Deficit Commission: A Progressive Redistribution of Wealth, Not Krugman’s Blunder
You read that correctly. The “leaked” Co-Chairs’ Proposal is an overwhelmingly PROGRESSIVE document.
What Krugman threw out about this in the NY Times is simply a blunder. His worst mistake in print, ever.
Reading this document in PowerPoint slide form makes all the difference. Co-Chairs’ Proposal – November 2010 from National Commission on Fiscal Responsibility and Reform. Add up the numbers and taken together this would reverse the REGRESSIVE fiscal policies of the past 30 years.
The preliminary PowerPoint document for this Deficit Reduction Commission, labeled “Draft,” is quite clear on Class Warfare effects. Nothing is hidden. Wealth effects are displayed in graphs and in explicit tables. The very poor, the impoverished are treated more charitably and held from poverty in old age. The impacts are not what you might expect. It is the wealthy, even our plutocrats, who are asked to make the greater sacrifices, any way you measure it.
In sum, these proposals are classically proletarian, even Marxist, aimed against the interests of the top decile for income or wealth, and top 1%. These proposals, taken together, are the very opposite to such as Reaganomics.
National Commission on Fiscal Responsibility and Reform apparently comes to these results not because they are flaming radicals, but because the present threat to national solvency leaves them no other choice. They have to go where the money is.
We didn’t get here solely because of fiscal policy. Monetary policy has been just as large an engine for regressive damage to the Middle Class and to the poor.
The country has seen 30 years of cheap loans which have been spread out, year after year, through the hands of insiders. This has been called ZIRP for Zero Interest Rate Policy. Money has been generated through the Federal Reserve into the banks with interests rates at-or-near the prevailing inflation rates. The banking insiders and their favored companies have become fabulously wealthy. Interest rates for small business and for individual economic investments, such as for advanced education, did not go out at these favored rates. The Lower Orders did not participate in technology-driven, productivity-driven wealth creation.
Mechanics of ZIRP and Bubbble monetary policy have left this Commission with no choice. No room to maneuver.
The specifics of the Deficit Commission funding props fall almost wholly on those who benefited from the 30 year ZIRP splurge. As you will see down below, the top levels have to be taxed differently. The American Pareto Distribution, today, leaves no other choice. The window dressing of these proposals includes a few minor regressive proposals:
1. A 15-cent increase to the gas tax
2. Hit up Federal employees for 1/2 the cost for retirement funds (admittedly negotiable)
3. Increased co-pay costs with a loose statement of means-test problems
4. No protection of the retirement age at 62 for Minimum Wage workers who toil outside of manual labor
Hold on to your hat till we get to the big money items below. These four items are tiny compared to what is coming below with changes to tax policy.
NCFRR lists progressive change after progressive change when it gets to the larger-ticket items:
1. Triple the Standard Deduction to $30,000 for a couple, $15,000 for singles
2. Repeal the regressive state and local deductions, cafeteria plans deductions, and the massively abused itemized deductions
3. Exclude all but one of John McCain’s 7 or 8 homes and all other non-primary residences
4. Exclude mortgage exclusions for payments on mortgages above $500,000
5. Limit charitable deductions at 2% of income (which most affects “family” charities)
6. Introduce or expand means testing in all of the entitlement programs
7. Expand contributions to Social Security to cover 90% of income — raising the ceiling
8. Reduce agribusiness subsidies by $3-billion a year
9. Eliminate virtually all of the tax scams that put income to special categories.
10. Do more claw back on companies that hide income in overseas operations while selling here.
“Broaden the payroll tax base” for Social Security means raising the upper limit on income that is subject to withholding, plus adding in the odd hedge fund moneys and other scam-account tax-avoidance moneys. This is totally progressive. This means a huge redistribution opposite to what has been happening.
These are massive changes. Every part of it goes against the regressive policies of the past 30 years. And I have no idea how Paul Krugman could read through this document and miss the core facts so completely.
NCFRR seems well informed as to how we got into this debt mess. $14-trillion is nothing to sneeze at. The NCFRR solution is national sacrifice directed specifically to those who have benefited from easy money. Between ZIRP and outright Bubbles, the facts are straightforward. Today’s debt burden at the Federal government is exactly what moved America’s wealth over to the top of the Pareto Distribution.
