Of Taxes and Deficits
BROCKWAY, GEORGE P.
The Dismal Science OF DEFICITS AND TAXES BY GEORGE P. BROCKWAY Another budget deadline has come and gone and that old devil deficit is still there. What can we do about it? First, we had...
...The $160 billion would not betaken from the spendthrift government and put in your thrifty pocket to be used in a more propitious time...
...Personal dignity and self-respect depend on the right to contribute to the common wealth...
...If you want to be fussy: not all credit is money, but all money is credit...
...Well, the states balance their budgets, so why can't the Federal government...
...There is no way these figures can be tortured to support the claim that a deficit causes inflation...
...The possibility is more ominous when you consider the unemployment rate...
...This weakness is the almost complete abandonment of progressivity...
...But what about our children and theirs...
...Our basest beggars are in the poorest thing superfluous...
...The possibility of an economic reaction is more immediate...
...It will be noticed that the foregoing probabilities are to some degree contradictory...
...Of course, it could—provided we accepted one of two outcomes: Either private businesses and private individuals would have to increase their indebtedness to match the Federal decline, or we would have to have that depression...
...the inflation rate was 1.1 per cent...
...The foregoing merely suggests ways in which the anti-indebtedness argument is false...
...The new law is certainly better than the old in that whatever is unreasonable or unjust in it is plainly stated rather than shoddily sheltered...
...It was insisted from the start—by Bradley-Gephardt in 1983 as well as by Reagan-Regan in 1986—that a reformed tax law would be revenue neutral...
...Even without a depression too many of us are denied that right...
...In 1980, thedeficit was$73.8 billion (or 2.7 per cent of GNP), and the gross Federal debt was $914.3 billion (or 33.47 per cent of GNP...
...and the assessments according to the number and nature of the favors they have received, for which they are allowed to be their own vouchers...
...Whether the miracle were achieved by reducing military expenditures or by cutting off the poor or by raising taxes or by all three, somehow $160 billion (more or less) would be abstracted from the economy...
...For too many years, greed has been admired in high places and doing good has been sneered at...
...Then capital gains were dropped back to 20 per cent...
...Mention of unemployment reminds us of the real point: The vice of depression is not the loss of potential goods and services but the loss of jobs and selfrespect...
...It is something of a paradox that lower personal and higher corporate taxes can be expected to result in both higher executive salaries and perks as well as higher winnings from speculating in the securities of the companies whose earnings are reduced by paying the salaries and perks...
...In 1929, the rate was 3.2 per cent...
...It may, in fact, lead to greater injustice...
...Won't all that debt bring double-digit inflation back again...
...These naturally reflect the various members' interests and capabilities, and many are nutty (as arc some of the President's), while others are politically impossible, at least for now...
...But that is not to say it is more reasonable or just...
...Then it was reduced to 50 per cent on "earned income...
...But, as to honor, justice, wisdom and learning, they should not be taxed at all...
...That's the way the capitalist system works...
...Today, it is officially stated to be 5.9 per cent—and this counts part timers as fully employed, and doesn't count at all those who are too discouraged to look for work...
...This can happen all at once through an accentuation of the polarization of the American economy...
...would now be dropped again...
...The average fall in GNP for depressions since World War I has been about 6 per cent...
...When you look at the record, you wonder how these staples of campaign oratory and editorial punditry get taken seriously...
...A steeply progressive income tax would be a sign of a shift in morale—which would be far more important than whatever increased revenue might be raised, and vastly more important than the size of the deficit...
...because they are qualifications of so singular a kind that no man will allow them in his neighbor, or value them in himself...
...Part I examines what it discreetly calls " Revenue Areas [it would be lèse majesté to call them tax increases] Addressed by the President's 1988 Budget Proposals.' Adopting all of them would increase 1988 revenues by about $3.7 billion—scarcely noticeable in the shadow of a$160 billion deficit...
...It does not claim that the present is the best of all possible worlds, that the level of our current deficit is exactly right, that we might not better buy different things with our money, or that we might not do better by financing the deficit differently...
...as a whole, they exceed the magic $160 billion goal, there is no point in adding them up because many of them would work at cross purposes, and because nowhere in the pamphlet is there a discussion of the leading weakness of the 1986 tax law...
...That excellently bitter proposal is not explored in the 291-page Description of Possible Options to Increase Revenues recently prepared by the staff of the Joint Committee on Taxation with the staff of the Committee on Ways and Means...
...The reason for this is simple: The flip side of debt is credit, and credit is money...
