There is an ongoing petulant argument being carried out in what one might call the economic and political press.
Should we cut government which will supposedly make us leaner and meaner and more ready to expand our economy? Or should we create more jobs, try to jump start the economy, create public jobs and revenues that can then be transitioned into private industry once investors see that aggregate demand is once again at a point that gives them confidence to invest?
There is a suspect study by two economists by the name of Carmen Rinehart and Kenneth Rogoff, both Ph.ds, both pretty bright, who said in a book called “This Time Is Different” that any country that allows its national debt to get over 90% of its GDP is headed down and will fail to grow, and that country will suffer serious long-term growth problems. Things like diminished education, social services and in particular…economic development.
The question is whether this report, if accurate, and there is some debate on that, has relevance to the United States and to our current economic condition. We have 90% debt to GDP and so the study talks about countries like us. But the issue has been clouded by the response of the Right Wing, the Republican Party. Rather than studying the issue using the information in the book, they simply used the general implications of the book to forecast the ruin of our economy out of hand. They used it to intimate that America’s economy is in grave peril.
The problem of course is that, even if the book’s predictions were accurate, the United States is far from the kind of country described in the book. The United States is the largest economy in the world. The world’s currency is our currency. We have personal assets worth four times what it would take to make us virtually debt free immediately. Not five years. Not twenty years. Immediately. We are in the unusual position of being both the world’s largest debtor nation (since Ronald Reagan) and the world’s richest nation.
Our national debt is $16.7 trillion dollars. The Republican Neo-Fascists will tell you that we have “unfunded’ liabilities of more than that. For example, we have unfunded liabilities in Social Security. If they are “unfunded” when will they be funded? The same time that the current Social Security recipients’s funds were funded…by the time they need them. In other words the prophecy of our dire circumstances is closer to a hoax than to reality. But the Neo-Fascists don’t end there.
Only the U.S. Post Office…and even then only because of legislation to try to privatize it…has a pension fund that is currently funded 75 years in advance. And only then because a lame duck Republican House of Representatives, a Republican Senate and a Republican President, the dunce President George W. Bush, inspired by FEDEX and UPS with campaign contributions pushed it through. It is the reason that the Post Office is having current financial problems.
So we don’t have an huge unfunded liabilities, something looming out there in the future that is going to one day suddenly do us in. What we need to do is balance the budget by making those rich members of society who had their taxes cut in 1981, 1983, 2001, and 2003, plus lowered inheritance taxes and huge numbers of tax loopholes created so that they often pay no taxes at all….pay their fair share of taxes again.
No one wants to hear about cutting Social Security colas on little old ladies who somehow survive on less than $1,000 per month while EXXON pays ZERO TAXES on $40 billion in profits a year. Don’t be fooled about stocks being important to pensions. Stocks will go to pension funds even if EXXON and others pay their 10% in taxes. But the owners of EXXON are not little old ladies. Remember that fewer than 5,000 people control the major corporations.
Of the Fortune 500, fewer than 2,000 people own about 30% of the stock. Do you have any idea how much money that is? Tens of trillions of dollars. The top 1% of Americans own $45 trillion in capital assets. Furthermore, many studies of the top 1% show that most of that wealth is actually in the hands of the top 10% of the top 1%. So don’t lose any sleep if Mit Romney should suddenly have to pay another 5% and move all the way up to a 19% tax rate on his $20 million a year income.
So the bru-ha-ha over the Rinehart-Rogoff study has been beneficial in one respect. The huge corporations and the super-rich who have attached themselves to this study, using their home-grown economists, have been made to question the subject. They can no longer automatically cry austerity at every discussion of the current economy.
The book questions the ability of a nation to grow with that kind of debt. The politicians took this, particularly the Right Wing politicians, whom we know now for certain work for the super-rich and big corporations. (See ALECEXPOSED.org) and they used it as an excuse to say…cut the government. Used it here and around the world to create an “austerity” movement. The idea of austerity is that if we trim back our expenses, cut back the amount of debt we incurred, then leaner governments will be more efficient and get out of the way of industry. It sounds good, but cutting governments, it turned out, just made them smaller and weaker.
