A Different Gulf Disaster?

Panhandler

For ye have the poor with you always, and whensoever ye will ye may do them good: but me ye have not always. — Mark, 14:7

A basic principle of physics and engineering is that there must be a difference in energy levels for an engine to function, a heat sink to cause “work” to happen.  This is no less true in economics.  There have always been both rich and poor.  If everyone were rich, who would make the beds?  I see this as one of William Blake‘s “contraries” which applies to economics.  But can the gulf between the classes be too great?  I submit that it is becoming so.

Right now, as the nation and the world teeter on a knife-edge of fiscal uncertainty, the contrast between the haves and the have-nots has peaked again.  It was high in the nineteenth century, the time of the robber barons and the second industrial revolution, and in the Roaring Twenties.  Companies and large banks are flush with money, but are loath to commit it to expansion and jobs.  Compensation for top executives has soared, but wages for the bottom 90% are stagnant.

Columnist Dale McFeatters, not known to be a leftist writer so far as I know, writes in today’s Joplin Globe about how the Bush II tax cuts have contributed to the growing gap between the classes.  (I would provide a link, but can’t find one.)  He begins this way:

This week is the 10th anniversary of passage of the first round of the Bush tax cuts, one that tidily disposed of that year’s modest $128 billion budget, ending four straight years of surpluses and setting the country on a downward deficit spiral.

McFeatters relates that a bipartisan blue-ribbon panel, the Committee for a 

Committee for a Responsible Federal Budget

Image via Wikipedia

Responsible Federal Budget, is grappling with the ramifications of keeping these tax cuts.  They conclude that, because of the cuts, the Treasury will be some $2 Trillion dollars (for the arithmetically challenged, that’s two thousand billions of dollars) lighter than it otherwise would have by the time they are set to expire in 2012, and that we are looking at another $4 Trillion to be added “on the nation’s credit card” if they are retained.  GOP leaders insist of course that the retention of the tax cuts, including for those making over $250,000, is non-negotiable.

Non-negotiable.  Am I the only one who thinks this an unsupportable position?  I have yet to hear anyone advance a cogent argument to support it, other than it would be bad for business because it would make the wealthy less likely to expand hiring.  But businesses aren’t expanding as it is, despite the availability of money.

McFeatters says, pointedly,

The problem with spending cuts is that sooner or later they run up against reality, both political and arithmetical.  Spending can only be cut so far, both because of the law of diminishing returns and voter resistance.

So, what does the blue-ribbon panel recommend?  Other than implying that renewal of the tax cuts would be bad, they want reform of the tax code.  But, as McFeatters says, “Now, how do we go about doing that?”  My answer:  we don’t.  The tax code is the tool Congress uses for tinkering with political capital and power – no way are they going to give that up.  I sure don’t know the answer, but I do know that seismic pressures are building up in the gulf between the haves and the have-nots.

“Of all the preposterous assumptions of humanity over humanity, nothing exceeds most of the criticisms made on the habits of the poor by the well-housed, well-warmed, and well-fed.”  — Herman Melville, US novelist & sailor (1819 – 1891)

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About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
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7 Responses to A Different Gulf Disaster?

  1. jwhester says:

    Wow, Jim we both are thinking along the same lines this morning. I posted this morning about the contrast between the amount of money the Ryan budget will help the deficit compared to how much the tax-cut extension damaged it.

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  2. Rawhead says:

    Expecting the wealthy to ‘expand hiring’ because they get a tax break is really wishful thinking. They can be expected to do what’s in their best interests. They don’t care if the lower class is employed or makes a fair wage or, sadly enough, if they have a place to stay or something to eat. All they care about is increasing their own income. In the case of corps, they can be expected to do what’s in the best interests of shareholders (and executives), rather than the best interests of the employees and the economy in general. The “Gulf” will just widen to the point the majority will no longer be able to afford the services of the wealthy and it will all come crashing down. There is nothing the government can do about it. The pathetic “Stimulus” attempts send money straight from the government into the pockets of the wealthy via the proles and Wal*Mart. 😉

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  3. ansonburlingame says:

    Whoa there you guys,

    In December while arguing over Bush tax cut repeal I heard it said MANY times by liberals that going back to Clinton tax rates on the rich only would “give us” $70 Billion per year in increased revenues. Now $70 Billion per year for ten years equals $700 Billion total does it not. Where does the $2 T or $4 T come from for ten year periods I wonder.

    I also read the inference that there is some “limit” (politically and/or arithmetically) that prevents us from cutting spending too far. I wonder if such is the case with raising taxes too far? Hell, we can’t raise them a nickle right now unless Congress “sneaks” them in as seems to be the case.

    My 2009 federal taxes were $4,000 more than in 2008 and my income was the same. I didn’t hear anyone yelling about tax increases so what the hell happened. Still trying to figure that one out. And in 2010 my taxes DOUBLED from 2008 and income only went up about 18%. I am lost!! Someone is doing something and I can’t figure it out.

    Of course I read the same column. But what I heard is more of the same, fix the Bush tax cuts and good things economically will result.

    Then I read the column on the opposite page about the President wondering what next to do to fix the economy.

    Like I said, I am “lost” in the rhetoric. But I STILL believe BOTH revenues and spending must change dramatically and at the same time. Now go figure out how to pull that one off.

    Anson

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    • Jim Wheeler says:

      I remember discussing the tax situation with you, Anson. The Obama administration in 2010 reduced your withholding on your Navy retirement as part of a stimulus program and you thought it was a tax increase when the stimulus plan expired at the end of the year. You had your “break” taken back and you thought it was a tax increase. Ironic, isn’t it? 🙂

      Jim

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    • Jim Wheeler says:

      I keep thinking about your tax problem you described, so I hauled my returns out for 09 and 08. My taxable income was within $300 for the two years, my gross income was within $400, and my total tax paid was about $180 less for ’09 than ’08. I did not itemize either year, so it was figured the same way.

      I was a volunteer tax preparer for three years, so I have some experience. You should always be able to understand your returns. If you don’t, you should look into it. If there were some grand left-wing conspiracy it would have affected me as well as you. The difference should be apparent from comparing your two forms 1040. Did you have significant capital gains one year and not the other? That is not uncommon.

      You generally have three years to file a 1040X to correct a problem, so don’t delay if you believe there’s an error. 🙂

      Jim

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  4. ansonburlingame says:

    Jim,

    That issue was very small potatoes and simply a misreadin on my part over some $50 a month. I was indicatin above the chane in the bottom line, taxes actually paid at the end of the year. Somethin happened and I paid sinificantly more (still have ” ” key not workin) in taxes without a comminserate increase in income simce Obama has been in office and I am still not sure why, exactly. But I have my suspiciouns for sure. And of course I am NOT “rich”, just your averae middle class retiree, economically.

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