Just How Stupid Are We?

A funny thing happened on the way to the TEA Party anti-tax rallies across the country.  Well, two things, actually:  Standard and Poor’s, the financial market rating agency, essentially downgraded the credit rating of the United States government from “stable” to “negative” for the first time in history.  And the teabagger crowd “taxes are too high” whine was turned on its head by a publication that is known for its conservative bent in one of the most conservative locales in all of California.Taxes are at a historical low

It’s really more sad than funny.  Sad enough to make one cry about how incredibly ill-informed and gullible our national electorate has become.  In short, how just plain stupid we are.

The Standard and Poor’s rating is very significant, and cannot be understated.  It says that U.S. government debt is no longer the investment it’s supposed to be.  U.S.  Treasury bonds (or T-bonds) are the single safest investment in the world.  An investment in Treasury bonds is as good as a guarantee that the money is going to be there in the long term when you need it.  That’s why the interest rate is so low—typically around 2%; because it’s considered an extremely low risk investment.  And as anyone with any kind of basic financial wherewithal knows, the higher the risk involved, the higher the return (or interest rate) on investment.

What S&P has essentially done is throw a damper on all of that.  U.S. Treasury bonds are no longer (at least for now) considered as safe as they’re supposed to be.  And it should be a slap in the face for the no-tax crowd, but it won’t be.  They’re to busy buying the snake oil being sold by Astroturf organizations like Americans for Prosperity, the Heritage Foundation, and the Club for Growth.  They’re too mesmerized by the Heritage Foundation’s fantasy that by following their “Path to Prosperity” (Paul Ryan’s budget, which is based on Heritage Foundation projections) they can reduce unemployment by over 2% by 2012, and to 2.8% overall by 2021, which is pure fantasy in and of itself.  The Federal Reserve considers 5% unemployment to be full employment, for all intents and purposes, and the lowest rate achievable to be compatible with price stability and guarding against inflation.

Just as a side note:  Social Security funds are invested in Treasury bonds of a sort.  All money paid into the Social Security Trust Fund gets invested into the U.S. Treasury and earns interest.  A large chunk of the U.S.  debt is, therefore, accounted for by “borrowing” from Social Security.  Which is good and bad, since Social Security investments will theoretically be earning a higher rate of interests in the near future, but bad since it’s only going to serve to increase the U.S. debt due to the higher interest rates.

What will happen if S&P downgrades the U.S. credit rating is that the rate of interest on Treasury bonds will go up.  When the rate on Treasury bonds goes up, the rates for ALL borrowing goes up, as interest rates are generally tied to the Fed rate, affecting the economy in its entirety as it makes it more expensive for all businesses and individuals to borrow money.

Center for Budget Policy and Priorities

And let’s not forget that it was the Bush tax cuts that directly led to the massive increase in the debt and deficit.  According to the Center for Budget Policy and Priorities, the Bush tax cuts accounted for 49% of the budget deficits and debt amongst legislation enacted between 2001 and 2008.  That’s more than any other factor.

So we’re “Taxed Enough Already,” but it was the tax cuts that led us into this crisis in the first place?  Talk about an oxymoron……

But there’s yet another little inconvenient factoid that puts a rather sizeable burr under the Tea Bagger saddle:  According to a story featured prominently in the Orange County Register—hardly a liberal leaning publication—taxes in the United States are at historically low levels.  No, Virginia, we’re not being taxed too much, particularly the richest 2%, who have seen their tax rates reach historic lows.

The wealthiest 400 households in the U.S. pay an effective tax rate of around 16%–“effective” meaning after all of the deductions, with households earning over $1 million per year hovering around 22% effective tax rate.  That’s significantly less than the 35% bracket they’re supposed to be in.

It’s the Republican claim that America has one of the highest tax rates in the world, which has the effect of driving businesses out of the country.  In fact, the United States has one of the lowest tax rates in the developed world, with only Australia registering lower on the tax scale as a percentage of GDP.  And the notion that any increase in the tax rates at all will devastate our economy is utterly laughable.

Right Wing mythology holds that government spending is the problem.  The only problem.  Taxes have nothing to do with it.  Taxes are too high and we need to cut taxes to grow our economy and get out of the rut we’re in.  And we’re just dumb enough to believe them on face value.  We as a people have bought their story and swallowed the hook whole because it just sounds so good!  No one likes paying taxes, after all, and we’ve been hearing folks like Richard Rider and Grover Norquist tell us that eliminating taxes is the only sure way to prosperity.  And we accept their premise without question because it’s what we want to hear.  It’s the easy way out.

Republicans swept into power last November on an anti-tax, anti-spending message.  They railed against out of control deficit spending, conveniently forgetting to mention that it was Republicans in the Reagan era that invented the concept.  And it’s the most gullible among us that made it happen, as seniors and low information voters turned out in record numbers to vote for their favorite Conservative Don Quixote who promised that they were gonna “save Medicare” from the evil Obamonster, when in fact the plan all along was to dismantle Medicare and Medicaid altogether.

The problem is that the facts are not on their side, but because the facts don’t fit into a nifty little sound bite or catchphrase like “Pulling the plug on Grandma,” because the facts are too much like math and science, and therefore too difficult to easily understand, and the catchphrases and sound bites are so simple and easily digestible, we completely ignore the facts.  We have become willfully ignorant of what is actually going on around us, and we’re paying attention to people who sell us a bill of goods and who once in power have set out to destroy the best parts of this country, literally and figuratively.

We are listening to people who claim they’re for small government, but are actually for very, very BIG, repressive government policies that are actively destroying the middle class and sinking our economic viability in the process.

The facts are that the Conservatives are the fiscally irresponsible ones peddling magic beans, and we believe in magic beans.


1 comment so far

  1. Sheryl Graves on

    You are absolutely right. They want to lower “income” or get rid of it altogether, But they will not lower or get rid of “payroll” taxes will they ? If they did that they would be eliminating their revenue base that they depend on to fund all of their little projects that they themselves are not willing to pay for themselves. Anyone who makes over 106,800 dollars a year does not contribute 1 cent to Social Security Medicare, or Medicaid. Millions pay more in PAYROLL taxes each year than income tax. For decades, payroll taxes generated more revenue than Soc. Sec. paid out in benefits. The excess created a surplus (the surplus they speak so fondly of in speeches concerning tax cuts) 2.7 trillion dollars.

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