about those missing revenues, and the taxes that the rich aren't paying, summed up in a nice bar chart: realistically and historically, "when tax rates for the rich go up, the economy gets better for everyone (including the rich)." (Source: Political Irony) The real breakdown of the effect and associated US cognitive disconnect regarding the impact of tax rates on wages and the economy comes from the source referenced by the Political Irony piece when making that bold, italicized statement above. It's a piece by Thom Hartmann, taken from his book Rebooting the American Dream: 11 Ways to Rebuild Our Country and published as an excerpt on TruthOut.

From the TruthOut excerpt:

So, if a worker is earning, for example, a gross salary of $75,000, his 2009 federal income tax would have been about $18,000, leaving him a take-home pay of $57,000. Both he and his employer know that he’ll do the job for that $57,000 take-home pay.

So let’s take a look at what happens if the government raises income taxes. For our average $75,000-per-year worker, his takehome pay might decrease from $57,000 to $52,000. So, in the short run, increased taxes have an immediate negative effect on him.

But here comes the part the conservatives don’t like to talk about. Our own history shows that within a short time—usually between one and three years—that same worker’s wages will increase enough to more than compensate for his lost income. [...snip...]

Similarly, when the government enacts a tax cut, workingclass people’s taxes go down; but sure enough, over time, their wages also go down so their inflation-adjusted take-home pay remains the same.

So stop listening to the Conservative and Teahadist bumper-slogan jingoism. If you're serious about fixing the economy, starting to get wages for the vast majority of Americans back toward a livable wage and intent on reducing the deficits, there are simple things that must happen:

  1. Fix healthcare. Preferably, put back in a lot of the cost savings that the GOP stripped in their efforts to reduce the effectiveness of the bill, and fix the other problems with HCR -- yell loudly if anyone tries to repeal it instead of fixing it. Push for Single Payer, which the CBO demonstrated would be a huge boon.
  2. Lose the tax cuts for the rich. They're marginal tax rates -- they won't make the rich into paupers. And, historically, that's been shown to not only resolve budgetary revenue issues, it's also sound economics. It's necessary to address and start resolving our budgetary deficits.
  3. Demand an end to the political theater. Hold pundits, "news" sources and politicians accountable for their words and actions (or lack thereof). Stop allowing them to abuse their privilege -- that's only their's to abuse because WE put them into office, so it's effectively OURS to control -- and stop letting them get away with setting the dialogue and tone. Demand answers, demand accountability, demand that they perform the business of the people and demand that they start clamping down on the Wall Street corporations and banks with actual enforced fines, fees, taxes and -- when necessary -- jail terms for the repeated fraudulent behaviour.

Are you serious enough to listen, and stop letting others set the dialogue? Are you ready to end the "kabuki theater in a Potemkin village" that our Congress is conducting, and start challenging the GOP to start making some ACTUAL fiscal decisions, taking responsibilty for their role in the current crisis and demanding that they, and their counterparts (both Teahadist and Democrats alike) get serious and start doing the work of the people, or are you going to sit back and do nothing?

At the very least, "Like" this and share it. Get others thinking and talking. And go visit the source articles referenced within.

Thanks for your time.

-- GH

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