Friday, August 12, 2011

Debt, politics and the issue that no one seems to be talking about

Last night I watched part of the Republican debate from Ames, Iowa. The focus from most of the candidates was on the recent debt ceiling debate. Michelle Bachmann took credit for "*being right" about not extending the debt ceiling and her proof was the Standard and Poors downgrade and the declining stock market. Others pointed out how much the deficit was hurting us quantitatively (here is a picture of the 2011 national budget if you were curious - net interest represents 7% of the 2011 federal budget) and qualitatively (Wall Street doesn't like this uncertainty). The candidates made their points in different ways, but here were the persistent themes; it is President Obama's fault, raising taxes isn't the answer, the growing federal debt was bad and the key was cutting spending.

*From the SP report: "The political brinkmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed." That quote makes it seem like Bachmann has no idea what she is talking about on that issue.

There were other questions on social issues (bravo Jon Huntsman for at least showing some level of civility towards equality) and other topics, but the main focus was on the economy and federal deficit. I agree that the federal deficit is an issue, but it isn't the main thing I think politicians should focus on. The main issue with the country is the increasing income gap. This country has been divided into a small % of people that are doing extremely well and then the majority of people who are struggling to get by. There really isn't much of a middle class. Here are some good charts showing the gap. Below is another chart showing the income earned from the top 1% compared to the bottom 80% from

No matter what graph you look at or article you read it is clear that income inequality gap is growing. I challenge anyone to debate that as a fact. Now the funny thing is that despite all of this, the top 1% have been seeing their tax rates decline. Why would that be? Part of the reason is that most Republicans are against any type of tax increase, and the Democrats aren't willing to challenge them on this point. The Bush tax cuts were extended and the budget deal was worked out through spending cuts alone. The people are the top are making more money and having to pay (compared to previous years) less.

This is the main issue facing America. I don't know the solution, but I would vote for pretty much any politician that would address this issue. We need programs, taxes, and solutions to this gap. Rana Foroohar from Time wrote this great article called Stuck in the Middle that is unfortunately only available for subscribers. If you get a chance, pick up last week's Time magazine and read this article. Until we solve the income inequality gap, then I don't think we should be wasting so much time talking about the deficit.

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