He was in my opinion. He accomplished a number of things, but most astoundingly, when he swept into office in 1953 he brought so many Republicans on his coattails that Republicans had majorities in both houses of Congress for the only time between 1932 and 1995. That situation only existed for two years, but during that two year session Congress enacted the 1954 Tax Code that had tax rates as high as 90% on the income of really wealthy people. It solved the huge budget deficit problem that we had developed during the great depression and WW II.
In the two prior sessions of Congress Democrats had a majority and had first enacted many of the taxes on the income of the wealthiest Americans, but I don't think that diminishes Ike's leadership on the issue. It would have been easy to have cut those high tax rates back to keep wealthy constituents happy as he looked forward to his reelection campaign, but he recognized we needed to deal with the debt and pushed the Republicans in Congress to act responsibly.
He still got reelected (although Republicans lost their majorities in both houses) and he left office with the country in pretty sound financial shape. Certainly no Republican President since then can say that.
Monday, March 26, 2012
Comparing the Federal budget with a household budget
It is currently popular among politicians and pundits to compare our National budget and National debt to a household budget. A recent article (SF Chronicle Insight, 3/25/12, p.E.3) argued knocking off a lot of zero's to make the Federal figures more like a household budget could make the Federal budget more comprehensible to the average voter. The article then argued the problem with solving the deficit was the Democrats not wanting to take up Medicare reform.
I think the household budget comparison is a grand idea, but needs to be refined a bit to make it fit reality.
The article, after knocking zero's of the Federal figures, came up with an example of income at $24,700 and expenditures of $38,000. This produces a yearly deficit of $13,000 with a total accumulated current debt of $115,800. Sounds bad.
But lets look a little closer. If are going to treat the Federal government the same as a household, it immediately becomes apparent that the $24,700 figure isn't really household income, it is just what we choose to put in the bank to cover bills. In fact, the actual income figure would be somewhere around $90,000 (using US Treasury data that Revenue as about 30% of gdp).
So our actual expenses are far below our income, and our debt only slightly larger than our yearly income. But we still do have some significant debt. Where did it come from?
The Federal government has two primary sources of income, the income tax and the payroll tax.
The income tax, 50% of which goes to fund defense spending, is what we use to fund government operations. It is sort of like what we put in our checking account to pay bills.
The payroll tax funds employee benefits like Social Security, Medicare and unemployment insurance. It is sort of like what we put in our savings account for retirement, illness or emergencies.
Since the 1930's the household arrangement has been that members of the household contribute to the checking account based on a percentage of their income, while the savings account is funded by each person paying a much smaller percentage of their income on their earnings up to $100,000 per year. Any income over $100,000 isn't counted. The savings account amount is significant for most members of the household, but is chump change for the wealthier. Someone making 5 million dollars a year will pay the same amount as someone making $100,000 a year, and not much more than someone making $25,000 a year. So the savings account is funded largely by the working folk.
So lets look at our household history. In the 1980's the wealthier members of our Federal household convinced enough household members to vote for them to take over the budget. They cut the required contributions to the checking account, particularly for the wealthier members. At the same time they also boosted spending out of the checking account,primarily on household defense. They paid for the increased spending by borrowing money. Over the years as the debt accumulated they sometimes borrowed from the savings account, giving the savings account an IOU.
This was a double reward for wealthier household members since, besides lower contributions to the checking account many of the wealthier members had financial interests in the defense companies on which the household was now spending more money. So the household was now spending more to the business benefit of the wealthier members, even as the wealthier members were paying less toward household expenses. So individually they were doing quite well even as the household debt accumulated.
In the last decade the wealthy members of our household again managed to grab complete control of the household budget and again they cut contributions to the checking account even as defense spending was climbing. Out came the credit card and up went the deficit.
How good a deal have the wealthier members of the household cut for themselves in the last 30 years? Profits to private business from household Defense spending were about $645 billion in 2010. If we knock a bunch of zero's off to make it fit our household example that means rich members of our Federal household profited last year to the tune of about $5000 to $6000 from our household defense spending. The wealthier members of the household also profit from the borrowed money the household uses to buy complex computer systems from companies the wealthier members own, and from all the other household spending out of our checking account. It is more math than I want to do but I imagine that if we identified all the profits our wealthier members are making from our household spending, it would vastly exceed our $13,000 household budget deficit. Yet their contributions to the checking account have shriveled over the years as the deficit rose.
