“It’s not class warfare, it’s simple math!”

That’s how President Obama defended the tax-the-rich foundation of his so-called American Jobs Act.  The President’s rhetoric was, of course, overreaching, as it so often is when he is in campaign mode, and none other than the Associated Press took him to task for his overzealous, inaccurate generalization that the rich are not paying their “fair share.”

Here’s the President setting up a straw man and then knocking him down with the practiced skill of a populist debater. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million… Middle-class families shouldn’t pay higher taxes than millionaires and billionaires,” Obama said. “That’s pretty straightforward. It’s hard to argue against that.”

Well, middle-income households shouldn’t be paying a higher percentage of their income in taxes than high-income households, and, of course, they aren’t.  As the AP pointed out, the rich, are (Mr. Buffett, apparently, notwithstanding), in fact, paying the highest marginal tax rates, as they should. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government according to AP’s Stephen Ohlemacher.  The ten percent of households with the highest incomes pay more than half of all federal taxes. They contribute over 70 percent of federal income tax revenue, says the Congressional Budget Office. (more…)

On Friday Former President Bill Clinton spoke at the dedication of a bridge at his Presidential library.  During his address he complained that Republicans try to take too much credit for his welfare reform legislation and for balancing the budget. The two parties can argue about who was behind welfare reform, but no one deserves credit for balancing the budget.  The truth is  the United States federal budget was not balanced in any of Bill Clinton’s eight years as President. Not once!

The federal government has two types of debt public debt and intra-governmental debt.  Public debt is comprises securities held by investors outside the federal government, including that held by investors, the Federal Reserve System and foreign, state and local governments  Intra-governmental debt comprises Treasury securities held in accounts administered by the federal government, such as the Social Security Trust Fund.

Traditionally the annual federal government budget deficit or surplus is the cash difference between government receipts and spending, ignoring intra-governmental transfers. This is a trick as intra-governmental debt needs to be repaid just like the publicly held debt. This is also how Clinton claimed a surplus in three out of his last four years. (Source for all of the numbers below, US Treasury Direct).

These figures include the public debt but not the intra-governmental debt.  Its like paying off your American Express card while ignoring the fact that your Mastercard over the limit and months past due. Your Amex looks great but your budget is not balanced.

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When Texas Governor Rick Perry in the Republican debate at the President Reagan Library described Social Security as a “Ponzi Scheme”; Perry hoped the media would hyper-ventilate and scream that his political career was over. Back in 1982, Democratic Speaker of the House Tip O’Neill legendarily damaged the President’s and the Republican’s popularity by spinning that Reagan’s efforts to return Social Security to solvency was an effort to destroy the program. Perry understands that Social Security still remains popular; but he intends to use as a wedge issue against Democrats the fact that few Americans are willing to pay more taxes make the program solvent and that younger voters believe they will never receive the benefits they are paying for.

The Merriam-Webster Dictionary describes a Ponzi scheme as “an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.” Social Security began collecting taxes in 1937 and began in 1940 to pay their first benefit recipient, Ida May Fuller. Ms. Fuller worked for three years under the Social Security program before she retired. The Social Security taxes on her salary were $24.75; her initial monthly check was $22.54; and she lived to collect $22,888.92. Essentially, Ms. Fuller earned a spectacular 925% return on her investment.

President Franklin Delano Roosevelt was quoted by his Labor Secretary Francis Perkins as trying to make sure Social Security would not be a swindle to future generations:

“Ah, but this is the same old dole by another name. It is almost dishonest to build up an accumulated deficit for the Congress of the United States to meet in 1980. We can’t see the United States short in 1980 any more than in 1935.”

Prior to the 1970s, the Social Security program was fairly well funded; because it took a highly visible Act of Congress to change the payments. But in 1972 Republican President Richard Nixon increased benefits by 20% and created a formula to automatically adjust Social Security payments by a cost-of-living-adjustment (COLA) tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. President Jimmy Carter in 1977 more than tripled the Social Security tax on wages; but price inflation continued to drive COLA payments up faster than the taxes on wages.

When President Reagan tried to reinstate the original COLA calculation in 1982 he was pummeled by Democratic Speaker of the House, Tip O’Neill, who famously told the press that trying to change Social Security was the political equivalent of asking for the instant death of touching the “third rail” of an electric train. Republicans lost 26 Congressional seats in the following midterm elections, as the Democrats made preservation of Social Security the centerpiece of their campaign slogan: “It’s not fair … It’s Republican”.

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The corporate media is panicking about the debt crisis. The politicians are squabbling over entitlement reforms and tax increases. The capitalist ratings agencies are warning about a downgrade in the U.S. credit rating. Americans are worrying about their jobs, their homes, their possessions–everything. The government wants to print more money, and the people can’t find enough money to buy basic goods. We are told to be afraid.

But those of us who have always struggled for social justice, for a truly free and humane society, know there is nothing to fear. FDR was wrong: we need not even fear fear itself! For the imminent collapse of the American economy is not just proof that the critique of capitalism was right all along. It is also an opportunity to replace an oppressive system with a revolutionary one–more efficient and democratic than last century’s attempts.

Lenin in Atlantic City. Source: Vernon Ogrodnek, AP

Comrades! This is our moment. The extraordinary confluence of the debt crisis in the U.S. and the debt crisis in the European Union is the surest sign that the globalized capitalist empire itself is crumbling, defeated by its own internal contradictions. Yes, the Soviet Union fell because it could not match capitalist production. But the United States will fall because it cannot afford capitalist consumption–neither private nor public. (more…)

From today’s New York Times:

The bursting of the real estate bubble and the ensuing recession have hurt jobs, home prices and now Social Security.

This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.

Stephen C. Goss, chief actuary of theSocial Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.

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This week, the US federal debt surpassed the $12 Trillion threshold.

Congress will vote in December to extend America’s indebtedness above $12,100,000,000,000, necessitated because our national debt grew last year by more than $1,400,000,000,000 and will grow this year by $1,400,000,000,000. According to the Obama White House estimates, the national debt will continue to grow by more than $1 trillion for the next nine years.  Except it won’t…because it can’t. There just isn’t $9 Trillion to borrow.

For years we’ve heard about the immorality of putting this debt on our grandkids. Forget the grandkids, our economy is at grave risk of collapse right now!

The dollar is in free-fall. The Ponzi scheme Congress calls Social Security is about to collapse. Foreigners are beginning to balk at loaning the US government more money. That grave economic turmoil our debt and deficit will cause in the future? It’s here now.

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