Balancing the Federal Budget on the Backs of the Poor

Human beings do not thrive under conditions of extreme inequality. And, under the guise of “balancing the budget” some politicians are trying to increase the amount of inequality in the United States. They claim that balancing the budget is of the utmost importance, and that it will require “painful cuts” in programs that help people pay rent and put food on the table.

The truth is, it’s not really all that difficult to balance the budget. It’s only difficult to balance the budget if you refuse to raise taxes for the wealthiest members of society and take cuts in military spending off the table.

Then, in order to balance the budget, you have to make painful cuts to programs that help people stay afloat in an economy that already has them on their knees. And balancing the budget that way is doubly painful because it will reduce demand for products and services, which will lead to slower economic growth.

Here are the facts:

  • The GDP of the US is $16.8 Trillion.
  • Federal expenditures are $3.7 Trillion
  • Federal tax receipts are $3.2 Trillion.

That’s a shortfall of a little under $500 Billion. We can debate how bad that is (it’s by no means the end of the world), but let’s assume for now that we want to erase the deficit immediately.

In order to make receipts match expenditures, the effective federal tax rate needs to be 22% (3.7/16.8).

It’s currently 19%. (3.2/16.8)

All we need to do is collect 3% more of GDP in taxes, and we can balance the budget without causing pain to those at the bottom, and without reducing aggregate demand.

Where should that money come from? The average worker? Or the owners of the means of production? Study this chart, and you tell me: