SYNDICATED COLUMN: The Phony Budget Crisis

Forget Austerity. Tax the Rich.

Everywhere you look, from the federal government to the states to your hometown, budget crises abound. Services are being slashed. Politicians and pundits from both parties tell us that the good times are over, that we’ve got to start living within our means.

It’s a lie.

Two case studies have made news lately: California, where new/old governor Jerry Brown is trying to close a $25 billion shortfall with a combination of draconian cuts in public services and a series of regressive tax increases, and Wisconsin, where right-winger Scott Walker says getting rid of unions would eliminate the state’s $137 million deficit.

Never mind the economists, most of whom say an economic death spiral is exactly the worst possible time for government to cut spending. Pro-austerity propaganda has won the day with the American public. A new Rasmussen poll funds that 58 percent of likely voters would approve of a shutdown until Democrats and Republicans can agree on what spending to cut.

The budget “crisis” is a phony construction, the result of right-wing “starve the beast” ideology. There is plenty of money out there—but the pols don’t want it.

There is no need to lay off a single teacher, close a single library for an extra hour, or raise a single fee by one red cent.

Every government can not only balance its budget, but wind up with a surplus.

The solution is simple: tax the rich.

Over the last 50 years tax rates for the bottom 80 percent of wage earners have remained almost static. Meanwhile the rich have received tax cut after tax cut after tax cut. For example, the rate paid by the top 0.01 percent—people who currently get more than $6.5 million a year—fell by half (from 70 to 35 percent).

Times are tough. Someone has to pay. Why not start with those who can most afford it?

Europe has the world’s best food, its best healthcare system and its best vacation policy. It also has one of the fairest ways to generate revenue for government: a wealth tax. In Norway, for example, you pay one percent of your net worth in addition to income tax.

What if we imposed a Norwegian-style wealth tax on the top one percent of U.S. households? We’re not talking upper middle class here: the poorest among them is worth a mere $8.3 million. This top one percent owns 35 percent of all wealth in the United States.

“Such a wealth tax…would raise $191.1 billion each year (one percent of $19.1 trillion), a significant attack on the deficit,” Leon Friedman writes in The Nation. “If we extended the tax to the top 5 percent, we could raise $338.5 billion a year (one percent of 62 percent of $54.6 trillion).”

But that’s just the beginning. Wealthy individuals are nothing next to America’s money-sucking corporations.

Business shills whine that America’s corporate tax rate—35 percent—is one of the world’s highest. But that’s pure theory. Our real corporate rate—the rate companies actually pay after taking advantages of loopholes and deductions—is among the world’s lowest. According to The New York Times, Boeing paid a total tax rate of 4.5 percent over the last five years. (This includes federal, state, local and foreign taxes.) Yahoo paid seven percent. GE paid 14.3 percent. Southwest Airlines paid 6.3 percent. “GE is so good at avoiding taxes that some people consider its tax department to be the best in the world, even better than any law firm’s,” reports the Times‘ David Leonhardt. “One common strategy is maximizing the amount of profit that is officially earned in countries with low tax rates.”

America’s low effective corporate tax rates have left big business swimming in cash while the country goes bust. As of March 2010 non-financial corporations in the U.S. had $26.2 trillion in assets. Seven percent of that was in cash.

The national debt is $14.1 trillion.

Which is a lot. And, you see, entirely by choice.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is



  • America’s low effective corporate tax rates have left big business swimming in cash while the country goes bust. As of March 2010 non-financial corporations in the U.S. had $26.2 trillion in assets. Seven percent of that was in cash.

    The national debt is $14.1 trillion.

    Is that supposed to be a syllogism or lead to an obvious conclusion? It would be shoddy logic, not to mention likewise morals, for someone to draw that “conclusion”. And no, knee-jerkers, I do not favor bailouts for greedy Wall Street either.

  • Anyone else catch the reason why Scott Walker decided against planting agitators?

    He said that if the protests turned violent, he might have to cave. He may be onto something.
    The best of both worlds could be achieved if anonymous acts of violence (against buildings) occurred on periphery of the protests.

