9/26/2012 1:55 PM ET|
Why Romney's 47% matters so much
Presidential contender Mitt Romney's dismissal of 'dependent' Americans who don't pay income taxes actually highlights our most critical need: more jobs that pay enough to make ends meet.
Mitt Romney speaks to the delegation at the 2012 Republican National Convention
Mitt Romney's 47% problem just won't go away. A week after Mother Jones magazine released a spy-cam video of the GOP contender writing off the 47% of the population that doesn't pay federal income tax, the politicos are still buzzing about it.
Romney's comments were incendiary. He lamented that nearly half of Americans are "dependent upon government" and "believe that they are victims" and that "they are entitled to health care, to food, to housing, to you-name-it." He added that there was nothing he could do to "convince them they should take personal responsibility and care for their lives."
Coming from a guy who could moonlight as petrified wood and is routinely criticized for lack of conviction -- and for not releasing much of his own tax data -- it was a rare glimpse of honest opinion. But it also touched raw nerves among members of both ideological extremes.
On the left, it played into their fears that Romney wants to cut benefits and raise taxes on seniors, the poor and the middle class. On the right, it echoed worries that a tyranny of the majority wants to increase government largesse at the expense of a narrowing base of wealthy taxpayers.
Both sides' fears are valid, to some extent. And Romney's comment about the 47% ignores important details, such as the fact that the working families who make up a large portion of those not paying federal income taxes do pay payroll, state and local taxes.
Here's the thing: This election isn't about tax cheats and welfare queens, who are just a tiny part of the 47%.
In fact, Romney's poor choice of words, and the political fallout that followed, highlight the real problems that have so many Americans on aid. A lack of economic growth, increasing inequality, a narrowing tax base and the resulting growth in benefit spending have pitted American against American. Here's a look at what's at stake.
More are receiving aid
Both sides make some valid points.
Research from Sen. Jeff Sessions, R-Ala., ranking member of the Senate Budget Committee, shows that more than 107 million Americans are getting some form of government welfare. Add the seniors on Medicare and the 22 million government employees (at federal, state and local levels), and you suddenly get a very big number: More than 165 million Americans are at least partially dependent upon federal benefits, a clear majority of the 308 million Americans counted in the 2010 Census.
Consider the increase in people who have received federal disability support since the economy tanked in 2007. As of January, 8.5 million individuals (plus 2 million spouses and children) were receiving these payments. As a share of the population aged 25 to 64, the total has increased to 5.3%, from 4.5% when the recession started, at a total cost of around $200 billion a year -- more than the budgets of the departments of Commerce, Energy, Homeland Security, Interior, Justice and State combined.
This is puzzling. More-advanced health care and an increasingly service-based economy should result in fewer debilitating injuries. Moreover, a weaker economy means fewer people are working, which should mean fewer on-the-job injuries. Research by David Autor and Mark Duggan (.pdf file) suggests that disability benefits "appear in practice to function like a nonemployability insurance program . . . rather than (primarily) as an insurance program for medical impairment."
There are other problems on the spending side, too, especially out-of-control inflation of health care costs and underfunding of Medicare and Medicaid. In fact, an official from the People's Bank of China commented recently that if U.S. debt measures included entitlement liabilities -- or the promises that haven't been funded with payroll taxes -- our ratio of debt to gross domestic product would be roughly twice as large as it is now, at around $31 trillion.
Not enough to go around
On the other hand, it's also true that the benefits of our economy are increasingly accruing to the upper crust while the rest struggle with stagnant wages, lower home values and higher costs of living. Many middle-income Americans are also missing out on the rebounding stock market, a rare bright spot in the current economy, since many investors have been pulling money out of equities and putting it into bonds throughout the recovery. The market has recovered, but a lot of nest eggs have not.
You can see the growing wealth disparity in the income distribution numbers shown in the chart below. Since 1979, low- and middle-class incomes have basically stagnated in inflation-adjusted terms.
In 2009 dollars, the middle 20% of households has seen income rise from $53,100 in 1979 to $64,300 in 2009. For the top 20%, it has jumped from $136,200 to $223,500.
As a percentage of total income, the middle 20%'s share has fallen from 16% to 15%. For the top 20%, it has grown from 45% to 51%. Similar measures of wealth tell the same story.
This helps explain why the rich are bearing a greater and greater share of the federal tax burden, despite policy changes like the Bush tax cuts. According to the Congressional Budget Office, in 2009 the middle 20% paid 9.4% of all federal taxes. The top 20% paid nearly 68%. In 1979, these burdens were 14% and 55%, respectively.
