Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset – their home – keeps shrinking in value.
Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on – such as schools and roads, or safety nets such as health care for the elderly and poor.
Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power.
These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices – all of which make the financiers even richer, because they own so many of shares of stock and run the casino.
Now, imagine that among the richest of these financiers are people called private-equity managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit.
Although these private-equity managers don’t even risk their own money – they round up investors to buy the target companies – they nonetheless pocket 20 percent of those fat profits.
And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent – even though they themselves made no investment and didn’t risk a dime.
Finally, imagine there is a presidential election. One party, called the Republican Party, nominates as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes – a lower tax rate than many in the middle class.
Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more – so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on – Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement.
What happens next?
There are two endings to this fable. You have to decide which it’s to be.
In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled – beyond your imagination.
The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.”
And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway).
But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back.
The citizens repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone.
Just a fable, of course. But the ending is up to you.
Part 1 of this series covering the Reagan years can be found here. This post relies on data from the following sources: Federal Income Tax Rates History, Social Security and MedicareTax Rates, Historical Capital Gains and Taxes and Party Control of Congress and the Presidency. In the first part we pointed out that Reagan under the tutelage of Ayn Rand lover Alan Greenspan flattened the tax code to just two rates: 15% for anyone making less than $56,427. and 28% for anyone making more than that amount. This effectively raised taxes on the poor and lowered them on the rich compared to the day Reagan entered office when the tax rate was zero on the poor and 70% on the rich. Reagan and Greenspan also drastically raised Medicare and Social Security (payroll) taxes which affect mainly the poor and middle class. Bush Sr served from 1989 till 1992 when Clinton took over. In 1991 under a Democratic Congress, Bush Sr raised taxes despite his pledge not to. Remember his campaign promise: "Read my lips. No new taxes." However, despite the big brou ha ha, Bush did not raise income taxes on the poor and middle class; he only raised them on the rich. You would think that, if the middle class and poor were paying attention, they would have been satisfied with this development and reelected Bush in 1992. But the Republicans and right wing media talking heads raised such a hue and cry, convincing voters that Bush Sr had raised taxes on all people and not just the top few percent, that Bush was defeated and Clinton elected. What Bush did was to add a third tax bracket of 31% for incomes over $135,336 while leaving unchanged the two lower tax brackets. Bush "unflattened" the tax code slightly which should have raised a cheer among the middle class, but it didn't due to the fact that they were convinced by the right wing punditry that Bush raised taxes period, end of story. They didn't distinguish whom Bush raised taxes on. They only paid attention long enough to understand that Bush raised taxes.
Bush Sr also raised FICA and SECA (Social Security and Medicare) taxes. These went from 7.150% for employees and employers in 1987 to 7.51 in 1988 and 1999. The corresponding rates for the self-employed went from 14.3% in 1987 to 15.02% in 1988 and 1989. So what Bush gave with one hand to the poor and middle class in the form of not raising their income taxes, he took away with the other by raising FICA and SECA taxes which affect mainly the poor and middle class. The net effect was to make the total tax burden on the middle class as great or greater than the tax burden on the rich since the rich pay little FICA and SECA tax compared to their total income. Bush Sr and the Republicans were at it again in 1990, a year in which they raised FICA and SECA taxes to 7.65% for employees and employers and 15.3% for self-employed where they have remained to this day. So Bush Sr was not such a traitor to his class as one might think from just considering the income tax structure alone. The net effect was that he raised taxes on the poor and middle class much more than he raised them on the rich.
Bush Sr had a Democrat controlled Congress during his four year term and they managed to raise the capital gains tax from 28% to 28.93% in 1991, a piddling amount compared to the huge decreases which were to come later during the Bush Jr administration. So the rich had their capital gains taxes raised for the last year of the Bush Sr administration through no fault of Bush's own. It was the Democrats who pushed this tax increase through.
Clinton took over in 1993 and with a Democratic Congress unflattened the tax code even more adding two tax brackets at the high end. The following is the tax table for married couples filing jointly, inflation adjusted.
