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Both the New York Times and the Wall Street Journal have recently run big profiles on how governments across the country are out of money, with predictably awful results: schools are closing, roads and buildings are falling apart, police and fire protection are becoming less reliable, street lights are being turned off, and library and park programs are being eliminated.

That's all just terrible, but the most terrible thing about it is that it's not happening because America is out of money. America has gobs of money. The rich are richer than they have ever been, and even in a prolonged economic downturn, big corporations are flush with cash. Of the companies in the 2010 Fortune 500, 139 are American; of those, 117 turned a profit in 2009 despite the dismal economy, and of that 117, 83 turned a profit in excess of $1 billion. (Of that 83, 14 turned a profit of over $10 billion.) The rich in America are so rich that many of them are banding together to donate their money to charity.

That's good, right? Well, yes and no. It's hard to fault anyone for donating to charity, but it's problematic for several reasons. If we were instead to simply tax the wealthy at a higher rate, the money would arguably be more effective: government provides all sorts of services to all sorts of people in need, while charities have a specific and targeted function. If you're not a recipient of the particular charities receiving all that money, it does you no good whatsoever, whereas if the money went to the government, it could help you in a number of ways. Someone who gives $500 million to a cancer charity has done a wonderful thing for people with cancer, no doubt. But someone who pays $500 million in taxes not only helps people with cancer, but people who are out of work and need job training; people who need to send their kids to college; people who need to use the library; people who need the roads to be repaired so they can get to work; people who need the fire that's burning their house down put out. It would probably be crass of me to mention that by donating such massive sums to charity, these benificent rich folks are getting even further tax breaks, allowing them to keep even more of the money they don't give to charity, and thus putting even less money in the public coffers than we already have. Again: it's good for the rich people, and it's good for the direct recipients of their charity, but it's very bad for everyone else. As Robert Reich points out, the primary accomplishment of this charitable largess is to remind us how vast the gap between the rich and the poor has become, and how much we're beginning to resemble the horrifically inequitable country we were during the era of the robber barons.

It's been said before by many people, and much argument has been made over to what degree it's intentional, but the right wing has ginned up so much hysteria over "socialism", and ingrained in ordinary Americans so much revulsion at the very idea of paying taxes, that they are in danger of destroying the country. No nation can thrive without government providing certain essential services; third world countries work that way because they don't have any income to shore up their government coffers, but there is absolutely no excuse other than greed for a country as hugely wealthy as we are to not tax the wealthy and the corporate citizens commensurate to their wealth. California's Proposition 13 is quite literally bankrupting the state; one of the world's wealthiest economies is in danger of total governmental collapse due to the short-sightedness of anti-tax zealots. Things have gotten so dire that our government refused to pass a bill providing health care to 9/11 first responders and emergency workers -- perhaps the most (justly) lionized heroes of the century -- because it would be paid for by an extremely minor tax on the offshore financial holdings of huge corporations. This is, quite simply, fucked.

The idea that any modern economy can survive without a strong government and a solid tax base is nothing more than a fantasy. The repercussions of believing that fantasy are a very basic, and very dismal, reality: you can see them all around you. Something's got to give.


Aug. 6th, 2010 07:30 pm (UTC)
There have been jokes that the United States is eerily paralleling the Soviet Union in its decline, mainly in getting involved in a pointless and hopeless war in Afghanistan and in trying to reform itself by turning to a charismatic leader. But I think the most interesting thing is that we too are clinging to a moribund ideology at a horrifying and escalating cost, although admittedly twenty-first century conservatives and Libertarians resemble bona fide Stalinists in their fanatical devotion to their ideology and contempt for reality.
Aug. 6th, 2010 07:54 pm (UTC)
Thanks for writing this. It's why I can't be a libertarian.
Aug. 6th, 2010 08:02 pm (UTC)
But if we're just good enough Capitalists, won't the Infrastructure Fairy come along and fix everything?
Aug. 6th, 2010 08:45 pm (UTC)
ingrained in ordinary Americans so much revulsion at the very idea of paying taxes, that they are in danger of destroying the country

Yes. Exactly.
Aug. 7th, 2010 12:06 am (UTC)
Isn't a lot of the danger local governments are in due to over-extended pension funds? See: Ohio, New Jersey, etc.
Aug. 7th, 2010 01:37 am (UTC)
That's a very good question, the answer to which I'm sure it will not surprise you to learn is very complex. (Not that this has prevented both parties from using it to slag off the other.)

In Ohio (I'm going to use it for my links and examples, but New Jersey is facing much the same issues), total pension costs are currently around $4 billion. Their total budget deficit for the coming year is estimated to be around $8 billion. This has led to a lot of Republicans claiming that pensions account for half of the budget problem, but in fact, all pension costs are flexible and deferred over time, so the current pension drain is less than $2 billion.

Still, that's a lot! And because public employees tend to make more money than private ones, and the ranks of public employees have grown lately, it's going to get bigger. (It's still a tiny amount of the overall workforce, but that's not especially relevant.) So the fact that their pensions are taking a big bite is an issue, even if it's not as big an issue as some people are making it out to be.

