Third Paradigm is an out-of-the-box thinktank on community sovereignty and regenerative economics.
We look at how to take back our cities, farmland and water; our money, production and trade; our media, education and culture, our religion and even our God.
We present a people's history of the Bible and a parent's view on how to raise giving kids in a taking world.
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Welcome to the 59th episode of Third Paradigm. Our title this week is "Two Things in Life are Certain: Debt and Taxes." We're going to look at the assumptions of the normalcy of debt and taxes on which the monetary system is based. Although Iceland is challenging their assumption of debt, along with Greece and Ecuador. In our episode Clash of the Continents, we found that every person in Iceland owed $360,000 for the national debt or 1000% of the GDP. Ireland was even higher at $450,000. So structural adjustment isn't just for third-world countries anymore, according to the IMF. Greece may want to look at Ecuador's debt assessment process, to learn how they're determining what debt they consider legitimate and what not.
But I'd like to ask, are national debts ever legitimate? When the European nations gave up their own currencies, did they also give up their own sovereignty? Every sovereign state has the right to print their own money, determine how it's distributed, and set preferential standards so its citizen can compete against foreign-made goods and not lose their assets to foreign money. Protectionism should be one of the most holy words in our vocabularies. National debts are an advance on future taxes, loaned by the taxpayers without their consent. It's taxation without representation, done through a sleight of hand. Instead of requiring a vote for additional taxes, they take out a mortgage on our future earnings with our lives as collateral. Did we authorize this when John Hancock put his mark on the Constitution?
National debts are incurred to fund things that aren't popular enough to tax, like wars and mercenary armies. But like any household budget, the bills have to be paid before the groceries can be bought. When there's nothing left for the bread and butter, the Republicans start wanting to slash services and the Democrats start wanting to raise taxes. Neither side questions the legitimacy of the national debt, which has diverted funds from human services. And if you're the loan collateral, are you free or are you the property of the state? Your wages are systematically garnished to repay debts you never agreed to; you're an indentured servant no matter how little or how much you make.
Neither Democrats nor Republicans question the interest we pay to "Federal Reserve" bankers for loaning us our currency. Is Washington a corporation or a government? A corporation exists for the profit of a few, but a government should exist for the protection of the many. How does it work to borrow our currency? In order to pay the interest, more currency needs to be produced, again backed by the borrowed funds of the Federal Reserve. When our interest repayment takes the money out of circulation, does it reduce the principal, or do we continue to pay interest on it in perpetuity? To replace the interest payment, new money has to be printed, backed by new reserves. This dilutes the value of the remaining money in circulation, which we call "inflation."
In addition, neither side questions why the Federal income tax is so much higher than the municipal or State tax, even though the vast majority of what we care about is provided by local government. And no one questions FICA, which is often presented as a savings plan rather than a tax. I've been listening to radio series called Wizards of Money produced by a woman who goes by the pseudonym Smithy. In The Imperial Budget and the Mythical Lockbox, she talks about FICA, which pays for Social Security and Medicare. Under Reagan, the FICA tax was increased while income taxes were decreased. The effect of this was to make our taxes less progressive. While Federal income tax increases at higher levels, FICA cuts off after $107,000. It's also most heavily–borne by the self-employed, since the employer pays half or, put another way, when you're your own employer, you pay double. This is a sneaky way of slipping in a tax that most people would object to if they saw the full rate. But even though employees only see half on their W-2, of course, their wages are still paying it. When the employer calculates the cost of the employee, it's at what's called the "fully-burdened rate" – doesn't that make you feel like an asset to your employer?
What is the FICA rate? Even though my background's in Human Resources and I should have known this, it still shocked me – between Social Security and Medicare, employer plus employee portions, it comes to 15.3%. 15.3%! A self-employed person who made $40,000 would pay $6,000 in FICA, and almost the same amount, $6100, in Federal income tax. In California, they'd pay $4400 in state income tax, or $16,500 altogether. This leaves the person with a median income less than $2000 a month to pay for housing, food, insurance, and bills.
