By Jim Miller
With the debt ceiling standoff underway, the Republicans are eager to extort the President and Democrats in Congress to agree to huge cuts in domestic spending in exchange for not pushing the country over an economic cliff.
While some in Republican leadership seem to understand that cuts to Social Security and Medicare are politically dangerous for them, more fanatical elements on the right seem happy to suggest otherwise. It is also clear that a Republican Congress littered with antigovernment zealots contains a healthy contingent of members who might not be averse to burning it all down.
The mainstream media are, perhaps understandably, largely focused on the dire consequences of a potential default, but beyond chastising contemporary extremists on the right, they offer little in the way of historical context other than pointing out that “entitlements” like Social Security and Medicare, along with defense spending, make up the lion’s share of U.S. spending.
This framing would seem to imply the question should be all about spending when, in fact, the most important factor driving U.S. debt is falling revenue.
As Robert Reich pointed out in the Guardian last week, the real beneficiaries of our growing debt are the rich:
As the federal debt continues to mount, these interest payments are ballooning – hitting a record $475bn in the last fiscal next year (which ran through September). The Congressional Budget Office predicts that interest payments on the federal debt will reach 3.3% of the GDP by 2032 and 7.2% by 2052.
The biggest recipients of these interest payments? Not foreigners but wealthy Americans who park their savings in treasury bonds held by mutual funds, hedge funds, pension funds, banks, insurance companies, personal trusts and estates.
This situation was created as the tax burden in the United States was shifted away from the wealthy to the rest of us. As opposed to overheated rhetoric about the growth of wasteful spending, a truer account of the last half century would show that the rich have gotten richer at our expense and, as a result, economic inequality has exploded, and government has become less able to serve the needs of most Americans.
It is, as Reich outlines, one of the great bamboozles of American history:
Hence the giant half-century switch: the wealthy used to pay higher taxes to the government. Now the government pays the wealthy interest on their loans to finance a swelling debt that’s been caused largely by lower taxes on the wealthy.
This means that a growing portion of everyone else’s taxes are going to wealthy Americans in the form of interest payments, rather than paying for government services that everyone needs.
So, the real problem isn’t America’s growing federal budget deficit. It’s the decline in tax revenue from America’s wealthy combined with growing interest payments to them.
Both are worsening America’s already staggering inequalities of income and wealth.
Thus, the Democrats’ mantra should not just be about the Trump tax cuts or the recklessness of the Republicans in risking default.
They need to make this story of upward redistribution of resources over the last several decades clear and put the blame where it belongs: on American plutocracy. Failing to do so cedes the argument to the right by accepting a frame that puts most of the onus on government spending and far too little on the consequences of this generational transfer of wealth from the majority of Americans to the rich.
The big political question is whether or not the Democrats have any inclination to try to take economic populism back from the right or if they’ll follow the lead of the blue dogs and crabwalk their way through “negotiations” without ever bothering to point out how we actually got here.
Lead graphic: Sahand Hoseini via Unsplash; Canva