  • Oh, BTW, after reading this I changed my mind about the struggle in Wisconsin between the tax-feeding union thugs and the tax-feeding thuggish governor (emphasis added):

    Wisconsin’s budget stalemate over union bargaining rights shows no sign of resolution – and it could be a long wait.

    The governor isn’t budging. AWOL Democrats aren’t planning to come back. And, despite talk of deadlines and threats of mass layoffs, the state doesn’t really have to pass a budget to pay its bills until at least May. Even then, there may be other options that could extend the standoff for months.

    Go Wisconsin “revolutionaries”! If your struggle means a jam-locked government, I’m all for it! No new laws, no new regulations, no tax hiking, oh the horror! Wisconsin tax-victims should thank their deity for such small favors.

  • Teachers are making slightly less than they did 50 years ago. Benefits are not the problem. The tax subsidy state is the problem.

  • @bucephalus The only conclusion that should, or indeed CAN be drawn from this column is the one Ted has laid out and proven factually: Wealthy individuals and corporations are undertaxed and as long as this condition persists, the rest of the country suffers.

    As for having shoddy morals, I would argue that the shoddy moral choice is not taxing the rich and thereby allowing the suffering.

  • in the context of the state system, it is more acurate to talk about a “failure to tax” the wealthy  as a subsidy.  “Under-taxed” wealthy individuals, corporate or other, are free riders and welfare queens.  Libertarians fantasize about a genius who “creates” wealth by the sweat of his intellect by filling a need in the market.  In this fantasy, the only impediments to this golden-egg-goose are non-market redistributive forces in the form of taxes.   Now that these geniuses have seized control of the commanding heights of the government, and freed themselves from the redistributors, they have become the distributors.  
    Socialists can listen to labor music, and read Noam Chomsky, and 
     libertarians can sit listening to Rush (the band) on their walkman, and masterbate to Tom Sawyer while reading Austrian economics and posting on Lew Rockwell websites about the lack of dynamism in socialism, but we must all accept the following:
    The spoilers are neither libertarian nor socialist. The enemy are the “centrists”, the imperialists, the oligarchs, the bankers AS WELL AS their government cabin boys.  Until they are dealt with, our discussions are purely academic.  Let’s kill them, and then we can kill eachother (of course, I don’t mean that literally)

  • buceph likes to point out that leftist pilicies require an intollerably repressive enforcement regime to be practical. He is quite right. François Mitterrand’s first few years were a socialist’s dream. But the wealthy simply pulled their money out of the economy, and waited for the fever to pass. No assets were frozen, no one was tried for treason, no one was shot.

  • Angelo, I can agree with you that the enemy are the centrists, the oligarchs, the bankers, central or “connected.” Where we part philosophical company is, of course, where you think more government (but by the right people!) can solve a problem big government itself engendered. That and, of course, the different value we attribute to liberty and equality.

    “Pro-austerity propaganda” may have won the day with the American public, but it hardly won the day with the American government, Demotican or Republicrat, buffoons like Walker notwithstanding. Unlike in Europe, where the appeal of “most economists” (most academic, left-leaning, federally connected Keynesian economists, that is) is not being given too much credit. What Rall hints at in the last paragraphs (what I would call the Rallian-Moorean proposal) is to bleed those cash reserves in private hands to pay for government profligacy and lack of foresight. Fair enough, but bear in mind at least two things:
    1) at the rate the deficit is growing (and I don’t see a Mooreanic proposal to stem that) that money will cover you for what, two, four years? What’s the next bright idea after that? Even if you bleed that cow slowly, you’re still going to make it sick
    2) those cash reserves serve a purpose, sopping them up will give an incentive to riskier behavior by companies, since cash is now a “liability”, thus making bankruptcy more likely. With no happy ending in sight, since potential competitor won’t have the cash to buy you out of bankruptcy;

    But I trust the Moorean plan has foreseen all that and has a nifty solution for all the all world’s problems. Unintended consequences is just a myth propagated by the benighted.

