Susmit Kumar, Ph.D.

For the last three decades, conservatives, especially Republicans, have been demonizing the government. But the truth is that the average citizen receives more services from the government than he or she gets from any of the Fortune top 50 firms. The government provides infrastructures (like roads and bridges), Social Security, Medicare, Medicaid, services after natural calamities (like hurricane, flood and tornado) and defense. The main driving force of any corporation is to generate profit. So why don’t the people on Capital Hill work to increase government revenue by increasing its income rather than giving tax-cuts to the rich? One point worth noting is that the rich people are not getting richer on their own, but with the help of government.

In his first presidential inaugural address, Ronald Reagan said, “Government is not the solution to our problem; government is the problem.” He understood things to be that way because he was a rich person who paid a lot of taxes, and did not need the government except in times of natural calamities like hurricane, flood or tornado. Donald Regan, Reagan's Secretary of the Treasury and later Chief of Staff, criticized President Reagan for his lack of attention to economics because in his four years as Secretary of Treasury, the President never talked about the economy with him one-to-one. On the other hand, using President Reagan’s motto, Republicans went on emptying the coffers of the government by giving tax cuts to the wealthy.

Let us take a recent example. Due to the July 2010 collapse of the Lake Delhi dam in Iowa because of heavy rains, the entire nine-mile long lake is empty. This has not only resulted in property damage, but also led to a crash in property values. There were over $100 million worth of homes facing the water on the lake and now those homes are worth less than a quarter of their previous values. Now property owners are asking for federal assistance to rebuild the dam. The dam was originally built in 1927 to produce electricity, but was in recent years used only for recreational purposes. If FEMA (Federal Emergency Management Agency) approves the aid, it would provide 75 percent of the dam’s construction costs. The state would pay 10 percent and the local government would have to pay the remaining 15 percent.

Similarly if a hurricane hit Florida or any Gulf state, every one would expect the government to provide relief, and of course the government would provide relief. But the government does not get anything in return. The question is – how can the government manage its finances if it does not collect enough revenue?

Everyone uses infrastructure like roads and bridges, which are built and maintained by government organizations. A majority of bridges are getting old and need to be replaced or repaired, but Republicans would not agree to an extra surcharge on gas for this purpose. Had these been owned privately, they would have been paid for through collection of tolls.

The main purpose of keeping the US army in the Middle East is to keep peace in this oil rich region. In this way, government is subsidizing oil, i.e. we are spending hundreds of billions of dollars every year to just keep the price of oil down; otherwise everyone would have been paying higher gas prices. Apart from the direct expenses of supporting the active military, we need to also add the expenses of supporting veterans.

Nobody, not even Tea Party activists or Republicans, wants to touch the Social Security System, Medicare or Medicaid. If we did not have these welfare programs, our cities would be like the slums of Calcutta. Yes rich people like Ronald Reagan and Glenn Beck do not need any of these programs, but others need them.

Every month average Americans spend a big portion of their income on expenses like gas, rent/home mortgage and food. But a question arises how much they pay to the government in taxes? The answer will surprise everybody – nearly half of all Americans did not pay any federal income tax in 2009.

Therefore it is wrong to say that the government is the problem. The government does a lot for everyone. It is a bogus slogan given by rich people like Ronald Reagan, who pay a lot of money in taxes, that the government is the problem.

Health insurance firms are making record profits by raising their premiums by double digits every year. Last year Anthem Blue Cross and Blue Shield of California, tried to raise the premiums of 800,000 individuals by up to 40 percent as it wants to make hundreds of millions of dollars profit from this group. We can apply the same rule in the case of government. In order to recoup the expenditure, should not the government raise the taxes on the people, who benefit from its relief works during or after emergencies like hurricanes, tornadoes or reconstruction of the Lake Delhi dam in Iowa? The problem is that government cannot recoup these expenditures from the affected people. The insurance rates for homes along the Gulf coast are high as these areas are prone to hurricanes. If we apply the same rule in the case of government, then should the government raise its tax for people living in these areas? Nobody will agree with increasing the tax.

Under the freedom of information act, you can find out the corruption and wastage in any government work or department, but you have to either wait for a firm to collapse or have a severe downturn in economy to find out how the private firms are making money at the expense of common people.

The Nikkei average went up to about 39,000 in December 1989, but after the crash it hovered around 15,000 during the lost decade of 1990s. In the last several years it has hovered around 10,000. Several economists, including Nobel Prize winner Paul Krugman, are fearing a similar lost decade for the U.S. economy, too, which would cause the Dow Jones to hover around 4,000, leading 401(K) plans to become 101(K)s. As a majority of firms have stopped pension options, the future for the entire country seems very bleak, especially because of the unsustainable debt of the government.

If the Dow tanks to 4,000, making 401(K)s become 101(K) for retirees, then common people (including those waving flags in the Tea Party) would suffer the most without Social Security, Medicare and Medicaid and not “Mama Grizzlie” Sarah Palin or Glenn Beck who are making millions by selling books to those Tea Party members.

 

 

 

 

 

Additional information