A Convenient Loophole

Alabama the Beautiful the sign at the state line says. There are probably some that would argue with that description but I think for the most part it fits. Alabama has recently gotten a lot of national attention for the passage of what many term is the strictest immigration bill passed in any state. While most everyone agrees that it is the province of the Federal Government to set immigration law there is a growing consensus in this country that the Federal Government is not doing very well at enforcing the existing regulations. State governments squeezed by rising health care and unemployment costs are having troubles making ends meet. A lot of people believe one of the reasons for these problems is the growing influx of illegal alien workers and their families.

The thinking is that these workers who often don’t contribute to the tax base are a double whammy when it comes to social services as their children attend public schools at the same time their families often take advantage of health care services that the state ends up paying for when people without insurance require medical care. On top of this loss is the simple fact that illegal workers take up jobs that US citizens would otherwise be able to do. I won’t bother to go into the merits of these arguments at this time because it seems to me that the illegal immigration problem is really fairly simple to solve. All we really have to do is enforce existing laws. If employers in this country were faced with the real prospect of paying the high fines such infractions are supposed to bring upon them, they would quit hiring illegal workers. Without jobs I can assure you that illegal workers would not be pouring into this country. It is really a simple matter to control the supply of workers by eliminating the demand for their services.

However, since the reality is that we are not likely to do something as sensible as enforce the existing laws in this country we have seen several states in the recent past pass legislation attempting to protect state interests from illegal workers; Alabama’s House Bill 56 being probably the most severe law passed so far.

Currently, there are ongoing attempts to overturn the law or have it declared unconstitutional and as late as last week a federal judge in Birmingham did set aside certain features of the law as being unconstitutional. Again, this is outside the scope of what this particular post is about so I won’t bother to go into this in any detail; just remind the reader that it is an ongoing process. The point of this particular post is to point out a convenient loophole in this law. HB 56 has been widely disparaged and supported from many different sides but I have yet to hear or read of a conversation concerning this loophole.

In order to explain just how far the drafters of this bill went to combat the influx of illegal workers into this state I would like to point to the following sections which many find the most ludicrous and uncharitable:

Section 13. (a) It shall be unlawful for a person to do any of the following:
(1) Conceal, harbor, or shield or attempt to conceal, harbor, or shield or conspire to conceal, harbor, or shield an alien from detection in any place in this state, including any building or any means of transportation, if the person knows or recklessly disregards the fact that the alien has come to, has entered, or remains in the United States in violation of federal law.
(2) Encourage or induce an alien to come to or reside in this state if the person knows or recklessly disregards the fact that such coming to, entering, or residing in the United States is or will be in violation of federal law.
(3) Transport, or attempt to transport, or conspire to transport in this state an alien in furtherance of the unlawful presence of the alien in the United States, knowingly, or in reckless disregard of the fact, that the alien has come to, entered, or remained in the United States in violation of federal law. Conspiracy to be so transported shall be a violation of this subdivision.
(4) Harbor an alien unlawfully present in the United States by entering into a rental agreement, as defined by Section 35-9A-141 of the Code of Alabama 1975, with an alien to provide accommodations, if the person knows or recklessly disregards the fact that the alien is unlawfully present in the United States.
(b) Any person violating the provisions of this section is guilty of a Class A misdemeanor for each unlawfully present alien, the illegal presence of which in the United States and the State of Alabama, he or she is facilitating or is attempting to facilitate.
(c) A person violating the provisions of this section is guilty of a Class C felony when the violation involves 10 or more aliens, the illegal presence of which in the United States and the State of Alabama, he or she is facilitating or is attempting to facilitate.

Basically it is no longer legal, according to this law, to conceal, harbor, transport, or even encourage the visitation of illegal workers under penalties up to and including conviction of a Class C felony. While this is the section of the law that has many people up in arms as being uncharitable or even worse in this state, unchristian; it is a fair idea of the seriousness with which the Alabama Legislature has taken it upon itself to do away with the issue. Our legislature means business. We want no more illegal workers in this state. Unless…

I know what you are thinking. Unless what? If we are willing to lock up Alabama citizens for simply giving a ride to illegal workers under what exception are we willing to overlook hiring them? There is a saying about how a chicken and a hog feel about breakfast; the chicken is involved when she gives her egg, but the hog is committed when he gives his ham. In this case it seems that some legislators are likely a little more committed in some areas of employing illegal workers than others.

In the opening part of HB 56 there is a long list of situations that the bill sets out to address not the least of which follows:

to prohibit a business entity, employer, or public employer from knowingly employing an unauthorized alien and to provide penalties;

This seems simple enough. After all, to control or eliminate employment of illegal workers is largely the main impetus for drafting the bill in the first place. Unfortunately, this is only partly true in this case. Tucked down in Section 15 you will find this loophole:

(l) This section does not apply to the relationship between a party and the employees of an independent contractor performing work for the party and does not apply to casual domestic labor performed within a household.

Ok… I know what you are thinking now; we can’t hold people responsible for hiring a contractor who might hire an illegal worker. Fair enough. However, it is the second part that contains the disgraceful loophole:

and does not apply to casual domestic labor performed within a household.

Why would we put this exception in? Maybe a person or persons who drafted this legislation have some reason for putting such a loophole into HB 56. Could it be that some of the legislators in Montgomery employ illegal workers for domestic labor within their own household? I mean after all, you can’t really blame the wealthy lawyers and business owners that populate our legislature if they don’t want to pay decent wages to have their house cleaned or their grass cut. They probably can’t afford to hire a maid service or a grass cutting service that might be forced to provide minimal benefits and wages to their employees. Maybe the whole domestic labor loophole is an oversight. After all, the whole purpose of the act is to make it illegal to employ illegal workers and anyone who hires someone to do anything is by definition an employer according to any reasonable definition of the term.
Unless… you happen to read the definitions in HB 56 Section 3:

(5) EMPLOYER. Any person, firm, corporation, partnership, joint stock association, agent, manager, representative, foreman, or other person having control or custody of any employment, place of employment, or of any employee, including any person or entity employing any person for hire within the State of Alabama, including a public employer. This term shall not include the occupant of a household contracting with another person to perform casual domestic labor within the household.

So… an occupant of a household contracting with another person to perform casual domestic labor within the household is NOT an employer according to this act. Well… surely anyone who hires an illegal worker is in fact offering them employment. Unless you happen to read 6) as well:

(6) EMPLOYMENT. The act of employing or state of being employed, engaged, or hired to perform work or service of any kind or character within the State of Alabama, including any job, task, work, labor, personal services, or any other activity for which compensation is provided, expected, or due, including, but not limited to, all activities conducted by a business entity or employer. This term shall not include casual domestic labor performed in a household on behalf of the occupant of the household or the relationship between a contractor and the employees of a subcontractor performing work for the contractor.

What a strange coincidence. It is not considered employment at all under HB 56 to do domestic labor on behalf of the occupant of the household. I am struggling to come up with a proper term to describe this type of arrangement whereby one person utilizes the labor of another if it is not employment; servitude? Slavery? Chattel ownership?

In any case, the drafters of this legislation were so determined to do away with employment of illegal workers that they even attempted to stop the practice of making tax deductions based upon employment of illegal workers:

Section 16. (a) No wage, compensation, whether in money or in kind or in services, or remuneration of any kind for the performance of services paid to an unauthorized alien shall be allowed as a deductible business expense for any state income or business tax purposes in this state. This subsection shall apply whether or not an Internal Revenue Service Form 1099 is issued in conjunction with the wages or remuneration.
(b) Any business entity or employer who knowingly fails to comply with the requirements of this section shall be liable for a penalty equal to 10 times the business expense deduction claimed in violation of subsection (a). The penalty provided in this subsection shall be payable to the Alabama Department of Revenue.

Not only is it illegal to make the deductions; you will henceforth be subject to fines up to 10 times the deduction if you are caught doing so. What about our little loophole about domestic labor? Forget it. This applies to “Any business entity or employer”. But wait a minute, we have already seen that you can’t be an employer under HB 56 just for employing someone to do domestic labor in your home. Maybe you can be a business entity? Let’s see how Section 3 defines a business entity:

(2) BUSINESS ENTITY. Any person or group of persons performing or engaging in any activity, enterprise, profession, or occupation for gain, benefit, advantage, or livelihood, whether for profit or not for profit. “Business entity” shall include, but not be limited to the following:
a. Self-employed individuals, business entities filing articles of incorporation, partnerships, limited partnerships, limited liability companies, foreign corporations, foreign limited partnerships, foreign limited liability companies authorized to transact business in this state, business trusts, and any business entity that registers with the Secretary of State.
b. Any business entity that possesses a business license, permit, certificate, approval, registration, charter, or similar form of authorization issued by the state, any business entity that is exempt by law from obtaining such a business license and any business entity that is operating unlawfully without a business license.

No….. I guess not. In other words the carefully crafted loophole for hiring domestic labor in your home also allows you to be exempted from paying a fine if you get caught illegally taking a tax deduction for it as well. It almost makes you proud to be an Alabamian. Either that, or it makes you long to be a legislator. It reminds me of the story about Ulysses S. Grant and his response to the first suggestion that he go into politics:

“I don’t think I belong in politics…. But… I could use a new sidewalk in front of my house…”

Thus launching the career of what many considered to be the leader of the most corrupt presidential administration our country has yet seen.

