If the Koch brothers and the Tea Party support the sequester as it currently stands, what does that tell you? For one thing, there are no further tax increases, just more cuts. And as usual, it's the most vulnerable and poor who will suffer the most in any spending cuts --- which always seem to start at the bottom --- because they, whose voices are the least heard, are always being drowned out by the roar of wealthy lobbyists.
The Pentagon might have to cut approximately $43 billion, or about 9 percent of its budget --- but it’s not catastrophic. Ezra Klein at the Washington Post says, "If the sequester goes into effect, the full cut to the defense budget will be about 31 percent."
We've heard the generals tells us on several occasions that members of congress always allocate pork barrel funds for military programs in their districts --- programs that the generals don't ask for or need. Last year Republican nominee Mitt Romney said he planned to increase defense spending by about $2 trillion over the next 10 years if he’s elected president. President
Obama said Romney’s plan is a bad idea, because it isn’t necessary, "He wants to spend another $2 trillion on military spending that our military is not asking for." (Politifact rated Obama's claim as TRUE).
But it's where the cuts are made arbitrarily in the sequester, that is what would hurt the most. (Read at Slate: "Sequester Insanity - Why the Pentagon budget cuts are far worse than you think."
But even with these sequester cuts in defense spending, theoretically, defense contractors such as Lockheed Martin, Northrop Grumman and Boeing might receive 9 percent less is government contracts, but their corporate tax loopholes are still left intact. And their CEOs won't see any increases in their own personal income taxes either, because the taxes on the capital gains they earn through stock options in their executive compensation packages will still remain at only 20%.
And if the Republicans and the Tea Party/Koch brothers are having anything to say about it, they will make sure it stays that way.
That might be another reason why the Dow Jones almost hit its all-time intra-day record high again (set on October 11, 2007 and stands at 14,198.10). Last Friday the Dow Jones closed at 14,072.49. Defense contactors might layoff workers with fewer contracts, but those at the very top of the food chain (the CEOs and the large institutional investors, such as the banks, hedge finds and private equity firms) won't have to alter their standard-of-living at all --- especially if there are no increases in their corporate or personal taxes.
It would only be the much smaller businesses (contractors) at the bottom of the supply chain, civilian and government employees, and military personnel and their families who would be hit the hardest (although, VA programs are exempt in the sequester). Those at the top aren't worried at all, and sleep easy at night. Although some foreign companies in other countries, where a lot of the spending occurs in our defense spending, might also see a reduction in the outsourced work.
President Obama had put forward a plan that includes twice as many spending cuts as it does tax revenue from the wealthy. Unfortunately, most Republicans in Congress refuse to ask the wealthy to pay a little more by closing tax loopholes (NOT raising tax rates).
It would also be helpful to add: And by redefining "income" and taxing that income accordingly, while using the current marginal tax rates (e.g. deferred interest, investment income, capital gains, unearned income, etc.). Tax ALL income (cash that's going into someone's pocket) as "wages" --- just like a 70-year-old waitress at a diner is taxed on her tips as part of her wages
Why should someone with the most get a better tax break than someone with the least? And don't say it's because the rich are "job creators". That's a thoroughly debunked myth: Working people that are paid fair wages and purchasing things are the real job creators, and it's that economic activity that most drives the economy. It's the people who are the "demand" in a supply-and-demand economy.
The Republicans and the Tea Party have been deliberately misleading and falsely claiming that Obama "already got his tax hikes". But that's not quite true (does that surprise you, that a Republican congressman or a radical anarchist would lie?)
Even though, as of the first of the year, the Bush tax cuts were allowed to expire for those earning over $400,000 a year --- that wasn't a tax "hike" --- it was an "expiration" of a temporary tax break that George W. Bush had endowed on the very wealthy back in 2001 --- and was set to expire at the end of 2010 --- but was also reinstated for two more years by Obama until the end of 2012, in exchange for extending unemployment benefits for the jobless.