As income increases over $107,000, however, FICA as a percentage of income goes down. Therefore, those who can least afford health insurance for themselves or their kids are proportionally paying the most to extend the lives of our seniors. 77% of Medicare expenditures occur in the last year of life, 52% of them in the last 2mo, and 40% in the last month. Inpatient expenses, especially in the Intensive Care Unit, account for over 70% of these costs. The costs are highest for those with the lowest probability of surviving another six months. Those who do survive often experience such a low quality of life and chronic pain that they're not sure it was worth it.
Is this how we, as a society, want to prioritize our healthcare system? Let's go all out for the dying, but the living can fend for themselves. Let's make abortion unavailable, except to those who can afford to raise a child. Then, to punish the mothers, we'll withhold healthcare from them and their babies. Spending a few thousand to ensure a healthy newborn is socialism; instead we should spend hundreds of thousands to extend a greater than average lifespan one more month. What if half of Medicare provided free reproductive care, free pre-natal care, and basic healthcare for all pre-school children? And then we limited care for those over 80 to palliative only – no life-saving interventions, but excellent pain-free, compassionate, personal, hospice care. If federal funds can't be used for abortions, then the government owes every child a right to life after birth.
Let's take a break from death and taxes for some poems about strong, beautiful women. When we return, we'll get back to the FICA tax, explore some deviant art about where our taxes go, and end with a parable. But first, this is No More Cliches by Octavio Paz, followed by a found poem by Marilyn Nelson called The Tao of the Trial.
The poems were No More Cliches by Octavio Paz, and The Tao of the Trial by Marilyn Nelson. The latter was written about Prudence Crandall, a Quaker who opened a school for Black girls in defiance of Connecticut law. She was certainly a woman of character, a Scheherazade with a story to tell of neglected rights. Octavio would have found her a fighter of a thousand-and-one fights, as did Mark Twain, who famously defended her.
For International Women's Day, Amy Goodman interviewed Mariko Lin Chang, whose study revealed that the median wealth assets for single black women is $100, single Hispanic women $120, and for single white women, $41,000. Mariko says, "...even if men and women had the same incomes, if nothing else changed, there would still be a wealth gap for women and a wealth gap for women of color, because they lack access to the wealth escalator, the fringe benefits and the government benefits that are already helping other people build wealth, and because they're more likely to be single parents.
These statistics have heavy significance and aren't to be taken lightly. But where is that government wealth escalator for whites, because most people I know feel like they're running up the wrong one? The focus should be on those who've thrown the escalator into reverse, so they can charge a toll for every step without letting any of us get off.
Let's get back to the history of Social Security and Medicare. Since Reagan increased FICA in 1983, it's run a surplus, adding up to $1.4 trillion. Reagan used this to fund his military build-up. More recently, Bush used the Social Security excess to fund the tax cuts that got him re-elected. But now that Social Security is pulling money out faster than it's being put in, many people are appalled to find that the surplus was spent. However, if you understand how money's created, there isn't any pocket that the government can use to put money away. If they did, it would take it out of circulation while we'd still be paying interest on it. Or it would be in a bank, where the Treasury would have to borrow more money to guarantee it. In reality, letting the Treasury spend the money back into the economy is the only way it can go. Social Security is always funded by current wage earners on a pay-as-you-go basis. It gives the illusion of a savings plan, but it's really a no-interest loan. The problem isn't whether more or less is going in than coming out. The problem, as far as the military is concerned, is that they used to have a surplus to buy more toys without parental approval. But now they're stuck having to ask for every darn billion.
Let's break for Monty Python with the song, "Money."
That was Monty Python with their song, "Money." But with money, taxes are sure to follow. A website called deviantart sells a detailed poster called Death and Taxes. It graphs out all of the expenditures of the Federal budget. I first looked at the 2004 budget, where military and non-military spending were neck-to-neck at $399 billion to $383 billion. But by the 2007 budget, it had gotten worse. Non-military had gone down to $350 billion, but military had risen to $632 billion, or 64%. The artist hasn't produced a 2010 chart yet, but the War Resisters League has a pie chart. It shows a total outlay of over $2.6 trillion for the 2009 budget, up from the $1 trillion of 2007. They show $965 billion for current military expenses, but also show $484 billion for veteran's benefits and interest on a national debt, which they estimate to be 80% due to past wars. So the grand total we're paying on this year's wars and still paying on past wars is $1.4 trillion, or more than double the rate of 2007.