A True Conservative (the Republican Party's worst nightmare)

Recently Republicans met in Iowa to start the process of deciding who their candidate for the upcoming presidential candidate should be. As is usual in all recent Republican conventions on the subject, it was a contest to see which candidate could prove themself to be the most conservative, the most fundamentalist Christian leaning, and the most fiscally confused. Unsurprisingly, Michelle Bachmann wound up winning the straw poll. Her victory was probably aided by the fact that Mitt Romney didn’t officially participate and Rick Perry of Texas waited until immediately after to announce his official candidacy. However, the whole process was probably an accurate microcosm of what is to come. Republicans believe that best path to the office in the coming election is one of showing just how different from our current sitting president they are; a kind of contest to see who differs the most from the policies of Barrack Obama.


There was something very interesting that happened in Iowa last week but it isn’t something that Republicans like talking about. Unsurprisingly, none of the candidates are making many statements that might in any way be seen to be unpopular with anyone remotely thinking of voting Republican in the next election so we are in effect getting a lot of coded answers to questions meant to reassure the far right without actually upsetting the moderates within the party. In other words, we are now and will be for the foreseeable future getting a lot of fluff and not much in the way of actual plan or position from all the candidates with one notable exception. Ron Paul has been a member of Congress for many years and has run as a straight libertarian for much of his political career. He is seen by many as the true philosophical leader of the Tea Party movement as he was espousing and standing by many of the convictions they hold dear since the early 1970’s; long before there was a Tea Party. In truth, Ron Paul has voted his conviction and his conscience for many years when it was not remotely popular to do so.


The debt ceiling debate was probably the first proof that the Republican Party could not actually control the Tea Party faithful that recently were elected to Congress. One doesn’t have to watch too closely to surmise that this is a problem for mainstream Republicans. Republicans were perfectly willing to ride the Tea Party wave of enthusiasm into office but they were unprepared for the tenacity that the Tea Party congressmen have displayed in refusing to compromise once elected. There is currently a movement afoot within the Republican upper tier of financial control in the party to bring these people under their influence and I expect this will continue for quite a while but Ron Paul is a problem that even the Tea Partiers themselves don’t exactly know how the deal with. The fact that he finished number two in the recent straw poll in Iowa is deeply disturbing for the Republican Party leaders as the one thing they are absolutely certain of is that they cannot control Ron Paul.


In short Ron Paul is more conservative than the Tea Party. He did not come to the Tea Party like so many of their also ran suitors such as Bachmann, Palin, Pawlenty, Perry, Cain, and Santorum. Ron Paul was exactly what he is today when he first stepped into the halls of Congress 40 years ago; a libertarian constitutionalist self educated politician who believes in what he preaches and votes his conscience whether it is popular or not. In other words, the difference between Ron Paul and the candidates listed above is that he didn’t come to the Tea Party; they came to him. He is the rarest of politicians, an idealist who has no fear of losing an election. He is honest and forthcoming with his beliefs whether they are popular or not and he always has been.


Ron Paul is a self educated economist who fervently believes in the Austrian School of economic thought. While this school of thought is relatively complex, probably the best way of describing it is to say that proponents of this school of thought reject mathematical modeling or laboratory type projections in favor of logic based upon direct deduction of the human reasons for people’s actions. They are extremely critical of artificial or governmental influence in markets as inefficient and inevitably damaging and believe that only an absolutely free market is efficient. This puts them in direct conflict with at least 90% of the world economies as they currently operate. Ron Paul himself is no accidental proponent of the Austrian School of Economic thought; he has studied it intently for many years and written several books on the subject. While much of the conservative media gives lip service to the idea of non interference in markets, Ron Paul and proponents of the this school of thought are averse to any sort of interference with the market; no matter who is to profit from such interference. In other words, Ron Paul doesn’t just favor non-interference where it most profits Corporations and the wealthiest Americans, he favors non-interference in all stages of the economy no matter who is profiting.


On the surface this might seem ideal to the far right and the talking heads of conservative radio, but in truth since they are simply paid propagandists to corporate interests who are profiting obscenely from the current economic system in this country they are running a little scared right now. This puts them in direct opposition to Ron Paul’s election which is exactly why Rush Limbaugh, Sean Hannity, and Mark Levine are so determined to paint Ron Paul with the brush of lunacy. In effect, he has stolen their thunder by not only giving lip service to economic theories they propose to hold dear but acting upon them at every opportunity during his whole political career. If they actually believed in what they are saying one would think they would be overjoyed at Ron Paul’s recent success. In truth, they are terrified that he might actually get elected and are actively doing everything possible to attack every position Ron Paul has ever taken that doesn’t jive with the Republican ruling party and there are many of these.


To list a few, Ron Paul voted against the invasion of Iraq despite the fact that he was the only Republican to do so. It seems he believes we have no business telling other countries how to run theirs no matter what their ideology happens to be. According to the American Journal of Political Science he owns the most conservative record of any of the 3320 congressmen who have held office from 1937 to 2002 in an active political career in Congress that spans over 20 years. As a practicing obstetrician Ron Paul has delivered literally thousands of babies and is a lifetime opponent of abortion. He has publicly stated that he believes life begins at conception. As a congressman for a largely agricultural district he has repeatedly voted against farm subsidies that would enrich his constituents because he believes they are unconstitutional. He has continually voted against legislation that is not strictly supported by direct Constitutional authority. He has proposed term limits for congress on numerous occasions and drafted legislation that effect with no success whatsoever in getting it through congress. He has consistently refused to sign up for congressional health care or pension plans because he says he doesn’t need them.


Ron Paul has also been a frequent and constant critic of US foreign policy that involves us in military conflicts anywhere outside of the territorial US; whether they are put forward by Republicans or Democrats. He has offered legislation to repeal the War Powers Resolution and force Congress to declare wars which is in his view the only constitutionally correct process by which the US can declare war.


It should be interesting to watch the pseudo conservatives attack Ron Paul in the coming months. Granted, Ron Paul has given them plenty of ammunition over his years of public service but he is undeniably the most conservative candidate to actually have a following in recent history and they will have to be very careful how they deal with him without making obvious the hypocrisy of their own positions. We are already seeing the first stages of the effort to derail his campaign by the news media at large that has chosen to largely ignore his accomplishments so far. What makes this so interesting is that Ron Paul is actually who most of the far right claim to be, a true conservative. Beyond that he is that most rare of commodities in politics these days; a man of principle. Of course that puts him on a direct collision course with most of the Republican party financial supporters whose only principle of note is personal greed.

Leadership Needed

Recently, I have made an effort to get more involved in political activities. This is a hard thing for me to do for a couple of reasons. First off, I am not an overtly social person in that I enjoy good conversation and the free exchange of ideas but have no interest in being bombarded with media minute facts from people who have already decided what they want to believe and are simply trying to find facts to justify it. Experience has shown me that it takes a great deal of patience to talk to someone like this and slowly but surely point out that they are missing some of the key points necessary to make informed decisions. In the instances where an actual discussion takes place I find this is almost always the outcome. In instances where someone is more interested in talking than listening it is not. As my dad used to say, some people are permanently stuck on Transmit and have no receiving function.

Second, what I value more than anything else is an open mind. In other words, every ideological bent that is deeply ingrained is more of a hindrance to understanding than a help. For this reason I believe that political parties are universally populated by people with less than an open mind to start with. I would also suggest that the more entrenched or active one becomes in a political party the more narrow and set in stone their views tend to become. While I realize this is not a universal truism it is a good gage with which to start basically knowing what to expect.
As anyone who has read my blog probably already knows, I am not a conservative by any stretch of anyone’s imagination. The readily apparent Republican bias for large corporate interests and right wing social issues is enough to make me sure I am not a Republican. My dilemma seems to be that I am equally unsure that I am a Democrat. The adage that you are “either with us, or against us” make work well when describing sporting events but it is a remarkably useless tool when trying to convince someone that they should adapt your views. Through my recent blogs and contacts that I have made in local political circles I have started to receive more and more email from Democratic Party sources. I suppose that anyone who reads my views on my blog or in fact talks to me in person can soon realize that I am opposed to most of the Republican Party platform as it exists now. However, it does not necessarily follow that I am in favor of that of the Democratic Party.


As a student of American history I am well aware of the vagaries of political parties and the platforms they have periodically put forth to support their position. The problem as I see it right now is that there is only one party in power. I would describe that party as the Corporate Interest party and from what I can tell it is holding all the cards right now which is exactly why we have swung so far to the right in this country. This party, which I believe started with Ronald Reagan, has steadily gained control over most of our political institutions in the last 30 years. It is rather ingenious that this party which actually only represents the wealthiest Americans in this country has also managed to convince much of the voting populace for the last 30 years that they have THEIR best interests in mind when they actually have done everything possible adopt legislation that effectively destroys the middle class. It is a classic bait and switch operation whereby they bring out the old standards of social programs that are perceived as thorns in the side of the working class every election without actually even addressing these programs once they are elected. A good example is the Tea Party which in my view is a bunch of well meaning middle class Americans who are mislead, misinformed, citizens who equate their home budget with the budget of the largest and most complicated economic system the world has ever seen. They are also absolutely convinced of their correctness; to the point of being zealously opposed to hearing facts that tend to point out their error. These people are actually being used by some of the wealthiest people in this country to get in office so that they can further advance their own narrow economic goals which can best be defined as “give me more money”.

Unfortunately, this Corporate Interest Party is also heavily invested in the Democratic Party as well. After all it was a Clinton led program that de-regulated the banking interests in this country and opened the floodgates to the recent economic disaster. Many of the top Democrats in Congress right now were a party to that particularly unfortunate piece of legislation, both in its formulation and adoption. It also seems that this is the most effective branch of the Democratic Party if one looks at the actual programs that get through Congress even in recent years when the Democratic Party has controlled Congress.