Lets examine the Savings account history. The savings account (payroll tax) has always brought in way more than it spent. The taxes that support the savings account have actually crept up, instead of down, over the last thirty years. The savings account has been partially depleted by IOU's from the checking account, but it still runs a big surplus.
Now some household members are trying to pin the responsibility for the deficit, not on the fact we have failed to fund the checking account , but on the savings account program, because there is not enough in the savings account to cure the checking account deficits and still pay for what the savings account was created to pay for.
The simple fact I take away from comparing the Federal budget to a household budget is the wealthiest members of the household have been shuffling the household accounts to their advantage for 30 years. Now that folks are concerned about the rising deficit those representing the wealthier members of our household want to preserve their wealth by raiding the savings account working folk are relying on to make their old age more comfortable.
I think the household budget comparison is a grand idea, but needs to be refined a bit to make it fit reality.
The article, after knocking zero's of the Federal figures, came up with an example of income at $24,700 and expenditures of $38,000. This produces a yearly deficit of $13,000 with a total accumulated current debt of $115,800. Sounds bad.
But lets look a little closer. If are going to treat the Federal government the same as a household, it immediately becomes apparent that the $24,700 figure isn't really household income, it is just what we choose to put in the bank to cover bills. In fact, the actual income figure would be somewhere around $90,000 (using US Treasury data that Revenue as about 30% of gdp).
So our actual expenses are far below our income, and our debt only slightly larger than our yearly income. But we still do have some significant debt. Where did it come from?
The Federal government has two primary sources of income, the income tax and the payroll tax.
The income tax, 50% of which goes to fund defense spending, is what we use to fund government operations. It is sort of like what we put in our checking account to pay bills.
The payroll tax funds employee benefits like Social Security, Medicare and unemployment insurance. It is sort of like what we put in our savings account for retirement, illness or emergencies.
Since the 1930's the household arrangement has been that members of the household contribute to the checking account based on a percentage of their income, while the savings account is funded by each person paying a much smaller percentage of their income on their earnings up to $100,000 per year. Any income over $100,000 isn't counted. The savings account amount is significant for most members of the household, but is chump change for the wealthier. Someone making 5 million dollars a year will pay the same amount as someone making $100,000 a year, and not much more than someone making $25,000 a year. So the savings account is funded largely by the working folk.
So lets look at our household history. In the 1980's the wealthier members of our Federal household convinced enough household members to vote for them to take over the budget. They cut the required contributions to the checking account, particularly for the wealthier members. At the same time they also boosted spending out of the checking account,primarily on household defense. They paid for the increased spending by borrowing money. Over the years as the debt accumulated they sometimes borrowed from the savings account, giving the savings account an IOU.
This was a double reward for wealthier household members since, besides lower contributions to the checking account many of the wealthier members had financial interests in the defense companies on which the household was now spending more money. So the household was now spending more to the business benefit of the wealthier members, even as the wealthier members were paying less toward household expenses. So individually they were doing quite well even as the household debt accumulated.
In the last decade the wealthy members of our household again managed to grab complete control of the household budget and again they cut contributions to the checking account even as defense spending was climbing. Out came the credit card and up went the deficit.
How good a deal have the wealthier members of the household cut for themselves in the last 30 years? Profits to private business from household Defense spending were about $645 billion in 2010. If we knock a bunch of zero's off to make it fit our household example that means rich members of our Federal household profited last year to the tune of about $5000 to $6000 from our household defense spending. The wealthier members of the household also profit from the borrowed money the household uses to buy complex computer systems from companies the wealthier members own, and from all the other household spending out of our checking account. It is more math than I want to do but I imagine that if we identified all the profits our wealthier members are making from our household spending, it would vastly exceed our $13,000 household budget deficit. Yet their contributions to the checking account have shriveled over the years as the deficit rose.