Smithy compares the Roman Empire's budget in 150 CE. 70% was spent on the military, 10% on police and other civil services, 10% on other, mostly foreign affairs, and the remaining 10% was split between social services and economic infrastructure. Curiously, in the Roman empire and the US empire, the most expensive outlying provinces to keep in military aid were Judea and Egypt. By comparison to Rome, the US is a profligate spender on healthcare, which may reach 20%, due to an aging population intent on living longer. This will definitely cut into military spending. What's an empire to do?
Smithy suggests that perhaps a new religion is in order. The one invented by the Romans did pretty well in convincing soldiers to go to war without pay. But 2000 years later, experts find that fear of death increases among the religious and doesn't fall off until you get to the completely deluded. This is especially true of fundamentalism. But despite this one glitch, Christianity was far ahead of its time in imperial propaganda. Let's look at a Bible story about the management of one of these troublesome provinces.
Jesus tells this parable: A man of noble birth is planning a trip to the imperial power to have himself appointed king of his region. But first, he calls three of his top advisors and gives each a million dollars, saying "put this to work until I return." His future subjects, who hate him, send a delegation of human rights NGO's to lobby and try to stop the appointment. But the empire controls the media and he's made king anyway. When he returns, he questions the servants: "So what did you do with my million dollars?"
The first one says, "I funded a paramilitary army to protect foreign investments and oil concessions. Now it's 10 million." "Well-done, my good servant," he replies, "you'll be my Secretary of Defense." The second one says, "I wrote preferential trade agreements for multinational corporations. Now it's 5 million." "Excellent, my good man. You'll be my Prime Minister." And so it went.
Finally, the last advisor strides in and throws a suitcase at him, saying, "Here's your stinking million. I won't be a collaborator and I don't want your dirty money because you take what doesn't belong to you and you reap what don't sow. You're a vicious tyrant and this is what we, the people, think of your IMF loans and corporate kickbacks." He spits in his face.
The king wipes off the spit and said, "If you knew that I take what I didn't earn, you could at least have put it in the bank to get me more of what I didn't earn." He laughs cruelly and the advisors laugh along. He hands the suitcase to the man with ten million and says, "Here's a little present." The other advisors object, but he says, "To everyone who has, more will be given, but as for the one who has nothing, even what he has will be taken away. Now take this scum and torture him. Find out every name of those who didn't want me to be king over them. Bring them here and kill them in front of me... slowly." Finishing this sweet parable, Jesus then enters Jerusalem as its King, first subduing a donkey that had never been ridden. He says that even the stones would proclaim him as King, and predicts that Jerusalem will be under siege and torn apart, with all its children killed, because they didn't recognize him as God. Although the story is set in 30 CE, it's written after Rome's siege of the troublesome province in 70, when everyone trapped inside Jerusalem was tortured, killed, or enslaved, because they had refused to be ridden like a beast of burden. I often hear people say that they wish the Christian leaders would pay more attention to Jesus' teachings. In my humble opinion, they already have.
This has been Tereza Coraggio with Third Paradigm. Thank you to Skidmark Bob for sound production and to Mike Scirocco for all things web. A huge thank you to Jackie Chase at Radio Free Brighton, who's broadcasting Third Paradigm Tuesday, Thursdays and Sundays at prime-time! See our website, thirdparadigm.org for times and links. And thanks to Robin Upton, our Bangladesh listener, who was visiting his mum in the vicinity of Brighton and took the time to check out some radical radio. I also have Robin to thank for archiving Smithy and her excellent series, Wizards of Money. Her broadcasts are now defunct but unfortunately still perfectly relevant. As an investment risk analyst, she took the career risk of producing the show after hearing Democracy Now and realizing that someone had to bell the cat. So thank you Amy. Our final song is Taxman by The Beatles.
Thank you for listening.