Bernie Sanders, Senator from Vermont, on February 5 questioned Budget Director Jim Nussel about the new proposed Bush budget.  The transcript was posted here.

Senator Sanders:  Mr. Director, as I’m sure you’re aware, the United States has by far the most unequal distribution of wealth, income and wealth, of any major country on earth, and increasingly we’re looking more like Brazil and Mexico than we are like Europe and Scandinavia, and other industrialized, ah, countries. When Senator Conrad talks about legacy, for this president, what we should be aware of, since President Bush has been in office, five million more people have slipped into poverty, the middle-class has shrunk, the median-family income has declined by over a thousand dollars, eight million Americans have lost their health insurance, three million Americans have lost their pensions, and yes! some people have done very well. And those are the people on top (right arm points into the air). And of all of the statistics that we throw out around here, I want to throw out one statistic that I want to get your comment on.

Director Nussel, according to the latest reports from the IRS, the wealthiest 1/10th of 1 percent, one-tenth of one percent, three hundred thousand men, women and children, now earn more income than do the bottom 150 million Americans! One-tenth of one percent, more income than 50 percent of the American people, and that gap is growing wider. What is your sense about what it means to the future of this country, and economic justice that we have such an unequal distribution of income and wealth?

Director Nussel: Well, first of all, ah Mr. San . ., ah Senator Sanders, I, ah, ah, I have not thought about that question. I will, I will . . .

Senator Sanders: Don’t you think it’s a question that you should think about?

Director Nussel: I will give it some thought. Ah, I have given some thought to, ah, tax distribution, and tax reform, and, ah, I would agree with you that, ah, our tax code, ah, needs to be reformed. And there are, ah, there are, ah, problems within our tax code that, ah, that, ah, need to be rooted out, and that we have the top 1 percent of the tax code, of the people paying taxes in this country pay 40 percent of all the taxes. The top 5 percent pay 59 percent . . .

Senator Sanders: But you’ve given me an example of the facts that the wealthiest one-tenth of one percent earn more income than do the bottom 50 percent.

Director Nussel: They also pay taxes.

Senator Sanders: Of course they pay taxes, but not proportionate to what they earn.
Let me ask you another question, a moral question. Let’s forget about being in the United States Senate, let’s get down to basic morality. In your budget (pointing his right index finger at Director Nussel), you propose over 700 billion dollars in tax breaks for the wealthiest three-tenths of one-percent; 700 billion dollars in tax breaks for millionaires and billionaires at the same time as you want to eliminate, among other programs, the low-income weatherization assistance program, as you want to make massive cuts in the (indistinct, sounded like Lydie) program, which you are very familiar with. Well, in Vermont, and all over this country, Iowa, I dare say (NOTE: Nussel, prior to appointment as Ch of OMB, had been a GOP Representative in the House), it is getting cold. Older people cannot afford to keep their homes warm. What is the moral justification for giving over 700 billion dollars in tax breaks to millionaires and billionaires, and then cut back on programs which keep people warm, which provide health care for desperate people, and which provide many other basic necessities? Give me the moral justification for that.

Director Nussel: The, ah, tax, ah, cuts the president proposed in 2001 and 2002 and 2003 are distribute much further than the top one-tenth of one percent.

Senator Sanders: But I’ve given you an example of how it impacts the top one-three-tenths of one-percent; seven hundred billion dollars. Tell me why the richest people in this country need tax breaks while poverty is increasing.

Director Nussel: Look, ah, look, I would guess under that, that you received a tax cut.

Senator Sanders: I may have. But I’m talking about millionaires and billionaires. And I don’t need a tax break. You don’t need a tax break. Tell me, why should the richest people . . .

Director Nussel: Why don’t I need a tax break?

Senator Sanders: Because you’re doing well and other people are going hungry in America. And people, the middle-class is shrinking.

Director Nussel: So it’s my responsibility . .

Senator Sanders: (Indistinct) I’m not talking about you, I’m talking about millionaires and billionaires . . .

Director Nussel: Then take anyone, take . .

Senator Sanders: For example, you want to repeal the Estate Tax. Is that correct?