Because of the progressivity of the income tax code, the upper-income household share of taxes exceeds its share of income. And in fact, because of growing inequality and the higher average tax rates paid by wealthy U.S. households, the Organisation for Economic Co-Operation and Development says the United States still has the most progressive tax system in the world.
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Here is why policy matters for the shrinking middle class.
High-energy prices can be partially attributed the Democrat's anti-energy positions against new refineries, new nuclear plants, pipelines and exploration. There untimely insistence on forcing clean energy technology before it’s commercially relevant or practical have sent us back even farther in the process. Energy job solutions are what we need not change and hope energy solutions.
The fiscal policies Democrats supports have devalued the dollar and shrunk the purchasing power of the consumer for the sole purpose of fueling their irresponsible spending policies. The price of those policies is now being paid for by the average person at the grocery store. High food prices can be directly attributed to the policy of currency devaluation.
The reasons the average persons costs are so high are due to the overburdening regulatory policies of the Democratic Party. In addition to the low child to care giver ratios they have forced on providers they also wanted to unionize the industry further driving up the already high costs. We need smart cost effective solutions, not overburdening regulation with a complete disregard for how it hits our pocket books. Lets do what makes sense at a reasonable cost to the consumer.
Since 1980 the amount of educators in the system has increased by 100%. We have double the amount on the payroll then we had 30 years ago. The problem is the enrollment of students has only risen about 15% over that same time frame and the results of student achievement have been flat or unchanged. We have driven up the cost of education with little to no improvement in outcome. We need to change outcomes not pay roles.
One should not be surprised that health care costs are escalating with former litigators continuing their reckless actions. These supposed consumer protectors have put such a scare of a lawsuit into our medical professionals that they are prescribing significantly more treatments then necessary to protect themselves. Exactly whom are they helping, not us but rather padding the pockets of legal professionals. Those that pile millions of dollars into thier campaigns to make sure their gravy train continues at the expense of the consumer. That is a tremendous cost to our system. This along with the support to organize medical professionals has driven up the cost of basic care beyond our ability to pay for it. Nice idea, organized labor has done tremendous things for our nation. But we have to ask ourselves what we can afford and how can we control these escalating labor costs.
One could conclude that even though Democrats believes in their causes there have been sever consequences to our pocket books. Yes we work hard and yes we follow the rules but at the end of the day we are falling behind due to these policies of unintended consequences. We need change that works not change that burden’s us with high costs. Practical solutions to complex problems vs. the change and hope philosophy of the last four years. We have been hoping to long, now we responsible solutions.
Obama's whole campaign has been to appeal to basest emotions of "victimization" in his base. Class warfare is fueled primarily by the notion that one class has been victimized by the other. In some ways, Romney paid a complement to Obama by saying that he essentially had given up on the 47% as he simply couldn't reach them anymore. In the tank media and dems are now playing both ends of the argument, continuing to espouse victimization while condeming Romney for acknowledging the success of their efforts.
BTW - if the taxes were raised on the one-percent (who already pay 38% of all federal income tax) it would pay for the interest on the debt for nine days. To hear our President, this is apparently the end all be all solutiuon to the debt crisis.
Trade policy is the heart of the issue. Neither really discuss it. Obama threatens a few industries, but that's about it. What about Foxcon who has essentially gained a monopoly on computer mother board production? What about textiles? What about other electronic devices? What about minor and major home appliances? What about furniture? Lots of jobs sent to the four corners. And who buys their stuff? We do. They don't.
Why is it that "Since 1979, low- and middle-class incomes have basically stagnated in inflation-adjusted terms?" Because so-called "American" companies aren't American any more. They have globalized themselves to scour the world in search of the cheapest labor. As a result, thousands of U.S. factories have been closed -- just as Ross Perot said they would in 1992 if NAFTA passed. In fact, "American" companies receive a tax deduction as a "business expense" the cost of shutting down U.S. factories, moving them overseas, and leaving millions of formerly gainfully employed Americans with nothing to do except compete with teenagers for the remaining low wage jobs.
The typical attitude is that expressed by Lee Raymond, CEO of ExxonMobil from 1993 to 2005: “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.” He could easily be a poster child for corporate greed, with his retrograde attitude toward climate change and a controversial retirement package valued at $400 million. And decisions based purely on the profit motive often will be different from what the public interest would dictate.
There's the problem.
Now, what was wrong with what Romney said? If 47% don't pay income taxes, and 165 million people are in fact receiving some form of government welfare, then what's wrong with what Romney said?
And if "the rich are bearing a greater and greater share of the federal tax burden, despite policy changes like the Bush tax cuts," why does the solution to our debt problem always involve taxing the rich even more? If having "the most progressive tax system in the world" isn't good enough to limit annual deficits and lower the debt, perhaps it is solely a spending problem, not a revenue problem.
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