I believe there is a good reason for this. Outside of the Corporate Interest branch of the Democratic Party there presently is no core constituency that supports anything. A large segment of the Democratic Party today is composed of lots of special interest groups that have one main agenda that necessarily conflicts with those of the Republican Party. The problem is that all of these fringe groups have no common ground that they can agree amongst themselves to support. Effectively the Democratic Party has devolved into a combination of the same Corporate Interest groups that dominate the Republican Party and an array of special interest groups who only have in common their dislike of the Republican Party’s platform. This makes it impossible for them to govern effectively if they do happen to get into office because they immediately start arguing amongst themselves about issues that they didn’t agree on to start with. This leaves the only really effective arm of the Democratic Party the Corporate Interest branch of the party. In essence Corporate Interest wins no matter which party wins an election in this country.


In recent discussions with people within the Democratic Party it seems that the matter of raising money for the party is the main focus of much of their activity. While I realize this is one key to effectively combating Republican efforts along the same vein I am unconvinced that this is the issue Democrats should be focusing on. In my view, the Democratic Party needs new leadership. Running in opposition to Republican actions is not enough. Reacting to Republican actions is not enough. The Democratic Party needs a plan of action that is both detailed and comprehensive as to how to address the problems we have in this country. Unemployment, a stagnant economy, rising health care costs, and the deficit issue are all interrelated and we need to figure out how to deal with these issues. Effective leadership would propose solutions. The American public is starting to realize we have problems but they do not have leadership as to how to deal with them because most of these problems have been caused by a government that is bought and paid for by the Corporate Interests that are causing the problems and that group is deeply imbedded in both parties.


We need to restructure the tax codes to incentivize investment in industries that create jobs. As long as financial markets are the most lucrative way to make money that is where the wealth of this country will be invested whether it creates jobs or not. Republicans like to talk about “job creators” as a euphemism for the wealthiest Americans when the present reality is that profit maximization is most effective in markets that do not create jobs. Why not make them put their money where their mouth is and base the tax rate on employment opportunity? In other words, if you create jobs you get a break on your taxes. If you ship jobs overseas you pay a higher tax rate. The reality of the situation we find ourselves in is that most of America’s large corporations are making record profits while at the same time reducing jobs. The reason is simple. Under present conditions and existing tax codes investment in financial markets that do not create jobs is the most effective means of making more money. Until we change that fact the economy is not going to get better because we need to put people to work to get the economy going.


Instead of falling back on the idea of simply taxing the rich to increase revenue why aren’t Democrats explaining what they are going to do with the revenue. Americans know we need to change the way we do business in this country; they are simply waiting on someone to explain a viable way to do it. The basic flaw in the Reagan revolution was the destruction of our manufacturing base in favor of a service economy. Without the support of a good base of manufacturing jobs service industries are impossible to operate because they depend on people having money to spend to be profitable.


The next thing we have to do is to balance our trade deficit situation with China. China has been subsidizing their manufacturing industry for years by manipulating and artificially holding the value of their currency down and constructing trade barriers to our products. The source of our inability to effectively counter these policies can be traced to the fact that the same Corporate Interests who are controlling all facets of our government depend on money from China to invest in the same financial markets that caused the latest collapse to begin with. Not only do these interests refuse to allow government regulation of these markets they do not want to in any way upset the people who are helping finance the whole thing; the Chinese. If the main goal of American business is to maximize profits then we should just continue along the path we are on. However, we must take note of where that path leads; to ever higher unemployment in this country which means more widespread suffering amongst the middle class AND the inevitable increase of our deficit. Let no one fool you, the only way to cut social programs in this country presently is to quit paying the medical costs of the unemployed and cut back on programs that presently allow them to survive on the lower rungs of subsistence.


These are the kind of ideas that are needed to get us out of the situation we find ourselves in presently. Electing more representatives of the Corporate Interests in this country will not do anything to solve the problems and I am unwilling to invest time or money in ANY party that is devoid of actual solutions to the problem. We cannot logically expect the portion of the population who are profiting the most from the present situation to be the ones to change it. The fact is that it is not in business leader’s interest to change a situation wherein they are seeing record profits every year. There is a very disturbing tendency in both parties to insist upon electing business leaders as our government representatives. Conventional wisdom suggests these are the people best suited to bring us out of our current situation. I can think of no more erroneous and fundamentally flawed assumption than this. Business leaders who run Corporate Interests have been controlling our government since Reagan and we are now seeing the fruits of their labor; an ever growing destruction of the middle class combined with the redistribution of wealth into the pockets of these same leaders and their allies who are the wealthiest 1% of the nation. This is a truism that we once understood in this country. After the Great Depression there was a backlash against these same people for the destruction they had caused by their greed. This backlash led directly to policies that saw the great economic boom that put our country in the lead in the world economy. Allow me to quote from Adam Smith and his “Wealth of Nations” that is widely considered the first complete description of Capitalist theory as he describes this same Corporate Interest:


Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of society, their judgment, even when given the greatest candor (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. Their superiority over the country gentlemen is not so much in the knowledge of the public interest, as in their better knowledge of their own interest than he has of his. It is by superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest of that of the public, from a very simple but honest conviction that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.


Try and keep that in mind the next time you hear a Republican or a Democrat describing their fitness for public office by boasting about their business background.

A Dose of Reality

It’s time for a little dose of reality. We are daily bombarded with rants from both sides of the political spectrum as we try to sift through the information concerning how the deficit in this country got out of control. To have any sort of perspective on the problem we need to go back to 2001 when Bill Clinton was leaving office. At that time the Congressional Budget Office estimated that the US budget would actually run a surplus of some 800 billion dollars a year for the years 2009-2011. What has actually happened is that we are now running an annual deficit of some 1.2 Trillion dollars a year for those years. This difference in these two amounts is a 2 trillion dollar headache for the United States and one that the current crop of politicians on both sides are steadily proving themselves incapable of understanding, much less rectifying the situation. What happened? How could the Congressional Budget Office have been so far off in their estimate?


Republicans would have us believe that the Obama administration with its socialist tendencies and out of control spending habits has destroyed our economy. Democrats would have us believe that tax cuts for the richest Americans and lobbying efforts by the largest American corporations have decimated the ability of the US to raise revenue needed to pay our bills. As is usually the truth in politics, there is a grain of truth in both explanations but neither of them addresses the real problem, which is that our economy is suffering from of one of the worst economic disasters in the history of financial disasters. I have already addressed these issues on several posts (What Really Happened, Magic Beans, A Swing to the Right, Tax Philosophy ) so I won’t bother to go into them in a great deal of detail again but we have to understand the problem before we can come up with a solution and the soapbox prima donnas on both sides of the aisle are either incapable of understanding the issue or unwilling to deal with the reality that we are in serious trouble here and it is not going to be easy to put the pin back in the grenade.


Let’s take a look at where the deficit numbers come from, the discrepancy between what the CBO predicted and what we actually have taking place right now. The largest part of the difference came from two unexpected economic downturns. The first happened in 2001 and was a small recession compared to the second one but it was a downturn and it affected projections of both spending and revenue. When the economy goes down and unemployment goes up two things happen at the same time. The money the government takes in from tax revenues drops and the money it pays out in social programs goes up. Unemployment payments, welfare payments, Medicaid payments, and all forms of social services bear the brunt of the fact that people who aren’t working become dependent on social programs to survive. At the same time, tax revenue that isn’t being generated from these same people goes down. It is a double edged sword; one made worse by the fact that most Americans health insurance is through their employer so when they lose their job they lose their health insurance as well and the government then gets to foot the bill for their medical expenses. The second economic downturn which started in 2007 right before the election that put Obama in office was much more severe and much more damaging to both the US economy and the budget deficits because of both the longevity of the downturn and the universal severity of the problem.


Clearly, Obama can hardly be blamed for the economy he inherited no matter what the conservative right would have us to believe. It happened before he was elected and he is still trying to deal with the effects of this problem. We can argue whether he has dealt effectively with the problem but it is incontrovertible fact that the problem itself is one that he inherited from George W. Bush and the Congress in place while he was in office. How much of the current deficit problem is directly attributable to this economic downturn is a matter of some disagreement but most economists agree that it is by far the largest part of the current deficit issue; in the range of some 37% of the 2 trillion dollar deficit miscalculation of the CBO. This means that some 740 billion of the difference between the CBO’s estimates and reality is a direct result of the economic downturns that occurred before Obama’s election.


Another large chunk of the problem came from two programs that George W. Bush pushed through Congress. You remember him and his buddy Cheney who confidently boasted that Reagan had already proved that deficits don’t matter. While this is obviously a remark made in total ignorance of economic reality, it is part of the the same fable that Republicans have been telling since Reagan was in office. According to the Republican mantra that has been around since Reagan the answer is cutting taxes no matter what the question might be. Cutting taxes stimulates the economy which allows it to produce more revenue according to Reagan’s idea of economics which the first Bush president accurately described in a debate as “Voodoo Economics”. Unfortunately, he neglected to explain this fact to his son who believes to this day that what we need are more tax cuts for the wealthiest Americans. The truth is that the Reagan years doubled the deficit which is something that was deemed impossible previously without a major war like WWII. I have trouble understanding how even the most ardent Reagan worshipers gloss over the fact that he doubled the deficit in peacetime the first time we tried tax cuts for the wealthiest Americans. As a matter of fact, cutting taxes didn’t stimulate anything but the second phase of Reagan improvements which involved spending massive amounts of government money paying large corporations to develop military hardware did. This is exactly why the economy took off, it was the largest influx of government money into the economy we had seen and it worked like a charm as long as you ignore the fact that it doubled the deficit.


