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The Economics of Destruction

September 18th, 2014 · No Comments · ALEC, Budgets, Corporations and Industry, Democracy, Economics, Fascism, Labor, Lobbying, Politics, Populism, Taxes, Wall Street

We are in a very serious time in the history of this country. Although it may not seem so to many, about 80% of the population are doing relatively well. But it may be a false spring. It is true that 20% of the population pay about 70% of the income taxes in this country. That is a family of two that earns at least $104,000 household income That segment is doing well and the government does well from them.

The Switch
But that isn’t the real story any longer. It was the issue when Reagan reduced the top rate on the rich from 70% down to 28%. Even with a bunch of other revenue generating taxes, but not personal income taxes, the budget deficits tripled. Today, while it is true that the top personal income tax rate is only 39%, the problem of both corporate and personal income tax shortfalls has been with us so long, that financial power increased and that financial power became political power in the hands of unscrupulous corporate owners.
Today, every large industry has a small oligarchy, a handful of corporations that controls it. The owners of those few companies hold the power, through political contributions and lobbying efforts in Congress. We have no small businesses to speak of any longer. We have local outlets of national chains, but they are not real “small businesses.” Five or six banks control half the financial assets in the country, with branches everywhere.Politically, we have hugely wealthy individuals who sponsor SuperPACS and secret 401-c-3 groups who manipulate elections. These people practice the economics of destruction.

The Falling Middle Class and the National Debt
Because we know the true numbers in all the economic categories and watch the progress or lack of progress in society, we know that those in the middle class and lower middle class are doing less well. Their incomes are not rising but falling. Household income has fallen, not risen in the last ten years. That trend is accelerating. With the top income really only paying Romney rates, 15% or less, and with corporations paying no taxes, the plan of the oligarchs to bankrupt the country is working. An income of only 18% of GDP can no longer support a country in which its major corporations sell here but operate overseas. We now have a national debt, thanks almost exclusively to Ronald Reagan, George H.W. Bush, George W. Bush and Richard Cheney, of $17 trillion dollars. Clinton, after accumulating another $1.6 trillion before he could balance the budget, eventually did just that, remarkably creating surpluses and a budget that would continue to write down the national debt until, according to the CBO tables it would have been completely paid off by 2011. Instead, Bush and Cheney came in and basically looted the U.S. Treasury. Halliburton, the company of which Cheney had been President, received $36 billion in government contracts. Now instead of $5.6 trillion debt—or no debt–we have $17 trillion debt.

If you are one of the one-in-five members of society doing well, you probably work hard, have a good education and own a substantial piece of your own home. If you don’t have those characteristics, you are not likely to be in that income group any longer. Almost two-thirds of the country says that they live paycheck-to-paycheck.
State governments who were doing passably well prior to 2008, are often now in trouble. The people who were selling them inflated securities, left, commissions in hand. But the states held pension funds and other obligations that were greatly diminished in value. Now the most common option among the ALEC sponsored Republican Governors is to cut pension funds for teachers and other public employees. Or even to cut the actual funds for education.
When Clinton left office, Wall Street was doing just fine. There was a slight blip when the “dot.com” phase ended. But many of those who briefly lost their jobs were able to regain them. How? Well, it wasn’t too difficult. Unemployment was only 4%, the country was smaller, the top personal income tax rate was 39.6% and the government budget was in balance. In 2000 there was a mild recession when many of the late blooming dot.com companies, often built on improbable business plans…failed. There was some unemployment but many in those fields who had been laid off when some companies failed, found jobs with the companies who succeeded and grew large and profitable. The people who lost money were the venture capital companies, basically those who came late to the digital boom.

