Why Obama has Taken Re-Taxing Rich Off the Table (and how it killed our credit)
Posted by grahamhgreen in General Discussion
Sat Aug 06th 2011, 11:38 AM
Obama has gone after the lynch-pin of the New Deal - fair taxes for the wealthiest Americans.
By adding a "cuts only" default mechanism to the new 'Cat-Food Commission Extreme' he virtually guarantees there will be no new taxes for the very people who can afford to pay more.
I think it's fairly obvious that this is the reason our credit rating was downgraded; the President's 'cut's only' backup plan is not adequate to stabilize the budget as it fails to increase revenues at all. And there is not a snowball's chance in hell that the R's on the committee will increase taxes on the wealthy in a significant manner.
While Republicans, who control the U.S. House of Representatives, insisted that a deficit-reduction plan accompany the debt-limit increase, the accord reached in Washington was dismissed by S&P in its statement on the downgrade.
“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” the credit-rating service said.
Pessimism About Congress
The company also said it’s “pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon.”
“One possible positive” of S&P’s move could be that it prods the committee “into coming up with a big deficit- reduction package -- bigger than the $1.2 trillion called for in the ‘trigger’,” said Ajay Rajadhyaksha, managing director of Barclays Capital in New York.
S&P has issued increasingly insistent demands over the past year that lawmakers address long-term deficits. Last October, it said Congress had as many as five years to address the issue. In April, the agency said there was a one-in-three chance of a downgrade within two years. Last month, it said there was a 50 percent chance it would downgrade the government debt within 90 days without a “credible” deficit plan.http://www.bloomberg.com/news/2011-08-06/s...
If we simply increased taxes on the wealthy to those of the Greatest Generation, the debt would be gone in 10 years. Without debt, we would get our AAA rating back.
Key Tax Facts
15,753: The number of households in 1961 with $1 million in taxable income (adjusted for inflation).
361,000: The number of households in 2011 estimated to have $1 million in taxable income.
43.1: Percent of total reported income that Americans earning $1 million paid in taxes in 1961 (adjusted for 2011 dollars)
23.1: Percent of total reported income that Americans earning $1 million are likely to pay in taxes in 2011, estimated from latest IRS data.
47.4: Percent of profits corporations paid in taxes in 1961.
11.1: Percent of profits corporations paid in taxes in 2011.http://www.ips-dc.org/reports/unnecessary_...
Our credit rating was not downgraded during the Great Depression, why? Because of increased taxes on the wealthy.
Against a Congress where zealously rich people-friendly conservatives hold the upper hand, how much can a President of the United States committed to greater equality realistically hope to accomplish?
The answer from today’s White House: not much. Advocacy for equality has to take a backseat, Obama administration insiders insist, once fanatical friends of the fortunate in Congress recklessly put at risk our nation’s full faith and credit.
But history offers another alternative....
How high should the top rates go? All the way, FDR proposed, to 100 percent. At a time of “grave national danger,” the President told Congress in April 1942, “no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year,” an income just shy of $350,000 in today’s dollars....
Congress, Roosevelt pointed out, “had authorized the drafting of men into the armed forces at $600 a year regardless of what they had earned in civilian life,” but, with the salary cap repeal, had “refused to reduce the salary of a man not drafted no matter how high his income might be.”
To be fair, it's the TeaBaggers who started this. But they have been enabled by the White House's failure to engage with progressives or attempt to enact progressive solutions, or progressive framing on the debate. In the end, the President signed off on a deal that gave the baggers 98% of what they wanted, and crashed our credit rating.http://www.ips-dc.org/reports/unnecessary_austerity_unnecessary_government_shutdownhttp://journals.democraticunderground.com/grahamhgreen/130