By Hannah Miyamoto - HONOLULU
Creative Commons, 2011: CC-BY-NC-ND)
Revised August 18, 2011
Revised August 18, 2011
Tea Party Depression is to end the Tea Party: an inflexible obstacle to the progress and prosperity of the U.S. However, since the "Tea Party Recession" is the product of reduced economic activity and refusing to relieve shattered consumer and business confidence, people need to understand that, since the Depression is manufactured by TPers, ending it requires little more than reversing all the Tea Party-influenced decisions; we just need a "U-Turn Party."
Here is a practical plan for restoring national prosperity without increasing the deficit or raising the tax rate more than a few percent, by restoring jobs and personal income in the U.S. to normal economic levels through a major new federal stimulus program.
First, it is important to reveal a fact the media is almost hiding from us: Personal income is actually quite good, as indicated by the consistently high corporate profit levels. In 2011 dollars, per-capita personal income is $41,332. Although that is down from the 2007 level of $43,002 (constant 2011 dollars), post-inflation personal income is actually higher than it was in 2005. The fact that personal income is only 4% less than in the home equity-mortgage fueled boom year of 2007 illustrates that the "Tea Party Depression" is really the result of consumer pessimism. Indeed, the national savings right more than doubled between 2007 and 2008, rising from 2.4% to 5.2% in one year, where it has continued to hover ever since. In 2010, Americans saved $593 billion, or almost $2,000 for every man, woman, and child in the nation.
Therefore, if the government injects $920 per-capita spending (about $284 billion) into the national economy, the economy will return to its 2006 condition. While this would only create 2 million new jobs, a mere fraction of those now unemployed, it would put enough money back into the economy to at least restore consumer confidence.
However, the money must go directly into new public spending. Tax cuts won't help, because most of the money will be immediately saved. The so-called "Stimulus Package" failed, to the extent it did, because too much of the money came in tax cuts. Some of those tax cuts were direct, and others came from states keeping down their tax rates and using the new federal money to patch their budgets. Even conservative commentators know this.
In short, the Republican insistence on using tax credits to "stimulate" the economy, rather than truly fund a "New WPA" helped sabotage economic recovery. Had even half of the stimulus bill gone directly into increasing federal and state spending, we would be out of the recession by now.
Furthermore, only $220 billion is actually needed, because spending $284 billion would generate over $65 billion in new federal income tax collections from the reemployed workers.
The first place to raise the money is to increase the federal gas tax by 10 cents a gallon, about 50% more than its current level. If Republicans refuse to raise the gas tax (in place since 1932), which will expire soon unless Congress reauthorizes it, Democrats can simply promise to let it expire if it isn't raised, thus forcing states to raise their gas taxes nearly 20 cents a gallon if they want to maintain their highways. Since Republican states tend to have low state gas taxes and little public transportation, taking the federal gas tax "hostage" will hurt Red States more than Democratic-dominated ones.
Raising the federal gas tax 10 cents a gallon would raise about $15 billion a year, and create about 105,000 new jobs, mostly in highway and mass transit construction.
Raising taxes on only the richest 17% of households would raise $224 billion a year and leave the middle class untouched. My specific tax plan would increase the tax rate of households earning between $100,000 and $200,000 by 5%, 6% for households earning $200,000 to $500,000, 7% for households earning $500,000 to $10 million, and 10% tax for households earning over $10 million.
My plan would not increase the deficit, and by increasing economic activity, scare headlines that the national debt equals the nations income would be a thing of the past. Additional spending cuts, such as savings from ending the Iraq and Afghanistan wars, and letting the Bush tax cuts expire, would eliminate the budget deficit and ultimately retire the national debt.
My main point in proposing this plan is to show how easy it is to end the Tea Party Depression --"If I can Do it, Anyone Can!"--and refute Republicans who only call for more nation-sabotaging spending cuts when asked for economic revival.
As they sang in 1932, Prosperity is Just around the Corner--but if we do not go to meet it, Ol' Man Depression will never leave.