Getting back to the present situation, George W. Bush pushed through two major programs that had devastating effects on the deficit. The first was the Reagan mantra of cutting taxes on the wealthiest Americans. This of course had the same effect that it had in Reagan’s years; it caused a loss of tax revenue that led to significant deficit increases. Interestingly enough, Republican believers in the tax cut mantra still believe it is the answer today even though we have a lot of statistical data that proves it takes increases in revenue along with decreases in spending to lower deficits. All one has to do is compare the Clinton and Bush Sr. years to the Bush Jr. and Reagan years to see this in action but it really is as simple as addition and subtraction. Any child knows you don’t increase the amount of water in a bucket by punching a hole in the bottom of it. The second program that Bush pushed through was the Medicare Prescription Drug Act which basically increased the amount the government program would provide for paying for drugs for Medicare participants. While this is a much more noble cause than tax cuts for the wealthy it was implemented without a hint of how it was to be financed so naturally it just added to the deficit. The net effect of the Bush Tax cuts and the Prescription Drug Act changed the CBO’s predictions by some 33% (660 billion dollars of the 2 trillion) by the time the increases in interest payments on the debt it created are added.


If you add the 33% to the 37% you come up with some 1.43 trillion of the difference between the CBO’s prediction and what we are actually seeing. Try to keep in mind that this number is composed strictly of policy mistakes that were put in place before Obama’s election. It is interesting that the harshest critics of the deficit issue today are some of the same people who actually caused both of these problems to happen through de-regulation of the financial industry and tax cuts for the wealthiest Americans along with a Prescription Drug Act that was passed without any hint of how it would be financed.


Does this mean that Obama has no blame in the current fiasco? I would say that there is enough blame to go around for everyone but we will continue to look at actual numbers to see where the 2 trillion dollars difference between the CBO’s estimate and today’s reality was created. Another 20% of the difference can be found in Obama’s support for the continuation of the wars in Iraq and Afghanistan combined with the continuation of the Bush tax cuts along with the Wall Street Bailout that Bush signed and Obama supported. In other words another 400 billion of the 2 trillion dollar difference can be traced directly to these three policies that Bush put in place and Obama continued to support after his election. Many of Obama’s supporters were disappointed with his continuation of the wars in Afghanistan and Iraq. Without knowing the security information that Obama became privy to upon arriving in the White House it is hard to make judgments about his decisions along these lines. We can further question his support of the Wall Street bailout but most reputable economists believe that it was necessary to keep the international economy from a devastating collapse; one that we are still not completely sure won’t happen in the near future I might add. Extending the Bush tax cuts was unmistakably a bargaining tool that Obama used to get support for some of his other programs but I personally believe it was a bad deal and one that can be shown mathematically to have increased the deficit problem when we need to go the other direction. In any case, if you add the 400 billion to the 1.43 trillion above you come to a 1.83 trillion dollar figure or some 90% of the current deficit problem and we still have not gotten to any of the Obama programs that conservatives want to convince us are the root cause of the deficit.


Obama is not without blame in the current crisis. The stimulus bill that he helped push through Congress to get the economy going added another 7% to the difference between the original CBO estimate and the 2 trillion dollar deficit we have. Obama’s health care bill that he pushed through has also added to the problem, along with his initiatives on education, energy, and other social programs added another 3%. In other words, Obama’s programs which conservatives see as the socialist part of his agenda have added a total of 10% (200 billion) to the deficit problem.


To recap; policies and economic problems that occurred during the 8 year term of George Bush are the direct cause of 70% of the deficit problem we are faced with. Obama’s support for/ and extension of Bush policies added another 20%. Obama’s programs that he has personally pushed through add another 10%. The end result is that we have a 2 trillion dollar difference between what we should have in our deficit and what we are actually faced with and we are now faced with the reality that we have to deal with this issue before it gets any larger. There are only two ways to decrease the deficit, increase revenue and decrease spending. Unfortunately, we are now faced with such a severe problem that we will probably have to do both in large and painful increments to see our way clear of this issue. There is always the possibility that the economy will turn around and start to grow at a fast rate which will necessarily narrow the difference between what we take in and what we spend. Unfortunately, the deficit issue has grown to such proportions that growth is probably not possible without first cutting into the deficit. It still remains to be seen whether we can change our economic policies to actually deal with the issues that caused the economic collapse that triggered the biggest part of the deficit.

The Family Leader Pledge

It’s getting close to election time again. Unfortunately, this means that all the fringe lunatics from both sides of the political spectrum will start pushing hard for their own particular agendas. It is interesting to watch closely how such throwing around of political weight actually affects the candidates. Naturally, the far religious right is right in the middle of the fray already. A group in Iowa calling itself “The Family Leader” has already managed to get caught making hash of historic fact and getting at least two of the Republican candidates to sign a pledge that is chocked full of misinformation and factual errors. It always amazes me what the perceived promise of large groups of voters will entice candidates to adapt as policies.

The Family Leader is actually a splinter group of the much larger “Focus on the Family” group run by James Dobson that has a long history of trying to set the agenda for conservative candidates on a right wing religious footing (See earlier post, Focus on the Family? ) Both groups like leading with the idea of being centered around “family” values but are actually only interested in pushing right wing Christian values as is evidenced by information on both of their websites if one takes the time to actually read their propaganda at its source. This is neither surprising nor new for anyone who has taken the time to look into exactly who is funding the Tea Party groups in the country today (See earlier post Tea Party of the Religious Right? ).

Beliefs
The FAMiLY LEADER champions the principle that God is the ultimate leader of the family. Our goal at The FAMiLY LEADER is to honor and glorify God – not a political party, not a candidate, and not a program. The FAMiLY LEADER is a Christ-centered organization that will lead with humility and service to strengthen and protect the family.

Hardly a broad based family organization if you take them at their word here. Obviously, unless you believe that God is the ultimate leader of your family you aren’t welcome in their “family”. In case you want to interpret their use of the term God in some generic way they further define this is a Christian organization with the bit about being Christ-centered. Jews, Bhuddists, Islamics, nor any other widely held views about who or what God is are incontrovertibly disowned in the second paragraph on the website. It is not a family organization at all, it is a Protestant Christian organization specifically aimed at influencing political elections and processes. This becomes even more obvious when one looks into the PAC mission statement on the same webpage which states that they seek to elect conservatives with a biblical world view. While I don’t begrudge them the opportunity to influence elections there is a widespread epidemic in this country of organizations working under the guise of religious organizations according to their tax structure and political organizations in actuality but I will leave that be for the moment.

Recently the Family Leader made headlines for a pledge it was trying to get candidates to sign in order to receive their support in Iowa. Two of the leading Republican candidates signed the pledge immediately after it came out as they were obviously anxious to garner whatever votes this organization could swing their way as a result. Michelle Bachmann and Rick Santorum both signed the pledge immediately upon being presented with it. While it isn’t surprising to see two Republican frontrunners anxious to be more conservative than anyone else running it doesn’t say much for their level of understanding when they both signed something that is so plainly discriminatory and controversial without bothering to read it first.
The very first tenant of the document gives away the intention of the document and the mentality of those who wrote it:

Slavery had a disastrous impact on African-American families, yet sadly a child born into slavery in 1860 was more likely to be raised by his mother and father in a two-parent household than was an African-American baby born after the election of the USA‟s first African-American President

Obviously, it is a backhanded slap at our current president which is only to be expected from any conservative group as most view him as something between the anti-Christ and a socialist intent upon destroying the very fabric of our culture. Anyone who couldn’t smell something wrong after reading this salvo isn’t very astute to begin with. In the first place, slavery in the United States did not recognize the right to have a family so there was technically no such thing as an African-American slave family in 1860. The institution of marriage was not recognized as something that slaves in the United States had a right to participate in. Recognition of slave families would preclude the right of slave owners to sell them separately and we should make no mistake in understanding this was a routine practice for slave owners. Beyond that, in ALL cases slaves had no right of ownership of their own children as it was a routine business practice to separate slave children from their parents at birth. Ownership of slave children was legally bound to the ownership of the parents. In other words, the slaves not only had no right of marriage they also had no right of ownership of their own children who could and often were sold outright with the parents having no say in the matter. In other words, there was absolutely no family unit recognizable to children born into slavery in 1860 and almost no possibility that they would be raised in a two parent household. It would be hard to make a statement more patently and irrefutably false than this one so I wondered where such an idea could come from.

There is a footnote in the pledge with reference to where this particular nugget of information came from. It is a report written to study the effects of marriage on African American families titled “The Consequences of Marriage for African Americans”. This report studies the effects of marriage on socio-economic status amongst African Americans and is an interesting read. However, it is NOT a source that covers anything to do with children born into slavery in 1860. As a matter of fact, the earliest data referenced in this report was taken in 1880 and 1910, fifteen and forty five years after the elimination of slavery in the United States. According to the report only minor changes in the basic numbers of two parent households in the African American occurred before 1950. Much the same can be said for white two parent households in this country as well but I am getting off the subject.

Not only is the original statement in the pledge factually incorrect, the report that was supposedly the source of the statement contains no information whatsoever that relates to it. The Family Leader website has this quote in bold letters on its mission statement page:

“…we do not use deception, nor do we distort the word of God. On the contrary, by setting forth the truth plainly we commend ourselves to every man’s conscience in the sight of God.”
-2 Corinthians 4:2

Obviously, to the people at The Family Leader deception has a different meaning from that the rest of us understand as there is not even a grain of truth in their original statement concerning children born into slavery. Whoever wrote the statement plainly does not understand very much about slavery, nor have they bothered to read the information they use as source material to support the statement. In any case, after the media noticed that two of our leading candidates for president had signed a pledge containing such idiocy the good people at The Family Leader took this section out of the pledge and issued the following statement:

“After careful deliberation and wise insight and input from valued colleagues we deeply respect, we agree that the statement referencing children born into slavery can be misconstrued, and such misconstruction can detract from the core message of the Marriage Vow: that ALL of us must work to strengthen and support families and marriages between one woman and one man." The Family Leader added, "We sincerely apologize for any negative feelings this has caused, and have removed the language from the vow.”

