When None of Our Political Leaders Say Reliably True Things, How Is the Public Supposed to Have Reasonable Opinions about What to Do? — Raising the Debt Ceiling and Attacking the Deficit

25 July 2011

In the past, we assumed that an apathetic and ignorant public was the greatest threat to democracy’s success — today, our quasi-delusional leaders represent a larger part of the problem

For example:

(1) It should not be particularly difficult to uncover what might happen to the economy, if the debt ceiling is not raised.

That it has proven difficult is because our political leaders, including President Obama, find it more satisfying to mislead, lie, and remain ignorant, than to learn, educate, and lead.

(2) It should also not be particularly hard to figure out what various tax-payer classes generally pay as a percent-of-income.

Yet, even here, it is hard to know whom to believe, due to deliberate obfuscation by people who should know better, like the Secretary of the Treasury.

(3) And it should be equally easy to uncover evidence of the implications of varied tax policies in regard to encouraging economic growth, if such correlations actually existed.

Yet, recognizing that there is no persuasive evidence that proves a correlation between perpetually reduced taxes and economic growth has not been easy for the public, due to extremist “no new taxes” exaggerators like Grover Norquist, president of Americans for Tax Reform.

Note:

I classify Norquist as a leader because he has had the hutzpah to recruit an inordinate number of politicians to his “no new taxes” pledge. If that is not leadership, I don’t know what is.

A basic proposition — effective leadership has to begin with seeking and confronting facts

I return again and again to the “truth matters” proposition on this website.

It is difficult for me, being both rational and scientifically inclined, to see facts as anything but a necessary aspect of our survival. Ignoring facts is a quick way to both grave and financial ruin.

If I am correct, then two of leadership’s preeminent responsibilities in a democracy are to ensure that the public:

(i) has the facts it needs to select the leaders it wants,

and

(ii) has the facts necessary to make intelligent and success-oriented choices regarding government policies.

The rest of this essay uses the ongoing deficit and debt ceiling debates as examples of how not to accomplish these goals.

So what does happen if the debt ceiling is not raised?

PolitiFact.com (a service of The St. Petersburg Times) examined some of the facts surrounding the debt ceiling debate. In dispute is the President’s belief that terrible things will happen to the economy, if the ceiling is not raised.

For example, in an interview with Scott Pelley (CBS, 12 July 2011), the President implied that Social Security checks might not issue on 3 August. So, PolitiFact looked at the probabilities:

The Bipartisan Policy Center -- a Washington, D.C.-based think tank with a board that includes former politicians from both parties -- conducted an analysis of what the government's fiscal situation would be if a deal on the debt ceiling is not reached.

When the center analyzed the government's inflows and outflows for the rest of August 2011, it found $172.4 billion in cash coming in, to offset required payments of $306.7 billion. That works out to a deficit of $134.3 billion.

With that amount of income to work with, the government -- if it could prioritize payments, and we'll say more on that later -- could pay the monthly costs of Medicare and Medicaid ($50 billion), Social Security ($49.2 billion), Pentagon vendors ($31.7 billion), interest on the debt ($29 billion), and unemployment benefits ($12.8 billion). Those categories total $172.7 billion.

But doing so would mean delaying other payments -- for instance, Pell grants and other educational programs ($20.2 billion), salaries and benefits for federal employees ($14.2 billion), welfare and food programs ($9.3 billion), health and human services grants ($8.1 billion), housing assistance ($6.7 billion), and many other programs, including military active duty pay ($2.9 billion), veterans affairs program ($2.9 billion), Department of Justice funding that includes the FBI and federal courts ($1.4 billion) and IRS refunds ($3.9 billion).

© 2011 Angie Drobnic Holan, Fact-checking claims about the debt crisis, PolitiFact.com (22 July 2011) (accessed at right-side sidebar under title: Social Security and other federal checks may not go out on Aug. 3 if the debt ceiling is not increased) (paragraphs split)

What is obvious from this excerpt is that, no matter how the Administration prioritizes federal payments, lots of people would be economically hurt.

How many active duty military people do you know who could survive on no income? (I set aside the question of how fair that would be for the very people who arguably sacrifice more for this nation than virtually any other group.) And how many tax payers could casually absorb the loss of their planned-upon tax refunds?

The economic ripples of a suddenly stopped $69.6 billion (listed in the above-quoted paragraph) would obviously be considerable.

People who deny or gloss these facts are either abysmally ignorant or willing to flush the bathwater with today’s economic baby in it. We generally don’t kill ourselves in order to save future expenses. There are better ways to force an economic consensus.

On the other hand, the President deliberately distorted the debt ceiling facts to imply that Social Security recipients would not get their payments if the ceiling weren’t raised.

