Search This Blog

Saturday, February 20, 2010

Why We Need Taxes

Recall that the first working title of my book It's All Tuna! was The Economy Doesn't Care. One comment I received was, "so what's new about that?" While the market doesn't care, fortunately there are people who do. Furthermore, some of those people stake their futures on holding high office so that they can try to do something about caring. I pose one question back to you:

Where would we (and I mean all of us collectively) be today had we not spent deficit-ly and raised taxes to pay for our programs?

If we had not allowed hundreds of thousands of Americans to borrow their house equity to pay for college educations, home remodeling, flat screen TVs, retirement village units, etc. we would have not enjoyed the lifestyle we have come to expect for the past 50 years. I peg the interval at 50 years because it was after the 1960s that the spiral of wage increases, inflation and cost of living bloomed large. What seemed like a bright beautiful sunrise skyline turned out to be the mushroom cloud of imminent collapse on the sunset horizon.

Pre-WWII, the world was in an isolationist economic mode. America was still an agrarian society. Recall that in the Great World War, canons were pulled by horses and our bombers were bi-planes. We still had Milk Wagons and Ice Delivery and we had only about 123 million people. By 1940, there were about 132 million people. It is not surprising to me to drive into a small town in any state and see 50 to 100 or more names of young men from that town who died in either of those world wars.

In those days, families were the economic unit that drove all larger macro-economic activity. Three generations of related people resided in one dwelling that had been built to accommodate that family dynamic. Houses were homes and remained in the family for many generations. People actually owned those houses and were not beholden to an investor or bank. But in the spirit of the market place, two people living as cheaply as one is a sacrilege. One married couple plus children per household became the norm. Grandmom and granddad stayed on the old homestead when the kids relocated to the big city in search of a wage or salary. One had to travel light and be strong and lean in order to make that trek and not be slowed down by elder-parents. The dominant image from the Grapes of Wrath is the WHOLE family, from sick-old-granpap to pregnant wife with a babe-in-arms broken down on the side of the road with EVERYTHING they could carry tied on the side of the old farm truck. Houses became investment units and their value measured in dollars not bedrooms and hearths.

We moved away from that style of living where a strong back and a determined attitude put food on the table year after year. We moved into a world where strong backs and determined attitudes built railroads and skyscrapers for the marketplace to do its business of deriving secondary wealth from the labors of farmers, miners and factory workers. The market made it possible for humans to derive a living without having to flex a muscle or assemble a machine. Now I say that in the better sense of the practice. After all we did not need 123 million people to bend their backs planting and harvesting food and textile crops.

Today, we do not need for 330 million people to bend their backs to earn their dinner. The 59 million people who are 65 or older are not in the workforce, but need shelter and food. Yes, some of them still are working out of necessity because for them there is no other way to eat. Take a look through the Lens of Reality. Lens: Today due to the economic recession we have an additional 7 million unemployed people in this country who have been added to the 6 million longer term unemployed people. Reality: the rest of us are doing quite well aren't we? We go to work, we buy our food, we fuel our cars, we watch our Superbowls, we pay our taxes, we drink our beer, we complain about paying for those who have not, we worry about mounting debt (only because we fear that the lenders will stop lending.) This last parenthetical is the ONLY justification for fiscal restraint that I have heard ANYONE raise during the heated debates on the size of Big Government.

Big Government is Medicaid, Medicare, Social Security and the interest on debt. To reduce spending on these entitlements we have to decide who will be sacrificed for the fiscal restraint. Some one has to decide who will be allowed to eat. Some one has to decide whose child will be turned away from the hospital because mom and dad don't have the money to pay the bills that will be issued. At the same time that these four line items of the Federal budget are growing out of control and remain unfunded they are also the four most urgent and essential items in our lives. Longer life expectancies are the primary cause of our imminent fiscal collapse. We want to live longer and live better, but we do not have an economic model which will allow that to happen without a mortgage that will some day need to be paid. What we have come to think of as mere comfort and necessity, is in actuality a luxury we never could afford on our ability to earn income. For us to live better than "the average" someone else must live below it. Hence we in America are less than 5% of the world population but consume about 25% of the energy production. Ask yourself this:

Am I willing to live completely within my means for my entire life?

This statement requires that you only consume one share of the resources which are equally shared among everyone on the planet. It means no consumer credit, or mortgages; you must save up to buy everything. It means that you will fund your own retirement. It means paying all your own medical bills or be denied care. It means that you buy no life insurance and if some cripples you in a car collision, you can only take everything that person has and no more. While you could leave wealth to your children, you cannot borrow against their future. My guess is that your answer is NO.

I know that my answer is NO.

We have and need taxes because we need the food, shelter, clothes and medical goods and services that the money will buy. The only reason we have a chronic National Debt is that we have chosen to defer paying our bills so that we can use future income and our future generations to pay the bills. There are legitimate reasons for borrowing now and making our children and grand-children pay the bill. Those reasons are supposed to be OUR responsible investment in the future. THEIR future. If we build a Billion Dollar highway now, it is supposed to be a benefit to our children too, so we issue bonds and get them to pay off the debt. We are responsible for constructing a sufficiently large health care delivery system with enough doctors and staff to be able to provide the necessary care. If we don't invest in training enough competent doctors and nurses, there will not be enough of them for our descendants. The actions of our Administrations has bled our investment funds to pay for non-productive pursuits such as the wars in Iraq and Afghanistan, and the tax cuts that have hamstrung our ability to pay our bills.

Today, there is no way to reduce the debt without tax revenues. As our ability to borrow grows thin, our economy will grind to a halt when the music stops and we are the country left standing without a chair.