Paul: Balance by returning to 2004; Lenzner: Top 0.1 percent gets half of all cap gains

On the Super Committee

By U.S. Rep. Ron Paul
Monday, November 21, 2011

http://paul.house.gov/index.php?option=com_content&view=article&id=1928:...

This week marks the deadline for the so-called congressional Super Committee to meet its goal of cutting a laughably small amount of federal spending over the next decade. In fact the committee merely needs to cut about $120 billion annually from the federal budget over the next 10 years to meet its modest goals, but even this paltry amount has produced hand-wringing and hysteria on Capitol Hill. This is only cutting proposed increases. It has nothing to do with actually cutting anything. This shows how unserious politicians are about our very serious debt problems.

To be fair, however, in one sense members of the Super Committee face an impossible task. They must, in effect, cut government spending without first addressing the role of government in our society. They must continue to insist the federal government can provide Social Security, Medicare, and Medicaid benefits in the future as promised, while maintaining our wildly interventionist foreign policy. Yet everyone knows this is a lie.

Keep in mind that the 2011 federal deficit alone was about $1.3 trillion, which means the Super Committee needs to cut that much per year rather than over a 10-year period. If Congress ever hopes to address its debt problem, it must first stop accumulating any new debt immediately, in 2012.

Federal revenue likely will be about $2.3 trillion in fiscal 2012. The 2004 federal budget was about $2.3 trillion. So Congress simply needs to adopt the 2004 budget next year and the federal government will balance outlays and revenue. That's all it would take to produce a balanced budget right now. Was the federal government really too small just seven years ago, in 2004? Of course not. Only Washington hysteria would have us believe otherwise.

Yet our Republican and Democrat friends on the Super Committee want to take 10 years, or even 30 years, to produce a balanced budget.

Government spending isn't just wasteful; it is often actively harmful to stated goals. The Super Committee could simply apply 2004 spending levels across the board and a tremendous victory for fiscal sanity would be accomplished.

What seems more likely, however, is a rearrangement of the tax code in an attempt to bring in more revenue. Deductions and credits will be taken away, and the Bush tax cuts will be allowed to expire. As a result, less money will remain in the private sector to create jobs and produce economic growth. The Super Committee has an opportunity to take a small baby step in the right direction. Instead, they no doubt will take this opportunity to raise taxes and make everything worse. But increasing taxes will only diminish freedom and deepen the recession. Instead of looking for ways to hike taxes under the guise of "raising revenue," the Super Committee should put forth a plan of real spending cuts to put America back on the path to liberty and prosperity.

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The Top 0.1% of the Nation Earns Half of All Capital Gains

By Robert Lenzner
Forbes.com
Sunday, November 20, 2011

http://www.forbes.com/sites/robertlenzner/2011/11/20/the-top-0-1-of-the-...

Capital gains are the key ingredient of income disparity in the United States -- and the force behind the winner-takes-all mantra of our economic system. If you want to even out earning power in the U.S, you have to raise the 15% capital gains tax.

Income and wealth disparities become even more absurd if we look at the top 0.1% of the nation’s earners -- rather than the more common 1%. The top 0.1% -- about 315,000 individuals out of 315 million -- are making about half of all capital gains on the sale of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400.

It's crystal clear that the Bush tax reduction on capital gains and dividend income in 2003 was the cutting-edge policy that has created the immense increase in net worth of corporate executives, Wall Street professionals, and other entrepreneurs.

The reduction in the tax from 20% to 15% continued the step-by-step tradition of cutting this tax to create more wealth. It first had been reduced from 35% to 28% in 1978 at a time of stock market and economic stagnation. In 1981, at the start of the Reagan era, it was reduced again to 20% -- raised back to 28% in 1987, on the eve of the October 19 crash in the market. In 1997 President Clinton agreed to reduce it back to 20%, which was an inducement for the explosion of hedge funds and private equity firms -- the most rapidly rising cohort within the top 1 per cent.

The battle that is to be fought over the coming attempt to reverse this reduction in capital gains will be bloody and intense. The facts are clear. According to the Congressional Budget Office more than 80% of the increase in income inequality was the result of an increase in the share of household income from capital gains. In fact, you can go so far as to claim that "capital gains income is the most unevenly distributed -- and volatile -- source of household income," according to Laura D'Andrea Tyson, University of California business professor and former chairwoman of the Council of Economic Advisers under President Clinton.

No wonder the super-wealthy plutocrats obtained the largest share of national income -- 25% of the nation's wealth -- greater than any other industrial nation in the period of 1979 to 2005. After unemployment, this disparity between the 1% (3 million) or the 0.1% (the 300,000) and the other 312 million citizens of the U.S. has become the major theme of the Occupy Wall Street movement and an important national debate.

I commend you to the late Justice Louis Brandeis' warning to the nation that "we can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both." We have to make up our minds to restore a higher, fairer capital gains tax to the wealthiest investor class -- or ultimately face increased social unrest.