The battle over a deficit-reducing federal budget (an oxymoron) is providing the American people with a much needed reality check. For years We The People have been electing a Republican president and a Democratically-controlled congress. We elect a congress that promises to give us more and better of everything and we elect a president that promises to get the government off our backs and out of our pockets. If it seems contradictory, that’s because it is.
We’d all like to eat our cake and have it too. Our politicians told us we could. We all seek after the mythical Free Lunch. Our politicians tell us it’s out there for the taking (the “rich” have it), just help ourselves. This is politics at its finest. Politics, you know what that is, that’s where the perception is the reality. It doesn’t matter what the truth is, only what people perceive it to be. The perception is such a powerful force for politicians that they will knowingly proceed with a harmful policy if the perception is that it is a good policy. Likewise the opposite is true. They don’t let the fact that a bill would be good for the economy prevent them from voting against it if the folks back home are against it. Apparently, We The People are too stupid to understand the complexities of it all so we fall back on The Conventional Wisdom. Well, either us or our politicians.
As seen in the recent budget vote, it is a prescription for gridlock. The budget proposal called for 134 billion in new taxes. The Democrats voted against it because the taxes would “hit hardest at the poor.” At the same time, the Democrats vowed to vote against any reduction in the Capital Gains tax because it would be “a giveaway to the rich.” It is long past time to set the record straight.
First off, 134 billion in new taxes is 134 billion in new taxes, is 134 billion in new taxes. And that’s a lot of money even to a congressman. It doesn’t much matter who “officially” pays it – that is, fills out the paperwork and writes the check, it all comes out of all our pockets. Those “rich” corporations have a place in their ledgers for taxes. Taxes are a cost of doing business. As the cost of doing business increases, so do the prices of the products or services the corporation supplies. So we all pay for corporate taxes.
And who owns all those big corporations anyway? We do, that’s who. Sure there’s the occasional really rich guy who owns a bunch of stock but the rest is probably owned by “institutional investors.” This means your insurance company, your union pension fund, your institution of higher learning, the mutual fund that your brother-in-law got you into, maybe even your church. So when corporations are taxed we all pay, but we don’t write the check so the perception is that someone else is footing the bill.
Certainly the average congressman is smart enough to figure this out but who wants to hear that if you want something you have to pay for it? Everyone wants to see some belt-tightening and all insist it must be someone else’s belt. Better to let people think that someone else is actually paying for it. That way they’re grateful. That way they vote for you. So what if their taxes go up? They’re just getting what they asked for.
And how about that Capital Gains Tax? Here’s another place where reality is ignored in favor of the perception. It’s touted as a tax break for the “rich” (So what?) and therefore unpopular with Democrats for whom that perception is like waving a red cape at a bull. Fact is, historically, every time the capital gains tax rate has been cut it has resulted in increased revenues from capital gains. Raising the rate actually diminishes the revenue from capital gains. Now, the Democrats know this but doubt whether you or I do. The simple-minded Conventional Wisdom has it that it only helps rich people so your populist Democrat votes against it knowing full well that revenues would be better (read “higher”) if the rate was lower.
So the smoke-and-mirrors guys keep giving us what we ask for and we’re paying for it but would like to think that we’re not. Time for a Reality Check, America. Time for a Reality Check, Mr. Congressman.