Lets examine the Savings account history. The savings account (payroll tax) has always brought in way more than it spent. The taxes that support the savings account have actually crept up, instead of down, over the last thirty years. The savings account has been partially depleted by IOU's from the checking account, but it still runs a big surplus.
Now some household members are trying to pin the responsibility for the deficit, not on the fact we have failed to fund the checking account , but on the savings account program, because there is not enough in the savings account to cure the checking account deficits and still pay for what the savings account was created to pay for.
The simple fact I take away from comparing the Federal budget to a household budget is the wealthiest members of the household have been shuffling the household accounts to their advantage for 30 years. Now that folks are concerned about the rising deficit those representing the wealthier members of our household want to preserve their wealth by raiding the savings account working folk are relying on to make their old age more comfortable.
Friday, March 23, 2012
Churches and regulations governing employers
Lots of complaining lately, most prominently from the Catholic Church, that the Government is anti-religion by insisting that the same rules that apply to all employers apply to the church when it is acting as an employer (and often getting government funds to support their activities). The claim is that it is unconstitutional to not exempt churches from regulations they object to on moral grounds.
The Constitutional claim stands the purpose of the first amendment on its head. The fundamental purpose of the religion clauses in the first amendment were to protect people from State enforced religious belief. It is not to grant Churches an exemption from the same regulations all other employers have to obey.
For me personally it is a little galling coming from an organization with a long history of being three steps behind the evolution of human rights. The Crusades, the inquisition, threatening the life of Galileo for having the audacity to point out the earth rotates around the moon. More modernly it is matters like collaboration with the fascists in pre-WW II era, opposing laws granting women control over their own bodies or laws aiming to require gays be treated as normal citizens. Not to forget the fact the highest officials in the church of today turned a blind eye to institutionalized sexual abuse of children by their priests for generations - often promoting the offenders, and are still sometimes trying to sweep the issue under a rug.
From where I sit the Catholic Church is no more or less moral than the average Multi-National Corporation. It's just another big amoral organization whose principal function is the survival of the organization and the power structure that controls it. They differ from Exxon, or Bank of America mostly in what they are selling.
The Constitutional claim stands the purpose of the first amendment on its head. The fundamental purpose of the religion clauses in the first amendment were to protect people from State enforced religious belief. It is not to grant Churches an exemption from the same regulations all other employers have to obey.
For me personally it is a little galling coming from an organization with a long history of being three steps behind the evolution of human rights. The Crusades, the inquisition, threatening the life of Galileo for having the audacity to point out the earth rotates around the moon. More modernly it is matters like collaboration with the fascists in pre-WW II era, opposing laws granting women control over their own bodies or laws aiming to require gays be treated as normal citizens. Not to forget the fact the highest officials in the church of today turned a blind eye to institutionalized sexual abuse of children by their priests for generations - often promoting the offenders, and are still sometimes trying to sweep the issue under a rug.
From where I sit the Catholic Church is no more or less moral than the average Multi-National Corporation. It's just another big amoral organization whose principal function is the survival of the organization and the power structure that controls it. They differ from Exxon, or Bank of America mostly in what they are selling.
Tuesday, March 20, 2012
Unions and the problem of public sector salaries
All Democracies are probably moving slowly down the road to the fiscal irresponsibility that now plagues Europe. In the private sector not controlling costs will ultimately put the people who own the business out of business, to great loss to the owners of the business. They are motivated to keep costs under control. That motivation is lacking in the public sector. The politicians and technocrats that scramble to the top of the public enterprises get paid and get good benefits, what happens down the road is pretty low on their priorities.
For democracies to be fiscally responsible in the modern interconnected world the law needs to build in some structures to control public sector salaries. Here are some mechanisms that could help:
1. Every taxpayer supported entity should have a provision in their charter or constitution that links public sector compensation to private sector compensation. People that understand math far better than I could set up the formula, using mean, median and mode tests. The goal would be to make public sector salaries match the private sector salary of three years prior. In any given year that will mean the private sector employees may make a little bit more than the public sector employees, but when the private sector hits a bumpy patch and the local economy takes a dive, Government would not add to the economic slowdown by not reducing salaries until three years later.