Despite the fact that Clinton raised only taxes on the rich and kept them the same on the poor and middle class, a fact that the vast majority of voters should have been happy with, Republicans managed to tag Clinton and the Democrats with the "tax and spend" and "big government" labels. FICA and SECA taxes remained the same under Clinton.
In 1994, half way into Clinton's first term, Republicans took over control of Congress. Despite that fact the income tax code remained substantially unchanged for the rest of Clinton's Presidency with the result that, by the time Clinton left office in 2000, there was a budget surplus and the nation was on track to eliminate the national debt entirely.
Capital gains taxes were a different story. They went from 28.93% in 1991 to 29.19% in 1993. The poor and middle class swallowed the Republican hogwash about Clinton raising their taxes and elected a Republican Congress in 1994. The Republican Congress slashed the capital gains tax all the way back to 21.19% in 1997 where it stayed for the remainder of the Clinton Presidency. So despite the fact that during the Clinton years income taxes were raised on the rich, capital gains taxes which affect primarily the rich were substantially reduced. The net result was that taxes on the rich were effectively lowered and despite that fact Clinton was able to run budget surpluses during his last few years in office. Go figure!
George W Bush was elected in 2000. Then the tax cutting which led to huge deficits began - with a vengeance. "You know how to spend your own money better than the government does." The Republicans were great at formulating slogans and defining the situation. What were the Democrats supposed to say to that: "The government knows better how to spend your money than you do"? Consequently, in 2001 the top tax rate was lowered by .5% from 39.6% to 39.1%. The middle three tax rates were lowered .1%, and the tax rate for the poor, the lowest tax bracket was not lowered at all. The net effect was to give the rich a big tax cut, the middle class a modest tax cut and the poor no tax cut. Here is the tax table:
In 2002 another half a percent was cut for the four highest tax brackets and in addition a new bracket was added at the bottom thus reducing taxes on the poor to 10% up till an income of $14,967. The 15% tax bracket was the only one not cut thus making a mockery out of tax cuts for the middle class. Here is the tax table for 2002:
Table 3 - 2002 - Married Filing Jointly
Marginal Tax Brackets Tax Rate Over But Not Over
10.0% $0 $14,967
15.0% $14,967 $58,246
27.0% $58,246 $140,752
30.0% $140,752 $214,464
35.0% $214,464 $382,967
38.6% $382,967
In 2003 there was another tax cut ... of course ... but only for the rich and upper middle class, not for the middle class or the poor!! 3.6% was cut off the top tax rate! 2% was cut from the next three tax rates leaving the bottom two tax rates all the way up to an income of $69,265 virtually untouched!! All the while the right wing propaganda machine was out to convince everyone that Bush Jr was cutting taxes for E..V..E..R..Y..B..O..D..Y. Here are the sad results:
Table 4 - 2003 - Married Filing Jointly
Marginal Tax Brackets Tax Rate Over But Not Over
10.0% $0 $17,072
15.0% $17,072 $69,265
25.0% $69,265 $139,810
28.0% $139,810 $213,039
33.0% $213,039 $380,409
35.0% $380,409
After 2003 the income tax cutting frenzy for the rich was over at least for the remaining years of the Bush Jr administration. The 2003 tax table was for all intents and purposes the tax structure that President Obama inherited when he became President in 2009. The same tax structure remains in effect till this day, Obama having failed to end the Bush tax cuts due to Republican intransigence and obstructionism and to raise the top rate back to the 39.5% that it was in the last years of the Clinton administration. As a consequence structural budget deficits continue to add immense sums to the national debt, and there is Republican pressure to cut spending on social programs like Social Security, Medicaid and Medicare but, of course, they don't want to reduce spending on the military. Obama may force their hand by ending the wars in Iraq and Afghanistan and talking up his desire on the campaign stump to spend half the savings on deficit reduction and half on rebuilding infrastructure, but he will need a Democrat controlled Congress to do anything of the sort.