Wall Street’s Responsibility
Today things are radically different. Wall Street’s most recent crash, we all know, or we should have learned…given the enormous literature on the subject…was the result of a series of actions that were so closely held among Wall Street insiders that it is hard to believe that the causes were not illegal activities, collusion and outright fraud. The sequence of events can be told quickly. With no new manufacturing being done in this country after Bush came to office, and with jobs and corporations being sent abroad, the capital of the country had nowhere to go. Interest rates should have climbed and money should have been withdrawn from the system as the economy improved after the dot.com bubble and the Bush 9/11 disaster fall-out came back to normal. But it was not.
Alan Greenspan kept money cheap and with nowhere else to go domestically, the housing sector, very sensitive to good interest rates, began to expand. Clinton had developed a housing initiative that got more poor people into homes. But the requirements, using Fannie Mae and Freddie Mac, quasi-government agencies remained strong for banks and difficult for the poor…but less stringent than before Clinton. Bush also said that he wanted people to own their own homes.
The problem arose when home builders, realtors and mortgage companies broke out of the established bounds of lending and went crazy, creating a housing bubble. Between 2001 after Bush took over, average new home prices were slightly more than $200,000. With nowhere else for money to go, and with Greenspan holding the cost of money so low, home prices grew to over $325,000 by 2007. Then they began a rapid decline which saw prices drop to about $250,000 in one year, the large drop in average home value in the history of the country. Many people like Representatives Barney Frank and Mike Oxley and numerous economists warned that there was a housing bubble and it needed to be addressed. Part one was that the home construction market and home buying was becoming speculative and dangerous. The next part that was even more dangerous was when Wall Street speculators began to buy up larger than normal amounts of mortgages from mortgage companies and put them into securities. They sold them like securities. They rearranged them, bundled groups of them together and then sold them as investments. They were often very unreliable security “instruments” but they were sold anyway, on the promise (that everyone basically understood was false and ridiculous) that they were somehow insured. So what happened?
Home prices finally began to fall, home sales fell off, people lost homes, companies lost money, stocks began to fall, and the whole house of cards, mortgages, stocks and eventually the economy…everything came to a huge crashing end because there was about 60% of what had been considered valuable that was now seen to have been merely hot air. No value. A house worth $300,000 in 2008 was worth $200,000 in 2009. Stocks worth $25 in 2008 were worth $6 in 2009. Lots and lots and lots of people lost huge amounts of money. At one point, one person in 9 was out of a job. Since the period from early 2009, more than 5 million people have lost their homes to foreclosure. As of the middle of 2014, there are still 690,000 more homes still working through foreclosure.

Emergence of Right Wing Fascists
Why is this important? Because there is a fundamental change happening in our economy. In 1970, the American Middle Class was the most solid in the world. It was what we were known for. By 2014, much of it has disappeared and numerous very wealthy groups have purchased elections in many areas to insert religious fanatics, warmongers, gun nuts and others with personal axes to grind into Governors mansions, and seats in the House of Representatives. Even huge Conservative pains in the ass Senators like Orin Hatch were not far enough Right Wing for the billionaires and they supported their own “do-nothing” Tea Party candidates to try to defeat health care, cut back on Social Security, and create larger budget deficits to bankrupt the country.
So many Americans now rely on the country for assistance with retirement or health care…areas where the private sector failed through greed and exclusion, that government is essential for those 80% who do not live above the high-income line. Those 8 out of 10 need help with retirement, with drugs, with Medicare. Those 8 out of 10 need a government to insure that they are not cheated by crooks or do not lose their homes as millions upon millions did under Bush and Cheney’s policies. The billionaires don’t need government. They want it to go away. Whether it will or not is the essential question of our day.