To put a top end limit on public salaries the charter/Constitutional provision can either set a maximum salary as some multiple of the average private sector salary, or use the salary of the highest paid elected official as a cap. For example, why should any State employee make more than the Governor?
In terms of how to get to a system like this, the Charter/Constitutional amendment should acknowledge that it would not be fair to go back in time and change assumptions that people have built their life plan around. The change to a linked salary structure should be prospective only - from the date of the approval of the amendment.
2. Another government practice that inadvertently fuels the increase in public sector salaries is the practice of sending money from one taxing authority to another. For example, when the Federal Government hands out a block grant for local governments to use for some purpose, that pool of money becomes a target for local government officials and employees. Local taxpayers don't pay much attention since it is not money out of the taxes they pay locally, so the easy road for politicians is usually to give the local public employee's what they want (and thereby get their support at the next election).
We need a Federal, State and local Constitutional/Charter amendments that preclude government from giving taxpayer money to another government entity or accepting money without a vote of people of the accepting jurisdiction. That doesn't mean the Feds or the State can't come into town and set up a program on their own, it means the Fed's can't just shower money on States and Local governments that undermine the local taxpayers ability to control their governments long term obligations.
For democracies to be fiscally responsible in the modern interconnected world the law needs to build in some structures to control public sector salaries. Here are some mechanisms that could help:
1. Every taxpayer supported entity should have a provision in their charter or constitution that links public sector compensation to private sector compensation. People that understand math far better than I could set up the formula, using mean, median and mode tests. The goal would be to make public sector salaries match the private sector salary of three years prior. In any given year that will mean the private sector employees may make a little bit more than the public sector employees, but when the private sector hits a bumpy patch and the local economy takes a dive, Government would not add to the economic slowdown by not reducing salaries until three years later.
To put a top end limit on public salaries the charter/Constitutional provision can either set a maximum salary as some multiple of the average private sector salary, or use the salary of the highest paid elected official as a cap. For example, why should any State employee make more than the Governor?
In terms of how to get to a system like this, the Charter/Constitutional amendment should acknowledge that it would not be fair to go back in time and change assumptions that people have built their life plan around. The change to a linked salary structure should be prospective only - from the date of the approval of the amendment.
2. Another government practice that inadvertently fuels the increase in public sector salaries is the practice of sending money from one taxing authority to another. For example, when the Federal Government hands out a block grant for local governments to use for some purpose, that pool of money becomes a target for local government officials and employees. Local taxpayers don't pay much attention since it is not money out of the taxes they pay locally, so the easy road for politicians is usually to give the local public employee's what they want (and thereby get their support at the next election).
We need a Federal, State and local Constitutional/Charter amendments that preclude government from giving taxpayer money to another government entity or accepting money without a vote of people of the accepting jurisdiction. That doesn't mean the Feds or the State can't come into town and set up a program on their own, it means the Fed's can't just shower money on States and Local governments that undermine the local taxpayers ability to control their governments long term obligations.
Saturday, March 17, 2012
Regulations as a political scapegoat
Because Federal and State Regulations are pretty arcane and remote from most peoples day to day experience they are a regular boogie man for politicians seeking to get elected. Currently regulations are frequently described as "job destroyers" or some similar term.
As someone whose business in significant part depends on understanding the nature and history of Federal and State regulations the political rhetoric sometimes seems divorced from reality. Regulations aren't some cruel torment dreamed up by politicians to torment business people, they are generally a crucial part of making markets function. They are simply laws to insure people clean up the messes they make trying to make as they go about their business.
Suppose I own a paper manufacturing business. I act responsibly by disposing of all my toxic chemicals in a responsible manner. The guy across town builds a paper manufacturing business, but he just dumps his toxic chemicals in the river. He now has lower costs than me, so can undercharge me. If I don't stop acting responsibly he puts me out of business. So instead of the rest of us paying slightly higher costs for paper now society has a poisonous river they will have to clean up, and lots of people are probably going to get sick and have lots of medical bills.
Or suppose I manufacture widgets. I pay my employees a decent wage, spend the money I need to spend to make the workplace safe, and make a little profit. Then the guy across town starts building widgets. He doesn't spend a dime to keep employees safe, pays the employees as little as possible and undercuts my prices. I am out of business unless I adopt his business practices, and the the long run, maybe so is he as the workers in the town eventually can no longer afford the widgets he is manufacturing.