This is a good example of the right wing’s idea of an apology. Obviously, there are some people at The Family Leader who have trouble understanding the English language. The statement is not one that can be misconstrued; it is a statement that is totally and completely without factual basis. Not only is it a flat out lie, it has nothing whatsoever to do with the material it purports to use as source information. None of this is surprising or new but we should start to be aware of the propaganda efforts that are currently underway in this country to convince the American public that this country was based upon some biblical worldview when the truth of the matter is that most of the founding fathers were secular humanists who were no less terrified of the involvement of religious institutions in our government than they were of monarchy and dictatorships. The far right and the religious fundamentalism is no less dangerous in this country than it has been in any other part of the world and groups like the Family Leader and Focus on the Family who are providing much of the financial muscle behind the Tea Party can only easily be defeated by dispersion of the truth. After all, propaganda can only be effective if its antithesis, factual information, is forcibly silenced.

Why I Don't Buy Magic Beans

I often listen to conservative talk radio in my car for a couple of reasons. First, I like to keep informed of all sides of political arguments and even though most of conservative talk radio is more akin to propaganda than information one can still get an idea of the right wing viewpoint by listening to Rush Limbaugh or Sean Hannity. The good news is that you don’t have to listen for very long in that they endlessly repeat the same talking points ad nauseum (see the definition of propaganda). Second, since I live in an area that is heavily right wing in its general political leanings there is virtually no left wing or progressive radio available without having satellite radio which I don’t happen to have in my car.

I don’t normally have much of a reaction to what I hear on these shows beyond the amusement that comes from realizing how childishly simple and devoid of actual study most of these points are in reality. It is interesting to follow the careful application of facts and editing that Limbaugh employs in trying to make his points. He really is quite masterful at avoiding telling the whole story about anything while at the same time emphasizing and carefully stacking the half truths of his narrative to build his positions. On average I would say that he rarely goes over a sentence or two without badly distorting the truth or taking a half truth and expounding it as irrefutable fact. There is an old maxim that says “a little knowledge is a dangerous thing”; in Limbaugh’s case I would expand this to “a little knowledge combined with a lot of half truths endlessly represented as the whole truth is a dangerous thing” (again, see the definition of propaganda).

As I was listening today I heard Limbaugh launch into his normal ridicule of Democratic positions by one of his favorite tactics of sarcasm combined with satire. The specific issue he was talking around today was the upcoming budget battles and the attempt by Republican’s to cut further into discretionary spending and Medicare programs. What is interesting is that both parties agree that rising health care concerns are an issue that is to a large extent driving much of our national debt problems. Unfortunately, this is about the only thing that both parties agree upon when it comes to health care. Typical of Limbaugh and his tactics he was not discussing the issue today or offering solutions to the problem but rather ridiculing the idea that Obama put forward in his speech yesterday that he was not willing to stand by and let the Republican party do away with Medicare programs that are the only means many Americans have of receiving the health care they need to survive. Limbaugh launched into an insulted tirade describing how Democrats are trying to paint the Republican party as the party that would have these people put out in the street without healthcare.

This is typical of the way Limbaugh operates, avoiding the substance of the issue by concentrating on the satirical implication that Democrats are only interested in demonizing Republicans. He went on to describe how offensive and silly it is to suggest that Republicans don’t care about people, that they are somehow immune to feeling of empathy for the needy. I doubt there are very many people who believe that Republicans want people to suffer or that they desire to somehow punish the poor and needy by denying them health care. The point that Limbaugh purposefully avoids and goes to great lengths to disguise is that this WILL be the result of doing away with Medicare programs and privatizing them with a public voucher system that everyone recognizes will lock people into set benefits at a time when actual health care costs are skyrocketing. Intentions count less than results when it comes to basic necessities of life. The fact that no one intends for people to suffer does not change that fact that people do in fact suffer and die when they can’t get the basic health care they need to survive. While it might be worthwhile in Limbaugh’s opinion to point out this was not the intention of such measures this is actually of no consolation to the people who will be suffering and dying as an inevitable result of the measures themselves. It is neither wrong nor imprudent to point out inevitable results of cutting such programs; it is in fact criminally irresponsible to avoid doing so.

There are two possible ways to interpret this behavior. The first and most obvious possibility is that Limbaugh simply doesn’t know what he is talking about. While it is easy to dismiss this out of hand there is perhaps a grain of truth to it. I would submit that it is hard to understand the concerns of those of us whose families are often at the mercy of such systems when you are as far removed from the cold hard realities of having to make hard choices as Limbaugh currently happens to be. Limbaugh makes some 28 million dollars a year in direct income without including endorsement contracts. This amounts to some 116 thousand dollars a day which probably does make it hard for him to have any understanding of the world that most of listeners deal with every day. It stretches the imagination to believe that someone who makes that much money could have any understanding of what it is like to do without basic needs. I would suggest that it has probably been quite some time since Limbaugh was even directly personally exposed to anyone who is struggling in today’s economy. While this also explains his undying and ridiculously nonsensical ideas about taxation and Reaganomics which preaches that lowering taxes is the best way to stimulate the economy, it doesn’t say much for his ability to be objective when he twists fact and figures so relentlessly to prove such a theory makes any sense economically while pocketing the results of the tax cuts so directly.

The second possibility is that Limbaugh actually is what he appears to be, a willing shill for corporate America who has as little use for truth and factual information as his hero Ronald Reagan. Reagan, who made a living many years being a direct employee of corporate interests as a spokesman in their campaigns to increase profit margins at any cost later graduated to a position in government where he could be even more effective in this pursuit; the President of the United States. It is impossible to know which possibility is correct or even if it is the combination of the two is what drives Limbaugh in his daily rants but it is easy to know the practical results of his choices; a show unmatched in its propaganda value if you are a wealthy American or a large corporation in its ability to influence voter opinions of the very people that such interests routinely abuse to build their wealth and power.

It is hard to imagine a better methodology for enriching the wealthiest amongst us than the talking heads of conservative radio. If I were to suggest a scenario that involved the wealthiest Americans gaining control of the levers of power with the full aid and support at the ballot box of the working class they are pilfering their profits from you would suggest that such a scenario is at best unlikely. However, both Limbaugh and Hannity, who manage to portray themselves as protectors of the common man while collecting millions of dollars each year from the wealthiest corporate interests in this country, are in fact two of the most effective agents for making sure this is exactly what happens. Hannity makes some 22 million dollars a year in salary before endorsements in case you are wondering. Not surprisingly, he is just as adamant that any increase in taxes on the wealthiest Americans would be a disaster of the first order. One basic mantra that all conservative commentators constantly repeat is the idea that tax cuts lead to net increases in revenue.

Budgets as large as our national budget can be extraordinarily complicated instruments but the basic laws of addition and subtraction are not magically suspended when it comes to evaluating them. National budgets, just like personal budgets, are a balance between money coming in (revenue) and money going out (expenditure). While it is possible to increase relative revenue if you cut expenditures enough the net gain is simply a one to one ratio, every dollar saved equals a dollar available to pay against the debt. Common sense tells us that to decrease the deficit we must have a combination of reduced expenditure and increased revenue. Not surprisingly, history does as well. Contrary to the cherished magical myth that conservatives love to repeat about cutting taxes while simultaneously increasing government revenue it simply does not occur and we have proved that on four separate occasions since 1980. Reagan’s first tax cuts drastically reduced government revenue to the point that three later tax increases were necessary to keep us from breaking the government then. The difference is that the later tax cuts worked to shift the largest proportion of the burden from the rich to the middle class. Even with the later tax increases, the deficit doubled during Reagan’s tenure.

When Bush senior came into office with his “read my lips, no new taxes” pledge he soon found that it was necessary to renege on this promise because we were still sliding into a deeper deficit and the only way to begin to pull us out of it was to increase revenue by raising taxes. While this may or may not have cost him the next election, it did manage to begin to increase revenue. With Clinton, we got more of the same in the way of increased taxes along with expenditure cuts that were well on the way to balancing the budget. With Bush junior we got another round of tax cuts that led directly to higher deficits. It is hard to stress this fact enough; tax cuts do not increase revenue. It really is voodoo economics to suggest that it does and recent history has pointed this out repeatedly no matter what conservative commentators say to the contrary. As anyone who has passed third grade math knows you cannot get larger numbers by subtracting no matter how many times you do it.

Beyond the simple mathematics of why this doesn’t work there is also the basics of how capitalism works to explain this more clearly. Capitalism is largely based upon the idea that accumulations of wealth can be used for investment which will spur more economic growth. It is a repeating cycle of continuous growth based upon the idea that one must first have accumulations of capital before there can be investment. If our country was in a situation where there was not enough capital to spur growth temporary tax cuts as a stimulus might be a viable option but we would still have to realize that any tax cut must be offset by expenditure cuts to keep from bloating the deficit. However, everyone agrees that there is a huge surplus of capital in this country right now; although much of it has been hoarded into offshore tax havens so that its owners can avoid paying taxes on it. In other words, cutting taxes on the wealthiest is not only unnecessary , it is actually counterproductive to inducing investment because it has been proven to further reduce the likelihood of investment for the simple reason that there is no inducement to reinvest this capital. This is largely the reason why there was such huge investment in the unregulated financial markets that crashed the economy in the first place. Every time there is a tax cut on the wealthiest Americans along with deregulation of the financial industry there is a corresponding increase in unfeasible financial markets that inevitably crash. Radical tax cuts to the top level of income earners in the twenties (70%-24%) immediately preceeded the rampant speculation that fostered the Great Depression. After the initial Reagan tax cuts we had the Savings and Loan crash. After the Bush tax cuts we had the recent financial crash of the whole US banking system that we are still trying to claw our way out from under. Nothing stimulates the ingenuity of the confidence men amongst us as much as large piles of cash reserves that become available with such tax cuts. In case anyone hasn’t noticed, we as the taxpayers bailed out the wealthiest Americans in each case so we not only don’t get to participate in the party; we have to pay the bill after the party is over.