In addition to the Bush Jr income tax cuts for the rich, he also cut capital gains taxes substantially during his term in office, an even greater boon to the rich than the income tax cuts. Capital gains taxes went from 21.19% in 2000 to 21.17% in 2001 and 21.16% in 2002. Then in 2003 they went all the way down to 16.05%. That was followed by a drop to 15.07% in 2006 and further down to 15.35% in 2008 where they remain today. The combined income and capital gains tax cuts which benefitted primarily the rich produced disastrous budget deficits, and, since structurally the Bush tax cuts remain in effect, the Obama administration is forced to run huge budget deficits which Republicans disingenuously blame him for although they refuse to raise taxes on the rich or let the Bush tax cuts expire which would ameliorate the situation.
Raising the top income tax rate back to 39.5% and the capital gains tax back to 28.93% (an almost doubling of capital gains tax) where they were under the Clinton administration would do a huge amount to eliminate the budget deficits that Obama is unfairly being tagged with. Adding more tax brackets for incomes above $382,967 where the highest rate now kicks in would also provide even more desperately needed revenue. Today when the Fortune 400 is composed exclusively of billionaires, tax brackets in the millions and billions of dollars are appropriate and only fair. Obama has presented this rather cleverly as the Buffet rule: a boss shouldn't be effectively taxed less than his secretary. Today most billionaires pay an effective tax rate around 15% since most of their income is composed of capital gains. The only way to implement the Buffet rule is to raise the capital gains tax since the income tax no matter how high it becomes for millionaires and billionaires will hardly affect them. In addition a financial transaction tax could raise as much as $100-$200 billion a year.
Let Santorum and Romney duke it out for who will cut taxes on the wealthy the most and shred the public services everyone else depends on.
The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what’s happening to the American economy you need to look at household wealth — not just incomes.
The Fed just reported that household wealth increased from October through December. That’s the first gain in three quarters.
Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.
But the vast majority of Americans don’t have their wealth in the stock market. Over 90 percent of the nation’s financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.
Most Americans have their wealth in their homes – whose prices continue to drop. Housing prices are down by a third from their 2006 peak.
So as the value of financial assets held by American households increased by $1.46 trillion in the fourth quarter, the wealthiest 10 percent of Americans became $1.3 trillion richer, and the wealthiest 1 percent became $554.8 billion richer.
But at the same time, as the value of household real estate fell by $367.4 billion in the fourth quarter, homeowners – mostly middle class – lost over $141 billion (owners’ equity is 38.4 percent of total household real estate).
Presto. America’s wealth gap – already wider than the nation’s income gap – has become even wider. The 400 richest Americans have more wealth than the bottom 150 million Americans put together.
Given this unprecedented concentration of wealth – and considering what the nation needs to do to rebuild our schools and infrastructure while at the same time saving Medicare and reducing the long-term budget deficit – shouldn’t we be aiming higher than a “Buffet tax” on the incomes of millionaires?
There should also be a surtax on the super rich.
Yale Professor Bruce Ackerman and Anne Alstott have proposed a 2 percent surtax on the wealth of the richest one-half of 1 percent of Americans owning more than $7.2 million of assets. They figure it would generate $70 billion a year, or $750 billion over the decade. That’s half the savings Congress’s now defunct Supercommittee was aiming for.
Instead of standing empty-handed while Santorum and Romney dominate the airwaves with their regressive Social Darwinism, Democrats need to be reminding Americans of what’s happening in the real economy – and what needs to happen.
The wealth gap is widening into a chasm. A surtax on the super rich is fair — and it’s necessary.
Economic cheerleaders on Wall Street and in the White House are taking heart. The US has had three straight months of faster job growth. The number of Americans each week filing new claims for unemployment benefits is down by more than 50,000 since early January. Corporate profits are healthy. The S&P 500 on Friday closed at a post-financial crisis high.
Has the American recovery finally entered the sweet virtuous cycle in which more spending generates more jobs, more jobs make consumers more confident, and the confidence creates more spending?
On the surface it would appear so.
American consumers in recent months have let loose their pent-up demand for cars and appliances. Businesses have been replacing low inventories and worn equipment. The richest 10 per cent, owners of approximately 90 per cent of the nation’s financial capital, have felt freer to splurge. Consumer confidence is at a one-year high, according to data released on Friday.
The U.S. government has not succumbed entirely to the lunacy of austerity. Republicans in Congress have just agreed to extend both a payroll tax cut and extra unemployment benefits, and the US Federal Reserve is resolutely keeping interest rates near zero.
