Tuesday, February 16, 2010

Wise Words

I was reading a blog/news/opinion piece last week and managed to somehow get sucked into the 200+ comments on the thread. I forget what the original topic was, or even what the website was, but one of the commenters made the following statement: "We can't keep on taxing ourselves like libertarians and demanding benefits like socialists." That stuck with me, particularly in light of some reading I've been doing lately for class on the Eisenhower adminsitration. Many politically astute people know that Reaganomics involved a big tax cut (down to 28% at its lowest point) down from the 70% top rate under JFK. Others will tell you that Reagan's cut was itself patterned after JFK's own big cut, which came down from the 90% top rate under Ike. I know that for those of us under retirement age it seems crazy, but back in our parents' childhood the Republican party was the party of green eyeshades and balanced budgets. Ike jacked taxes sky-high and also cut the military's conventional forces (while investing heavily in nuclear deterrence, which provided far more "bang for the buck"--in more ways than one). Not that Ike loved the taxes, but he felt like the 1950s economy, which was growing like gangbusters, could handle it. Both Truman and Eisenhower paid off part of the national debt, which had necessarily run up during WWII (the last president to completely pay off the debt was Andy Jackson).

Of course, that didn't last. The big-spending of the Great Society under LBJ opened the door to non-emergency deficit spending, and of course, we've all heard the horror stories of the exploding deficits during the era of Reaganomics. I will defend the Reagan deficits, at least to a point. The Reagan tax cuts were, I firmly believe, instrumental in pulling us out of the recession of the late 1970s and fueling the economic boom that persisted until just lately. Moreover, if you could have told me in 1983 when Wargames was looking a lot like a work of nonfiction (or a couple of years later, when The Day After showed by hometown of Charleston getting nuked) that the deficits we were running would finance the end of the Cold War, I would have said, "where do I sign?" And when Clinton (with a good bit of help from the '94 GOP congress) was able to run a surplus on the strength of the "peace dividend" and the internet boom, I thought that the time had come to go ahead and pay down that debt.

Of course, that was not to be. First was the dot-com bust, followed by 9/11, followed by more and more and more spending (and yes, I'm pointing the accusing finger right at old G.W. Bush and his Medicare Part D, et al.) And somehow along the way, we as a country forgot that somebody has to pay for all this. Then came our current administration, who managed to vilify Bush for 400-billion dollar deficits while at the same time proposing deficits in the trillions for as far as the eye can see, not counting whatever it might cost for a big health care entitlement.

Anyway, back to those wise words. I wish we could somehow set the clock back and both tax ourselves like libertarians and also spend like libertarians. That would be fine with me (within limits--my brand of conservatism would conserve much of the New Deal). But if that's not going to happen, I'd also be OK with actually taxing people what it costs to pay the bills. Note that I didn't say some people. You could tax every dime over $250k a year in this country at 100% and still not generate enough revenue to break even. And I'm not a fan of 40%+ (and rising) of the country having zero federal income tax burden. I'll even go so far as to say that my own family is under-taxed. We make nearly double the national average income, yet we pay hardly any federal income taxes after 5 standard exemptions, all our itemized deductions, and multiple credits. Don't get me wrong--I don't want to pay more. But I also don't think it's cool that somebody else pays the freight of citizenship for my upper-middle-class lifestyle.

What if--just imagine it--we were to just do the math and determine that social security can't get by on only 15.3% payroll tax (which it can't). Let's say 20% would do the trick (I have no idea if that's even close). So charge that. Ditto medicare. Yes, people would absolutely howl. And then we could have the necessary discussion about whether we're willing to pay that much or cut benefits, raise retirement age, means-test, or whatever other solution presents itself. But whistling past the graveyard, pretending that the bill is never going to come due, is just crazy.

Once again, my personal preference is low tax, low spending. But option number two would be that we all pay for the benefits we enjoy. Want to live like socialists, fine. Pay the bills. I'll bet that wouldn't happen--we would discover that a majority of voters would vote for freedom and corresponding personal responsibility. What we've got now is the worst of all possible worlds.

2 comments:

Kim said...

It's funny that you talk about this. Greg and I have very recently had the "necessary discussion" of whether it was worth paying 15.3% of our income (written in four checks throughout the year) in order to have Social Security, if it is still there.

Seeing how much you are paying really does make you look at the benefit in a new light. However, we ended up choosing not to "opt-out" because 1)we do not morally object to SS and Medicare, and 2)yes, SS may not be there, but our Roth IRA might also not be there. If last year had happened the year before our retirement, we would be in major trouble. So...we will continue to put our eggs into two baskets and hope that at least one will still be there at the end.

That said, it definitely hurts to write that check.

Pete said...

Kim,

1. I do morally object to Soc Sec. I believe that G_d has requested us to be good stewards of his money. I do not believe that handing it to the Gov't qualifies. Secondly, I also see that in the Soc Sec account is one huge IOU from the gov't. in other words, the money you & I are paying in... ISN'T EVEN THERE.

2. Like Dave Ramsey, I would forfeit any and all claim to ANY money I've paid in to Soc Sec if they'd just let me keep the remaining money. I will stand by that saying until the day I die.

If I could opt out (which only clergy can do), I would immediately. Unfortunately, only ones income as clergy can qualify. If you have any other job, you are still required to pay in.

BTW, you may want to investigate the option of converting your IRA's and 401k's into Roth's this year. If you make over 100k, you could find this to be the ONLY year this option is available to you.