The problem is that we have a gap between income, that is government revenues, and expenditures. Part of the reason the gap is so huge is that we have about 15 million people either unemployed or making so little that they pay no taxes. That adds about $700 billion annually to our costs and with no jobs added does drag down our ability to grow the economy.
So we need to do two things. We need to raise taxes on those who now have so much money that the wife of a businessman, not even the man himself, just his wife, could take $90 million out of her petty cash to run for the Senate. And her platform? Cut more taxes for the rich! So, let’s take the obvious first. Those who created the Depression, profited from it and are still profiting from it should be the ones to bear the brunt of solving it. The world problems were caused by the fraud of Wall Street. Wall Street firms like Goldman, Sachs told the government pension funds and private investment funds both here in the U.S. and abroad that they had new investments that were totally reliable because they were backed by U.S. mortgages. The problem is that they weren’t. They lied. The world crumbled.
These Wall Street hucksters knew that Americans knew that The U.S. housing market had been solid since the end of World War II, with only one glitch, during the Reagan era recession. So the securities sounded pretty good. But everyone in Wall Street was on the take and the deal was rigged. The rating agencies said the mortgage backed securities was was triple A. Insurance companies were supposed to have backstopped the securities. But it was all a huge scam.
The American people alone lost $7.5 trillion in personal wealth. Only a few people ever went to jail and Wall Street is booming…at an all-time high. The Wall Street boys were making billions, literally billions…some of them…in bonuses while the U.S. citizens and the Spanish citizens and the Greek citizens were losing everything.
The stock market went from 6900 at the bottom in 2009 to over 14,000 today and is on the verge of crashing again, only this time we have no idea why. Wall Street has become so isolated from the rest of society, yet provides over 20% of the GDP, that they have the power to make the economy go any direction they want to point it. And because of the Right Wing propaganda, all the hicks keep voting in Republicans who keep supporting them.
People lost money. They had bank accounts that said one million one day and half a million the next day. Because the value of securities that said one buck on Monday said fifty cents on Tuesday. The result was that people lost money, banks lost money, pension funds lost money and even some rich people lost lots of money…but they have lots of money to lose and still have plenty left over.
When this kind of crash happens, people pull in all the cash they can get. No loans. No investments. Just hold on to the money. “Show me the money!” So the world went into crisis and our brilliant economists tried to “figure things out.” The results, plus the fact that George W. Bush graduated from Harvard Business School and Ted Cruz graduated from Harvard Law School, should tell you something about how corrupted our educational system and thus our economics profession has become.
Our economic terrorists are those people who somehow pass through these difficult institutions and are abroad in the land with no particular knowledge or qualifications, only with a certificate. If they were pilots we would have a crash every day. If they were surgeons, people would be dying like flies. They infest politics and work for the rich, using educational backgrounds that they should not have, as authority for ridiculous proposals.
So the result is that when we ask the simple question…if we were a little bit in debt with 7 million people out of work and now we are in huge debt with with 15 million people out of work what changed? Hmmm. Let’s see….7 million: things ok; 15 million: a country in deep doo-doo. And what is the solution? The answer comes back…and is that answer “more jobs?” No. Not bloody likely from this GOP Senate. That would be too logical and simple…and it would not help the rich.
The answer given by the Right Wing Neo-Fascists is to cut more jobs. This time, let’s cut government jobs, because, thanks to the Republicans, there are no new private sector jobs. Republican Senators filibustered any investment programs to create private jobs over 200 times. So Wall Street is still riding high. The stock market is flirting with 15,000, certainly in speculative range–many multi-billion-dollar investors pulling out–and we all know that they have not changed.