Yet the US economy has been down so long that it needs substantial growth to get back on track – far faster than the 2.2 - 2.7 per cent projected by the Federal Reserve for this year (a projection which itself is likely to be far too optimistic).
A strong recovery can’t rely on pent-up demand for replacements or on the spending of the richest 10 per cent. Consumer spending is 70 per cent of the US economy, so a buoyant recovery must involve the vast middle class.
But America’s middle class is still hobbled by net job losses and shrinking wages and benefits. Although the US population is much larger than it was 10 years ago, the total number of jobs today is no more than it was then. A significant portion of the working population has been sidelined – many for good. And the median wage continues to drop, adjusted for inflation. On top of all that, rising gas prices are squeezing home budgets even more.
Yet the biggest continuing problem for most Americans is their homes.
Purchases of new homes are down 77 per cent from their 2005 peak. They dropped another 0.9 per cent in January. Home sales overall are still dropping, and prices are still falling – despite already being down by a third from their 2006 peak. January’s average sale price was $154,700, down from $162,210 in December.
Houses are the major assets of the American middle class. Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now “underwater”, owing more to the banks than their homes are worth on the market.
Optimists point to declining home inventories in relation to sales, but they’re looking at an illusion. Those supposed inventories don’t include about 5 million housing units with delinquent mortgages or those in foreclosure, which will soon be added to the pile. Nor do they include approximately 3 million housing units that stand vacant – foreclosed upon but not yet listed for sale, or vacant homes that owners have pulled off the market because they can’t get a decent price for them. Vacancies are up 1m from 2006.
What we’re witnessing is a fundamental change in the consciousness of Americans about their homes. Starting at the end of the second world war, houses were seen as good and safe investments because home values continuously rose. In the late 1960s and 1970s, early baby boomers got the largest mortgages they could afford, and watched their nest eggs grow into ostrich eggs.
Trading up became the norm. Homes morphed into automatic teller machines, as baby boomers used them as collateral for additional loans. By the rip-roaring 2000s, it was not unusual for the middle class to buy second and third homes on speculation. Most assumed their homes would become their retirement savings. When the time came, they’d trade them in for a smaller unit, and live off the capital gains.
The plunge in home values has changed all this. Young couples are no longer buying homes; they’re renting because they’re not confident they can get or hold jobs that will reliably allow them to pay a mortgage. Middle-aged couples are underwater or unable to sell their homes at prices that allow them to recover their initial investments. They can’t relocate to find employment. They can’t retire.
The negative wealth effect of home values, combined with declining wages, makes it highly unlikely the US will enjoy a robust recovery any time soon.
Under these circumstances it’s not enough to rely on low interest rates and make it easier for homeowners who have kept up with their mortgage payments to refinance their underwater homes. The Administration should also push to alter the federal bankruptcy law, so homeowners can use the protection of bankruptcy to reorganize their mortgage loans. (Few will actually do so, but the change would give homeowners more bargaining power to get lenders to voluntarily alter the terms.) A second possibility if for the Federal Housing Administration to offer to take on a portion of a household’s mortgage debt in exchange for an equitable interest in the home, of the same proportion, when it is sold. Such debt-for-equity swaps could help homeowners now struggling to keep up with their mortgage payments, while not adding to the federal budget in future years when housing prices are expected to rise.
But whatever is done will not affect the fundamental change that’s come over Americans with regard to their homes. It’s not clear what will take the place of houses as the major investments of the American middle class.
[I wrote this for the Financial Times, where it appears today]
A cushion of reliable income is a wonderful thing. It can help pay for basic necessities. It can be saved for rainy days or used to pursue happiness on sunny days. It can encourage people to take entrepreneurial risks, care for friends, or volunteer for community service.
(Credit: Rifqi Dahlgren under a Creative Commons license from flickr.com)
Conversely, the absence of reliable income is a terrible thing. It heightens anxiety and fear. It diminishes our ability to cope with crises and transitions. It traps many families on the knife’s edge of poverty, and makes it harder for poor people to rise.