Regulations are always long and complex, even convoluted. They have to be to prevent people from using slick lawyers to get around them. But they are absolutely necessary to the long term health of society. Are there obsolete or poorly thought out regulations? Unquestionably - but it is hard work to figure out which ones are obsolete or not accomplishing their goals, hard work that the politicians who rail against regulations are seldom willing to do. History has demonstrated that often the regulations that politicians loudly complain about are the ones that make wealthy people behave responsibly to protect our economy and our health. Meanwhile obsolete or useless regulations get ignored because their is no political hay to be made in eliminating them.
As someone whose business in significant part depends on understanding the nature and history of Federal and State regulations the political rhetoric sometimes seems divorced from reality. Regulations aren't some cruel torment dreamed up by politicians to torment business people, they are generally a crucial part of making markets function. They are simply laws to insure people clean up the messes they make trying to make as they go about their business.
Suppose I own a paper manufacturing business. I act responsibly by disposing of all my toxic chemicals in a responsible manner. The guy across town builds a paper manufacturing business, but he just dumps his toxic chemicals in the river. He now has lower costs than me, so can undercharge me. If I don't stop acting responsibly he puts me out of business. So instead of the rest of us paying slightly higher costs for paper now society has a poisonous river they will have to clean up, and lots of people are probably going to get sick and have lots of medical bills.
Or suppose I manufacture widgets. I pay my employees a decent wage, spend the money I need to spend to make the workplace safe, and make a little profit. Then the guy across town starts building widgets. He doesn't spend a dime to keep employees safe, pays the employees as little as possible and undercuts my prices. I am out of business unless I adopt his business practices, and the the long run, maybe so is he as the workers in the town eventually can no longer afford the widgets he is manufacturing.
Regulations are always long and complex, even convoluted. They have to be to prevent people from using slick lawyers to get around them. But they are absolutely necessary to the long term health of society. Are there obsolete or poorly thought out regulations? Unquestionably - but it is hard work to figure out which ones are obsolete or not accomplishing their goals, hard work that the politicians who rail against regulations are seldom willing to do. History has demonstrated that often the regulations that politicians loudly complain about are the ones that make wealthy people behave responsibly to protect our economy and our health. Meanwhile obsolete or useless regulations get ignored because their is no political hay to be made in eliminating them.
Wednesday, March 14, 2012
What qualifications prepare one to be a political leader?
Few of us, no matter how qualified we are in our particular field of expertise, would think we could step in an operating room and perform surgery, or design a bridge to support the weight of traffic, or step right into almost any other field of expertise and be competent without a long training period.
But when it comes to politics the world is full of people who think they can step right in and be competent.
This creates a real problem, because getting elected is pretty easy if you have money, some degree of public speaking ability, and attractiveness. But being competent at steering the country is a job that requires a broad base of knowledge and understanding in widely diverse subjects like economics, psychology, history and law.
The last few years the political world has been full of people that made a lot of money in business who think that means they can successfully run a government. The problem is, business is easy. Oh you have to work hard and make tough decisions, but figuring out what decisions to make is relatively easy because you have one goal to focus on - what will make money? What really sets people apart in the business context is ruthlessness. If laying off 2000 people is what will make the most money, you have to be able to do it without letting the impact on those people affect you.
Politics can be that easy if your a dictator. Your goal is your own self interest, with little concern for the powerless.
But in a democracy there is no such simple goal to govern your decisions. Idealists would say you should do what is best for everybody, but often every choice is a choice between helping one group at the expense of another group. So democracy ends up being a more benign version of a dictatorship - whoever has power gets their way at the expense of others.
Since 1908 there have been 18 Presidents. 8 were lawyers - Taft, Woodrow Wilson, Calvin Coolidge, FDR, Nixon, Ford, Clinton and Obama. 7 came out of a business background, ranging from Warren Harding, who owned a newspaper, to Herbert Hoover the mining engineer, to Harry Truman, with his brief fling as a haberdasher, to Jimmy Carter the Peanut farmer, Ronald Reagan the actor and Union President, and the two Bushes with their oil industry interests.