And the tax on capital gains* (which they like to refer to as "investment income"), which was taxed at 15% since 2003, also went back to the previous rate of 20%. But that is STILL LESS than what Warren Buffett's secretary pays on her taxes. The top marginal rate for regular wages and salaries is 39.9%. President Obama had proposed the Buffett Rule, which would have taxed millionaires and billionaires at 30%, which is STILL LESS than the top marginal rate of 39.9%.
But the Republicans refuse to budge, protecting these CEOs and the top 1% --- such as the 428 multi-billionaires on the Forbes Fortune list - the only people the GOP truly represents. By not closing this, and other tax loopholes, the Republicans are forcing our children, seniors, military families and the middle class to bear the burden of deficit reduction.
Last year, in the previous Congress, Republicans in the House had passed a bill that would have kept all the domestic cuts and replaced the defense cuts with yet more domestic cuts, mostly to anti-poverty programs. (So far, the Republicans have not introduced any new bills in the new Congress to address the sequester cuts.)
But as usual, the Republicans would rather cut programs for the most poor, rather than close tax loopholes for the most wealthy.
Sheldon Adelson (the Las Vegas casino owner with a net worth of $20.5 billion) has allegedly given in excess of $70 million to non-profit groups such as Americans for Prosperity to have his voice heard in his attempt to get people like Newt Gingrich and Mitt Romney elected as our president; so I believe he can also easily afford to pay a little bit more in capital gains taxes.
Can you imagine if someone as wealthy as Bill Gates (net worth: $66 billion) were asked to pay 30% instead of 20% on unearned income from his capital gains? While although Mister Gates might contribute a little bit less to his foundation that helps many people around the world, it would also greatly help the poor here at home in America. Bill Gate's standard-of-living wouldn't suffer at all --- he wouldn't have to sell his home or take out a second mortgage (pictured below).
But our elderly and disabled, those who are living on Social Security incomes, they would have their standard-of-living affected if Congress were to impose chained CPI upon them. And the Republicans are also perfectly willing to layoff people with the sequester cuts, while at the same time, also reducing their unemployment benefits -- rather than taxing people like Sheldon Adelson or Bill Gates (or Mitt Romney) just a little more.
Below are the cuts listed that would affect just the poor and those who are most at risk in the sequester --- and doesn't include cuts to military spending, education or mental health programs --- although, because cuts in these categories will also cause jobs losses --- they too might also need to rely on the programs listed below.
- Social Security – Potential effects on SSA operations could include a reduction in service hours to the public, and a substantial growth in the backlog of Social Security disability claims.
- Senior meals – Federally-assisted programs like Meals on Wheels would be able to serve 4 million fewer meals to seniors. The meals can account for 50 percent or more of daily food for the majority of participants.
- Nutrition assistance for women, infants and children – Approximately 600,000 women and children would be dropped from WIC from March through September. At least 1,600 State and local jobs could be lost as a result.
- Child care – Cuts to the Department of Health and Human Services in the Child Care and Development Fund would leave 30,000 low-income children without child care subsidies - ending a crucial work support for many families.
- Rental assistance – HUD's Housing Choice Voucher program would face a significant reduction in funding and would place about 125,000 families at immediate risk of losing their permanent housing.
- Emergency unemployment compensation – People receiving extended unemployment benefits would see their benefits cut by nearly 11 percent. Economists have estimated that every dollar in unemployment benefits generates $2 in economic activity.
- Homelessness programs – More than 100,000 formerly homeless people, including veterans, would be removed from their current housing and emergency shelter programs, putting them at risk of returning to the streets.
Today the sequester goes into effect, and where are our members of Congress now? As usual, they took another taxpayer-paid vacation.
* Changes in the 1921 tax law that reduced the federal tax rate on capital gains income is “by far the largest contributor” to rising income inequality in the United States, according to a new paper from Thomas Hungerford, an economist at the Congressional Research Service.