So the problem is that the banks are still speculating with your bank deposits. They could fail again, and with six big banks both speculating and controlling half of all assets, we could have a worse Depression, one where 25 percent to 30 percent of people could be out of work.
So that is the first problem. Control of the economy by the banks, creating dangerous situations and still doing it in spite of what the people want and people who should know better, from schools that should know better, graduating them them and unleashing them on society.
The second problem may be perhaps generalized by saying that our current government is controlled by Neo-Fascists. It may be a broad characterization, and somewhat sinister-sounding, but the reason is that–it is sinister. Not “potentially” sinister but evil in its intent…right now. And here’s the part that relates to our economy and our government.
The Neo-Fascists, which refers to an alignment politically of one Party with heavy industry, the military, the super-rich Right Wing (there is a Left-Wing super-rich meaning some old money…think Roosevelt and Rockefeller…and some new money…think Buffett, Spielberg, Theresa Heinz and the Kennedys) Right-Wing Fundamentalist religions and the giant global corporations. In the days of Mussolini and Hitler and Franco…these were called reactionary forces, people who trusted the dictators to keep things as they were. In those days, in Italy and Spain, the Roman Catholic religion was the religion. Today it is people like Pat Robertson who preach a different kind of nonsense and the hyper-political segregationist preachers, plus the hierarchy of the Catholic Church, not the Catholic parishioners, who are the backers of the Right Wing.
Let’s define the Right Wing even further. The Right Wing is the top income group in the country who seeks political power to maintain their status indefinitely through political means. Much of their wealth is inherited. Other wealth on the Right is often from industrial consolidation enabled through politics. People like Grover Norquist have been hired to intimidate Republican politicians to vote for tax breaks for this super-wealthy segment, which then uses its newly found extra cash to elect Neo-Fascist governors, House members and Senators.
That same group has used funds from rich, anonymous sources to defeat more moderate candidates and replace them with less astute, certainly less rational and more obsequious candidates who will follow the instructions of the leaders on the Right. That would be Senators like McConnell, McCain, Cornyn, Sessions, Shelby, Vitter and others who vote 100% to obstruct any legislation that will hurt the rich.
So this second group, which is not mutually exclusive of the first–many Right Wingers are Wall Street bankers and “investors”–spends its time working for a small group of special interests. It is this group that has no qualms about voting to put guns in the hands of madmen who kill little children on behalf of the gun manufacturers.
All of the Republicans and several Democrats in states where they are politically vulnerable (though now they are almost certainly vulnerable from the Left, which is finally angry) voted against a law to make it more difficult for crazy people or criminals or Right Wing white supremacy lunatics to get guns. In the meantime, children are being killed every day by crazy people with guns.
This group, those who sponsor Right Wing Republicans and Tea Party Republicans–the vicious and radical Anti-Middle-Class corporations and economic aristocracy have organized themselves into a funding organization for Neo-Fascists. These number among themselves House members like former physician Michael Burgess who relentlessly fights against health care reform while spouting speeches on the floor of the House about how much he cares…as a doctor…for those who have pre-existing conditions.
What Michael Burgess doesn’t tell his constituents is that he voted against every bill that has now at least, even with the sequester, allowed hundreds of thousands to get health insurance. In 2014, despite his efforts and the votes of every other Republican…every single Republican in the House of Representatives…the Affordable Care Act will usher in a new era of health care in this country. The health insurance companies have been defeated so long as we continue to elect good Democrats, who unlike Burgess to not work for the health insurance companies.
Always remember this. Health insurance is not a good business if it is working properly. The reason it works now is that the health insurance companies can pick and choose customers, and…at one time…could simply drop you if you cost them too much money. Second it is only good because they simply keep marking up the prices every year and corporations who pay the bills for health insurance keep adding health insurance to the price of business and also making workers pay a higher and higher share of the premiums.