Here is a list of Presidents and their vocations:
William Howard Taft - Rep - 1909-1912 - Lawyer
Woodrow Wilson - Dem- 1913 to 1920 - Lawyer
Warren Harding - Rep - 1921 to 1923 (died in office) - Newspaper owner
Calvin Coolidge -Rep - 1923 to 1929 - Lawyer
Herbert Hoover - Rep - 1929 to 1933 - Mining Engineer
FDR - Dem - 1933 to 1945 (died in office) - Lawyer
Truman - Dem - 1945 to 1953 - briefly business (retail) but lifelong politician
Dwight D. Eisenhower - Rep - 1953 to 1961 - Career Military Officer
JFK - Dem - 1961 to 1963 (died in office) - In the military in WW II but aiming at politics his whole life.
LBJ - Dem - 1963 to 1969 - briefly teacher - lifelong politican
Nixon - Rep - 1969 to 1976 - Lawyer / politician - made his name as a prosecutor
Gerry Ford - Rep - 1976 to 1977 - Lawyer/politician
Jimmy Carter - Dem - 1977 to 1981 - Navy, Peanut Farmer
Ron Reagan - Rep - 1981 to 1989 - Radio Sports announcer, actor, union rep
Bush Sr.- Rep - (1989 to 1993) - Economics/Investment.banking/oil/politics
Clinton - Dem - 1993 to 2001 - Lawyer
Bush Jr. - Rep - 2001 to 2009 MBA - Biz and politics
Obama - Dem - 2009 to -Lawyer
But when it comes to politics the world is full of people who think they can step right in and be competent.
This creates a real problem, because getting elected is pretty easy if you have money, some degree of public speaking ability, and attractiveness. But being competent at steering the country is a job that requires a broad base of knowledge and understanding in widely diverse subjects like economics, psychology, history and law.
The last few years the political world has been full of people that made a lot of money in business who think that means they can successfully run a government. The problem is, business is easy. Oh you have to work hard and make tough decisions, but figuring out what decisions to make is relatively easy because you have one goal to focus on - what will make money? What really sets people apart in the business context is ruthlessness. If laying off 2000 people is what will make the most money, you have to be able to do it without letting the impact on those people affect you.
Politics can be that easy if your a dictator. Your goal is your own self interest, with little concern for the powerless.
But in a democracy there is no such simple goal to govern your decisions. Idealists would say you should do what is best for everybody, but often every choice is a choice between helping one group at the expense of another group. So democracy ends up being a more benign version of a dictatorship - whoever has power gets their way at the expense of others.
Since 1908 there have been 18 Presidents. 8 were lawyers - Taft, Woodrow Wilson, Calvin Coolidge, FDR, Nixon, Ford, Clinton and Obama. 7 came out of a business background, ranging from Warren Harding, who owned a newspaper, to Herbert Hoover the mining engineer, to Harry Truman, with his brief fling as a haberdasher, to Jimmy Carter the Peanut farmer, Ronald Reagan the actor and Union President, and the two Bushes with their oil industry interests.
Here is a list of Presidents and their vocations:
William Howard Taft - Rep - 1909-1912 - Lawyer
Woodrow Wilson - Dem- 1913 to 1920 - Lawyer
Warren Harding - Rep - 1921 to 1923 (died in office) - Newspaper owner
Calvin Coolidge -Rep - 1923 to 1929 - Lawyer
Herbert Hoover - Rep - 1929 to 1933 - Mining Engineer
FDR - Dem - 1933 to 1945 (died in office) - Lawyer
Truman - Dem - 1945 to 1953 - briefly business (retail) but lifelong politician
Dwight D. Eisenhower - Rep - 1953 to 1961 - Career Military Officer
JFK - Dem - 1961 to 1963 (died in office) - In the military in WW II but aiming at politics his whole life.