...We are all demeaned by that denial...
...In spite of the most sophisticated programs run on the most powerful computers, Pandora's box remains closed to us...
...And now the top rate is 28 per cent across the board, with a complicated proviso that need not be of concern to you unless your taxable income exceeds $200,000...
...But, as is well told in Showdown at Gucci Gulch by Jeffrey H. Birnbaum and Alan S. Murray, the Senate Finance Committee grudgingly accepted the strength in order to achieve the weakness...
...An exception was that certain of the poorest of the poor, who had been added to the rolls in the reactionary surge of 1981-82...
...It was not so long ago that the top bracket in the personal income tax was 85 per cent...
...Our economy is bad because our morale is bad...
...Consequently, to say that we can fine tune the economy is an exaggeration...
...Or look at it this way: One hundred and sixty billion dollars is about 4 per cent of our gross national product...
...Does this mean we are doomed to run deficits forever...
...Moreover, the possibility of its existence would be gone forever, and with it the goods and services the money might have bought, plus the goods and services that might have been bought by those who would have earned money by producing the first lot, and so on ad infinitum...
...It is probable, too, that the kind of investment banking that leads to raids and takeovers and greenmail will be stimulated, and that so will the securities and commodities and futures markets...
...Actually, "abstracted" is the wrong word...
...without money, no business...
...And isn't it irresponsible to pass on to our children the consequences of our fecklessness...
...It is, however, a fact that we have, in the record of the past 40 years, proof that some kind of tuning can have significant results...
...See "A Cautionary Tale of Tax Reform," NL, January 27, 1984...
...As Jean Baptiste Say, in one of his acuter moments, wrote, "There is nothing to be got by dealing with people who have nothing to pay...
...HOPE OF CHANGING the tax law's rate of progressivity was abandoned by everyone who entered the Congressional conference rooms...
...Part II, taking up the document's remaining 257 pages, examines "Other Possible Revenue Options," most, if notali, having been suggested by members of the Committee on Ways and Means...
...Then to 50 per cent on all income, except for capital gains, which were taxed up to 35 per cent...
...We may, in any case, want to remind ourselves that taxation is not necessarily for revenue only...
...As Keynes observed, it is no favortoourchildrento neglect our natural and civic and domestic environments and thus save our children from the perils of indebtedness in their adulthood at the expense of forcing them to spend their childhood in squalor...
...The attack on progressivity has been going on for several years...
...No, all that lovely money would not exist...
...In other words, we have a head start on any depression we decide to bring about...
...Kahn's multiplier works both ways...
...Last year the deficit was $220.7 billion (or 5.2 per cent of GNP), and the gross Federal debt was $2,132.9 billion (or 50.68 per cent of GNP...
...without credit, no money...
...The highest tax was upon men who are the greatest favorites of the other sex...
...For we'd have a crashing depression, that's what would happen...
...Without debt, no credit...
...Though it is likely thai...
...It is probable that throughout the corporate world executives will demonstrate an increased eagerness for high salaries because they will be able to keep a higher proportion of them...
...First, we had better consider briefly what would happen if Gramm-RudmanHollings were successful in getting the annual deficit down to zero...
...No one can spend much time in the labyrinths of a shopping mall without concluding that we already have more goods and (perhaps) services than we—literally—know what to do with...
...The trend can continue for a damnably long time without arousing much political reaction...
...The rich can become richer by keeping the poor in their place and by pushing more of the middle class down to join them...
...Attending a debate in the Academy of Laputa, Lemuel Gulliver was struck by a proposal "to tax those qualities of body and mind for which men chiefly value themselves...
...That's the golden-egg-laying goose that myopic conservatives want to kill...
...the inflation rate was 12.4 per cent...
...The great strength in the new law is that the grossest shelters were blown down...
...It is even probable that the changes in the corporation tax will encourage many companies to increase executive perks, on the ground that the tax collector would get the money if it weren't spent on limousines and Lear jets...
...This shibboleth meant not merely that the total revenue raised under the new law would be the same as that under the old, but also that the various quintiles of income recipients would pay the same proportions of the total tax under both laws...
...The proviso, allowing for certain deductions at the lowest rather than at the highest rate, was one of the few good ideas of the original BradleyGephardt proposal...
...Let it be said at once that the appropriate level of the deficit is a matter of trial and error...
...This brings us to the probability that at some time—perhaps tomorrow, perhaps the day after—we may want to tinker with the new tax law we hailed so proudly only yesterday...
Vol. 70 • October 1987 • No. 14
