Most Americans May Actually Want Higher Taxes, but Don’t Realize It

To be more precise, they really just want to feel more secure, and they don’t realize that a strong central government can provide that security. Libertarians definitely don’t feel this way, nor do many of those who refer to the Civil War as the War for States Rights or the War of Northern Aggression. Still, if you break down the reasons why so many people are so upset at the current state of the affairs in the U.S., you will see that their fears and anger could be addressed with some beefed up government programs.

I know – those are fighting words these days.

Donald Trump’s promise to make America great again – especially when he talks about bringing back the manufacturing jobs of the 1960’s to 1990’s – is a message to return to a time when people could feel more secure in their jobs and private lives. Except during times of recession, most workers – white male ones, at least – could find a job fairly easily, and that job was good enough to allow them to support their families and give their children a good shot at having a better life than they had. During the good times, women and non-white workers could also find decent jobs, although there were certainly more obstacles for them in the workplace.

And why were there so many good jobs during that period? Much of it was the result of government spending, and the stimulus that it provided to the economy. The 1960’s through 1980’s brought us Cold War defense spending and the Space Race. All that federal spending, and the geographically diversified nature of military and space programs, created many secure jobs around the country, and those jobs generated many more.

The 1990’s were a bit different. The collapse of the Soviet Union in 1991 gave us the Peace Dividend. War was much less likely and we (the West) won. That felt good, and what did we do with that good feeling? We went shopping! Defense spending dropped substantially as a percentage of gross domestic product (GDP) during the decade following the Soviet Union’s collapse, and that might have been a drag on the economy, but it was offset by consumer spending which shot up by more than 40%. Traditionally, when we feel good about our lives and our futures in the United States, we buy stuff. And considering about two-thirds of the economic engine is driven by personal consumption, the economy kept improving and we kept feeling good about it.

We Americans don’t feel very good these days. The Great Recession had a devastating effect on so many families, and while we are now in the 88th month of the recovery, most of the news seems to be bad. Don’t get me wrong – it’s not the economists who are saying bad things about the economy, it’s the politicians and the media outlets which have something to gain from making people feel insecure. Donald Trump’s slogan sounds positive – Make America Great Again – but his messages are overwhelmingly negative. He has said how bad the economy, military, border security, and trade policies are, and many times each day, he emphasizes the negative. If Donald Trump can convince enough voters that things are horrible, he may be elected president because people will want change. He has a vested interest in making Americans feel bad.

Mr. Trump wasn’t the first. Other politicians – primarily republican – have been practicing this strategy during the entire presidential term of Barack Obama. In fact, it began before President Obama was even sworn in, at a meeting of republican House and Senate leaders in late 2008 in which leaked video showed the plan. The republican leaders decided to obstruct as many Obama initiatives as possible, and to publically state how bad things were, in order to set the stage for an Obama defeat in 2012.

While that electoral defeat did not occur in 2012, the negative messages stuck and the American people still feel that the country is doing poorly. It’s ironic really. The rise of Donald Trump on the wave of people who feel that Washington can’t get anything accomplished is a direct result of that republican congressional strategy outlined in late 2008. Talk about poetic justice.

Finally, conservative media – both main stream news programs, and opinion shows & websites – have a vested interest in convincing the American people that things are bad. The vast majority of their consumers believe that taxes should be low or nonexistent – some because they have high incomes, but also many who are convinced that they can handle money better than Washington – and these media outlets attempt to steer elections toward candidates who promise to lower taxes.

So here’s the controversial part – I think the American people want higher taxes and the federal programs that they would generate. Why?

People feel insecure. They feel terrorists will kill them in their homes or at the coffee shop. They think that they may lose their jobs, and then their houses, and perhaps their families. They believe the government has screwed them over with free trade deals and defective border security, and they are going to hunker down until things get better. During the past decade – a period which included the Great Recession – personal consumption has increased by less than 16%. (Cutting out the recession, the extrapolated increase is about 19% per decade.) Recall that the increase during 1992-2001 was over 40%. The negative messages have sunk deep into the American psyche and today’s spending is significantly affected, although there is a demographic component caused by so many retired and retiring Baby Boomers.

Who should be taxed? That’s an easy one – the top 5-10% earners and multi-national corporations.

Let’s start with business taxes. We should reduce the tax rate and cut out tax advantages (loopholes) which allow large businesses with lots of lawyers and accountants to avoid paying taxes. It isn’t just Donald Trump who uses the tax code to avoid paying federal income taxes; General Electric, Inc. is probably the king of tax evasion. From 2008 to 2013, GE made $33.9 billion and had an effective corporate U.S. tax rate of -9%. They got a net refund from the IRS during that period of $2.9 billion. A simpler tax code with a lower tax rate means that GE would pay taxes, and that smaller businesses would have their tax burden reduced. That’s a win-win, I think – unless you’re a multi-national corporation.

With respect to individual income taxes, data show that tax increases on the top 10% don’t impact the economy in the two years following the increase, but there is a substantial drag on the economy when taxes are increased on the bottom 90%. A tax increase on the top 10% would keep the economy growing but allow the government to reduce the deficit and fully fund programs that would help people in the bottom 90% feel more secure.

When governments don’t have the funds to do the job well, shortcuts are taken and most people experience the negative effects – they feel less secure. It’s ironic that part of Donald Trump’s appeal to the less educated working class voter is his extravagant lifestyle. It’s a little like mattress ads. If the ad shows a beautiful woman on a mattress, men’s subconscious thoughts go to, “If I buy that mattress, I can get a beautiful woman like that.” Women, on the other hand, subconsciously think, “I can be that beautiful if I buy that mattress.” For Donald Trump, many are thinking, “If Donald Trump becomes president, I can live like he does.” It doesn’t make sense, but that’s your subconscious for you – it’s magical thinking.

I believe a strong federal government with a mandate to help their citizens succeed with reasonable tax policy, drug treatment programs, job training, healthcare for all, assistance when in trouble, road improvements, etc. would make people feel more secure. The people would probably be much happier. But, then again, maybe not.

Surveys have shown that Denmark is the happiest country in the world, and it’s not necessarily because of a strong central government and the programs they provide. No, Denmark is the happiest country because Danes tend to have low expectations, so they’re much more likely to be pleasantly surprised than disappointed with any given situation. I would not describe the average American as one with low expectations, so happiness may be out of the picture, but at least they would feel more secure with strong programs which meet their needs.

About tonyj126

I'm a 50+ married man who always seems to have a large backlog of work to do, but also a lot of flexibility in my schedule. Much of the work I do is volunteer or taking care of extended family members. I suffer from, as my priest calls it, "the sin of self-sufficiency," which means I can figure out how to do most things myself, and consequently, reduce the need for community to solve problems. As a logical extention (at least to me), I find myself called to comtemplate the country's and the world's woes and offer my observations. I hope someone out there will find them useful.
This entry was posted in Economics, U.S. Politics, Uncategorized. Bookmark the permalink.

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