LBJ - Dem - 1963 to 1969 - briefly teacher - lifelong politican
Nixon - Rep - 1969 to 1976 - Lawyer / politician - made his name as a prosecutor
Gerry Ford - Rep - 1976 to 1977 - Lawyer/politician
Jimmy Carter - Dem - 1977 to 1981 - Navy, Peanut Farmer
Ron Reagan - Rep - 1981 to 1989 - Radio Sports announcer, actor, union rep
Bush Sr.- Rep - (1989 to 1993) - Economics/Investment.banking/oil/politics
Clinton - Dem - 1993 to 2001 - Lawyer
Bush Jr. - Rep - 2001 to 2009 MBA - Biz and politics
Obama - Dem - 2009 to -Lawyer
Monday, March 12, 2012
Statistics and light posts
There is an old joke about people using facts like a drunk uses a light post - for support, not illumination. In the February 23, 2012 Republican debate Rick Santorum made a statement that is a perfect example of how statistics can be used the same way.
The former Senator stated that the defense spending was not the problem with the Federal deficit, that entitlements were the problem, because only 16% of Federal spending was on defense. That is so twisted it made my jaw drop. This is a former Senator - is he cynically manufacturing misleading statistics to support his political position, or does he really not get it?
Here is what he is either hiding or ignoring - Congress has borrowed money from working people for decades to fund tax cuts for wealthy people.
Here are the facts: There are two main sources of tax revenue for the United States. Payroll taxes and Income taxes. Payroll taxes are what is taken out of all of our paychecks every month for social security, medicare, unemployment insurance and other similar programs. In other words, all those programs that actually impact ordinary working citizens are funded by payroll taxes. The bulk of the payroll tax is to cover Social Security and Medicare. To my knowledge in my lifetime payroll tax income has always exceeded the expenditures on these programs and in fact generally run big surpluses. (I am not sure about how unemployment insurance taxes and expenditures stack up over time)
These payroll tax funds were supposed to have been trust funds - the money could not be used for other purposes, but Congress started raiding the trusts funds years ago, in large part to close the big holes in the Federal budget blown by tax cuts on income taxes. Defense spending has for decades equaled about 50% of income tax revenue. The remaining 50% pays for all the other things the Federal Government does. Basically for decades the Congress has not imposed enough income tax to cover the costs of government and they have covered it up by using payroll tax money, or running a deficit. So Senator Santorum's 16% figure was arrived at by looking at the total Federal budget, and then laying the blame for the deficit on the part of the budget that has actually paid for itself over the years.
I don't know which scenario is more worrisome. That former Senator Santorum doesn't understand these distinctions, or that he is quite comfortable manufacturing misleading statistics to make a misleading debating point.
The former Senator stated that the defense spending was not the problem with the Federal deficit, that entitlements were the problem, because only 16% of Federal spending was on defense. That is so twisted it made my jaw drop. This is a former Senator - is he cynically manufacturing misleading statistics to support his political position, or does he really not get it?
Here is what he is either hiding or ignoring - Congress has borrowed money from working people for decades to fund tax cuts for wealthy people.
Here are the facts: There are two main sources of tax revenue for the United States. Payroll taxes and Income taxes. Payroll taxes are what is taken out of all of our paychecks every month for social security, medicare, unemployment insurance and other similar programs. In other words, all those programs that actually impact ordinary working citizens are funded by payroll taxes. The bulk of the payroll tax is to cover Social Security and Medicare. To my knowledge in my lifetime payroll tax income has always exceeded the expenditures on these programs and in fact generally run big surpluses. (I am not sure about how unemployment insurance taxes and expenditures stack up over time)
These payroll tax funds were supposed to have been trust funds - the money could not be used for other purposes, but Congress started raiding the trusts funds years ago, in large part to close the big holes in the Federal budget blown by tax cuts on income taxes. Defense spending has for decades equaled about 50% of income tax revenue. The remaining 50% pays for all the other things the Federal Government does. Basically for decades the Congress has not imposed enough income tax to cover the costs of government and they have covered it up by using payroll tax money, or running a deficit. So Senator Santorum's 16% figure was arrived at by looking at the total Federal budget, and then laying the blame for the deficit on the part of the budget that has actually paid for itself over the years.
I don't know which scenario is more worrisome. That former Senator Santorum doesn't understand these distinctions, or that he is quite comfortable manufacturing misleading statistics to make a misleading debating point.
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