Director Nussel: (Nods head up and down)

Senator Sanders: All the benefits of the Estate Tax go to the richest three-tenths of one-percent. If the Estate Tax is completely repealed, the Walton family, which is worth 80 billion dollars, which owns Wal-Mart, will get over 30 billion dollars in tax relief. Do you think the Walton family needs 30 billion dollars in tax relief, when you’re cutting back on healthcare, when you’re cutting back on programs that feed hungry people; hungry senior citizens? Let me hear the moral, your administration talks a lot about morality, and family values. Now tell me about the morality of giving tax breaks to the Walton family, worth 80 billion dollars, and cutting back on the needs of the most desperate. Look! As far as that, . . . justification for raising the fees of our veterans who are getting into the VA hospital, that will drive veterans off of the VA.

Director Nussel: Well, these are the, ah, these are the, ah, veterans who, ah, have incomes that are higher than . . .

Senator Sanders: Yuh, twenty-seven thousand dollars a year. You know, what I want to hear is a simple, man to man, man to man . . . You tell me about tax breaks for billionaires and cutting back on the needs of veterans and low income people.

Director Nussel: First of all, I don’t what the tax bill is for the Walton family. I don’t know how much they pay

Senator Sanders: My estimate is they will save 30 billion dollars through the repeal of the Estate Tax. Tell me why they need a 30 billion tax break, and what do they do with that 30 billion dollars then.

Director Nussel: I’ve no idea. But my bet is that they’re quite philanthropic, as are many in that situation. Again, I don’t know what they do with it. But they earned it.

Senator Sanders: I’m glad you’re concerned with the Walton family. Some of us are concerned about other . .

Director Nussel: No, you brought up the Walton family. I don’t even know them. I’ve never met them. I, ah, I, ah . .

Senator Sanders: But you’re worried . . . Your administration is pretty connected to them.

Robert Reich, writing in the New York Times, recommends that we use the tax system to transfer wealth from top earners to earners in the bottom two-thirds of income.  Reich says, “The binge seems to be over. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth. The only way to keep the economy going over the long run is to increase the wages of the bottom two-thirds of Americans.”

Specifically, Reich is calling for, “a larger earned-income tax credit, financed by a higher marginal income tax on top earners.”

Reich says, “We’re sliding into recession, or worse … normal remedies are not likely to work this time, because this isn’t a normal downturn.”  He says, “The only lasting remedy, other than for Americans to accept a lower standard of living and for businesses to adjust to a smaller economy, is to give middle- and lower-income Americans more buying power — and not just temporarily.”

Excerpts from the article:

• The underlying problem has been building for decades. America’s median hourly wage is barely higher than it was 35 years ago, adjusted for inflation. The income of a man in his 30s is now 12 percent below that of a man his age three decades ago. Most of what’s been earned in America since then has gone to the richest 5 percent. The problem has been masked for years as middle- and lower-income Americans found ways to live beyond their paychecks. But now they have run out of ways.
• The first way was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. The percentage of American working mothers with school-age children has almost doubled since 1970 — to more than 70 percent. But there’s a limit to how many mothers can maintain paying jobs.
• So Americans turned to a second way of spending beyond their hourly wages. They worked more hours. The typical American now works more each year than he or she did three decades ago. Americans became veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.
• But there’s also a limit to how many hours Americans can put into work, so Americans turned to a third way of spending beyond their wages. They began to borrow. With housing prices rising briskly through the 1990s and even faster from 2002 to 2006, they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans. But this third strategy also had a built-in limit. With the bursting of the housing bubble, the piggy banks are closing.
• The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway.  A larger earned-income tax credit, financed by a higher marginal income tax on top earners, is required. The tax credit functions like a reverse income tax. Enlarging it would mean giving workers at the bottom a bigger wage supplement, as well as phasing it out at a higher wage. The current supplement for a worker with two children who earns up to $16,000 a year is about $5,000. That amount declines as earnings increase and is eliminated at about $38,000. It should be increased to, say, $8,000 at the low end and phased out at an income of $46,000.
• Over the longer term, inequality can be reversed only through better schools for children in lower- and moderate-income communities. This will require, at the least, good preschools, fewer students per classroom and better pay for teachers in such schools, in order to attract the teaching talent these students need.
• These measures are necessary to give Americans enough buying power to keep the American economy going. They are also needed to overcome widening inequality, and thereby keep America in one piece.

From the New York Times, “Totally Spent,” by Robert B. Reich, a professor of public policy at the University of California, Berkeley, author, most recently, of “Supercapitalism.”