Populist Daily

Politics, Culture and American Life

Populist Daily header image 1

Neocons Trying to Split the Middle Class

July 23rd, 2010 · 2 Comments · Economics, Jobs, Politics, Taxes

Divide and conquer…that’s their motto. As ancient as the Romans and as current as the Rovians. The Neoconservative plan is to pit the American Middle Class against itself. Those on Social Security and unemployment insurance will campaign to keep those vital income streams alive and the Neoconservatives will work against them trying to have them cut as part of austerity programs.

This is typical Karl Rove dirty politics. Don’t look at the best case scenario for our citizens while looking at the complexity of our national debt. That would be too humane and it would work against the Neocon supporters, the very wealthy and the global corporations. The Neocons work for the top 1% of Americans and the global corporations. That’s where the money is and that’s where they focus their time and energy.

The proposition is this. Recent studies by Rogoff and Reinhart, two prominent economists, suggest that when a country’s debt hits 90% of GDP, problems arise that may result in a very difficult and very protracted period of decline before the country can begin to expand its economy again. While that may be true in less developed countries, the experience of the United States was somewhat different in that we actually borrowed 120% of GDP in order to win World War II and we paid that debt down as far as we wanted to pay it down, by about 1970, while having a long and affluent recovery after the war.

Our problem is different now. Since 1980, when Ronald Reagan became President, our debt has gone from under $1 trillion to over $13 trillion today. It should be said very quickly that all that debt except for the less than $1 trillion when Reagan took over and the approximately half-trillion during the Clinton era were all incurred by Presidents Reagan, George H.W. Bush, and George W. Bush.

In 2009, $1.4 trillion in debt was left to President Obama because of several significant things: 15 million unemployed and two wars. The structural deficit was over $500 billion. The loss of revenues and the added unemployment was an additional $600 billion and the stimulus to keep the country from falling into a second Great Depression, was about $300 billion for 2009. The result was a total $1.4 trillion deficit.

But how bad are things? The Congressional Budget Office is the most respected and the least biased on the subject of the U.S. Budget. The CBO says that for something like fifty years we have been carrying an average debt of about 36% of GDP. At the end of 2008, the debt grew to 40% of GDP and now, at the end of two more years it will be something like 62% of GDP.

Rogoff and Reinhart were talking about something like 90%. Even though we have dug ourselves into the deepest economic hole since 1929, we still have a long way to go to reach 90%. But we will get there in a hurry, which may be what some Neocons want, if we do not begin to restore the economy by creating about 5 million jobs. That will cost about $200 billion.

The Neocons are fond of saying that we must now pay for every new project because we have a $13 trillion debt that they created and we have a $17 trillion GDP. While this is true, the first thing we need to do is jump-start the economy.

So how about this? The Iraq War and the Afghan War are costing us about $7 billion a month. The Bush Tax Cuts cost us about $15 billion a month. So let’s put the Bush Tax cuts back and raise them by 10%. Then let’s accelerate the troop withdrawals from Iraq. Then let’s cut about ten percent from the military budget. All these things will raise a lot of money and we won’t have to cut Social Security and we won’t have to cut Medicare.

If we have a fiscal problem, we should do one very important thing to dramatically cut costs. We should immediately have an amendment to the new health care plan to allow a public option. And option for people over 50 to buy into Medicare immediately and phase in people down to 35 starting two years from now. People under 35 have the best health stats, so they would be less affected and they can stay on their parent plans until 26 anyway.

Health care is one of our big costs. The sooner we can fix the bill that that the Republicans tried to kill, the sooner we will have lower health care costs and better health outcomes. We have the ability to cut health care costs in half over time.

If we make these cuts we will have enough to create 5 million jobs. That will jump start the economy. Each full-time job in a down economy creates 1.9 other jobs. That means that we would basically be out of the recession as soon as we could implement the hiring process.

This is something that needs to be done. Forget that those in the income category now paying 35% and worried about paying 39% would have been paying 74% before Reagan. Now, those over $250,000 will go back to the Clinton rate that means that the government will regain about $60 billion a year. All these things would generate enough revenue to pay back the investment in expansion within a couple of years. But there is one significant difference.

The five million on the direct public jobs would pay taxes plus the people in the private sector would be paying taxes and many companies would either be saved or would grow and hire more people. That would create the kinds of revenues that would make the draconian budget cuts unnecessary.

Tags: ·····

2 Comments so far ↓

  • KenR

    Reducing our Iraq and Afghanistan and general military expenditures (by at least 10%) should be a high priority. With six months’ worth we can start creating jobs. By the way, the Neocons are the best allies of Osame Bin Laden. His aim was not to conquer Afghanistan or Iraq, but to weaken America…oops! we ignored money and were sent out shopping.
    Health care: Yes, just open up Medicare, but please, a public option means everybody and that means healthy young people you are entering their first jobs–even at sixteen. Of course, this is only possible with sensible minimum wage levels and the free right to unionization.
    The government has got to return to kick-starting the economic development and to castigating the Neocons (Chicago Style!)

  • Joshaughn

    Chicago style? Amen, Ken!