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.
The IPS estimates that by restoring tax rates on the wealthy and corporations to 1961 levels, closing tax loopholes and foreign tax havens, along with other tax reforms the government could raise as much as $4 trillion over the next decade. While this would not completely solve current U.S. budget and deficit problems, it would reduce their severity significantly. If such measures were combined with significant reductions in defense-related spending, there is no reason to believe that the current U.S. deficit could not be restored to manageable levels, with no impact on vital social spending.
Moral and Political Will
From the Catholic perspective, from which I write, this is not a moral question. The social teaching of the Catholic Church fully supports social policies for the redistribution of income. As the Compendium of the Social Doctrine of the Catholic Church states:
The economic well-being of a country is not measured exclusively by the quantity of goods it produces but also by taking into account the manner in which they are produced and the level of equity in the distribution of income, which should allow everyone access to what is necessary for their personal development and perfection. An equitable distribution of income is to be sought on the basis of criteria not merely of commutative justice but also of social justice that is, considering, beyond the objective value of the work rendered, the human dignity of the subjects who perform it. Authentic economic well-being is pursued also by means of suitable social policies for the redistribution of income which, taking general conditions into account, look at merit as well as at the need of each citizen. (303, emphasis original)
What this means is that an important measure of the health of a society is it’s distribution of income. Furthermore, this distribution should not be measured solely on the basis of what people are owed based on their work, commutative justice, but also based on their needs, social justice. A society is only truly just when all people have what is necessary for a dignified life. When this situation does not exist, government, as the entity responsible for maintaining the common good, has a duty to step in and take measures to rectify the situation.
I offer this brief digression into theology to illustrate the fact that there is no obstacle from a Christian perspective to taxing the wealthiest members of a society, contrary to what many Christian conservatives like to claim. In fact, as the above illustrates there is a strong moral argument to be made for the taxation policies recommended by the IPS report.
The question, then, is one of political will. Do our political leaders have the ability to institute the kind of policies necessary to address current budget and deficit problems or are they too beholden to the interests of wealthy corporations and individuals to act justly? I suspect the answer to this question is no, due to the demonstrated willingness of both parties to favor the interests of the wealthy and powerful over those of everybody else. In this respect Democrats differ from Republicans in terms of degree and not in action.
The U.S. does not have a money problem, it has a class problem. If the government wanted to significantly increase its revenue it has the means to do so in the form of a more progressive tax system. If this doesn’t happen, which seems likely, it is because the political class of the United States has become an extension of the interests of the wealthy and powerful and no longer acts with the best interests of the nation as a whole in mind. This is ultimately what the current budget crisis is about and until we address this underlying problem we will not be able to resolve our the issues of budgets and deficits.