President Obama's plan for addressing the debt polls well with Democrats and Independents. After all, it sounds fair: an equal mix of revenue increases (i.e., taxes) and spending cuts. Americans will hear this and say to themselves, "Democrats want to raise taxes and Republican want to cut spending. This gives both sides what they want. It must be fair! This is how I convince my kids to share their toys." However, to believe that the notion of fairness to President Obama's so-called "balanced approach" to the budget is fair is to accept a canard.
To raise revenue, the president will let Bush era tax cuts expire. The top two tax rates, currently 33% and 35%, will rise to 36% and 39.6%. Many Americans, particularly those of us who earn less than $200,000 per year, don't see a problem with that. They might even indulge in a bit of schadenfreude, believing that their own economic woes have something to do with the excesses of the wealthy. Most Americans don't realize that the real money is not in income but in long-term capital gains, which are only taxed at 15% now and will only go up by 5% if Obama prevails. Who are the people who own these assets? You guessed right: half of them belong to the wealthiest 1%, and another 25% of them belong to the wealthiest 10% (source). The wealthy do not earn income; they allow their assets to appreciate.
The other part of the president's plan is to make deep spending cuts. As outlined in a leaked draft of the president's "Grand Bargain" with Republicans (source), he is willing to consider cuts in Medicare, unemployment benefits, and Veterans' medical programs.
What is terribly unfair about this is the fact that the deepening economic crisis that this country is facing has little to do with our failure to tax wealthy Americans more than we already are. It has little to do with what we are spending on Medicare, unemployment benefits, and Veterans' programs.
President Obama takes pride in his willingness to solicit the wisdom of Warren Buffett, but he wasn't paying attention when the financier said, "The U.S trade deficit is a bigger threat to the domestic economy
than either the federal budget deficit or consumer debt and could lead
to political turmoil…(source)."
The hope is that the reader , when he or she hears about this "Grand Bargain" between President Obama and Republicans, will remember this: raising taxes and cutting programs won't affect the budget deficit as long as the trade deficit is allowed to increase. Between 2001 - 2011, the U.S. balance of trade with China has increased by over $301 billion dollars. During the same year, The U.S. lost over 2,742,200 jobs that can be directly attributed to this trade imbalance (source).
Since the late 1970's (at about the same time that the rules restraining campaign contributions were greatly weakened), an increasing share of American wealth has become concentrated in the hands of a few. There is good reason to believe that many of the beneficiaries of this new-found wealth are the very same financiers and CEO's whose actions have directly contributed to the loss of American jobs and the emergence of China as an economic and military power.