By John DeQ. Briggs
This is my inaugural column for The Chesapeake Observer. My topic will always be “Thinking About Things”. I do not know what I will be thinking about any given day, week, or month. In general these days I intend think about the ongoing breakdown and accelerating dysfunction of our political parties and, more broadly, our entire political system. I intend to think and write about these things (among others) in small bites, and in a reasonably orderly way. I expect to stay grounded in facts to support views.
Money: Where It Goes
The expenditures of our country are hiding in plain sight in this mesmerizing website. The captivating first page will tell you at a glance that federal spending is approximately $4.5 trillion; federal tax revenues are approximately $3.5 trillion; the US national debt is more than $22.5 trillion; the ratio of federal debt to GDP has increased from 34.7% in 1980 to 105.6% today; and much more. And you can see that total student loan debt is more than $1.6 trillion while total credit card debt is just a smidgen over one trillion dollars. Such numbers are at the center of most policy issues.
Here are the largest budget items: Medicare/Medicaid nearly $1.2 trillion; Social Security a smidgen over $1 trillion; defense spending $643 billion; interest on the national debt $380 billion; income security (welfare/food stamps $299 billion; federal pensions $287 billion; food/agricultural subsidies $156 billion. These numbers come to $3.96 trillion). Given total federal spending of $4.5 trillion, the stubborn mathematics of it all is that the spending identified above amounts to 88% of the federal budget. And, of course, the entitlements (Medicare/Medicaid; Social Security; interest on the national debt; income security; and federal pensions) are growing relentlessly at a rate in excess of the growth of available federal revenues.
In the face of these daunting
numbers, which have been trending this way for some time, it is astounding that
no political party seems concerned or committed to some semblance of financial
rectitude. Fiscally responsible budgeting used to be the province of the
Republican Party and Conservatives generally. This is no longer true. Financial
responsibility has never been the province of the Progressives or the
Money: Who Provides It
Tax data are important to any understanding of spending policies; the data are also fascinating. Data from the Congressional Budget Office tell us that total federal tax revenue is a bit more than $3.5 trillion and this includes income taxes, payroll taxes, corporate taxes, excise taxes, and all other federal taxes. About half of this total amount comes from income taxes. More than a third comes from payroll taxes. Here are some highlights about income taxes from the Tax Foundation.
- The top 1% (1.4 million tax returns) paid 37.32% of all federal income taxes in 2018, and the average tax rate was 26.87%
- the top 5% (7.04 million tax
returns) paid 58.23% of all federal income taxes in 2018, and the average tax
rate was 23.49%
- The top 10% (14.08 million tax
returns) paid 69.47% of all federal income taxes in 2018 , and the average tax
rate was 21.19%
- The top 25% (35.2 million tax
returns), page 85.97% of all federal income taxes in 2018, and the average tax
rate was 17.84%
- The top 50% (70.44 million tax
returns) paid 96.96% of all federal income taxes in 2018, and the average tax
rate was 15.57%.
“The top 1%” is a construct that varies very much from state to state and is based on household income not individual income. In the US writ large, a family needs an income of $421,926 to be in the top 1%. But in New Mexico, this number is just over $250,000, while in Connecticut, it is just over $700,000. But the average income of the top 1% nationwide is “only” $1.32 million. State-by-state and other data of interest are here.
To be sure, there are thousands of
households in the top 1% who may enjoy incomes (and net worth) well in excess
of $20-$50 million and even into the billions. These individuals likely include
Hollywood stars, many professional athletes, highly paid media personalities,
CEOs of certain public companies, and a good number of elected politicians who
have managed to parlay public service into vast personal wealth.
It is not particularly clear as a
matter of policy why these mega rich or super-rich should be taxed at the same
rate and in the same manner as a family of four, with an income of $425,000. And
it is not clear why the capital gains rate should be so far below the ordinary
income tax rate. There are legitimate policy questions lurking in these areas.
But however they are addressed, more taxing of “the rich” (whatever that might
turn out to mean) is neither going to be short-term solution to the nation’s
financial problems, nor will it represent an endless cache of riches that can
fund the Progressive dream of debt forgiveness, free education and free health
care services for future generations. There is also the question of the
unintended consequence of tax policy serving to smother family businesses.
Still and all, funding even the current deficit requires that the funds come
from somewhere, and taxing the mega rich more might make a dent in the deficit
while creating more social cohesion. But absent a broader tax increase or a
national sales tax, our nation cannot afford the obligations to which it has
committed itself already, much less those obligations that demographics suggest
might soon become politically popular
So, let us turn to the stubborn
truths of demographics.
