The US national debt is the outstanding total of each year’s deficits in the federal government’s budgets (where deficit simply means the difference between federal expenditures and tax receipts). Each year’s deficit results from the federal government deciding either to not reduce spending to the level of tax receipts or else to not raise taxes up to the level of federal expenditures. In other words, deficits reflect the political decisions of elected officials in the Congress and the White House.
In 1989, the US national debt was about $3 trillion. As 2010 draws to a close, it stands at just under $14 trillion. It rose steadily but relatively slowly from 1989 to 2001. After that it accelerated and then zoomed higher after 2006, once the current capitalist crisis hit. Clearly both Republican and Democratic administrations in both the White House and Congress made the repeated political decisions to run ever higher deficits.
Those politicians made those decisions because they won elections. Those decisions satisfied contributors to their campaigns (mostly businesses), lobbying groups concerned with their influence on legislation (mostly businesses), and the voters. It was and remains too dangerous politically for elected officials to reduce or eliminate federal spending that benefits their business and individual constituents who can always shift contributions and other supports to the officials’ political competitors. Officials likewise fear reductions of spending that can anger middle and lower income constituents who may then vote against them. Exactly the same applies to raising federal taxes that can incur their constituents’ displeasure and consequent opposition. Political careers depend on offering yourself as more supportive of federal spending benefitting your constituents and more opposed to higher federal taxes on them than opponents in your party’s primary and in the general election. Deficits and our fast accumulating national debt are direct results of the actual political competition between Republicans and Democrats.
To overcome deficits would require a new political force or party, one committed to a different program for the federal government’s budget. That program could focus first on the revenue side in a simple, direct way. Deficits would be eliminated by raising taxes to equal federal spending. This would be achieved by means of a steeply progressive taxation that subjected the largest 5 % businesses (by assets) and the top 5% of individual income earners to the highest rates, significantly higher than they pay now. These new, higher tax rates would be levied on their incomes and/or their property holdings in proportions depending on which combination kind worked best for the operation of the economy as a whole.
This program could eliminate deficits and thereby avoid the heavy future interest costs that they impose on the federal budget. It could finally overcome the long history of the US tax structure’s unfair redistribution of wealth from the bottom to the top. It would leave untouched the incomes and expenditures of 95 % of US businesses and individuals who account for and would thus maintain the vast bulk of spending in the US economy. Once in effect, it would focus the nation on a long overdue debate over what parts of federal spending could and should be reduced to allow future reductions in the total revenues from this new progressive tax structure.
The richest US corporations had more to do with causing the current crisis and benefitting from the government bailouts than most US businesses. The richest US individuals have gained far more wealth over the last 30 years than the rest of the population. They can and should bear the major burden of funding the government’s efforts to overcome capitalism’s current crisis. The mass of people have already borne the bulk of the pain caused by the crisis – in a huge unemployment problem, a massive home foreclosure crisis, greater job insecurities, lower job benefits, etc. The mass of people have already watched the bulk of the government’s response benefit the largest banks and various collapsing corporations such as AIG and GM while little was done to end unemployment or foreclosures. It would be utterly unjustified now to place the burden of paying for the government’s response on those who benefitted the least from it. Yet the work of President Obama’s Deficit Reduction Commission and of leaders in both parties points exactly in that un justified direction. And that is why a new political force with a different program of the sort sketched above is now the urgent order of the day.
Richard Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York. He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications. Check out Richard Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at www.capitalismhitsthefan.com. Visit Wolff’s Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.