There’s been much discussion of late about how to save America’s declining middle class. The answer politicians of both parties give is always the same: jobs, jobs, jobs. The parties differ on how the jobs will be created — Republicans say the market will do it if we cut taxes and regulation. Democrats say government can help by investing in infra¬structure and education. Either way, it still comes down to jobs with decent wages and benefits.
It’s understandable that politicians say this: it was America’s experience in the past. In the years following World War II, we built a solid middle class on the foundation of high-paying, mostly unionized jobs in the manufacturing sector. But those days are history. Today, automation and computers have eliminated millions of jobs, and private-sector unions have been crushed. On top of that, in a globalized economy where capital can hire the cheapest labor anywhere, it’s no longer credible to believe that America’s middle class can prosper from labor income alone.
So why don’t we pay everyone some non-labor income — you know, the kind of money that flows disproportionally to the rich? I’m not talking about redistribution here, I’m talking about paying dividends to equity owners in good old capitalist fashion. Except that the equity owners in question aren’t owners of private wealth, they’re owners of common wealth. Which is to say, all of us.
One state—Alaska—already does this. The Alaska Permanent Fund uses revenue from state oil leases to invest in stocks, bonds and similar assets, and from those investments pays equal dividends to every resident. Since 1980, these dividends have ranged from $1,000 to $2,000 per year per person, including children (meaning that they’ve reached up to $8,000 per year for households of four). It’s therefore no accident that, compared to other states, Alaska has the third highest median income and the second highest income equality.
Alaska’s model can be extended to any state or nation, whether or not they have oil. Imagine an American Permanent Fund that pays dividends to all Americans, one person, one share. A major source of revenue could be clean air, nature’s gift to us all. Polluters have been freely dumping ever-increasing amounts of gunk into our air, contributing to ill-health, acid rain and climate change. But what if we required polluters to bid for and pay for permits to pollute our air, and decreased the number of permits every year? Pollution would decrease, and as it did, pollution prices would rise. Less pollution would yield more revenue. Over time, trillions of dollars would be available for dividends.
There’s been much discussion of late about how to save America’s declining middle class. So why don’t we pay everyone some non-labor income? I’m talking about paying dividends to equity owners in good old capitalist fashion. Except that the equity owners in question aren’t owners of private wealth, they’re owners of common wealth. Which is to say, all of us.
And that’s not the only common resource an American Permanent Fund could tap. Consider the substantial contribution society makes to publicly traded stock values. When a company like Facebook or Google goes public, its value rises dramatically. The extra value derives from the vastly enlarged market of investors who can trust a public company’s financial statements (filed quarterly with the Securities and Exchange Commission) and buy or sell its shares with the click of a mouse. Experts call this a ‘liquidity premium,’ and it’s generated not by the company but by society.
This socially created wealth now flows mostly to a small number of Americans. But if we wanted to, we could spread it around. We could do that by charging corporations for the extra liquidity that society provides. Let’s say we required public companies to deposit 1 percent of their shares in the American Permanent Fund for ten years, up to a total of 10 percent. This would be a modest price not just for public liquidity but for other privileges (limited liability, perpetual life, constitutional protections) we currently grant to corporations for free. In due time, the American Permanent Fund would have a diversified portfolio worth trillions of dollars. As the stock market rose and fell, so would everyone’s dividends. A rising tide would truly lift all boats.
There are other potential revenue sources for common wealth dividends. For example, we give free airwaves to media companies and nearly perpetual (and nearly global) copyright protection to entertainment and software companies. These free gifts are worth big bucks. If their recipients were required to pay us for them, we’d all be a little richer.
Banks are another large recipient of our collective largesse. I’m not talking about bail-out funds; I’m talking about the hugely valuable right we give banks to create money out of nothing. Banks do this (with our generous permission) by lending roughly seven times the money customers deposit (this is called ‘fractional reserve banking’); they then charge interest on these magically minted dollars. This gift to banks is justified on the grounds that it injects needed cash into the economy, but a comparable boost could be achieved by giving people new government-issued dollars — for example, by wiring money to their bank accounts — and limiting bank lending to money actually on deposit. Fresh money would then trickle up through households rather than down through banks.