Starbucks is one of the largest corporations in the United States. After labor itself, their second greatest cost is health insurance. In Canada, it is not. Canadians already have health insurance. And despite the lies about accessibility told by every pandering Republican Congressman and Senator, 95% of Canadians say that they are happy with their health care and would never change their system of health care delivery. It is not the lowest cost in the world, but is is almost half the cost of U.S. health care. And unlike the U.S., where 50 million Americans use the emergency room for health care…in Canada everyone has health care automatically.
So, the point is that our economy is not going to be restored by those who claim that they will make things better in the ways that they have claimed since 1981. And what are these Right Wing Republican claims?
1. Cutting taxes on the rich, while it will temporarily cost the government revenues, will eventually allow the economy to expand and the additional revenues will more than pay for the tax cuts and will expand the economy much faster and to a much larger size than without the tax cuts.
This is patently false and can be proved in a dozen ways but here are two that are sufficient. The CBO says that not only does that not work, but that income tax cuts done for this purpose, including those from 2001 and 2003, not only do not pay for themselves but cost the government somewhere between 80% and 100% of the tax cuts. In other words, the CBO says, tax cuts like these would produce something between a low of 1% of the costs of the cuts to 20% of the costs. That is why, under Reagan, we spent $2.68 trillion more than we took in, and under George W. Bush, the Second Bush, we literally spent $12 trillion more than we took in and created a Second Great Depression. This economic policy, cut taxes for the rich, then cut government services for the poor to pay for it, is what has happened. Republicans know it. They are behind it.
The second evidence is that Bill Clinton raised taxes by about 5% in 1993. As a result he was not only able to balance the budget and create surpluses but those tax increases ushered in the longest sustained period of economic prosperity this country has ever seen, and that includes the post-war period up to the late 1970s. Unemployment, by the way, under Clinton fell to below 5% and in some areas below 4% and at some times in some areas, below 2%! In certain areas, even unskilled but experienced workers were jumping from job to job as wages increased.
2. Cutting government services in order to bring down the national debt is not only wrong, it is the exact opposite of what has worked in the past.
In 1933, 1934, 1935 and 1936, Franklin Roosevelt infused the economy with more direct job programs than had been done before. It took unemployment down from 25% (and growing) to 14% (and falling.) But confident that the economy was coming back, the Congress insisted that the FDR balance the budget. In 1937, he did. And it was a mistake. The economy was not ready and unemployment grew rapidly to 19%. Once again, they returned to direct jobs and continued to do so, with unemployment falling eventually to 9% before the war mobilization took hold and unemployment literally was under 2% in 1945. (Of course millions of men were at war, but we were also at maximum industrial capacity.)
So what is the answer?
Many people now realize that when Americans are out of work or have no health insurance, other Americans will eventually pay the bill. Europeans have known this for a long time. Consequently, we have done to some extent what Europeans have done, but half of our population has done it grudgingly. A new selfish, me-first poliical party, funded by some of the Right Wing super-rich have hired the Republican Party to avoid helping other Americans.
But it happens anyway. Good people eventually prevail and government eventually steps in to help those temporarily disconnected from an income. And that is costly. Because it is something called unemployment insurance. And that is a palliative and one that is very expensive. So what the Germans do is to keep people employed. They modify hours and adjust programs that reduce unemployment as much as possible because even a worker making less is still employed and still advancing that small part of the economy for which he or she is responsible.
So how does this relate to aggregate demand? What it does is to spread the costs of lower demand across a large number of industries and creates shared responsibility. People are not dropped like a bag of potatoes as they are here, almost exactly the way they were treated nearly 100 years ago. Europe has made progress in worker-corporate relations. We have regressed since Reagan.
The proper solution is to maintain employment as long as possible and as widely as possible. Yes, this does require government intervention. It requires planning. and yes, this is against everything to which these regressive, 19th Century industrialists want to return. They want high unemployment with fewer social welfare programs. In short and in regular parlance, that means they want lots of people out of work, desperate for a job so that wages will be low and so that their taxes will be low. This is the goal of this segment of the population who have incomes of $83,333–per month–and up!
