Americans and Our 'Stuff'

Shameless GOP Forgets Who Pays for Retirement and Health

We Like ‘Stuff’: Republicans have come up with a new shift-the-blame strategy for their self-made defeat. Voters rejected them, the new yarn goes, because they want ‘stuff’ like health and retirement benefits.
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We Like ‘Stuff’: Republicans have come up with a new shift-the-blame strategy for their self-made defeat. Voters rejected them, the new yarn goes, because they want ‘stuff’ like health and retirement benefits.

By J.J. Goldberg

Published November 16, 2012, issue of November 23, 2012.
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On the other hand, every worker pays the same 4.2% payroll tax into Social Security and Medicare (matched by their employer), regardless of how little he or she makes. The only deadbeats on this street are citizens who make more than $110,000 per year. Every dollar earned above that cap is payroll tax-free. It’s the grunts who pay the freight.

Well, you ask, if Social Security and Medicare are self-sustaining and fully funded, then why do we have a budget crisis? The reason is that we’ve spent the past 30 years cutting personal and corporate income tax rates. These are the funds that pay for everything else the government does, from the military, FBI, courts and prisons to food and drug inspection, air safety, disease control, national parks, hurricane warning, disaster relief — and, yes, assistance to the poor.

Before 1981, the year Ronald Reagan became president, the federal government for two centuries had generally run budgets that were more or less balanced, except during wars. Washington used to collect enough taxes to pay for what it did. In the three decades following World War II, that included building an interstate highway system and putting a man on the moon. The top tax rate on earnings over $400,000 averaged 80%. Growth averaged about 3.8% per year. Reagan inherited a federal debt that totaled all of $900 billion.

Over the next eight years Reagan lowered the top tax rate to 28% and nearly tripled the debt to $2.6 trillion. It’s continued to rise every year since then, except for four years under Bill Clinton. Average economic growth rate over these three low-tax decades: the same 3.8% per year as before the cuts. Today’s debt: $16 trillion. Interstate highways? Moon exploration? Fuggedaboutit. We can barely afford to keep the national parks open. And now they’re telling us we can’t afford Medicare.

You may have read about the study prepared by the utterly nonpartisan Congressional Research Service this fall, showing that cutting taxes historically bears no relation to increased economic growth. It was in the news in early November, after congressional Republicans ordered it buried, summarily and with extreme prejudice. Tax cuts are the GOP’s holiest sacrament. They like to say reducing taxes boosts economic growth. That congressional research report threatened to unmask their real motive: They want stuff.

Contact J.J. Goldberg at goldberg@forward.com


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