The Rich Get Richer, the Middle Class Gets Poorer
In household net worth, that is to say, the value of what we earn and own after subtracting what we owe, our individual net worth is just $45,000 and household net worth about $90,000. We are 19th in the world, behind all the European countries, plus Japan and others above us. But here is an interesting point. If you calculate our—average, not median—net worth it is much better. Why is that? Well, when you add the net worth of the billionaires (42% of the world total) and and the net worth of people who have more than $50 million (49% of the world total) it raises our average–or theoretical–net worth to $210,000. As an example our real household net worth (the $90,000 number) is less than half Australia’s median household net worth of $219,000. More Europeans own homes than we do now. They have far more money set aside for retirement.
Our median income in 1999, according to government statistics, was $56,000. In 2012, it was $51,000 and going down. Yes, Right to Work, and the strong $2 billion industry created to bust unions and to lower wages and benefits for workers have done their jobs. Oddly enough these were sponsored by organizations like, the Chamber of Commerce, now working for the giant corporations, by Americans for Prosperity, which is still working for the health care industry to prevent universal health care and reduced medical costs and by ALEC, the association of corporations which now writes legislation for over 25 Republican state legislatures and is funded by corporations like Koch Industries, Home Depot, Federal Express, Comcast, AT&T, Boeing, and groups like the NRA. The Republican Party also held the minimum wage to $7.25 until a breakthrough just recently after poverty levels grew to become an international scandal and began to make “American exceptionalism” a joke and a point of ridicule by government leaders all over the globe.
By the way, there are a number of Right Wing commentaries that claim the net worth of Americans to be $300,000, $400,000, even $700,000. This is nonsense, or simple lies, depending upon your opinion of their motivation. One or two people like Bill Gates and Warrant Buffett or the Koch Brothers or the Waltons of Walmart (worth $148 billion) will skew the numbers dramatically but even then not even close to those numbers. There are 50,000 people in the U.S. with over $1 billion in net worth. But that only proves that people under the median ($90,000 according to our government) are actually much poorer than even those numbers would show. And this only talks about white Americans.
Here is the truth about African-Americans. Although adjusted household income has grown to about 60% of white incomes since the 1960s when it was about 55%, median African American households, on average live barely above the poverty level. In addition, African American household net worth is an incredibly low $13,000. (Yes. Those are the numbers. American Dream not working out for African-Americans. Deplorable and racist.) We know one reason. African American home values are only about one third of the value of homes of white Americans. Also, when you are last one hired in and first one laid off, you do not stay employed in a downturn and often do not have steady income or a steadily rising income. As a result African-American families cannot sustain incomes long enough to get out of debt or accumulate assets. (At this point, one third of all U.S. families, black or white, have at least one bill that is in collection!) African-American families, through racism or lack of education or suppression of opportunities by white Americans or simply in some cases because they live in communities that foster despair and frustration, the African-American experience in this country is one of deliberate delivery into second class citizenship. They are a subsidiary society. And those who escape it are not simply those who “work hard and get good grades.” They are people who have overcome other obstacles that would be virtually unimaginable to white Americans.
Of course average white American families are under siege also. We have created a monster with our tax codes. The President and founder of the Chinese giant Ali Baba, the multi-billionaire entrepreneur, Jack Ma, has said that his stockholders are not his prime concern. His customers are his prime concern and then his employees and only then his stockholders. He thinks that American companies are shortsighted and will decline if they maintain this attitude. We see it already, don’t we?

