The Solution

Eureka!

There; I said it.

While everyone else is looking at pieces of the problem, I found the crux. Therein, I also found the solution.

The only catch is that our leaders have not the intelligence, inclination or interest in fixing it.

Unless you have slept through the entire debt ceiling debate you have heard someone claim that 48% of Americans pay no tax. Those who wish to protect the wealthy and the corporations from the IRS consider it to be the ultimate argument. It would still be a stupid argument even were it true.

Follow this, step by step. In their ignorance or prevarication, they have inadvertently pointed the way.

That 48% are not paying income tax, as defined by the IRS.  They don’t make enough. Don’t you envy them? They do, however, pay FICA (Federal Insurance Contributions Act).

FICA is composed of 12.4% of your salary going to Social Security and 2.9% dedicated to Medicare. Ones paycheck will reflect half of that 15.3% tax. In order to not scare people so much the law says that the employer covers the other half. That half is also a part of ones compensation. It is simply a hidden tax for the employee.

As a point of interest, compare that 15.3% the capital gains tax of 15% for those who gamble rather than work.

That 48% pays sales tax, state income tax, gas tax, excise taxes, real estate tax, car tax, numerous fees and more. They pay no tax? Bat feces.

Social Security and Medicare taxes are generating surpluses, which are put into trust funds, until Congress replaces them with IOUs. That means those entitlement programs are paying their own way and making loans to those programs that don’t.

Cutting back on those programs hurts those programs and makes more money available in the trust funds for the Congress to borrow. Making their slush fund larger will not encourage congressmen to economize. It solves nothing for the government nor for the people, just for the politicians. They will be back for more cuts in the future.

Well, there’s no solution there.

That leaves increasing revenue. The parasites on Wall Street are adamant they will not pay their share. So, does that mean we suck more out of those on the bottom rungs of the economic ladder? Yes.

What?

‘splain yourself, Lucy.

The cost of the federal government as a percentage of the Gross Domestic Product is close to a post-WWII low. Then why are we running such debts? Because of a shortfall of revenue. This is not a problem that began in this millennium.

Some of that is easily explained by the Chicago School of Economics’ trickle down theory, an impractical joke. Cut taxes and job creators will create more jobs. But, in the real world, we have lowered their taxes and they didn’t produce; at least not in this country.

The wealthy and the corporations not pulling their own weight makes us justifiably angry but something else they have been doing is of greater import. Something else has been far more insidious, far more destructive of the country, the economy and the people.

You’re angry that we bail out the gamblers, the freeloaders, the parasites. You wonder what they could have done that was worse.

They set about to destroy the unions. They largely succeeded. The middle class was the strength of our economy and thereby the foundation upon which our status as the superpower has been based. The middle class came about only through the existence of the unions.

They didn’t stop with their victory over the unions. They set about dismantling the entire middle class. Our highest inflation-adjusted personal income happened in 1973. The oil embargoes of 1973 and 1979 started the descent. Trickle down and deregulation turned a temporary setback into a decline and fall of at least a couple of generations.

The relative size of the middle class has shrunk. That 48% not earning enough to pay income taxes is your proof. Masses of people continue to be booted from the middle class. Wages and salaries are not keeping up with inflation. Fewer people make enough to contribute to the non-FICA revenue.

So, the government remains the same relative size while revenue decreases. Simple subtraction. Too much subtraction. Too many negative notations.

The real solution is to make it possible for more people to attain and remain in the middle class. Then they will make enough to get the attention of the IRS. Then the government will have sufficient revenue. Wow! A revenue increase without a tax increase.

Our leaders can try this and try that. They can try all of the solutions they want. Some may work. Most won’t. Regardless, unless we reverse the decline of the middle class those other solutions will just buy more time for us to endure the decline of our country and its economy.

I didn’t promise an easy or quick solution. It will take time. But, it is the only long-term solution. Will it happen? Not unless we try something new – electing competent grownups.

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