There’s an old saying among English conservatives that “no man’s life or property are safe as long as Parliament is in session.” I don’t believe that, but it seems pretty clear that common sense and reasoned discussion are endangered species while the major political parties here in the United States rev up their presidential campaigns.
At one time in our nation’s history, political candidates were willing to analyze political issues in depth and to weigh fundamental differences of values in detail. Moreover, citizens were willing to pay attention to such analysis for hours, not just a 10-second sound bite. Read excerpts from the Lincoln-Douglas debates of 1858 or Abraham Lincoln’s Cooper Union speech of 1860, and you’ll see what I mean.
Nowadays, exaggerated rhetoric, hype and political spin seem to drive thoughtful discussion of public policy issues into the tall timber. Even a fast finger on the TV remote and radio preset buttons did not protect me from some real gems last week as the GOP convention kicked off in Philadelphia.
Item: One Michigan delegate, a small-business owner from Detroit, in an interview with National Public Radio, commented that reducing taxes was his highest priority because “our people are getting poorer and poorer. Taxes keep taking a bigger bite.”
Well! It was not clear whom this delegate meant by “our people.” A press report on the convention noted that one in five of the Republican delegates is a millionaire. Past studies show that there are far more registered Republicans than Democrats in the highest-earning 40 percent of U.S. households, which have accounted for virtually all the growth in national income over the last 20 years.
So who is getting “poorer and poorer?” Many small-business owners do not necessarily fall into the top two income quintiles. But virtually none of them fall into the lowest-income quintile, the only one that has seen substantial declines in real income in recent years. That group is made up almost entirely of retirees or very young single adults.
It is hard to see how “taxes keep taking a bigger bite” when there has been no significant change in any federal tax rate in several years and the proportion of income paid in taxes has actually declined for the richer half of the population.
Item: House Speaker Dennis Hastert proclaimed to a cheering crowd that “a Democratic-controlled Congress spent the money in the Social Security trust funds. We in the Republican congress have put the funds in a lock box so that cannot happen again.”
All the rhetoric about “saving Social Security,” “spending the Social Security funds” and “lock boxes.” is about smoke and mirrors alternatives in the way the federal government tabulates its accounts. Spending the trust funds refers to putting Social Security receipts “on budget” so that surpluses in this rubric would reduce the visible overall federal budget deficit.
This step had broad support of Republicans as well as Democrats when it occurred. A “lock box” is a non-binding promise by Congress to avoid the use of one particular color of smoke and one specific mirror.
None of this rhetoric recognizes the fundamental fact that as long as Social Security proceeds are not used to buy private securities, the only guarantee future Social Security recipients can have is a faith in the continued willingness of American citizens to tax and borrow.
Even more fundamentally, unless some “reform” measure increases the nation’s savings rate, now nearly negative for the private sector, there will not be any more goods and services to meet the needs of retired baby boomers. This is true regardless of how we book overall federal revenues and expenditures.
Minnesota Senator Rod Grams weighed in with additional hot air: “Washington taxes love through the marriage penalty, taxes old age by taxing seniors’ Social Security benefits and even taxes death through the death tax.”
Strange. My mother gets Social Security but pays no tax on it. Nor does my aunt, my half-sister or any of my retired neighbors back home. My father-in-law died earlier this year, but no death tax is due. Nor was there any when my uncle died two years ago nor for my aunt and brother-in-law who also passed away in recent years.
My wife and I are in exactly the same marginal tax brackets as we would be if single. I have friends and neighbors with one spouse earning much more than the other, and I believe that they are probably paying less federal income tax than if they were single. Am I living in a different country than Senator Grams? Are my family, friends and neighbors tax cheats and scofflaws?
No. Only a very small proportion of deaths result in any estate tax due. Only a minority of Social Security recipients pay any income tax on their benefits. And as many couples benefit from a marriage bonus as pay a marriage penalty.
I’d be the last person to say that we have a perfect system of government finance in the United States. Policies relating to each of the issues mentioned here, Social Security, income taxes, estate taxes and how the federal government affects small businesses, could be made both more equitable and efficient.
Backers of both parties, indeed U.S. society as a whole, could benefit from a thoughtful overhaul of U.S. fiscal policy. But achieving such a thoughtful and reasoned restructuring is well-nigh impossible in a political atmosphere of inflated rhetoric and 10-second sound bites.
For those of you who feel I am being unnecessarily harsh on the Republicans, please wait a few weeks. I will give the Democratic convention its due. Neither party has a monopoly on shallow posturing.
© 2000 Edward Lotterman
Chanarambie Consulting, Inc.