Right-to-Work and the Deliberate Reduction of Wages and Living Standards
People love to be entertained with cable TV but hate being overcharged and treated like dirt by the cable companies. So people are moving away from cable in droves. In 2012, cable companies lost 1.4 million customers. In 2013, they lost 1.7 million. It is so bad that Comcast has issued a directive that cancellations will only be taken by specialists whose job it is to retain customers. One of these recently and famously denied to a customer on a recorded call that she was even allowed to cancel services!
This brings us to the idea of restricting and controlling markets and segments of society. The goal of the Right to Work people, those who want to see all states set up Right to Work legislation…attempting to bust unions…is really to control workers. They want to control wages and working conditions. For example, a common control factor is for the business owner to tell the employee whether he or she will be paid off in higher overtime wages or paid off in comp time, days off from work. Well, of course, the simple thing is for corporations to say that the person cannot have the time off for business reasons. Who could object to that? Result, the worker must work additional hours. The worker does not earn overtime pay. The worker, at the end of the year, loses days off that were awarded in lieu of actual cash. Overtime money has always traditionally been savings, or college money or home repairs money. You cannot spend days off, particularly if you never get to use them. Business owners like billionaire aluminum siding queen, Diane Hendricks, who on a video begged Governor Walker to institute “Right-to-Work” legislation in Wisconsin, presumably in return for her $500,000 campaign contribution, also wants to hire workers, fire them, and then hire new workers at lower wage levels. This from a woman who is already personally one of the richest women in the United States. Diane Hendricks apparently does not see her customers as coming first, her employees second and her stockholders third. She apparently sees herself as first, second and third….all three…and any tin-horn politician she can buy as number four.
So, let’s say that billion-heiress Diane Hendricks only wants “Right-to-Work” legislation in Wisconsin so that she can be more beneficent to her employees without the interference of a union. She can do that easily. Just make her employees happy. Then they will not be susceptible to union entreaties. On the other hand, if unions do organize similar workplaces in Wisconsin, and those employees have health care, pension plans and good wages and working conditions, the Diane Hendricks types in the Wisconsin working world will have to step things up a little to be competitive for good workers.
In states where there are Right-to-Work laws, unemployment numbers are no better. Just as many people are unemployed as in other states, only the employed work in Right-to-Work states work for lower wages. About 5% to 8% fewer workers belong to unions as a result of a state becoming a Right-to-Work state but the remaining union workers still have their same rights. Of course the big problem is that in Right-to-Work states non-union workers get the same benefits as the union workers even though the non-union workers, under Right-to-Work laws are not obliged to pay dues. In Right-to-Work states, even though there are still many unionized companies with high wages and benefits, the overall incomes, benefits and working conditions are lower. In addition, in those states health care and the K-12 educational systems, welfare systems, and social programs rank among the worst in the country. In fact, in the state where Diane Hendricks asked and Governor Walker agreed to promote Right-to-Work, his job creation skills have not been helped by his anti-union stance. He has fallen short of his job promises by 150,000 jobs and ranks variously between 40th (by a Right Wing web site) to 49th on the scale of governors bringing in new jobs.
Union membership has fallen dramatically since 2001 when the Republicans for some unknown reason gained complete control of government. They began their campaign, with government regulations and even incentives to move jobs abroad. There was nothing unions could do. Laws were such that corporations could outsource and build new plants abroad. And they did, using the excuse that wages would bring lower prices and lower prices were needed to be competitive. We know now that this was in most cases, a lie. Some companies, like Walmart, did outsource overseas and encouraged other U.S. corporations to make products in China to Walmart’s specifications and prices which could only be met by workers making a fraction of what U.S. worker make.
American Corporations and their ally, the Republican Party and its even further Right Wing component, the Tea Party have created the union busting industry, now something like $3 billion and climbing, to discredit unions, call them thugs (when they aren’t busy calling Occupy Wall Street or other Occupy…terrorists.) We now have about 7% of U.S. workers in private unions. Overall, we have about 12% in both public and private unions. The Republicans are doing their best to try to eliminate the U.S. Post Office. They have repeatedly lied about it on the floor of Congress. And they want to substitute private delivery services, which would make a forty-seven cent first class mail stamp go to $1.25 and even then mail would not reach every citizen. The Republicans basically feel that mail should only be delivered to businesses. (They don’t feel that way but the billionaires who pay their salaries in ALEC and give them the money to go on TV to lie and stay in office do feel that way.) And the second reason they are attacking the U.S. Postal Service is that the postal union is the largest and most powerful voice for the People and they want to get rid of it.
We mentioned the far higher living standards in Europe. Do you know how many people belong to unions in Europe? In the Scandinavian countries…much smaller than the U.S., with less national debt and a much higher standard of living for the average worker, there is a 70% participation in unions. Germany, which is probably the most economically sound country in the world right now has 30% of its workforce unionized. Ireland has 35%. Netherlands has 50% and Canada…28%.

The Struggle Against Fascism
Some people find sports metaphors useful. Professional football plays about 16 games a year, so if a team starts out well, everyone anticipates that it will be in the playoffs, perhaps in the championship, the Super Bowl. But after one game it is very difficult to know how a team will do. So this year, the Chicago Bears were scheduled to play a supposedly weaker team in their first game. The Bears played poorly and the other team won. In analyzing why the Bears did not win, there were almost as many theories as there were sportswriters. The offense was weak. The defense was porous. The special teams–kickers and those responsible for stopping the other team on kickoffs and punts–seemed disorganized. The coaches were bad. The players were bad. The whole thing was a mess. The season was in serious jeopardy.
Then came the second game. They played against the Super Bowl champion from two years ago and one of the most powerful teams in the National Football League. And the Bears won. How did they win? It isn’t magic. The players were motivated. They exerted maximum effort. They played with a desperate intensity. The coaches had them organized and ready. They took advantage of opportunities to score. They had some luck. And the other team became confused by this team that was stronger than they had anticipated. Most of all, the Bears–down by quite a few points, early in the game–didn’t give up.
There is a parallel with politics. Once Citizens United came out, the other side had won the first battle. They had won the legal right to spend as much money as they had, if necessary, any amount, all of it if they so desired–to defeat an opposing candidate. The rich could afford to hire propagandists to make people believe that good, decent candidates were fools or crooks or both. They could try and, many people felt, could or would succeed in persuading the great unwashed that they, the rich were proposing all these good laws that benefitted the masses. They said that creating monopolies would lower prices and streamline services. Buying up legislators would somehow reduce taxes. Giving tax breaks to the rich would somehow raise more government revenues. The poor and the elderly, even those who had lived in the same house in the same neighborhood for 40 years must be committing voter fraud, and so needed to prove that they were citizens and registered voters. Voter fraud actually occurs in .00007 of the votes cast.
But all this money spent to defeat candidates didn’t work. Fifty-four percent of Americans chose the daily-demeaned and rebuked President Obama over the slick, supposedly business-savvy Mitt Romney. Many fine Democratic legislators, members of the House of Representatives and the Senate were targeted by the Right Wing money boys. Huge amounts of money were spent to dislodge them from office. But in case after case, it did not work. More Republican and Tea Party members were elected but that was because traditional districts were redesigned in 2010 by corrupt state legislatures to create more Republican districts and create fewer, larger Democratic districts. The money had worked in one instance. Under the radar the Koch Brothers and their alliance of corrupt corporations called ALEC, made up of Fascist corporations like AT&T and Comcast and Home Depot and Boeing elected 29 Governors and Republican legislatures.
Despite the huge expenditures on the Right, the American People came through. They organized and they made sure that everyone got to the polls on time. But the people with money haven’t given up. They don’t have to leave their yachts to find hate-filled, fanatical or venal elements in society who want paydays like the $40 million the Right Wing pays to Rush Limbaugh or the $20 million to Sean Hannity or Glenn Beck.