What is actually needed is not further reductions in capital gains taxes and the income taxes of the wealthiest Americans, but the increase of such taxes to induce them to reinvest the money in industries that produce jobs in this country instead of encouraging further tax havens for shifting jobs overseas. Tax incentives could easily be written to encourage investment in industries that create jobs by tying tax rates directly to the number of jobs created while increasing tax rates on financial markets that do not. In other words, we have plenty of capital for investment. Tax cuts to increase the capital available for investment aren’t what we need. Tax increases with incentives designed to induce investment from existing capital in industries that produce jobs are what we need.

Limbaugh, Hannity, and their ilk would be comical if they weren’t doing so much damage to our political structure by deliberately spreading corporate propaganda. Shills have been a component of the business world since the first halting steps of capitalism but they have rarely been as effective as this new crop of them happens to be. While Reagan himself is their patron saint, they are all cut from the same cloth. It is up to the American public to recognize they are being fleeced by the people who proclaim to protect their interests but I find it especially ludicrous that two men who make 48 million dollars a year between them are widely seen as the protectors of the working class public by a large portion of the voting populace. They remind me of the peddler of the magic beans in the fable Jack and the Beanstalk with the exception that they are peddling “magic tax cuts” instead of “magic beans”. Unfortunately, there is no such thing as “magic tax cuts” that will grow us out of the deficit situation we are in. There are only real numbers and the reality that it takes addition to make larger numbers and tax increases to create more revenue.

A Swing to the Right

The far right in this country has managed to shift the whole political spectrum to the right in the last thirty years. While most of the conservatives on talk radio and Fox News would have everyone believe that the exact opposite is underway, the right wing media has managed to use propaganda very effectively in this country since Reagan eliminated the Fairness Doctrine (see my posts Propaganda? and the Fairness Doctrine). Reagan himself was the first to successfully demonize the liberals in this country but he has been followed by many others with even more right wing conservative agendas; to the point that the political middle in this country today has shifted drastically to the right. To a certain extent the pendulum swing of politics is inevitable in a democratic based government, but the effective use of propaganda techniques utilized by the far right has shifted things further than any other time in recent history in this country.

I would like to point out a few examples of what I am talking about. As I have written about in a past post (The Redistribution of Wealth Parts I and II) we have seen a rather drastic upward shift in the wealth of this country since Reagan took office in 1980. This is the direct result of changes in our basic tax structure. Reagan cut income taxes for the wealthiest Americans some 40% and started a trend that has more or less continued without pause in the ensuing 30 years. What is less well understood is that cuts of an even more drastic measure were also made in other taxes designed to tax the wealthiest Americans; inheritance taxes, luxury taxes, and capital gains taxes. At the same time even though corporate taxes are posted at 35%, loopholes for the largest corporations have culminated with 8 of the top 12 corporations on the Fortune 500 list not only paying NO income tax last year; but also receiving almost 4 billion dollars in tax credits. The combination of these policies has resulted in the top 1% of wealthiest Americans now owning 45% percent of the wealth in this country instead of the 17% they owned when Reagan came into office.

If the right wing argument that cutting taxes is the best way to stimulate the economy actually held true we should be in the biggest economic boom this country has ever seen after the tax policies of the last 30 years. Instead, we find ourselves in the worst economic downturn since the Great Depression brought about by the unimaginable greed of the wealthiest Americans. Where is the great investment in jobs and infrastructure that Reagan and his supporters predicted? It is in the internationally collapsed financial markets that the average American financed with huge losses to his 401K and hard earned retirement plan. Almost all of corporate America is healthy and showing near record profits but we don’t see job creation or infrastructure investment in this country. Instead, we see continuing shifts of jobs overseas and more investment in the same financial markets that collapsed the last time and had to be bailed out by the US government. Leaving aside the fact that it is reprehensible that the wealthiest amongst us just received government bailouts of their business interests it is plain that the jobs creation that tax cuts were supposed to produce are actually jobs overseas. Financial derivatives markets that are more profitable than production are the favored investment for this money and will continue to be as long as the tax structure remains tilted in favor of this type of market. Anyone who takes a look at the new Republican budget plan fostered by Paul Ryan will quickly see that one of the tenets of this plan is the further reduction and elimination of capital gains taxes. What we should actually be doing to stimulate the creation of jobs is raising capital gains taxes on these unregulated markets. This would induce investors to invest in industries that actually create jobs instead of putting all of their money in financial markets and overseas manufacturing owned by US companies that are specifically designed and structured to avoid paying US taxes. Investors seek profit so as long as there is greater profit margin in financial markets as opposed to manufacturing or production we will not see jobs created in these markets.

One form of conventional wisdom that the right wing loves to express concerning tax systems is that cutting taxes stimulates the economy. As I have noted in several other posts, a fair taxation system is one that taxes according to the benefit one receives from the government. The US government has explicitly been corporate business oriented since WWII in this country, especially since the Reagan years. The massive buildup of defense spending which Reagan used to boost the economy by doubling the money spent on defense spending in the first five years of his administration was a stimulus program aligned directly towards lining the pockets of the biggest American corporations. Reagan cut taxes on the wealthiest Americans while he at the same time fed them the largest increase in government spending ever seen up until that time in the form of defense contracts. It is little wonder that the budget deficit that we are still struggling with today originated during Reagan’s term. Reagan managed to more than double the deficit in just eight years; a feat that has not been matched before or since. It is true that Reagan cut taxes, what is not usually understood is that he stimulated the economy by doubling our defense spending and that all of this extra 600 billion dollars went to large American corporations. If this isn’t bad enough, the extra spending went directly towards the deficit because we also cut government revenue in the form of taxes at the same time.

Another conventional wisdom along the same lines is that any increase in taxes on the wealthiest Americans leads directly to a decline in our economy. The basis of this particular myth is an attempt to directly correlate profit margins with taxes. The gist of the myth is as follows; since the wealthiest Americans are the ones who have money to invest and create jobs, raising their taxes leads directly to them cutting their investment and raising prices. In the first place, if American investors are so averse to paying taxes that they want to invest overseas to avoid it I suggest that they do so. What they will find is that without the force of the US government backing their investments with foreign policies explicitly designed to further their profits they will find the sledding a little tougher. Again, it goes back to the fact that they are the beneficiaries of a government system friendly to their interests and should be willing to repay the subsidies and support they get by paying their fair share of the taxes needed to support the government. Second, it is both disingenuous and ridiculous to suggest that higher taxes lead directly to higher prices. Oddly enough, such muddled logic is espoused by the same people who purport to be the biggest supporters of free markets and the capitalist system. Even a casual acquaintance with capitalist theory leads to the understanding that profits are based upon supply and demand; not some arbitrary decision by the owner of the manufacturing interest as to what his profit margin should be. I would suggest that if owners could set profit margins based strictly upon what they want to make, no one could afford to buy any of their products. In other words, profit maximization is one of the basic tenets of capitalism. Owners of manufacturing interests maximize profits as a matter of course based upon pricing that is the maximum that the market will bear; not upon what profit margin they would like to realize. To suggest that raising taxes on these owners will lead directly to them passing this cost directly along to the consumer is to suggest that they can somehow suspend the free market system in favor of some imaginary notion of desirable profit margins.

Another conventional wisdom that the conservatives love to use as camouflage is the idea that small business owners who create most of the jobs in this country are being stifled by high tax rates. As in most common sense ideas there is a grain of truth to this notion. Small businesses without the means to hire large teams of tax attorneys do wind up paying the high tax rates and this is without a doubt a drain on their ability to create jobs. However, what most conservatives don’t like to admit is that the statistics they like to throw around about “small business” include some of the largest corporations in this country. The classification itself is so skewed as to be meaningless under current government regulations. What we really need to do is separate small business owners from the large corporate interests they are grouped with in our efforts to stimulate small business. I am all for giving tax breaks to companies under 100 employees or some like category. However, the current definition of the term “small business” allows some of the largest companies in this country to fall under this heading. It is this heading that conservatives from both parties use to disguise the fact that there is a difference between what most Americans consider a small business and what the US government specifies as a small business. This gives them the ammunition they need to loudly proclaim the sad stories about actual small businesses suffocating under high taxes and continue to attempt to cut taxes for all business interests, including those that are not paying taxes now because they can afford to hire teams of attorneys to find loopholes in the system.

This same tactic is used in the income tax tables for individuals. Currently in this country those that make from 53 to 174 thousand dollars in this country pay 28% of their income in federal income tax. The highest rate is 35% for those reporting above 379 thousand dollars in income. It is indeed debatable where the dividing line should be for paying higher rates of tax but I don’t think anyone in this country could reasonably argue that someone who makes 53 thousand dollars gets the same benefit to his business interests that someone who makes 379 thousand dollars from living in this country. Let’s take this analogy a little further and compare someone who makes 53 thousand dollars and someone who makes 2 million dollars a year. Can anyone seriously suggest that both receive the same benefit to their interests from the US Government? In previous years, when the US deficits were small and manageable, we had a progressive tax rate that topped out from 70-90% for the highest wage earners. However, these tax brackets were also progressive for much higher incomes. In other words, the tax tables topped out from 1 to 5 million dollars and were graduated accordingly. Who benefits the most by grouping themselves with those who earn less in deciding what their tax rate will be? It is not accidental that the top brackets were lowered when Reagan came along as it makes it possible for the very wealthiest to group themselves with those who make much less income. In reality the business interests most favored by living under the US government are the very wealthiest Americans and a tax table that accurately reflects this would in fairness progress at a much steeper rate for those Americans who make the highest incomes.

