By Donella Meadows
–March 5, 1992–
Most of us are well aware that the economy is badly off kilter. We are working harder (those who still have work), paying more, and getting less. We’d like to ask the candidates who are seeking our votes some hard questions.
But economic analysis is not exactly the long suit of the average citizen, and the government doesn’t go out of its way to explain the complexities of the national budget to us. So we’re mad and scared about the economy, but we don’t really quite know what’s wrong with it.
Citizens for Tax Justice in Washington DC has helped us out, with a booklet called “Inequality and the Federal Budget Deficit.” It is the clearest presentation of the national economic picture I have ever seen, and its contents are shocking.
Here are some central facts from that book, facts that every voter ought to understand in this election year.
BORROWING: In 12 years the national debt has doubled as a percent of the total economic output of the country (the GNP), from 30 percent in 1980 to 60 percent in 1992. We have not been so indebted since the 1950s, when we were paying off the cost of World War II, and when the economy was growing fast.
SPENDING: Despite all the rhetoric, government spending has not gone down. In 1980 it was 17 percent of GNP, in 1990 it was 18 percent (not counting Social Security, which not only pays for itself but runs a surplus).
Spending on the people, however — on education, environment, roads, unemployment insurance and so forth — has gone way down. From 1980 to 1990 spending on justice and general government went down 42 percent, education down 40 percent, environment and natural resources down 39 percent, roads and transportation down 32 percent. Domestic spending has declined by $130 billion per year, which means that the average family gets $1,260 less each year in services from the government.
What has gone up? Three things: the military (up 10 percent); interest on the national debt (up 83 percent); and bailing out S&Ls (up from zero to $60 billion in 1990 and still rising). At least two out of these three items (and some would argue all three) are reparations for government mistakes; they do not directly benefit the people or build the productive capacity of the nation.
TAXES: Also despite the rhetoric, taxes have gone up, except for the very richest and the very poorest of us. The bottom 20 percent of the population, those making an average income of $8000, have seen a small reduction in taxes, 0.5 percent of income, or about $40 less per family per year.
The next 20 percent, making an average of $20,000, have seen the greatest tax increase, up by 1.2 percent, or about $250 more per family per year. Everyone else up to the richest 5 percent is also paying more taxes.
Of that 5 percent on top, the lower 4 percent, average income $132,000, are paying 1.2 percent less of their incomes in taxes — $1,500 less per family per year. The taxes of the richest 1 percent, whose average income is $675,000, dropped by a whopping 12.3 percent — $83,000 less per family per year. If these families were still taxed at 1978 rates, the government would take in $84 billion more per year.
Besides the richest of the rich, there is one more beneficiary of the Reaganomic tax shift — corporations. The corporate tax burden has gone down from 3.8 percent of the GNP in the 1960s (when the economy was booming, by the way) to 1.7 percent in 1990.
INCOME: The average after-tax income of that most privileged 1 percent rose between 1977 and 1992 from $314,000 to $675,000. This 1 percent of the population now makes more than the total combined income of the bottom 40 percent. On average the incomes of 80 percent of the nation’s families (average $48,000 or less) have stagnated or dropped, mostly dropped. Those who were poorest went down the most, by 13 percent. The great majority of American families are working as hard or harder than ever, earning less, paying more taxes, and receiving less support from their government.
These are not marginal changes in our economy. They are enormous, and grossly inequitable, and deeply destructive of our productivity. They have been the result of ideology, ineptitude, and greed on the part of our leaders of both parties. Republican administrations thought them up, and Democratic Congresses permitted them to happen.
The Citizens for Tax Justice report calls Reagan-era economic policy a “reckless experiment” that has shattered the expectation that each generation will be better off than the one before and that has undermined economic hopes for decades to come. The policy continues. The nation is sinking further into debt. The tax structure continues to load the cost of government folly not on those who have gained from it, but on the great majority who have lost.
A democratic government couldn’t possibly bilk its citizens as badly as ours has, unless its citizens don’t understand what is happening. Take these facts and digest them and pass them on. In this election year, we are not nearly as mad or scared as we ought to be.
Copyright Sustainability Institute 1992