Lucius Flatley told the coffee group this week that the issues underlying the differing budget proposals between the GOP and Mr. Obama should be understood by every American. If the country chooses the wrong path, it may lead into a wilderness. A common goal in both offerings is to put the national budget on course to a balance in the next 10 years or so, including debt payments to reduce the national deficit. Both proposals claim to keep the economy strong while doing this, but Mr. Obama’s proposal adds another goal – “a reaffirmation of American compassion and community, a competitive future.”
Professor Flatley opened the discussion by arguing that while the GOP proposal has commanded a lot of ink, it is as wacky as “old trickle down” economics, its paternal granddad. The plan seeks to cut spending (outgo) over the next 10 years by $4.3 trillion. At the same time, it proposes to reduce taxes (income) by $4.2 trillion. Simple arithmetic shows this to be a “wash.” Disregarding the flatulent assumptions of prosperity (for which there is not the slightest proof), if reduced saving is offset by reduced income, net worth remains unaltered.
It does, however, enrich the wealthy. Its spending reductions would almost exclusively come from low income or elderly programs, e.g., 34 million would be deprived of medical care, while generous new tax benefits would be forced on the deserving rich. This approach to dividing up the loaves and fishes is a GOP drone strike in the continuing American class war – an economic masquerade ball. As a typical bit of this fiscal legerdemain, the Republican plan proposes to contract the administration of medical expenditures to insurance companies, even though private plans cost about 12 percent compared with Medicare cost of less than 6 percent.
Beyond a balanced budget, Mr. Obama’s proposal is also concerned with the future world competitive strength and health of the country – something besides being 17th in child mortality, or having the poorest medical care for its population of any industrial nation, or student achievement scores below the industrial world median.
The GOP proposal fails the future – there is little concern for education, health, infrastructure or research. They are saying no to rebuilding bridges, to sending students to college, to investing in research. The capitalist mantra of investment producing wealth, so long a GOP principle, is nowhere to be heard.
Even though the non-partisan Congressional Budget Office forecasts a bigger deficit and more debts, Republican economic daydreams promise that spending (other than Medicare) will eventually fall to 3.5 percent of the GNP. Hello??? That is less than we are spending today on defense alone! Flatley noted these dollar proposals demonstrated Republican DNA – the forecast spending percentage is about the same as when Calvin Coolidge was president.
Flatley also called attention to history – an economic drama starring tax cuts in three acts. In the first act, Ronald Reagan promised that tax reductions favoring the wealthy would pay for themselves, but the result was a 6 percent drop in GNP and a sharp reduction in national income. For the second act, Bill Clinton raised taxes (including tax on the wealthy) and – presto! – the greatest economic boom in 30 years. The dot-com expansion and the stock market ride into affluence demonstrated that, in themselves, taxes on wealth have little to do with prosperity. When Clinton left office the budget had enjoyed a surplus for four straight years.
Unfortunately, in the third act of this economic drama, George Bush undid Clinton’s taxes with the biggest tax cut in history ($1.6 trillion, heavily favoring the very rich). Dick Cheney said it all: “Deficits don’t matter.” By the time those two left office, the country was facing a budget deficit of unprecedented proportions.
If higher taxes lowered the standard of living, Germany, Denmark and Sweden would be desperately poor. No one has ever seen an objective study concluding that tax breaks have ever created a single job. But the fault is shared. Both parties have been wildly irresponsible stewards of the national treasury. Democrats bought out the candy store in the 1960s, both parties vied for the wastrel championship during the ’70s and ’80s, and the Republicans have been staggeringly reckless ever since.
Stay in your seats. The drama will continue through more acts.
Devil’s Dictionary quote of the week
Rich: performing no useful work.
Riches: the savings of many in the hands of a few.
Rodney Quinn, a former Maine secretary of state, lives in Gorham. He can be reached at rquinn@maine.rr.com.
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