Demography is Destiny
Many aspects of the American future are obvious to anyone who cares to look. We can look at the current population and its ethnic/racial/religious/national makeup; we can look at the birth rate of each discrete segment of the population; and we can look at immigration patterns for the same categories of people. The Pew Research data shows the accelerating impact of Asian, Hispanic and other non-white populations. The data at the link reveal several points of consequence for the medium and longer term.
First, there are wide gaps between
the generations on many social and political issues. Millennials (born from
1981 to 1996) and other relatively young people are far more likely than their
elders to hold liberal views on most political and social issues. They do not
much identify with any political party and more than half self-identify as
Second, the 2016 electorate was the
most diverse ever and the 2020 electorate will be even more so. Millennials are
the most racially diverse adult generation; 43% of them are nonwhite. They are
supposedly the “best educated” of any generation, although the nature of that
education will be the subject of a future column. This is a generation burdened
with much of the $1.7 trillion in student debt, many of whose members still
live at home. It is a generation that may not have the wherewithal to produce
an income sufficient to retire the debt. It is a generation more dependent on
government support than any other.
Third, Millennials this year
surpassed Baby Boomers (those born from 1946-64) as the largest US adult
generation. Millennials are struggling financially; pay few taxes; and do not
contribute substantial amounts to the Social Security system. Baby Boomers pay
substantial taxes; they are moving into Medicare at the rate of roughly 10,000
people per day; they will also be drawing down social security entitlements
while paying little or nothing into the Social Security system.
Politics and Policies: Cognitive Dissonance
Democratic Party, increasingly dominated by Progressives, seems fully prepared
to tax the income rich, to tax wealth itself, and to add trillions of dollars
to annual federal spending. And like it or not, given the demographic trends it
is difficult to envision a future in which a majority of voters will not
support much of the Progressive agenda despite the vast public and private
seismic demographic shift provides an enormous challenge to “Conservatives,”
however, they may today be defined. Their natural constituency is steadily
declining. Yet there has been no coherent Republican or Conservative response
to the circumstances, other than what might be called “Trumpism.” However, Trumpism
does not bring together any particular set of consistent policies, but rather
represents at its best a series of ad hoc reactions to world and
national events. It is also depending on a declining base that will be
overwhelmed by the ascent of immigrants and younger generations with little
affinity for Conservative principles and a natural affinity for “free stuff.”
there are multiple points of consensus across the country that Conservatives,
might consider embracing as positive policy that could capture majorities in
contestable jurisdictions. For example:
- On immigration:
there is broad agreement on the need to develop an actual national policy on
immigration that would welcome desired skills (including unskilled labor in
many cases), while barring or limiting from entry skills not desired. Surely,
we can agree on country by country quotas and on some requirement that
immigrants become integrated into our educational, language, and cultural
systems. Immigrants who cannot or will not so integrate simply re-create the
tribal systems from which they came and do not seem desirable candidates for
- On entitlements: a
Conservative agenda could substantially reduce expenditures for Medicare,
Medicaid, Social Security, food stamps and other such welfare by:
up over time the age of entitlements to age 70 or so;
some form of state or national service for the unemployed, perhaps related to
infrastructure maintenance or re-building;
testing, Social Security and Medicare benefits.
- On China:
addressing the PRC’s routine theft of American Intellectual Property in ways
that are aggressive, but that do not create nearly uncontrollable trade wars to
the detriment of American consumers. There are WTO and other remedies less
disruptive than engaging in a broad gauged trade war.
- On climate change:
acknowledge that climate change is occurring, while also acknowledging that the
United States cannot unilaterally make the slightest difference, if indeed any
difference can be made even by multilateral action by the most populous
countries in the world, including China, India, Brazil, and so forth.
- On guns, accept
and embrace some form of gun control. Rather than opposing any and all
forms of gun control, Conservatives might be far better off embracing agreeable
and uniform approaches to state gun control. At some point soon, the
annual slaughter of children by armed madmen using large magazine weapons will
produce a series of Progressive policies that may reflect the emergent popular
- On criminal
justice reform: the Republicans seemed to have been far more serious than the
Democrats and there does seem to be broad consensus that we should not be the
country that incarcerates more citizens than any other country.
The list could go on and on.
will be the purpose of this column to think about and address these and other
similar things in a considered way and, in the fullness of time, to make modest
or immodest proposals for course changes both within and without the political
John DeQ. Briggs is a lawyer whose practice has
for decades focused on competition policy in the United States, Europe, and
Asia. He is a partner with a Washington
law firm specializing in these matters and was for a decade a Lecturer in Law
at the George Washington University Law School on these topics.