Is the U.S. broke? Are we heading towards financial catastrophe caused by government debt and profligacy? With the government heading towards a catastrophic shutdown that will probably be bad for all, it's worth taking a moment to reflect on what everyone seems to think is the underlying cause of our current stalemate: a lack of money. The premise seems to go something like this: the government is in debt because it spends too much and the U.S. no longer commands the wealth it once did, but is this true?
In a word, no. According to a recent report, Unnecessary Austerity, Unnecessary Shutdown by the Institute for Policy Studies (IPS) , there are literally trillions of dollars waiting to be collected. The problem is that getting these trillions requires raising taxes on the wealthy, something that Republicans are uniformly unwilling to do and and Democrats seem unwilling to fight for.
The Situation Today
The simple truth is that the U.S. is wealthier today than it was at any other time in the past, but this wealth is increasingly concentrated in the hands of the wealthiest one percent of households, who currently control 35.6 percent of all private wealth (roughly $20 trillion). In 1961 there were 15,753 households with incomes over $1 million, today, adjusted for inflation, there are 361,000. This is a 968.4 percent increase during a period in which the population only grew by 69.3 percent. Continuing our comparison, in 1961 these households payed 43.1 percent of their incomes, on average, in federal income taxes; today that rate is 23.1 percent. Restoring tax rates to 1961 levels would raise an additional $231 billion per year in revenue.
The same comparison can be made in regards to corporate tax rates: in 1961 corporations paid 47.4 percent of their profits in taxes, today that number is 11.1 percent. During this period the amount that corporations contribute to the federal government's total income dropped from 22.2 percent to 9.1 percent. All of this while corporate profits have steadily risen. Furthermore, due to tax loopholes and the use of offshore tax havens, some large corporations pay little to no annual taxes; the most odious example of this being General Electric, which recorded $10.3 billion in profits last year, but paid no taxes.