Each day brings a stupefying new chapter in the class warfare underway in America. Today, it’s the unfathomable idea that regular people who had worked their entire lives serving the public should now be effectively cast out into the cold, their pensions ripped up. But, what we need to connect is this: there is plenty of money to solve our financial challenges at the state and federal level but our political leaders have made a conscious decision to let the rich (read: the political leaders’ campaign contributors) escape unscathed.
To set the stage for my point:
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.
But, hold on. The real scandal is something I, and many others, have pointed out for a long time: The careful and decades-long obliteration of a fair tax system has brought these pension plans to the brink. That has been aided by the irresponsibility, and criminality, of many of the fools in the financial sector.
In fact, the story of today should be paired with the story that ran yesterday:
As state governments struggle with the fiscal damage caused by the recession, an income tax increase has become a rarely used remedy.
Governor after governor has publicly forsworn the prospect of raising income taxes, preferring to talk layoffs and cuts in programs and public union benefits. To cite prominent examples, Democrat Andrew M. Cuomo of New York and Republican Chris Christie of New Jersey have ruled out income tax increases.
Understand the frame that we are being sold because it is crucial that we fight back:
Problem: We are screwed. We have no money.
Solution: Demand that the people who had little to do with the financial deficits carry the burden. As for those of you who are pocketing the lion’s share of the wealth in the country, continue your party, don’t sweat it.
Oh. My. God.
In New York State, and virtually, every other state, we could wipe out fiscal deficits, or certainly make them more manageable and even trivial, and continue to have decent pensions for people if the wealthiest paid their fair share–rather than continue to get unconscionable tax cuts. In NY, if the state replaced the existing rate structure (consisting of 5 brackets with rates ranging from 4.0 to 6.85%) with one consisting of 14 brackets with rates ranging from 2.0 to 15.0%, we could bring in $6-7 billion more, and perhaps as high as $11 billion.
Indeed, the one sentence in yesterday’s story that really should have been the headline is this:
In New York, an increase of two percentage points in the state income tax could raise about $9 billion and perhaps tip the state into surplus.
That is simply worth repeating again: In New York, an increase of two percentage points in the state income tax could raise about $9 billion and perhaps tip the state into surplus.
And, from my point of view, we would not need to touch regular people at all. We could deal with this fiscal challenge (notice I do not use the word "crisis") by demanding that the rich stop plundering the country and give a little back.
Instead, we get the theme that states somehow magically have gone broke–because of some irresponsible spending habits (I leave aside graft because frankly I think that is a sideshow) and, now, the time has come to "get real" and cut back.
By abandoning their responsibility in society, the richest among us have consigned millions of people to a retirement of poverty and a struggle to survive. The richest have benefited from the services provided by the public workers in our country but they refuse to pay their fair share–and so public workers are cast off.
We can’t let that happen. And we can’t let people fight and die alone because we allowed the rich to walk off with the nation’s wealth so they could buy another yacht and another mansion and let the rest of us struggle with no electricity and no water.
