Wednesday, July 27, 2011

How We Got To The Brink of Financial Disaster

Amidst all the finger pointing and hyperbole going on in D.C. these days, it is helpful to take a deep breath and a step back from the abyss, and review how we got to the brink of financial disaster.

Just to remind my forgetful Republican friends, the road to financial ruin started with the huge tax cuts passed under the early days of the George W. Bush administration. From a high of $236 billion surplus in fiscal year 2000 to $127 billion when Clinton left office prognosticators had depicted a rosy scenario of surplus for as “far as the eye could see”. As you can see from the above graphic, progressive tax policies work. Oh to be able to return to the days of the Clinton Administration

So what in the hell happened? In short, Republican economic and tax policies. Add to that two unfunded wars and you get to the mess we are in today. "But what about all the Obama stimulus?" A necessary evil which worked to pull us back from the brink of economic collapse in the midst of the worst recession since the Great Depression. Besides, at least some of the stimulus went to the middle and working classes for things like extended unemployment insurance. To all my conservative friends who call that type of spending a waste: "...there by the grace of God go you" unless of course you can weather a lay off. Just go out and try finding another job today before shooting off your big yaps!

My brother was good enough to enlighten me with perhaps the best summary of where we are today, as a nation, financially: Elizabeth Drew's excellent article "What Were They Thinking"

As Elizabeth Drew so eloquently and accurately stated in her article:

"...The Republicans displayed a recklessness that should have disqualified them from being taken seriously. Any deal that was reached would contain substantial cuts in the coming fiscal year—too soon, as Fed Chairman Ben Bernanke and the head of the Congressional Budget Office Doug Elmendorf have recently warned.

The antitax dogma of the Republican Party is strongly rooted in mythology. The theory that tax cuts create jobs has been discredited by the results of George Bush’s tax policies. The Republicans cling to the myth that “small business” owners are the “job creators,” and so they oppose proposals to eliminate the Bush rate cuts for even those earning over $250,000. But relatively few small business owners earn $250,000—in fact, fewer than 3 percent of the 20 million people who file business income on their personal tax forms (the 1040s) earn that much.

Finally, the antitax position of many conservatives would seem to be illogical, since they also hate deficits: but their real aim is to reduce or eliminate federal programs. They call efforts to redistribute wealth “socialism,” but have no problem redistributing from the poor and middle class to the wealthy through taxes, as set forth in Paul Ryan’s budget plan, which the House approved on April 15. Under the Ryan plan, the taxes of the richest one percent of Americans would be cut in half, while taxes would be raised on most of the middle class. People earning over $1 million would be taxed at a lower effective rate than the middle class..."


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