In addition to questions about our conduct of foreign affairs, there are a few that should be asked about domestic policies as well. Whatever the economic issue, the answer these days seems to require fiddling with programs in a way that impacts negatively on the middle and lower classes. Plans to re-vamp Social Security, the tax code and health care all end up promoting ‘solutions’ that do not benefit the great majority of Americans. One popular theory suggests that a rising tide lifts all boats; thus any plan that cranks up the economy at the top should bring everyone else along. Unfortunately, wages at the middle and lower end haven’t kept pace with the enormous gains in upper corporate pay, for example, a disparity that is growing. In addition, the export of American jobs, a sharp increase in mergers, a huge trade imbalance and corporate avoidance of taxes through the establishment of offshore entities have led to a less upwardly mobile labor force and lower wages.
Recent tax and savings plans can sound enticing at first but, as always, the devil is in the details; the impact on real-life wage earners may not be obvious at first. Take a family with one child – – two adults with decent jobs whose salaries total somewhere around $60,000. That sounds pretty good, certainly not poverty level. However, what with mortgage, car, daycare, medical and general household expenses this is a paycheck-to-paycheck family. Any little blip, due to sickness, car problems or other unexpected expenses can cause economic hardship.
The notion of medical savings accounts, for example, in which up to $5000 can be sheltered from taxes is only practical for those people who have the financial wherewithal to set aside an amount that large. It certainly isn’t the $60,000-a-year family. And any smaller amount such a family might save wouldn’t make a dent in a real medical crisis. Over a ten year period, for example, laying aside even $1000 a year wouldn’t provide enough to pay for extended medical care or sustenance after a job loss.
The pending bill in Congress to strengthen laws regarding personal bankruptcy targets those whose debts have overwhelmed them. If the bill passes in its present form, it will be more difficult for individuals to discharge their indebtedness. Contrary to the belief of some, dire financial straits are not, in most cases, the result of profligate spending by consumers. Studies show that the vast majority of personal debt crises are the result of sudden calamities, particularly medical expenses or the loss of a job. Credit card companies, some of the biggest contributors to the Bush campaign (MBNA being the single largest contributor), have lobbied strenuously for changes in the bankruptcy laws even though they have one of the country’s largest profit margins. Ironically, Enron can reorganize under Chapter 11 despite having squandered its employees’ pensions, and with many of its executives still under criminal investigation.
Why is it always the weakest members of society who are targeted in such matters – – the question that answers itself. The president’s budget calls for increased IRS funding to uncover tax evaders in the general population. But where’s the zeal to prosecute corporate tax avoidance, to ferret out those bank accounts in the Caymans? What happened to the plan to deny government contracts to companies that hide income abroad? Why is it the average taxpayer who gets clobbered? – – Did that waitress report all her tips? Did that local contractor do a few cash deals and not report the income?
Each new proposal is an assault on the great middle of America, and I don’t mean the red states although they too would do well to pay attention to what’s coming down the road. When Chairman Greenspan floated a few teasers about a possible consumption tax he suggested that such a tax “could raise savings and…place more of the tax burden on higher-income households.” “A report by the Treasury Department in 2002, though, concluded that almost any form of consumption tax or flat tax would shift some taxes from upper-income to middle-income households.” (NY Times, 3/4/05, A18)
There is suspicion in some quarters that many of the proposals are at bottom an attempt to hide the negative effects of the Bush tax cuts and the enormous costs of the war in Iraq. By focusing attention on “fixing” Social Security the public is drawn into the debate obliquely and away from the fact that the non-lockbox is filled with government IOUs that might reflect badly on the president as those notes come due. Bush and his supporters have tried to set in motion machinery to “starve the beast”, i.e. the federal government. Basically, however, they have simply created a beast more to their liking. By passing the cost of many programs on to states and municipalities they have placed the burden on those least able to absorb the costs. No doubt taxes will rise at the local level, and in some states already have. But while downsizing programs that benefit the poor, they have expanded the Pentagon budget. It should give us all pause to wonder if, by increasing our military capacity, we may be also increase the likelihood that we will choose military options rather than diplomacy.
As usual the double talk one encounters in trying to decipher the intricacies of administration policies is truly mind-numbing. Just when you think you’ve got a handle on a definition or a concept you find you’ve run amok once again. Senator Grassley, on Washington Journal 3/7/05, said that if the Bush tax cuts were not made permanent, Americans would see the biggest tax increase ever when the ten-year, tax-cut period ends. So reverse linguistics turn temporary tax cuts, enacted to fuel a sluggish economy, into tax increases when they expire as originally intended.
Will the use of language ever be simple and straightforward again? Will this government ever provide the American people with honest evaluations of conditions at home and abroad or will we continue to stumble about in an endless rhetorical wilderness? … estate taxes called death taxes, private Social Security accounts that are to be called personal accounts, suicide bombers cum homicide bombers, temporary tax cuts that morph into tax increases. The Bush lexicon is a wondrous thing.

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