Regardless of its revenue sources, the mechanics of an American Permanent Fund would be simple. Every U.S. resident with a valid Social Security number would be eligible to open a Shared Wealth Account at a bank or brokerage firm; dividends would then be wired to their accounts monthly. There’d be no means test — and no shame — attached to these earnings, as there are to welfare. Nor would there be any hint of class warfare — Bill Gates would get his dividends along with everyone else. And since the revenue would come from common wealth, there’d be no need to raise taxes or cut government spending. All we’d have to do is charge for private use of common wealth and feed the resulting revenue into an electronic distribution system.
How large should dividends be? The amounts paid would vary from year to year just as corporate dividends do. But the system should be designed so that dividends supplement rather than replace labor income. One good guide is Warren Buffet’s rule for bequeathing money to children: give them “enough to do anything, but not enough to do nothing.” We could also bear in mind that the higher the dividends, the stronger the middle class and the smaller the gap between the richest 1 percent and everyone else.
The United States isn’t broke, as some Republican say; we’re a very wealthy and productive country. The problem is that our wealth and productivity gains flow disproportionately to the rich in the form of dividends, capital gains, rent and interest. If we want to remain a middle class nation, that needs to change. Jobs alone won’t suffice. We need to complement wages with non-labor income from the wealth we all own. That would truly make us an ownership society.
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LINDSTROM, Minn. — Ki Gulbranson owns a logo apparel shop, deals in jewelry on the side and referees youth soccer games. He makes about $39,000 a year and wants you to know that he does not need any help from the federal government.
He says that too many Americans lean on taxpayers rather than living within their means. He supports politicians who promise to cut government spending. In 2010, he printed T-shirts for the Tea Party campaign of a neighbor, Chip Cravaack, who ousted this region’s long-serving Democratic congressman.
Yet this year, as in each of the past three years, Mr. Gulbranson, 57, is counting on a payment of several thousand dollars from the federal government, a subsidy for working families called the earned-income tax credit. He has signed up his three school-age children to eat free breakfast and lunch at federal expense. And Medicare paid for his mother, 88, to have hip surgery twice.
There is little poverty here in Chisago County, northeast of Minneapolis, where cheap housing for commuters is gradually replacing farmland. But Mr. Gulbranson and many other residents who describe themselves as self-sufficient members of the American middle class and as opponents of government largess are drawing more deeply on that government with each passing year.
Dozens of benefits programs provided an average of $6,583 for each man, woman and child in the county in 2009, a 69 percent increase from 2000 after adjusting for inflation. In Chisago, and across the nation, the government now provides almost $1 in benefits for every $4 in other income.
Older people get most of the benefits, primarily through Social Security and Medicare, but aid for the rest of the population has increased about as quickly through programs for the disabled, the unemployed, veterans and children.
The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary mission has gradually become primary: maintaining the middle class from childhood through retirement. The share of benefits flowing to the least affluent households, the bottom fifth, has declined from 54 percent in 1979 to 36 percent in 2007, according to a Congressional Budget Office analysis published last year.
And as more middle-class families like the Gulbransons land in the safety net in Chisago and similar communities, anger at the government has increased alongside. Many people say they are angry because the government is wasting money and giving money to people who do not deserve it. But more than that, they say they want to reduce the role of government in their own lives. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it. They say they want less help for themselves; less help in caring for relatives; less assistance when they reach old age.
The expansion of government benefits has become an issue in the presidential campaign. Rick Santorum, who won 57 percent of the vote in Chisago County in the Republican presidential caucuses last week, has warned of “the narcotic of government dependency.” Newt Gingrich has compared the safety net to a spider web. Mitt Romney has said the nation must choose between an “entitlement society” and an “opportunity society.” All the candidates, including Ron Paul, have promised to cut spending and further reduce taxes.
The problem by now is familiar to most. Politicians have expanded the safety net without a commensurate increase in revenues, a primary reason for the government’s annual deficits and mushrooming debt. In 2000, federal and state governments spent about 37 cents on the safety net from every dollar they collected in revenue, according to a New York Times analysis. A decade later, after one Medicare expansion, two recessions and three rounds of tax cuts, spending on the safety net consumed nearly 66 cents of every dollar of revenue.
