Democrats and even some republicans are strongly opposed to President Bush’s latest tax cut stimulus to the economy, the idea of eliminating the dividend tax or significantly reducing it. Some even want the 2001 income tax cut and bracket restructuring rescinded.
You can’t really blame the democrats for trying to make political hay out of this when we’ve just spent a fortune invading Iraq and are about to spend even more rebuilding that country’s infrastructure. These are new expenses that are not covered by the largest defense appropriations any budget has ever contained.
But the real problem is the public’s almost complete lack of understanding of where tax cuts and surpluses come from. For reasons that will be obvious in a moment, the government does not want people to know this.
By keeping it secret, what seems to be a hallmark of the Bush administration, they’ve made it almost impossible for people to see the logic of another tax cut, so now it works against them—tough toenails.Let’s start by looking at two years of surpluses that the government has so far enjoyed. The results of fiscal 2000 and 2001, the largest and the second largest surpluses ever garnered:
As you can plainly see, entitlement overcharges, led by Social Security, are the major reason for surpluses. In fiscal 2000, entitlements accounted for 63 percent of the surplus. Overcharges in personal and corporate income taxes accounted for the other 37 percent.
In fiscal 2001, if it hadn’t been for stealing entitlement money we would have had a deficit. Entitlement overcharges were solely responsible for the surplus with income tax receipts in the negative after 9/11 and the Bush income tax cut of about $38 billion in $600 refunds.
This is the part that the Beltway Bandits don’t want to publicize. Part of their stealing entitlement money includes a neat bit of double bookkeeping when these entitlement surpluses appear as an asset here, under the “unified budget” accounting, and a debit under the national debt.
This sort of fraud on the part of our government makes Enron, WorldCom, and other private sector companies look like children playing in the same sandbox and is the major reason you don’t see people like Ken Lay going to jail despite President Bush’s public statements about how “they should all be in handcuffs.”
It’s still the same pattern today. We may be running deficits, but the entitlement overcharges continue to grow with some slight and temporary reduction due to things like unemployment and a sour economy; i.e., fewer paying some entitlement taxes.
For instance, by the end of fiscal 2002, Social Security still managed to produce an $89 billion surplus and all entitlements together had generated another $149 billion surplus. Surpluses are not gone, as many politicians would like you to believe. They’re simply buried in budgets as “off budget” receipts.
The only thing that has changed is the income tax overcharge. Let’s back up again.
In January of 2001, the Congressional Budget Office produced estimates of surpluses for the next ten years. Before the income tax cut, they looked like this:
And here’s what the estimates looked like after the income tax cut that was passed in fiscal 2001:
Notice that there is still an income tax surplus/overcharge. It’s just not as large as it was before the tax cut. You might also notice that the shape of entitlement overcharges hasn’t changed a bit.
In both cases, the Congressional Budget Office projections show that Congress and the administration plan to abscond more than $3 trillion from entitlements by 2010, funds that are not supposed to be used for other purposes.
Also, do not confuse this outright theft with the huge amounts the government intends to borrow from investors—since the beginning of fiscal 2002, we’ve already added $653 billion to the national debt, with something less than $200 billion coming from stealing your retirement and other entitlement money.
What does this mean in terms of today’s controversy over Bush’s fight to cut dividend taxes?
Let’s get real.
On one hand, we’ve still got projections of an income tax surplus. It’s not as great as it was before the 2001 income tax cut and bracket restructuring, but it’s still there. Over ten years, it’s still going to bring the government an extra $400 billion or so.
This is the argument today, is it not? In the Senate, republicans and democrats alike are saying that they’re willing to give the president a $350 billion tax cut, but not more.
On the other hand, any tax cut, no matter what it is, means less revenue for the government. There is no doubt about this, no argument to say otherwise. But taxes are not the only way for the government to raise money, not by a long shot.
Granted by the Constitution, the government has the ability of selling Treasury securities to investors and as long as these investors continue to have faith in the American people’s ability to pay them back it’s an unlimited source of money. Of course, it increases the national debt, puts it on the shoulders of our children and grandchildren to pay that money back plus interest along the way, but what the hell, final payoff is in the future and maybe we can weasel out of it somehow.
For the last twenty-five years, both republicans and democrats have been sending the national debt “to the moon, Alice.” They’ve abused this emergency funding method and taken the national debt from practically nothing to its current $6.4 trillion, a debt that under any normal payback schedule would take 50 years to eliminate.
The Bush administration has increased the national debt $653 billion since the beginning of fiscal 2002. That’s not chicken feed.
And
Since February 20, 2003, the government has lost its credit card. Borrowing has been suspended. We hit the national debt limit on that day and it has not been automatically increased nor is there any publicized plan to do so in the immediate future.
Televisions war channels and the so-called “watchdogs” of our economic well being have been strangely silent on this subject. Normally, when we even approach the debt limit there’s all sorts of commotion about possible bankruptcy, government shutdowns, and so forth.
If Congress and the administration were concerned about appearing economically weak before our “coalition of the willing” or the rest of the world, they would have raised the national debt ceiling long ago, it’s not hard to do.
There have even been times when Congress buried a debt ceiling increase in other popular legislation and no one even noticed. Such was the case in 1997 when the ceiling was raised to $5.9 trillion by putting it on page 387 of the popular Balanced Budget Act.
Congress could have done the same in any recent popular bill such as the “support our troops” $75 billion more that the president asked for and Congress increased to $80 billion just to sneak in some extras for themselves, but they didn’t. And it was just last June that we raised the ceiling to $6.4 trillion on the very last day of the deadline to pay the Social Security trust fund its semi-annual interest due without actual cash involved but raising the national debt.
There is something much more sinister going on folks and it’s not going to be resolved by party warfare or accusations of fiscal irresponsibility by the democrats. To think that the democrats could do any better would be a diversion. They are just as involved in the Pay-It-Again Sam scam and rip-off as the republicans, maybe more so. After all, it was the democrats who gave us the Marc Rich debt laundering plan of 1999 and 2000, the idea that we could pay off the legitimate side of the national debt with our supplemental retirement money in a mere ten years.
The debt limit was imposed in 1968 as a way to force the government to live within its means, to not spend more than it receives in general taxes, to achieve balanced budgets.
Ironically, the Balanced Budget Act of November, 1997, picked the year 2003 as the date when the federal government would finally achieve a balanced budget. Isn’t that a kick?
“Published originally at EtherZone.com : republication allowed with this notice and hyperlink intact.”