Depending on which side of the debate the candidate resides, we'll hear that the so-called Bush tax cuts have helped the economy by boosting the stock market (Dick Cheney said “deficits don't matter,” remember?); others will say these same tax cuts buried the nation in debt, wrecking the economy for future generations the way a balloon mortgage wrecks a fool's finances.
President Bush says the tax cuts should be made permanent (they are set to expire in six years) because the stock market is rebounding and thus the recession he inherited has dissipated. Although he signed the bill that allows the tax cuts to expire in 2011, Bush said last week during an Ohio campaign swing, that allowing the cuts to expire was akin to “raising your taxes.” The likely Democratic presidential nominee, John Kerry, wants to repeal the bulk of the tax cuts that benefit the wealthiest Americans and has frequently scorned those offshore tax havens that allow U.S.-based corporations to skirt paying any U.S. taxes.
Meanwhile, George W. Bush will probably not make an issue of corporate America's tax liabilities on the campaign trail. Instead, Bush will do his best to emulate President Ronald Reagan, who called for tax cuts for the wealthy in the '80s under the theory that the money will “trickle-down” to the middle class once the wealthy invest all that extra money into the economy. Reagan won a second term even though the theory is bogus. That is, we learned that tax cuts for the rich and corporate America simply leads to even richer rich people and even richer CEOs, but without the corollary reduction in the deficit or increased economic opportunity for the middle class. More to the point, Reagan's economic policies—which cut taxes while increasing military spending—led to enormous deficits. Bush's economic policies—which cut taxes to an even larger degree for the wealthy, increase military spending to an even larger degree than during the Cold War while increasing overall domestic discretionary spending—has led to even more enormous deficits.
But even if this sounds familiar, today there are two important differences from the Reagan years that you won't likely hear much about during the 2004 elections that speak more directly to the economic sign of the times.
The first is succinctly explained by Clinton's former Labor Secretary Robert Reich in a recent USA Today editorial. Reich writes, “In (today's) global economy, wealthy people and corporations will invest their extra money wherever around the world it can get the highest return. It ’trickles out' rather than down.” And as we learned in the case of Enron and others, it also trickles into Caribbean banks in lieu of the U.S. Treasury, further disabling attempts to bring down the deficit.
The second issue, and from the standpoint of working Americans the most important, can be found in results of a recent nationwide study published by the insurance giant MetLife.
The survey, conducted in the third quarter of 2003, found that more than half of working Americans live paycheck-to-paycheck. Not surprisingly, the number was highest (59 percent) for ages 21-40. For Hispanics the number was 78 percent, and for folks at the traditional retirement age, 61-69, it was 51 percent. In other words, the majority of Americans with full-time jobs have no money.
While 87 percent of American workers making less than $30,000 per year (the per capita annual income in New Mexico is significantly less) live paycheck to paycheck, 34 percent of the highest earners surveyed—those making $75,000 per year or more—are also “just trying to make ends meet.”
So while the wealthiest Americans received the lion's share of the Bush administration's tax cuts (Dick Cheney recently told a crowd of Republicans paying $1,000 for lunch at an Albuquerque fundraiser the tax cuts were “exactly what the economy needed”), the vast majority of Americans have nothing left after taxes and cost of living expenses.
There are other telling signs of trepidation: while 68 percent of parents said they were concerned about their children's education costs, only 17 percent have money saved for college funding. Overall, the majority of Americans have neither savings nor a retirement plan, and 48 percent said they fear they'll outlive whatever retirement savings they eventually accumulate.
Only 32 percent of employees surveyed expressed satisfaction with their company health and retirement benefits, down from 41 percent in 2002, when MetLife published a similar study. A large reason for the decline is that employers are focusing on reducing health care benefits to reduce company costs. As a result, many employees will voluntarily pay additional cost for fear of losing family coverage due to the infamous pre-existing condition if they're dropped from the company policy.
It stands to reason that folks aren't paying attention to Washington lawmakers, because they are too concerned with spending the next paycheck in order to keep the utilities running, while praying they don't lose their health insurance and their kid wins a scholarship. The good news, at least for the time being, is that inflation and interest rates remain low.
Although the MetLife survey does not address the credit-card debt being carried by average Americans, it's a safe bet that folks that are employed full-time and living hand-to-mouth are actually carrying exorbitant credit card debt. Let's face it, you know who you are.
It's not likely you'll see the MetLife study in any political ads this year. But you can read it online using a key word search, “2003 MetLife Study of Employee Benefit Trends.” At the very least, it might give some folks a broader perspective on today's economic reality, even if politicians like Heather Wilson hell-bent on re-election would rather talk up the good news—whether real or illusory.
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