Much has been made recently about excessive executive compensation, especially amongst those large companies that the US taxpayer recently bailed out. The rate of pay for top US executives is literally hundreds of times higher than they are in the rest of the world. They are also on average some 700 times higher than they were just thirty years ago in this country. What is not well understood is that the elimination of the higher tax brackets that Reagan brought about during his administration was the catalyst for this change. There is a direct correlation between the Reagan tax cuts and the beginnings of the runaway executive pay system. I would also point out that there is a direct correlation between these astronomical rises in compensation for top executives based upon profit margins for the corporations they manage and the rise of corporate fraud and illegal bookkeeping practices that have crashed numerous large corporate entities in this country in the last 30 years. It is simply too tempting for many of these executives to obtain almost limitless wealth by cooking the books and often destroying their own companies in the process. This factor should not be underestimated in many of the recent large financial disasters that recently crashed the world economy. By replacing the top 35% brackets with 90% brackets we could remove much of the temptation for such avarice while at the same time adding immensely to government revenue at a time when we are suffering from record deficits.

If anyone is unconvinced that we have swung to the far right of the political spectrum in this country, try to remember the last time you heard any such discussion on the US tax structure on a news network. In actuality, what we hear is not discussion at all but carefully choreographed commercials aimed at convincing us that anyone who dares suggest higher taxes is either a socialist or simply unable to understand basic economic theory. Meanwhile, the rich get richer and the working middle class is disappearing under a mountain of seemingly insurmountable public and private debt.

The Fruits of Supply Side Economics

We often hear the right wing Reaganites espousing the same old supply side rhetoric that Reagan himself pushed so successfully. I suppose this is a natural response, trying to continue a lie that worked once until it is finally disproved to the point that you can no longer use it effectively is a basic strategy. While most of those using the arguments today have fallen away from some of the terminology Reagan used because it has been proven to be disastrously wrong, there is still strong sentiment for the basic idea of smaller government and more free market enterprise. Without bothering to repeat that this didn’t work in Reagan’s time and has had disastrous results ever since, I want to go a little deeper into how big business in this country really works and explode the myth that the free market has anything to do with corporate business in this country.


Of the top ten Fortune 500 companies in the United States in 2010 3 were oil companies who between the 3 of them generated some 34 billion dollars in after tax profits last year. Taking the time to add up all profits from these same top ten Fortune 500 companies and divide this total number into the oil company profits I realized that these 3 oil companies account for 36% of the total profits of the top ten corporations. The interesting connection that most people fail to make after this point is that the US government supports this industry in a very large way financially. While it is near impossible to pin down exact amounts in the form of government subsidies these companies receive in various forms the best estimates are somewhere between 15 and 35 billion a year industry wide. For arguments sake let us take the lowest number of the two and say that 15 billion a year is an accurate number.


Adding up the total oil production of the top 50 companies in the US and dividing this into the production of the big three oil companies we see that these three oil companies account for about 37% of the total oil production in the US. Assuming these top three companies get an equal share of government subsidies this comes up to some 5.5 billion dollars a year these companies receive in the form of subsidies or 16% of their total profits. While this is fairly typical of the large corporations and their working agreements with the US government it hardly makes for a level playing field for the rest of us. Talk to any small business owner in this country and ask them if a 16% subsidy would help them. The subsidies themselves come in many different forms; the following of which are just a partial list:

• Construction bonds at low interest rates or tax-free
• Research-and-development programs at low or no cost
• Assuming the legal risks of exploration and development in a company's stead
• Below-cost loans with lenient repayment conditions
• Income tax breaks, especially featuring obscure provisions in tax laws designed to receive little congressional oversight when they expire
• Sales tax breaks - taxes on petroleum products are lower than average sales tax rates for other goods
• Giving money to international financial institutions (the U.S. has given tens of billions of dollars to the World Bank and U.S. Export-Import Bank to encourage oil production internationally, according to Friends of the Earth)
• The U.S. Strategic Petroleum Reserve


Looking a little deeper into oil companies in the US and their deals with the government we come upon another set of circumstances that work differently in the US than any other industrialized nation in the world. Presently, most of the oil reserves in the US are under public lands or in publicly owned waters offshore. While this is not unique to the US the sweetheart royalty deals that US oil companies get with our government in the use of these lands most definitely is different. US oil companies typically pay some 40% of their profits on the oil from these publicly owned lands back to the government while the average in the rest of the world on such deals is 65%. This number is further reduced on offshore deepwater rigs to 18%, or in special cases where the extraction is prohibitive; eliminated entirely. What this amounts to is another 25-38% of profits that oil companies in the US get to keep as opposed to the way this business works in the rest of the world.


How any of this fits into the description of free market enterprise is beyond me; a more accurate description would be government subsidized enterprise and the dirty little secret that the Republican party and Conservative commentators don’t want you to know is that all large corporations in this country operate under a similar umbrella while usually at the same time complaining that they are taxed too high. If they actually paid the 35% tax rate they are supposed to according to the law they might have a point. As we shall see, this is not the case.


For example, oil field lease agreements and drilling equipment are taxed at 9% in this country while almost all similar equipment cost taxes are in the 25% range. What this amounts to is that government subsidized corporations not only get incentivized deals to support their industry but they also don’t pay their fair share of the taxes on the profits they make. In 2009 Exxon advertised that they paid some 15 billion on a 34.2 billion profit before taxes. What they failed to point out was that this 15 billion was paid out to foreign governments where they had set up offshore tax structures specifically to avoid paying US taxes. In actuality they paid absolutely zero in US income taxes that year but were able to receive tax credits for the taxes they paid overseas while simultaneously taking advantage of the subsidies that the US government affords them. During the same time period Chevron paid some 200 million in US income taxes on 10 billion dollars reported profits. In case you are wondering, this comes out to about a 2% tax rate which is a little high for a large US corporation as we will see.


Let’s look at some other of the corporations on the Forbes ten lists for a moment. GE, which is listed as number 4 on the list with some 11 billion in profits last year, paid zero in US income taxes over that same period. As a matter of fact they have some 2.4 billion in tax credits for the same year. Hold onto your hat, it gets worse. GE, as a large corporate conglomerate, managed to relieve itself of most of its tax burden by shifting jobs overseas and hiring a small army of ex IRS examiners to help it file its taxes. Let’s look at this a little closer. GE makes a substantial amount of its profit margin in government contracting so it is a direct recipient of government funds while at the same time is steadily laying people off in the US to help its tax burden. From the US government’s point of view, this is a lot like handing someone a gun and paying them an obscene amount of money to shoot you in the foot.


Bank of America is listed at number five on the list. In 2010 Bank of America showed some 6.2 billion dollars in profits on their books. Of course this was after they received almost 1 trillion in interest free bailout money from the government so it isn’t hard to see how good their business acumen is to start with. Nevertheless, they also paid zero in income taxes while at the same time receiving a 1.9 billion dollar tax refund; not a bad way to make a living if you ask me.


Conoco-Phillips is next at number six on the list. As an oil company they also receive the same subsidy treatment that Exxon listed above does. The best figures available show them receiving some 16 billion in profits in the last three years while paying 450 million in income taxes. Obviously they need to hire better accountants because they paid in to the US coffers at an astounding 2.8% while Exxon paid zilch. Of course this is probably because of their less effective use of money spent lobbying Congress. They only spent 19 million dollars in that effort in 2009.


Ford Motor Company comes in at number eight on the list. They only reported 3 billion in profits in 2010. To their credit Ford didn’t take a government bailout last year. To the discredit of their accountants they actually paid in some income tax as well, some 69 million for a whopping 2.3% tax rate. Try to keep in mind as you read this that the unfair tax rate that all conservatives regularly complain about for business interests is 35%.


Earning honorable mention is Citi Group at number 12 on the list. While they didn’t manage to crack the top ten last year in total revenue they did manage to make some 4.4 billion in profits while paying exactly zero in income taxes. I don’t suppose their board of directors is too despondent about those two slots out of the top ten because they also managed to garner 2.5 trillion in federal money in the recent bailout.


Let’s see if we can make sense of all of this. Of the 8 corporations I have listed (all within the top 12 on the Forbes 500 list) they took in some 63.9 billion in reported profits last year. From these profits they paid in a total of 283 million in income tax over that same period. Wait a minute, I almost forgot; they also received 4.3 billion in tax credits over that same period. In actuality that means on 63.9 billion dollars in profits they paid in a -4.27 billion dollars in taxes (or made an extra 4.27 billion in refunds). Yet the American public is somehow supposed to believe that we live in country that is not business friendly.


Our government in actuality has evolved into a bunch of well paid cheerleaders for large corporations and the wealthiest one percent of Americans. Not only is our foreign policy built around supporting large business interests; much of the legislation bought and paid for by lobbyist from these same interests in Washington is specifically designed to help them line their pockets with subsidies. Our tax structure is an abysmal joke and if you are by any chance wondering who is the butt of the joke look at your pay stub next week to figure out where these subsidies come from. They are listed under income tax withholding.