  • “Where we part philosophical company is, of course, where you think more government (but by the right people!) can solve a problem big government itself engendered”

    I’m not sure we part philosophical company. Monopoly cannot exist without its enabler, and vice versa.
    Consider the following:
    Let’s say libertarian monetarists seized control of government tomorrow. Being avid readers, they hunt down Bucephalus, and set him to work purifying the economy of monopolistic restaurants from the pre-revolutionary era.

    Item 2067C on the to-do list:
    1) McDonalds is using government subsidy toward putting hundreds of smaller restaurants out of business. They are also constantly lobbying to strengthen this arrangement.
    2) They are required to do this, lest another burger joint beat them to the punch.

    Your email back to headquarters is terse and succinct:

    Solution: Government eliminated. No further action needed
    As part of the larger initiative, the old government will be eliminated, thereby suffocating McDonald’s monopoly. No subsidy, no lobby, no monopoly. No problem.

    Before sending it off to headquarters, you forward it to me for my input, this is how I respond:
    Sounds great! I would send it along just like that. Might want to include some teeth in your proposal… JK LOL :p

    five years later, I get this email.

    Sorry it took so long to respond. I got nervous and sent the email. No sooner than my hitting ‘send’ did I get a knock at the door. It was a Blackwater representative. I shut the door and dialed Pinkerton. Too late, they had a hood over my head and whisked me through the roof before I could say a word. As far as I can figure it, it’s the year 2021. I’m in Poland, I think. There is a sign on the front of the faciliity that says “Arbeit Macht Frei”. Weird. Oh well, gotta go back to work. Talk you later.

    Suppose the monopolist can survive without government. Is that not itself a tyranny.

  • Angelo,

    I wouldn’t give my day for political satire, were I in your shoes. Two obvious points:
    a. I thought Blackwater’s one and only “customer” was Uncle Sam. With it gone, why would they hunt political opponents for?
    b. I wouldn’t do a damn thing about Mickey D’s “monopoly”, because, for starters, it isn’t one. I hardly ever eat there, and there are plenty of other junk food joints, chain or independent, besides decent restaurants to choose from, even in the good ol’ USA.

  • I had no idea you were such a big fan of the corn subsidy…or, does that not exist.

  • Oops..and, yep, I forgot..monopolies do not exist either. You’ll have to excuse me, I left my LV reader at the barber last week.

    a) Not “political opponents” (those really don’t exist) but rather, economic opponents. They say service private clients, and that’s not counting their work for Unocal et al subcontracted through the DoD.
    b) i submit to you that the existence of all four fast food chain joints within 500 feet of my house are suppressing the existence of at least two local joints. As a libertarian / anarchist, this makes mcdonalds your worst enemy. We dont need to know exactly how, we just need to use our senses.

    You said we part ways on solutions. I’m still trying to see how.

  • Angelo:

    1. Did I ever say there was no corn subsidy? Of course that should be done in, but may I remind you it is a consequence of overbearing government agencies and “programs” stretching as far as FDR’s hailed soft-fascist administration?

    2. All four? I take it that means you live in the East Coast, since “all four” probably doesn’t include Carl’s Jr and Arby’s, right? What exactly are they “supressing”? What’s preventing an enterprising young fellow, say, yourself, from buying up the defunct Jiffy Lube shop in the corner and starting your own greasy business, although in the alimentary industry? Since when being a libertarian equals being against businesses growing “too big”?

    I didn’t say we part ways on solutions: we part ways, as you make evident, on seeing the same “problems” too. Mostly because of the different value you and I attribute to equality versus liberty. Simple as that.

  • go read these:

    Don’t pretend not to understand that McDonalds cannot coexist with tens of thousands of superior if less well-connected burger joints. You know the problems cited in the above referenced articles utterly short circuit whatever marketplace corrections you would expect to improve the lot of Bucephalus’ Burger Boutique.

    By now i respect you too much to allow you to trudge into the mush fest of context-less terms like liberty and equality. It reeks of underachievement. How about the equality of wealth and power. Big business and big government have common goals, we agree on that. I think our difference lies in how (whether) we distinguish principle from agent.
    How can you be against centralized wealth and not against centralized power?

Comments are closed.