The last few weeks have been pretty turbulent to most Americans, with the stock market swoon making Americans poorer to the tune of almost $1.5 trillion dollars.
Yes, that amount was wiped out in a couple of weeks by the steep falls in the stock values … and, we’re not out of the woods yet.
We can revisit the causes. The primary one was the adjustment downward by Standard and Poor of the U.S. credit rating, from AAA to AA+, harming the nation’s financials for at least the medium term.
Through that was the proximate cause, it was not the reason. The major reason is the country’s staggering debt burden, now exceeding $14.3 trillion and reaching 100% of the country’s GDP.
Our political system has also proved itself over the last month in particular, to be quite dysfunctional, despite cobbling together a debt ceiling agreement at the 11th hour.
Left to ourselves, we would love as a nation to continue to borrow well beyond our means to repay and continuing to spend more on our prized defense industry, pork projects of all types, and entitlements.
It was just a matter of time before the world called us on this and that time has finally arrived.
More Fundamental Problems
Even with the above litany of problems, I believe the country’s problems are even more fundamental. Even before the Supreme Court allowed unlimited amounts of anonymous monies to be poured into election campaigns, I will argue that government was already broken.
Yes I said it. Broken. A government that is so corrupted by lobbyists that every tax bill has hundreds if not thousands of pet projects and exemptions that benefit the big and connected.
We also have a government where lobbyists get to affect, if not dictate every major piece of legislation with an economic impact. The bigger you are and the money you are prepared to spend, the more you can affect the taxes you pay and the laws that govern your industry – to your benefit.
Opensecrets.org states that there were 12,967 registered lobbyists working Washington DC last year and they corporately spent $3.51 billion to affect legislation. That amount has grown every year since 1998, when it was a ‘mere’ $1.44 billion.
You have to ask yourself if that amount of money can slosh around DC without corrupting the people it is spent on.
In addition, OpenSecrets lists 3,689 ex-congressional staffers who lobbied in 2009 in their “Revolving Door” report. Work for the government today and lobby tomorrow is par for the course down in DC.
More Lawyers and Accountants = Fewer Taxes
The peculiarities of our tax system means that large companies can get by with paying little or no taxes. This they do mostly by fiddling transfer prices between domestic and international operations.
Last year the vast conglomerate, General Electric, had $10.3 billion in pretax income but ended up owing nothing to Uncle Sam. In fact, it recorded a tax benefit of $1.1 billion.
HP also paid $1.75 billion in taxes on pretax income of $9.4 billion or a 19% tax rate. A great deal if you can get it. Similarly, Microsoft earned $28.1 billion last year, but paid just $4.9 billion in taxes.
I guess the issue here is that most middle class working stiffs get to fork over a third or more of their salaries to Uncle Sam and his state cousins.