Why? Social Security recipients are more numerous than active duty military members, most of whom vote Republican anyway. So the President was playing unhelpful games with a reality that does not need grandstanding to be impressive.

On balance, both of these intransigent political sides lose intellectual and moral substance. The President loses credibility, and therefore leadership capacity, by misleading. The Republicans lose by being obviously and deliberately obtuse.

The result? A generally ignorant public receives no illumination on a difficult subject and, therefore, cannot steer the action in an intelligent or even quasi-desirable unintelligent direction. That is almost certainly not what the Founders envisioned.

And when Treasury Secretary Geithner implied that rich people pay less of their income in taxes than “ordinary” people was he accurate? — No

Should we care that he was wrong? Yes, it’s pretty difficult to vote “smart” on tax policy, when you don’t know who is paying what and why.

Here is what PolitiFact had to say about the Secretary’s comments:

Let’s break Geithner’s statement down into its parts:

* The richest group is paying in the low 20s;

* That tax burden is lighter than it has been in decades;

* Their effective tax rate is lower than for people who make much less.

© 2011 Angie Drobnic Holan, Fact-checking claims about the debt crisis, PolitiFact.com (22 July 2011) (accessed at right-side sidebar under title: For people in the top 1 percent for income, "your effective tax burden is in the low 20s, the lowest it’s been in decades and decades and decades -- lower than somebody who might make substantially less money.") (paragraphs split)

Using apparently authoritative non-partisan studies, PolitiFact found Geithner truthful on his first two statements. But wrong on the third:

The CBO [Congressional Budget Office] chart covers only the federal individual income tax, which is the one Geithner was discussing.

But even if you fold in other federal taxes (corporate, estate, Social Security and Medicare), average rates remain higher for the richest group than for everyone else.

The non-partisan Urban-Brookings center folded in the other forms of federal taxes for 2011, and found that the top 1 percent will pay 27.6 percent, and that rates steadily decline for the less-wealthy until they reach zero (a little less, actually) for the lowest one-fifth of earners.

Geithner was largely correct when he said the top 1 percent pay rates in the low 20s, a tax burden that is historically low. But he's wrong that the wealthiest enjoy effective rates "lower than somebody who might make substantially less money."

Well two for three ain’t so bad, is it? Yes, it is.

Obviously the Secretary lied because it’s easier to drum up support for a “tax the rich” policy if the public believes the rich aren’t carrying their weight.

That’s duplicitous and dishonorable coming from someone in his king-of-the-hill Treasury position. It deprives the public of the facts it needs to vote for a fair-minded tax policy. And it dishonorably makes the Administration’s Republican opponents look like they are lying in one of the few situations in which they’re not.

Was Grover Norquist correct in claiming that reduced capital gains taxes always result in economic growth? — No

Do we care? Yes, for the same reasons that Secretary Geithner’s lie was democratically undesirable.

If your leaders lie about the qualities of the tigers in the bushes, how are you avoid or make friends with them?

PolitiFact said:

Getting back to Norquist's statement, he said, "Every time we've cut the capital gains tax, the economy has grown. Whenever we raise the capital gains tax, it's been damaged."

Is that true? No:

We noted exceptions [to Norquist’s observation] in 1982 (tax rates were lower, but the economy declined); in 1987 (tax rates increased, but the economy still grew); and in 1993 (tax rates increased slightly, and the economy still grew.)

We looked for other research on the issue and found that Troy Kravitz and Leonard Burman put Norquist’s contention to the test in a simple study published in the respected nonpartisan journal Tax Notes in 2005. They looked at changes to capital gains taxes and compared them with both to stock market performance and overall economic growth.

They found a weak relationship between tax changes and the stock market, but virtually no correlation to overall economic growth, measured by gross domestic product (GDP).

The Congressional Research Service, the nonpartisan analysis agency for the U.S. Congress, compiled research on capital gains taxes and concluded that reductions to capital gains taxes are "unlikely to have much effect" on economic growth. "A tax reduction on capital gains would mostly benefit very high income taxpayers, who are likely to save most of any tax reduction," the report said.

© 2011 Angie Drobnic Holan, Fact-checking claims about the debt crisis, PolitiFact.com (22 July 2011) (accessed at right-side sidebar under title: "Every time we've cut the capital gains tax, the economy has grown. Whenever we raise the capital gains tax, it's been damaged.”) (paragraphs split)

If Norquist’s comment were correct, everyone would know and act on it. Economic simplicity of that kind could not remain hidden.

The moral? — Dishonest political manipulators not only reinforce the public’s forgivable ignorance of complex topics, but their deceptions make it more difficult for the public to educate itself

That’s a lose-lose situation.

PeteFree.com

When None of Our Political Leaders Say Reliably True Things, How Is the Public Supposed to Have Reasonable Opinions about What to Do? — Raising the Debt Ceiling and Attacking the Deficit