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Lying on Top

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Dean Baker
January 22, 2002

"The third quarter is going to be great." That's what Enron Chairman Kenneth Lay said last September to a room full of workers who had come to hear about the company's prospects after a recent wave of bad news had sent the stock price plummeting. These were workers who had devoted their careers to building up Enron into one of the nation's biggest companies. Most of them were counting on Enron stock to provide the bulk of their income in retirement. Not only did Mr. Lay lie to these workers about the state of the company, he went on to encourage them to persuade their family and friends to invest in Enron as well. 

As despicable as Mr. Lay's behavior was, he actually performed a valuable service for the nation. He showed the incredible contempt with which the nation's elite—the ones with million dollar houses, yachts, and servants—view the people who have to work for a living. Unfortunately, Mr. Lay's conduct is not unusual among the rich and powerful. He just happened to get caught. 

While the corporate world is filled with Kenneth Lays, as millions of workers and shareholders are coming to realize, the ones that are most visible to the public are the nation's political leaders. If you want lies from on high, a good place to start is the Republican attacks against people who want to rollback part of their tax cut. The Republicans are trying to convince the public that there is a conspiracy afoot to raise their taxes. 

Of course none of us want to pay higher taxes—but the Republicans recognize that the taxes for the vast majority of the public will not be affected by the tax proposals on the table. Some members of Congress are pushing to limit the portion of the tax break that would go to the richest 2 percent of the population. For most of the nation the tax rate paid by this group has as much relevance as the tax rate in Portugal—we might end up paying those taxes one day, but it's not very likely.  

Given the choice between cutting Bill Gates' taxes or extending health care coverage to the growing number of uninsured people and making prescription drugs affordable to seniors, most people would probably opt to have Bill Gates pay more taxes. But, if a little bit if lying can convince the people that it is their tax dollars at stake—well you've got the Republican party platform. 

Lying to the public is one of the few areas of bipartisan agreement. The press recently reported that the Democrats will attack the Republican tax cuts—not by saying that they unfairly benefited the wealthy, or by pointing out that this money could have been used for important public needs—but rather by claiming that these tax cuts jeopardize Social Security and Medicare. According to the insiders, this argument scores better in the focus groups. 

News Flash: the tax cuts have no effect whatsoever on Social Security and Medicare. Social Security and Medicare have accounts that are separate from the overall budget. When the programs are running surpluses—as they are now—this money is used to buy government bonds. The programs will hold exactly the same amount of government bonds regardless of whether this money is saved or spent. Therefore Social Security and Medicare cannot be affected at all by the tax cut, unless Congress were to default on the nation's debt, a policy that no politician in Washington would advocate. 

Everyone in Washington knows this to be true—the Social Security and Medicare trust fund are described in numerous public documents. However, instead of addressing real issues, the Democrats believe that their best political strategy is to scare people about the future of these vital programs.  

In short, the country is filled with Kenneth Lays, people who have made it to the top by lying and stealing, and who have nothing but contempt for ordinary people. The effort to retake the nation is a long and difficult battle. But the first step has to be restoring honesty to political debates. The next time you hear a politician complain about tax increases, or threats to Social Security and Medicare, just remember: "the third quarter is going to be great." 

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

 

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