Can We Solve Our Fiscal Problems by Taxing the Rich? II. Robert Reich’s View

 

One of America’s foremost liberal writers, Robert Reich, a Professor of Public Policy at UC Berkeley, argues in his latest book, “Beyond Outrage”, that “America’s economy and democracy are working for the benefit of ever-fewer privileged and powerful people.”  He presents “a plan for action for everyone who cares about the future of America.”  Mr. Reich’s tax policy:

  • Raise the tax rate on the rich to what it was before 1981

“Sixty years ago Americans earning over $1 million in today’s dollars paid 55.2 percent of it in income taxes, after taking all deductions and credits.  If they were taxed at that rate now, they’d be paying at least $80 billion more annually.”

  • Put a two percent surtax on the wealth of the richest one-half of one percent

“The richest on-half of one percent of Americans, each with over $7.2 million of assets, own 28 percent of the nation’s total wealth.  Given this almost unprecedented concentration, and considering what the nation needs to do to rebuild our schools and infrastructure, as well as tame the budget deficit, a surtax is warranted.  It would generate another $70 billion a year.”

  • Put a one-half of one percent tax on all financial transactions

“This would bring in more than $25 billion per year.”

These new tax provisions would together raise tax revenue by $175 billion per year.  But our deficit this fiscal year, ending September 30, 2013, is about $700 billion.  In a few years, without significant changes in either discretionary or entitlement spending, annual deficits will be back up over a trillion dollars per year and climbing.  Mr. Reich’s steep taxes on wealth and wealth creation are not enough to seriously tame deficit spending, let alone end it.
Let’s be honest and admit that some new tax revenue is probably going to be necessary in the future if we are ever going to be able to eliminate the deficit.  But it makes no sense to start out with a tax increase which will be strongly opposed anyway.  It is far more sensible to first wring out the hundreds of billions of dollars in wasteful federal spending which now exists.  After this is done there likely will still be a big deficit.  Then, and only then, would it be appropriate to generate significant new revenue by raising taxes.

4 thoughts on “Can We Solve Our Fiscal Problems by Taxing the Rich? II. Robert Reich’s View

  1. You are wrong to assume that we should “wring out” wasteful spending without also bringing in new revenue. To do one without the other would we seen as an attack on one side without consideration for the other. But where would the “wringing” be done? Too often, the immediate answer is Medicaid, Medicare, and Social Security completely leaving out the wasteful spending that goes into farm subsidies, the wasteful and discriminating war on the poor and nonwhites touted as a “war on crime”, military incursions world-wide, nuclear armaments in whole, NASA, and the many tax credits and deductions that only the wealthy enjoy. Leave the social programs alone and lets trim the fat from the truly wasteful programs and policies.

    • We should address waste and inefficiency in all areas of the federal government, including farm subsidies and military programs as you suggest. But Social Security, Medicare and Medicaid are growing much faster than discretionary spending. Until we undertake entitlement reforms, we simply are not being serious about our exploding national debt. Taxing the rich, as Robert Reich suggests, would offset increases in discretionary spending such as for social programs, education, scientific research and infrastructure, for example. But growth in entitlement spending will ruin us within 20 years or so if we can’t figure out how to operate these programs at lower cost.

      • Yes, we should definitely address waste where ever it is lurks. However, the focus on “entitlement” spending such as Medicaid, and Social Security muddies the water and allows lawmakers to not act. So-called “entitlement” programs are programs put into place to assist the neediest of Americans, these programs more than anything else fulfill the purpose of government- to do for the people as a whole what they could not do individually. The truth of the matter is that our country does not suffer a lack of resources, but a lack of will to use those resources to help those who need it most.

        But I digress, the problem of cutting “waste” in “entitlement” programs is that they have been cut too far. The fat is gone. Here in Nebraska they have taken away the Social Service workers who work directly with needy people and replaced them with a call center. This may have cut the price of service, but it has also cut the efficiency and level of service. No longer are you able to set up a meeting to talk to someone with whom you have fostered a professional relationship and who knows your circumstances. Now you call a center, sit on the phone for at least an hour (time that could have been spent working, are caring for your loved ones, or resting from either activity) waiting to talk to someone (who is different every time) who only has a few notes to go on, and isn’t truly motivated to help you. But that’s not the only problem, what level of service is considered inefficient, and what does it entail? In Nebraska, they’ve decided that face-to-face interaction and relationship are inefficient, not surprising in the call center capital of the U.S.

        The issue of cutting certain other programs isn’t nearly so murky, take nuclear armaments. Since we never intend to use nuclear weapons it make no rational sense to waste the time, money, and other resources in continuing to build and maintain them. In fact, they are a huge security risk! Think of those unsettled people who lose their minds and attack large groups of people. Think of those servicemen who for reasons unexplained opened fire on their comrades on military bases! Now picture one of them if they had gained the rank and security clearance necessary to work with nuclear weapons! The are also a huge environmental hazard, where exactly is it safe to dispose of nuclear waste? Truth is that it’s not safe at all. There is no where on the surface, beneath the ground, or in the ocean that the waste won’t leak, spill, or in some other way harm the area in which it’s put. And it’s a monumentally huge and ultimately wasteful task to attempt!

        So, by focusing on “entitlement” programs we are merely cutting the crust off the bread. But with programs that are truly unnecessary, such as nuclear programs, we could scrap the whole thing and be done. By getting rid of such programs not only do we save money, but we also clear the national diet of fatty programs who have little or no meat!

  2. Thanks for your extensive reply, Tad. With regard to your comments about trying to call a Social Service worker, I suspect that you are talking about the Medicaid program. I think that the best way to reform and control costs for Medicaid is to give the Medicaid funds directly to the states as block grants and let each state figure out the best way for them to spend the money (within guidelines, of course). Rhode Island has a waiver from the federal government to do this and it’s working quite well and also saving money for both RI and the federal government.
    With regard to nuclear armaments, I support cutting back because I think we have more than we need. Once missile defense, which I strongly support, has proved to be effective, then I think we could cut back on nuclear armaments even more.
    Frankly, with a soaring national debt, we are going to have to cut back spending for all areas of the federal government. The reason I talk primarily about slowing the growth of entitlements is because this is where the costs are growing the fastest.

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