Americans Can Win the Country Back
It is time to prepare. Take someone to the polls. Get your team organized. Find that desperate passion to literally…not figuratively but actually get out and save Democracy in this country. Because 29 states already have governors and legislators who are trying to undo the society we have built up for 100 years. Like all Fascists, they believe that if they achieve their goals, they will be rewarded by the billionaires, and the corporations. They are the Quislings, paid to turn traitor on their own fellow citizens.
The rich believe that they cannot be stopped and cannot have their lives of privilege interrupted. That’s what the nobility thought in 1789 France and in 1917 Russia and that’s what King George’s allies, the Royalists thought in 1776 America. And it is what the Nazis thought in 1933. You must prove that we do not need a wholesale civil war again, blood in the streets, to let the billionaires know that they cannot take over this country. Let them know that they cannot win by purchasing our electoral system and our candidates, turning this country into an oligarchy with 3 million rich and 300 million wage slaves, with no rights and eventually no property.
The top one percent, statistically about 3 million people, already own half of everything (by now it may be 60%) in this country and it is getting worse by the hour, while the country itself gets none of that revenue and will go broke if it continues. If we do not assess corporations and billionaires the appropriate taxes, (which is what the political battle is all about and has been for the last 30 years) then every year the country will continue to lose another trillion dollars. How much money does one person or one family need? A billion dollars is a thousand million dollars. So it would take a person beyond 100 years, i.e., beyond a normal life cycle, to spend a billion, if spending $10 million a year. Do you think you could live on half that, say $5 million a year at least until you are thirty-five to help the rest of Americans survive? Because that is about what it would take. The top one percent has about $60 trillion in assets. If we simply raised taxes on individuals and corporations the minimal amount necessary to balance the budget, as Clinton did, and then put into place the above taxation on assets, we would have the $20 trillion it would take to reduce all national debt and have $3 trillion left over for emergencies.
Rather than having Warren Buffett and Bill Gates give their money away to research in Africa, how about taxes here at home, or expenditures to elect people who will put Humpty Dumpty back together again! Do you consider yourself an American? Your government should be able to do the best it can be, to defend you, to give you good roads, to help you start a business, to support you when your employer goes bankrupt, to offer you assistance in paying your doctor bills and to give you enough to buy food and minimal shelter when you turn 66 or 67 and can no longer work. The Right Wing wants to let the government collapse and take away all those services…which you have paid for incidentally…so that the top half of one percent can keep all of the $60 trillion in private assets that they have accumulated from the rest of us. Yes, some have invented things to earn it. But others have simply invented ways to buy up politicians to write laws that allow them to steal it from you. In 2008 and 2009 they stole $7.5 trillion in savings, in 401Ks, in home equity, all things belonging to you. Because of crooks and a crooked Republican regime. There is no point in saying “everybody does it” because most, over 95% of Democrats do not. Just look at the voting records.
This is the fight. It is coming in November. It is the Party of the Rich against the Party of the People. Get your allies together and go to the polls. Support your Democratic candidates. The Republicans and the Tea Party, as a group, have been bought by the rich and the corporations. So get out and vote and get others out to vote.
Or go out and buy a gun. Because if we lose the Senate and the House to the Fascist billionaires this time, there is a very good chance you’ll need one sooner than you might imagine.

 

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