So the Neo-Fascists (Neoconservatives, Republicans, Tea Baggers–whatever you want to call them) have rooted themselves firmly in the reactionary policies of the early 1900s. And why have they done so? Very simply because the Republican politicians have been filtered through the vetting process by these huge industrialists and the Super-rich. If the do not adhere to anti-labor, pro-NRA, anti-abortion, anti-gay, anti-government policies, they do not become candidates in the new, Neo-Fascist, Republican Party. This is a political party owned and operated by very wealthy, multi-billionaire individuals who will stop at nothing to destroy the Middle Class.
The anti-MIddle Class policies of the Right Wing super-rich have caused something like 47 million Americans to fall below the poverty line with no hope of rejoining the Middle Class. The Super-rich have created manufacturing outside the U.S. They control the financial sector, the banks and the flow of money. They contributed over $2 billion in the last election to see to it that Right Wing Neo-Fascists were elected.
The immediate goal is simple for any thinking American. The rich have more than they have ever had. They have the lowest taxes and the highest share of total income by a ratio so far beyond anything that has ever happened that it literally will not fit on a chart that compares it to previous periods. On the part that shows current income compared to other citizens, it goes up and out of the chart. Once again, 1% of the people of this country own 50% of all assets and earn 80% of current income. Think of how much you make and then try to understand how much that means for that Super-rich individual.
So we need to toss out all politicians who have created this situation. Right now that is easy. Anyone who does not think like one of the Super-rich is not a Repubican and anyone who is a Republican votes in a bloc, as anyone who looks at Congressional votes can clearly see. The idea that “both sides are at fault” is a lie. Every single Republican voted against health care for American Citizens. Then, even after it had been voted in, a program that was not very radical but a start towards reducing health care costs and towards incorporating the 50 million Americans without health care and without Medicare or Medicaid, the Republicans simply tired to repeal it. “Repeal, repeal, repeal” was their only call and that was because they knew that any serious proposal would eventually eliminate the high-profit health insurance gangsters making obscene profits over the bodies of American men, women and children.
We have seen recently a clear indication of how serious this matter has become. In recent surveys, after the massacres of children by crazy people with automatic weapons, the American People, when polled, were 90% in favor of tighter controls on guns, especially automatic weapons of war. But the Senate, under the control of the rich and powerful who are aligned with the National Rifle Association–gun manufacturers–voted down such legislation. We stopped being a Democracy that day.
We must end complacency. Every single person must become involved. Rich individuals and corporations, people like Donald Trump, casino owner and Sheldon Adelson, casino owner and the Koch Brothers, the worst chemical polluters in the history of the country…worse than the robber barons of the early 1900s…have more money than you and are spending it in the billions to control your life. ALEC, the secretive consortium of companies that Americans support every day, like Coca-Cola and Kraft Foods, have spent billions buying up local politicians. Governors like Scott Walker of Wisconsin, lie to the people that they can’t afford schools with smaller class sizes while giving $168 million in tax breaks to Wisconsin businessmen…not the people. The people lose firemen, teachers and nurses in “austerity” programs while businesses get tax cuts that we have seen the CBO say…do not work. They are a scam.
Is the solution a partisan message? Of course it is. When there are people out to get you, holding down the economy, voting against jobs, against replacing our ever-increasing costs of fossil fuel with the new energies being developed in China and Europe already, and causing the failure of U. S. start-up companies in wind and solar, then you need to vote Democratic. When 80% of all new income is going to the top 1%, and they have bought up 100% of the Republican Party, then you need to vote Democratic. When they are talking about a war with Iran…which would be a disaster…but can control politics so completely that we cannot prevent the massacres of 20 of our own small pre-school children, we need to vote Democratic.
This is the solution. It is not economic. It is political. Vote out the Neo-Fascists working for the Super-rich. Vote in Democrats who will work for the People. And, if they do not work for the People, throw them out and find people who will.