That means we have to ask ourselves (A) how it got that way and (B) what can be done about it. How it got that way is a very complex question. A pension fund works by people paying into it, and by the money it makes on investment. Both of these have been a big problem. It's obviously better for people to voluntarily pay more into their own pension funds, but in good times, the investments tend to make a lot of money, and the pension funds get fat, so nobody wants to pay extra into them -- why should they? And in lean times, nobody can afford to pay extra into them. Investments, of course, are the bigger problem. Naturally, fund managers tend to invest in the most profitable stocks, because that's where the money is; however, as you may have noticed, a number of companies that once posted big profits were found to have been doing business not quite so honestly, and as a result, they completely tanked. When you hear some liberal politician on the news complaining about how so-and-so lost their pension because of Wall Street crooks, this is exactly what they're talking about: pension funds are heavily, heavily vested in blue chip stocks. In Ohio, for example, investments in Lehman Brothers cost the pension fund $480 million -- half its current operating cost and more than 10% of its total value. (John Kasich, who's running for governor of Ohio, is pretty deeply enmeshed in that particular fiasco.)

Other problems: thanks to loopholes in the law, city and state employees are often allowed to double-dip into pension fund resources. Medical costs, which are the largest expenditure for pension funds, have been hugely on the rise. Pension fund managers were either slow to react to news about toxic investments, or didn't move on them at all, for a variety of reasons. And, increasingly, actuarial studies on which pension projections are made have been found to be faulty.

Aug. 7th, 2010 01:38 am (UTC)
So, there's a lot of reasons pension costs are high. What can be done about it? Naturally, the Republican response is to privatize jobs, cut government payrolls and default on pensions. I'll leave it to you to figure out why I think this a bad idea. Democrats, not wanting to fuck with their core constituencies, generally offer pretty mild fixes: they reluctantly backed pension reform after double-dipping became a scandal, and they've supported raising the mandatory retirement age for state workers, something I approve of despite my own commie leanings (in some states, the retirement age is as low as 50, which even I'll admit is putting an incredible strain on pension funds). Financial reform would help -- a huge reason that the recent Wall Street collapses hurt pension fund investments so badly is because of consolidation of financial services, and the cronyism between investment firms and fund managers. The federal government has stepped in at times to bolster ailing state budgets (though, personally, I think the pension fund depletion is less of an issue than it's being made out to be, and that really shouldn't be necessary), so maybe we'd have a little more money to play around with if we weren't fighting two wars. Real health care reform, as opposed to the garbage pile we ended up passing, would have meant substantial pension fund savings as well, but that ship has sailed right under the insurance industry's profit margin.

Mostly, though, the pension funds would be easier to manage if the economy were stronger: less drain on health care, more money to put in voluntarily, a more robust stock market, etc., etc. One insane, mad, it's-so-crazy-it-almost-certainly-would-work idea to cope in the short term would be, well, raising taxes. Because another reason state pensions are problematic is that states don't have the money to pay for them. Ohio's tax revenue has decreased four years in a row -- dating back to the 2005 Tax Reduction Act, which cut personal income tax by 21% and corporate and business tax by 50%. It's not really much of an intellectual leap to figure that a state that eliminates that much of its revenue might have trouble paying its bills down the road; in fact, it's so obvious that Policy Matters issued a report five years ago predicting exactly what would happen, almost to the dollar. But John Kasich has said repeatedly that tax increases are off the table, calling them a "doomsday scenario" and "unthinkable". His opponent, Ted Strickland, has a history of being more sensible, but is so spooked by the current anti-tax hysteria that he's backed off of even implying that there might be a tax hike if he wins.

So, there you go.

Edited at 2010-08-07 01:44 am (UTC)
Aug. 7th, 2010 01:43 pm (UTC)
This is all good stuff!

You know my politics, but I'll agree with you so far as to say that it would be better if American citizens had less of a disconnect between "the services they want to receive" and "the taxes they're willing to pay." Everyone wants competitive schools, generous pensions for public employees and cops watching kids on crosswalks; nobody wants to pay more in property taxes.

And also, the same pension issues which Ohio, NJ and CA (and other states) are suffering could be applied, without much rewriting, to GM, most airlines, etc. So it doesn't fit as neatly into the libertarian/mid-90s-conservative gospel of "government accounting gone awry." (Although, really, they should have seen this coming)
Aug. 7th, 2010 01:59 am (UTC)
It took us 40+ years to dig ourselves into this hole, and it might take us at least half that long, if not more, to dig ourselves out of it.

Here's what we have to do:


I would love to know of any progressive organizations that have paid volunteer jobs.
Aug. 7th, 2010 04:30 pm (UTC)
There is a rich irony in contemplating the fact that the Camden, NJ public library system (slated to close) was originally funded by Andrew Carnegie, a capitalist if ever there was.

Doesn't it seem like immiseration isn't a decent stratagem for the wealthy, who will inevitably pay their share of taxes indirectly -- via a mounting wave of mugging, robbery, identity theft, etc.? "We'd rather pay for riot squads / Than pump your ghetto back to life."

Welcome to Galt Gulch.
Aug. 7th, 2010 07:59 pm (UTC)
forgive me for repeating myself
You may choose to be shocked, shocked that such things happen in our advanced society. But when a rule has more exceptions than instances in which it holds, it's helpful to change the rule. Once you think that we live in a third-world plutocracy, then all of a sudden everything begins to make sense.


flavored with age
Gun-totin', Chronic-smokin' Hearse Initiator
Ludic Log


Leonard Pierce is a freelance writer wandering around Texas with no sleep or sense of direction. If you give him money he will write something for you. If you are nice to him he may come to your house and get drunk.

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