How Wealthy Benefit and Others Lose

By Darrell Berkheimer, As published in The Union

Our nation’s $33 trillion debt concerns billionaire Stanley Druckenmiller, and he wants to do something about it – starting with cuts in Social Security.

Isn’t that just like a billionaire?

He’s not about to volunteer to pay more taxes. Nor will he propose that Congress close some loopholes in the tax code, which allow corporations and the wealthy to dodge paying their full share. After all, he gets his wealth from corporate stocks.

No, he doesn’t like either of those choices.

He’d rather cut the Social Security benefits that elderly workers paid into for 35 years of their working lives.

And notice, too, that he’s not suggesting elimination of the maximum earnings on which the Social Security tax is collected – at $160,200 this year. Since his annual taxable earnings are considerably higher that, he would be paying more into the Social Security Fund – along with other billionaires and millionaires.

No, instead of that, he wants to cut Social Security benefits.

But seniors aren’t the ones who created the big spending problem, so why should they be the ones to suffer? Many live entirely on SS benefits and will cut back on food to meet housing expenses.

Meanwhile, to make payments on that big debt, our federal government borrows money from the Social Security Trust Fund at very low interest rates. That’s because we certainly can’t allow the SS Trust Fund to earn 2 to 4 times more by investing in mutual funds.

But why not? That’s a story of trust fund mismanagement, according to some columnists.

And surely Druckenmiller is continuing to benefit from President Ronald Regan’s tax cuts of the 1980s, when Regan’s Administration doubled the national debt. And even more tax cuts were initiated by President Donald Trump, whose spendthrift administration added a record of nearly of $7.8 trillion more to our national debt.

Notice the correlation between tax cuts and soaring debt.

Druckenmiller and Republicans also want to cut what they call “entitlement” programs – a term they use incorrectly. The only true entitlement programs are Social Security and Medicare – because workers pay directly into those programs and are entitled to the benefits.

Other programs referred to as entitlements are listed as “Economic Security Programs” in the national budget. They benefit the working poor, whose wages aren’t enough to cover necessities, and others living in poverty.

Those programs include Earned Income and Child Tax Credits, unemployment insurance, Supplemental Security Income, housing assistance, Supplemental Nutrition Assistance Program (SNAP – informally called food stamps), plus school meals and aid to abused or neglected children.

To a small degree, those economic security programs also help to stabilize our economy because the recipients immediately put the money they receive back into circulation. They are among the 37.9 million – 11.5% of our population living below the poverty line in 2022.

They don’t have the option of hiding extra income in Swiss banks or off-shore accounts like our big corporations, or the 735 billionaires here in the U.S. – and nearly 22 million more who are millionaires.

I have a big problem with all those numbers. They tell me that too much of corporate profits goes to stockholders and CEOs while not enough is shared with the workers who create the products and services.

I also must mention our defense spending, which accounts for nearly half of the discretionary portion of the federal budget.

I’m not against defense spending because it’s a most important part of our nation’s security. But I am against extreme redundancy in spending. And I can’t help but believe that more than 1200 military bases and installations – including 450 in the U.S., plus 750 in more than 80 other countries – account for an extreme amount of overlapping redundancies.

And if we’re going to spend big, then we have to tax big, too. That means closing corporate tax loopholes, and higher rates on higher incomes – like we had during the boom years after World War II.

It’s important to note that we can have a booming economy even with much higher tax rates at the upper income levels. Much depends on how well workers are paid and their disposable income above necessities.

After World War II the upper income tax rates ranged from 88% to 92% compared to today’s 37%. And they continued at rates of 70% or above until 1982 when it was dropped to 50% – and then as low as 28% at the end of President Regan’s administration.

But we continued to have a booming economy throughout those high tax rates of the 1950s through the 1970s. Again, a major part of the reasons for that booming era was the better wages that workers received. Boomers were able to do much more with their earnings than today’s Millennials.

The big change began in the 1980s and continued for three decades as wages stagnated while production rose more than twice as fast. As a result, income inequality has been growing ever since the ‘80s.

And we’re continuing to collect lower tax revenues while increasing spending. Everyone knows that lower income forces spending cuts.

So I do agree with Druckenmiller that something must change. But cuts should not be levied on workers, retirees and others who are not responsible for that huge debt. Instead, we’re overdue to increase upper income taxes appropriately.