Super Failure

As the Congressional supercommittee grinds toward failure, the Times published an article on Saturday contending that the panel is “stymied by a deep rift over whether affluent Americans should help reduce the deficit by paying more taxes.” True, and it goes straight to the heart of the issue: Democrats think the solution to our budget problems must include higher taxes, while Republicans would rather close the deficit by cutting spending. To truly plug the hole in the budget, bumping up rates for the wealthiest Americans won’t be enough, but even Democrats aren’t stupid enough to admit that the middle class will also need to chip in. When the GOP won’t even contemplate allowing the Bush tax cuts to expire for households making over $250,000, why mention the inconvenient truth that confiscating 100% of millionaires’ income won’t fix the national debt?

Still, the disagreement over taxing the rich is the highest-profile and most emotional issue the supercommittee faces. One line from the Times article illuminates what I see as the fundamental flaw in the conservative argument against using the tax code to “redistribute” wealth. Reporter Annie Lowrey writes that Democrats are wary of the GOP’s proposal to lower tax rates and curb exemptions, “fearing tax cuts would require cutting even more from government programs that primarily aid the poor.” It’s true that the Medicare, Medicaid and Social Security — to say nothing of the smaller programs like food stamps and housing assistance — disproportionately benefit those with lower incomes. But it’s disingenuous to claim that “the poor” are the only beneficiaries of these programs. Elizabeth Warren, despite being terribly overhyped by the media (New York magazine calls her “a saint with sharp elbows,” while the Times magazine blares that “heaven is a place called Elizabeth Warren”), drew criticism from Republicans for articulating the truth about government spending. Video of her speech went viral in liberal circles. She said:

There is nobody in this country who got rich on his own — nobody.

“You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for . . . .

“Now look, you built a factory and it turned into something terrific, or a great idea. God bless — keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.

So, though Medicare and Medicaid may matter more to people with little savings and low incomes, even the rich benefit from programs ostensibly aimed at the poor. Unless the wealthy are content to live in a country where they’re accosted on the street by beggars or where consumers are too poor to purchase the goods they produce, indiscriminately cutting government spending benefits no one. Hedge fund managers and CEOs don’t reap the rewards of the social safety net as directly as the average person, but that doesn’t mean they are unaffected.

Republicans argue that the wealthy already pay more than their “fair share” of taxes — nearly 40 percent. Tea Party favorite Senator Rand Paul said today that “The vast majority of millionaires and billionaires are paying all of the taxes. That’s who pays the income tax.” Well, no kidding: When you earn most of the income, of course you’re going to pay most of the income tax. The richest 1 percent of households contribute an increasing percentage of tax revenues because their income has also increased. The Washington Post has some fantastic graphs to illustrate this point. Between 1986 and 2008, their share of the tax burden jumped 54%. But over the same period, their incomes increased by 119%. Far from paying more than their fair share, the most affluent now pay only 23% of their income to the government — down from 33% in 1986. And yet, that proportionately smaller contribution still entitles the wealthy to the same benefits — roads, an educated workforce — that it did nearly thirty years ago.

I’m going to go out a limb here and predict that the supercommittee won’t have a sudden breakthrough in the next four days. This might be just fine, considering that the cuts mandated under sequestration don’t touch Social Security or Medicaid, and only take a small swipe at Medicare. The defense budget would take the biggest hit, an outcome that wouldn’t be unwelcome. But the likelihood of those defense cuts taking place is nil. John McCain, Lindsey Graham and other hawkish Republicans are already exploring ways to weasel out of cuts to Pentagon spending. The whole point of sequestration was to make failure by the supercommittee unpalatable, but changing the rules halfway through the game makes bitter medicine go down a lot easier. With the panel deadlocked and Republicans offering only token tax increases (which are only on the table if all the Bush tax cuts are extended), you have to wonder if failure wasn’t their game plan all along.