One of the most frustrating things about the budget and debt ceiling argument in D.C. is the inability of our politicians to discuss the linkage between the loss of jobs, lowering of taxes, and resulting loss of tax revenue. But taking a quick look at how these interconnect makes it obvious that we MUST RAISE REVENUES if we are ever to have a chance to get the budget back towards balance and sustainability.
The Recession/ depression that began in 2007 has dropped a bomb on revenues and jobs, by any measure. As former Reagan economist Bruce Bartlett pointed out earlier this year, U.S. income taxes are at their lowest levels in 60 years, and America has the lowest corporate tax burden in the OECD. But it sure hasn't translated into jobs, now has it? It is worthy to remember just how badly things blew up at the end of the Bush Administration and how it carried over into the start of the Obama Administration.
2007- GAIN 1.092 million jobs
2008- LOSE 3.600 million jobs (2.862 million in the last 6 months)
2009- LOSE 5.063 million jobs
2010- GAIN 940 thousand jobs
2011- GAIN 757 thousand jobs
So we're still almost 6 million jobs in the hole compared to where we were at the end of 2006. Not surprisingly, this means fewer income taxes, and fewer Social Security taxes.
If you start reading around Page 133 of the CBO's budget outlook paper (Page 150 on the PDF), you'll see where the depression has crushed our revenues.
2006- $2.407 trillion revenues, 18.2% of GDP
2007- $2.568 trillion revenues, 18.5% of GDP
2008- $2.524 trillion revenues, 17.5% of GDP
2009- $2.105 trillion revenues, 14.9% of GDP
2010- $2.162 trillion revenues, 14.9% of GDP
2011 (projected)- $2.228 trillion revenues, 14.8% of GDP
So if you got revenues back to 18% of our $15.0 trillion GDP, you'd have another $472 billion in revenues, and cut the deficit by more than 30%. Along those same lines, if you go to Appendix B of the CBO report, you'd see that if we were able to increase GDP growth by 1.0 percent and get wages and salaries up to 2007's already-depressed levels of 45.5% of GDP from our current level of 44.0%, that's $49 billion in revenues without any other changes.
And that's not even taking into account the offsetting cut in expenditures for unemployment insurance, as that went from $33 billion in 2007 to $159 billion in 2010, and is projected at $129 billion for this year. You stop the layoffs and get people back to work, you not only raise revenues, you're looking at a spending cut of tens of billions of dollars.
So with these numbers in mind, why would you continue down the failed road of low taxes, low wages, low benefits, and rewarding of layoffs and pumped-up profits instead of actual production and hiring? The record of the last 30 years, and especially the last 10, tell you that lower taxes haven't led to higher revenues or employment. So with that in mind, why not change the tax code to higher effective taxation on the corporations with few to no loopholes (which discourages profit hoarding), higher tax rates on upper-level incomes (to discourage bloated executive compensation and shift that money toward the hiring of workers), and an aggressive jobs program that could largely "pay for itself" through increased payroll and income taxes, and lower spending on safety net programs.
So when you see our media let the talking point of "our debt is due to overspending" slide, they are being derelict in their duty to the public. What caused our deficit and debt problems were deregulation, which led to reckless financial decisions which eventually collapsed, leading to large-scale layoffs that we have not come close to recovering to. That, in turn, destroyed revenues, and helped to lead to big increases in safety-net spending. Add to that our stupid war costs, and you have a whole lot of the problem pinpointed.
Bottom line, get America back to work, make protections and moves that get Americans a decent wage, and make the rich and corporate pay for what they have taken from us in the last decade, and you get yourself back on the road to fiscal sanity. Any budget "solution" which does not admit that economic and employment growth is the NUMBER ONE priority won't solve a damn thing, and anyone who promotes such bullshit should be tossed out on their ears, and never taken seriously again.