The beginning of the deficit issues we are currently smothering under in this country occurred when Ronald Reagan came into office and began drastically cutting the tax rates on corporations and the wealthiest Americans. The truth of the matter is that we would not be in a deficit situation if we had not been handing out free passes in the form of subsidies and tax loopholes to the wealthiest among us for the last thirty years while steadily shifting the burden for paying for everything to payroll deductions on the middle class.

Tax Philosophy in America; a Brief History

The United States has been blessed with an abundance of natural resources unlike most any other nation in the world from the very beginning of our nation. Plentiful rich land for expansion, an abundance of coal, oil, natural gas, and a mostly congenial and mild climate combined to make this a haven for those willing to work hard and have an independent spirit for the better part of three centuries now. Combine this with rich soil, and almost limitless supplies of fresh water and wild game and you begin to get a feel for how uniquely rich this country has been since its inception. It is hard to overstate the fact that much of the rich character of our nation is directly attributable to the vast bounty in natural resources that our part of the continent of North America contained when the first settlers from Western Europe set foot here. We as Americans are fond of bragging about the individualism and entrepreneurial spirit that made us the greatest economic and military power in the world today without giving due credit to the vast richness the land held when we came here.

At the outset of the experiment that the United States government is we were almost overwhelmingly an agricultural nation. What made this country unique from so many of the nations of Western Europe where so many of the original immigrants came from was the heretofore unimaginable amount of land available for the taking. This is the only nation of the western world where for centuries there was more land available than people to work it. This led to low prices on land and high prices on labor; both uniquely and vastly different from what the rest of the western world knew as normal. It was this great abundance of land that financed much of our government expense for most of the first two centuries of our existence as a nation. Money from the public sale of these lands along with moderate tariffs on imports from overseas provided the great majority of revenues that our government needed to survive. While much of Western Europe struggled with high taxes and all manner of attempts to raise enough revenue to cover expenditures Americans were for the most part completely unconcerned with such problems.

Indeed the American Revolution by which we as a country gained our independence from Great Britain was largely fought over Americans refusal to pay taxes to the British government. Great Britain believed that since she had provided the military that fought two wars against foreign powers and Native American allies to these powers, the colonies should share in the high taxes these expenditures had levied on her citizens in Great Britain and other colonies of the crown. American colonial leaders disagreed. It is worth noting here that even at that time the preponderance of this tax burden fell upon the first wealthy class that had sprung up in this nation. These taxes that American colonial leaders found so objectionable were not levied on the average American small farmer they were taxes on the merchant and planter class; the wealthiest Americans.

As Adam Smith in his "Wealth of Nations" notes; it is the division of wealth that is in many ways the root cause of government expense to begin with. If all nations are equal in wealth there is little motive for one nation to attack another. If all citizens within a country are equal in wealth there is little reason for the expensive protections government provides in the form of justice systems, police, and standing armies. It is the division of wealth, furthermore the unequal division of wealth that makes stronger central governments necessary. Central governments from the very beginning of civilization have been necessary to support property rights. John Locke, the enlightened thinker from whom Jefferson borrowed the immortal "Life, Liberty, and the Pursuit of Happiness" in the opening of the Declaration of Independence, stated the function of all government more clearly as the protection of "Life, Liberty, and Property". While both Jefferson and Locke agree that all true governments receive their power from the consent of the governed Locke was much more honest about the three basic rights governments have the duty to protect. In other words, justice systems, courts, police, and to a great extent national armies are necessitated by the need to protect property rights. In largely agrarian societies with equal wealth smaller, less expensive governments have always sufficed. An axiom that Smith well recognized is that the larger the division of wealth within a nation, the more complex and expensive the government system that is needed to support it.

Smith spends a great deal of time in his book explaining this theory. It is the basis for his justification for taxing the populace in proportion to their wealth. After all, if they are the reason why a larger more expensive government is necessary, they should be willing to pay for it in proportion to their need. This is an important point and one that we seem to have lost sight of in this country in the recent past. Much of our governmental effort goes into protecting the business interests of our wealthiest citizens. Our nation's foreign policy since the beginning of the 20th century has been overwhelmingly slanted towards protection of the largest business interests in the country. When we were an isolationist nation with little business interests outside of our borders we had little need of a huge military or a large and expensive state department. As corporate giants began to dominate the market place both here and abroad our government grew to protect and support their interests.

When the bulk of this nation was agrarian we had little need of a large central government. For much of the first 120 years of our history as a nation this held true. However, with the growth of corporations, manufacturing interests and international trade interests at the end of the nineteenth century this began to change. This change was manifested in our growing involvement in international affairs on a national basis. We didn’t become intimately involved in international affairs through a national referendum; we became involved because of the growing influence of a wealthy class of Americans whose financial interest necessitated a strong military and diplomatic international presence to support their interests. Anyone who takes the time to read the writings of our founding fathers will find them almost unanimous in their disdain for a strong central government supported by large standing armies. This is because as an agrarian nation, we had no need of such exigencies, but as an economic leader in world financial centers this is no longer the case. I don’t think anyone would sensibly argue we don’t need a standing army today or an international diplomatic corp. Aside from those who believe we should revert to being an agrarian nation, everyone understands this is simply a necessity in today’s world.

It was our nation’s rise as an industrial nation that necessitated the growth of our government. In other words, the growth of wealth in this country led to our becoming a leader in the world and this wealth also has costs associated with it that we pay in the form of a larger, more expensive government. You simply cannot have one without the other. Therefore, since it is the wealthiest among us who profit the most from this system they should pay the largest share of the expense in maintaining it. This has been the basis for a fair system of taxation from the very beginnings of organized governments. To quote from Smith again;

The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expence of government to the individuals of a great nation is like the expence of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.

The growth of corporate power in this country is another reality that we seem to not understand very well as a voting public. Corporations have gained legal status that allows them to have many of the same rights as individuals without the requisite liability of an individual. Just for example, the Supreme Court recently ruled that corporations have the same right of free speech as individuals so they should not be limited as to how they contribute to campaigns of their favorite candidates. While this may seem plausible on its surface it covers up the fact that as an individual you and I are responsible for all of our actions to the very limits of our financial ability to cover them while corporate leaders are only liable as far as their corporate finances while their individual finances are beyond the ability of a court to reach. This is just one example of how the vast capabilities of large corporation’s wealth don’t match their culpability in our legal system. There are many others that favor corporations which is exactly why their success has been tied so closely with the growth of our nation’s power and the growing division between the wealthiest 1% of Americans and the rest of us. I don’t believe corporations are evil entities but they are favored entities under the legal system of this country which is exactly why they have so much wealth and requisite power in our government today.

It is in their best interests that many of the foreign policy decisions that the rest of us pay for are routinely made. Receiving the great abundance of favor that such decisions afford them, one would think that they would happily pay the heaviest share of the expenses put forth to gain them but that is not what is going on in this country today. Since the Reagan revolution we have seen a steady increase in corporate profits along with a steady decrease of the amount of revenue the government receives from them. It is true that the Corporate Tax Rates in this country are high compared to most other industrialized nations (close to 35%). However, what is also true is that tax loopholes that have progressively been extended throughout the last 30 years have reduced the actual tax liability of corporations to all time lows. In 1978 the percentage of total tax revenue raised in this country off of tax revenue on corporations was 15% as opposed to some 47% in individual income taxes at the same time that corporations took in some 40% of the total profits realized. In 2009 the percentage of revenue gathered from corporations was 6% as opposed to 46% in individual income taxes. In other words, corporations which took in some 70% of the total profits made in this country paid 6% of the taxes collected. Looked at another way if corporations earn 70% of the profits and pay 6% of the revenue they are paying a vastly smaller percentage of the cost of the government that makes their profit margin possible while at the same time capitalizing on the protection government affords them. Taking into account the recent rulings on campaign contributions by corporations it is easy to see how this vast increase in profit margins will allow them to continue to consolidate control over the election process in the near future.

Beyond the unlevel playing field of corporate America is another level of unequal taxation the Reagan revolution ushered in that is just as devastating to the deficit. The highest tax brackets in this country have historically paid some 70-90% in income taxes. Again, this is the group of Americans who profit the most from the business environment that our large government creates through subsidies, government research and development grants, and foreign policy decisions built around protecting the financial interests of this same group of people. This same group of people today typically pays some 15% on their income taxes by the time all the loopholes available to them through tax attorneys and favorable legislation are assessed while the average upper middle class citizen pays close to 30% on their income taxes in direct payroll deductions. This is exactly why the upper 1% of the wealthiest Americans now own 45% of the wealth of this country as opposed to the 18% they owned when Reagan came into office.

Without a doubt we as a country have some serious problems as far as our financial situation. We are continually spending more than we take in which is obviously unsustainable. The question is what do we do about it? Do we continue to slash government programs until we can subsist on the lower revenues our present tax codes provide or do we believe that it is both necessary and proper for the government to provide basic services and increase our revenues through higher taxation on corporate profit? The ugly truth we seem to be ignoring is that our government which has steadily grown more and more to be controlled by corporate interests in the financial interests of the wealthiest Americans has at the same time continuously reduced their responsibility for paying the bills. The good news is that we are approaching a point to where these questions will have to be answered. The bad news is that we don’t seem to realize why or how we got into this situation. Corporate interests of the wealthiest Americans continue to gain more control of our government while at the same time increasing their profit margins by cutting the amount of taxes they pay while pointing to the poorest among us as the financial drain on the economy. The choice is ours to make. We can either institute a taxation system based upon the timeless values of equal taxation espoused by Adam Smith above or we can continue our present system of unequal taxation and see the eventual financial collapse of our government as we now know it. What we cannot do is expect to continue on the path we are presently on without facing up to where it is leading us.