The effects of this debt stand out, so the Commission presents the situation right up front:
1. We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today and our country will not be able to compete without a plan to get this crushing debt burden off our back. 2. America cannot be great if we go broke. Our economy will not grow.
This emphasis on “grow” at the start echos the rather odd mechanisms that caused the American economy to grow over the past 30 years. Further, one can hardly see the word “grow” without hearing another echo that whispers to us, telling us which income classes sacrificed nothing and went to no wars and got practically all of the economic benefits.
As you will see, NCFRR would reverse the bulk of what Reaganomics and Greenspan hath wrought. Closely, Greenspan’s domination of the Federal Reserve was the worst of it.
Alan Greenspan generated two hyper-ZIRP expansions with help from Ben Bernanke toward the end — the Big Bubbles of 1994-2000 and 2003-2008. We are a little close to the 2003-2008 bubble to get a full view of it. A lot of the working papers are not available yet. However, that 1994-2000 Bubble had all the same banking mechanism and wealth redistribution features. Peter Hartcher’s Bubble Man from 2006 caught the internal mechanics of the 1994-2000 “Great American Bubble” from the perspective of this well trained Australian financial reporter, who also had access to meeting notes from The Fed. From the final paragraph:
“(Writing in 2006) the consequences continued. The American recovery (after 2000) was built on self-destructive levels of indebtedness. To feed itself, America was cannibalizing itself.”
NCFRR expresses identical conclusions, today, to what Hartcher observed in 2006. The report does not mention wealth or income redistribution or the Pareto Distribution even once. NCFRR only talks about debt. But there is no way to study the one without learning the macroeconomic facts of the other. The processes of normal ZIRP and the two Big Bubbles, together with Hartcher’s “cannibalistic” indebtedness, did grave damage to the American Middle Class who never once participated in the various “recoveries” over this 30 year period.
NCFRR is not altogether progressive. Reductions to the size of the Federal government civil workforce and its armed forces tend to be regressive; fewer jobs with good pay will be available through Federal hiring. If everything went through, this would total some $150-billion a year in employment reductions. Compare with what else is in the stew.
And I did read one item in there that made no sense to me:
Promote Smart Retirement Decisions -- Allow greater flexibility in how benefits are claimed Give retirees the choice of collecting half their benefits early and the other half at a later age to minimize impact of actuarial reduction and support phased retirement options.
Good luck translating that to a sensible law. If you had cancer, you’d take the “half their benefits early,” but otherwise I don’t get it.
On the other hand, Page 49 is simply astonishing. This is the report’s Distributional Analysis for Social Security. Benefits go to the bottom, costs go to the top.
They’re not hiding a thing about what they want to do.
If you do a Distributional Analysis for the whole report, spending reductions and tax increases, it looks about the same. NCFRR reforms to the tax system “broaden the tax base” by taxing the rich to the tune of at least $600-billion a year initially, perhaps as much as $800-billion a year. Capital gains go in, hedge fund money, all the smarmy exclusions that apply to the wealthy.
Corporate media are trumpeting that this NCFRR report is not going to happen. You must know who they work for. But if progressives read this thing — go through the PowerPoint — it should be clear that these proposals could bring a sea change to how America is operated. The one immediate result is ending The Fed’s redistribution engine — the Big Bubble system.
In fact, the directions of these proposals are far to the left of what you see in Great Britain or any other EU country.
What you hear in the news is not what this Co-Chairs’ Proposal says. The $200-billion in spending cuts are the least of it. In fact, this is indeed a bi-partisan admission from elder statesmen of both parties that Reaganomics and any form of “Trickle Down” and Fed-driven Big Bubbles have been a three decade disaster for the country. This is a progressive document, through and through. The proposals are realistic, sometimes honest to a fault.
Please, go to the NY Times site and scan through the 50 pages. — HERE
An informed electorate has a chance of protecting itself. An uninformed electorate, never. The further we get from the jingoistic, slogan-driven TeaBagger Cult and the prevailing functional illiteracy the better.