Tuesday, December 20, 2011

Defining Issue Not Size of Government

Robert Reich
Published: Tuesday 20 December 2011
The cynicism comes from a growing perception that government isn’t working for average people

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The defin­ing po­lit­i­cal issue of 2012 won’t be the gov­ern­ment’s size. It will be who gov­ern­ment is for.
Amer­i­cans have never much liked gov­ern­ment. After all, the na­tion was con­ceived in a rev­o­lu­tion against gov­ern­ment.
But the surge of cyn­i­cism now en­gulf­ing Amer­ica isn’t about gov­ern­ment’s size. The cyn­i­cism comes from a grow­ing per­cep­tion that gov­ern­ment isn’t work­ing for av­er­age peo­ple. It’s for big busi­ness, Wall Street, and the very rich in­stead.
In a re­cent Pew Foun­da­tion poll, 77 per­cent of re­spon­dents said too much power is in the hands of a few rich peo­ple and cor­po­ra­tions.
That’s un­der­stand­able. To take a few ex­am­ples:
Wall Street got bailed out but home­own­ers caught in the fierce down­draft caused by the Street’s ex­cesses have got al­most noth­ing.
Big agribusi­ness con­tin­ues to rake in hun­dreds of bil­lions in price sup­ports and ethanol sub­si­dies. Big pharma gets ex­tended patent pro­tec­tion that dri­ves up every­one’s drug prices. Big oil gets its own fed­eral sub­sidy. But small busi­nesses on the Main Streets of Amer­ica are barely mak­ing it.
Amer­i­can Air­lines uses bank­ruptcy to ward off debtors and rene­go­ti­ate labor con­tracts. Don­ald Trump’s busi­nesses go bank­rupt with­out im­ping­ing on Trump’s own per­sonal for­tune. But the law won’t allow you to use per­sonal bank­ruptcy to rene­go­ti­ate your home mort­gage.
If you run a giant bank that de­frauds mil­lions of small in­vestors of their life sav­ings, the bank might pay a small fine but you won’t go to prison. Not a sin­gle top Wall Street ex­ec­u­tive has been pros­e­cuted for Wall Street’s mega-fraud. But if you sell an ounce of mar­i­juana you could be put away for a long time.
Not a day goes by with­out Re­pub­li­cans de­cry­ing the bud­get deficit. But the biggest sin­gle rea­son for the yawn­ing deficit is big money’s cor­rup­tion of Wash­ing­ton. 
One of the deficit’s biggest dri­vers — Medicare – would be lower if Medicare could use its bar­gain­ing lever­age to get drug com­pa­nies to re­duce their prices. Why hasn’t it hap­pened? Big Pharma won’t allow it.
Medicare’s ad­min­is­tra­tive costs are only 3 per­cent, far below the 10 per­cent av­er­age ad­min­is­tra­tive costs of pri­vate in­sur­ers. So why not tame ris­ing health­care costs for all Amer­i­cans by al­low­ing any fam­ily to opt in? That was the idea be­hind the “pub­lic op­tion.” Health in­sur­ers stopped it in its tracks.
The other big bud­getary ex­pense is na­tional de­fense. Amer­ica spends more on our mil­i­tary than do China, Rus­sia, Britain, France, Japan, and Ger­many com­bined. The basic de­fense bud­get (the por­tion un­re­lated to the costs of fight­ing wars) keeps grow­ing, now about 25 per­cent higher than it was a decade ago, ad­justed for in­fla­tion.
That’s be­cause de­fense con­trac­tors have cul­ti­vated spon­sors on Capi­tol Hill and lo­cated their plants and fa­cil­i­ties in po­lit­i­cally im­por­tant con­gres­sional dis­tricts.
So we keep spend­ing bil­lions on Cold War weapons sys­tems like nu­clear at­tack sub­marines, air­craft car­ri­ers, and manned com­bat fight­ers that pump up the bot­tom lines of Bech­tel, Mar­tin-Ma­ri­etta, and their ilk, but have noth­ing to do with 21st-cen­tury com­bat.
De­clin­ing tax re­ceipts are also dri­ving the deficit. That’s partly be­cause most Amer­i­cans have less in­come to tax these days.
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Yet the rich­est Amer­i­cans are tak­ing home a big­ger share of total in­come than at any time since the 1920s. Their tax pay­ments are down be­cause the Bush tax cuts re­duced their top rates to the low­est level in more than half a cen­tury, and cut cap­i­tal gains taxes to 15 per­cent.
Con­gress hasn’t even closed a loop­hole that al­lows mu­tual-fund and pri­vate-eq­uity man­agers to treat their in­comes as cap­i­tal gains.
So the four hun­dred rich­est Amer­i­cans, whose total wealth ex­ceeds the com­bined wealth of the bot­tom 150 Amer­i­cans put to­gether, pay an av­er­age of 17 per­cent of their in­come in taxes. That’s lower than the tax rates of most day la­bor­ers and child-care work­ers.
Mean­while, So­cial Se­cu­rity pay­roll taxes con­tinue to climb as a share of total tax rev­enues. Yet the pay­roll tax is re­gres­sive, ap­ply­ing only to yearly in­come under $106,800.
And the share of rev­enues com­ing from cor­po­ra­tions has been drop­ping. The biggest, like GE, find ways to pay no fed­eral taxes at all. Many shel­ter their in­come abroad, and every few years Con­gress grants them a tax amnesty to bring the money home.
Get it? “Big gov­ern­ment” isn’t the prob­lem. The prob­lem is big money is tak­ing over gov­ern­ment.
Gov­ern­ment is doing less of the things most of us want it to do — pro­vid­ing good pub­lic schools and af­ford­able ac­cess to col­lege, im­prov­ing our roads and bridges and water sys­tems, and main­tain­ing safety nets to catch av­er­age peo­ple who fall — and more of the things big cor­po­ra­tions, Wall Street, and the wealthy want it to do.
Some con­ser­v­a­tives argue we wouldn’t have to worry about big money tak­ing over gov­ern­ment if we had a smaller gov­ern­ment to begin with.
Here’s what Con­gress­man Paul Ryan told me Sun­day morn­ing when we were de­bat­ing all this on ABC’s “This Week”:
If the power and money are going to be here in Wash­ing­ton, that’s where the in­flu­ence is going to go … that’s where the pow­er­ful are going to go to in­flu­ence it.
Ryan has it up­side down. A smaller gov­ern­ment that’s still dom­i­nated by money would con­tinue to do the bid­ding of Wall Street, the phar­ma­ceu­ti­cal in­dus­try, oil com­pa­nies, big agribusi­ness, big in­sur­ance, mil­i­tary con­trac­tors, and rich in­di­vid­u­als.
It just wouldn’t do any­thing else.
If we want to get our democ­racy back we’ve got to get big money out of pol­i­tics.
We need real cam­paign fi­nance re­form.
And a con­sti­tu­tional amend­ment re­vers­ing the Supreme Court’s bizarre rul­ings that under the First Amend­ment money is speech and cor­po­ra­tions are peo­ple.
This ar­ti­cle was orig­i­nally posted on Robert Reich's blog.

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