The recent recession increased dependence on government, and stronger economic growth would reduce demand for programs like unemployment benefits. But the long-term trend is clear. Over the next 25 years, as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights.
Americans are divided about the way forward. Seventy percent of respondents to a recent New York Times poll said the government should raise taxes. Fifty-six percent supported cuts in Medicare and Social Security. Forty-four percent favored both.
Support for spending cuts runs strong in Chisago, where anger at the government helped fuel Mr. Cravaack’s upset victory in 2010 over James L. Oberstar, the Democrat who had represented northeast Minnesota for 36 years.
“Spending like this is simply unsustainable, and it’s time to cut up Washington, D.C.’s credit card,” Mr. Cravaack said in a February speech to the Hibbing Area Chamber of Commerce. “It may hurt now, but it will be absolutely deadly for the next generation — that’s our children and our grandchildren.”
But the reality of life here is that Mr. Gulbranson and many of his neighbors continue to take as much help from the government as they can get. When pressed to choose between paying more and taking less, many people interviewed here hemmed and hawed and said they could not decide. Some were reduced to tears. It is much easier to promise future restraint than to deny present needs.
“How do you tell someone that you deserve to have heart surgery and you can’t?” Mr. Gulbranson said.
He paused.
“You have to help and have compassion as a people, because otherwise you have no society, but financially you can’t destroy yourself. And that is what we’re doing.”
He paused again, unable to resolve the dilemma.
“I feel bad for my children.”
Middle-Class Blues
Mr. Gulbranson has tried several ways to make a living in the storefront he bought from his father in 1979. He ran a gift shop, then shifted to selling jewelry. Nine years ago, he moved the gold scales to the back and bought equipment for screen-printing clothing. Through it all, he has never made more than about $46,000 in a year.
Meanwhile, the cost of life — and of raising five children — has climbed inexorably.
“I used to go out and try to have a meal at Perkins, which is a restaurant here, and get out of the store with $5,” Mr. Gulbranson said. “And now it’s probably up to $10.”
In recent years he has earned so little that he did not pay federal income taxes, although he still paid thousands of dollars toward Medicare and Social Security. The earned-income tax credit is intended to offset those payroll taxes, to encourage people with lower-paying jobs to remain in the work force.
Mr. Gulbranson said the money covered the fees for his children’s sports leagues and the cost of keeping the older ones on the family’s car insurance.
“If we didn’t get these government things, then probably my kids could not participate in some of the sports they do,” he said.
Almost half of all Americans lived in households that received government benefits in 2010, according to the Census Bureau. The share climbed from 37.7 percent in 1998 to 44.5 percent in 2006, before the recession, to 48.5 percent in 2010.
The trend reflects the expansion of the safety net. When the earned-income credit was introduced in 1975, eligibility was limited to households making the current equivalent of up to $26,997. In 2010, it was available to families making up to $49,317. The maximum payout, meanwhile, quadrupled on an inflation-adjusted basis.
It also reflects the deterioration of the middle class. Chisago boomed and prospered for decades as working families packed new subdivisions along Interstate 35, which runs up the western edge of the county like a flagpole with its base set firmly in Minneapolis. But recent years have been leaner. Per capita income in Chisago excluding government aid fell 6 percent on an inflation-adjusted basis between 2000 and 2007. Over the next two years, it fell an additional 7 percent. Nationally, per capita income excluding government benefits fell by 3 percent over the same 10 years.
Mr. Gulbranson’s business struggled as other companies, particularly construction firms, stopped ordering logo-emblazoned shirts. In 2009, the family claimed the earned-income credit for the first time on the advice of their accountant, who was claiming it for herself. The share of local families claiming the credit climbed 33 percent between 2000 and 2008, the most recent year for which data are available.
To make extra money, Mr. Gulbranson refereed 40 soccer games on Tuesday and Thursday nights last fall. His wife sold clothes at equestrian events and air-brushed novelties at craft fairs, driving around the country with a one-ton trailer hitched to a 20-foot van.
Their difficulties, Mr. Gulbranson said, have made it hard to imagine asking anyone to pay higher taxes.
“I don’t think most people could bear to pay more,” he said.
Instead, he said he would rather give up the earned-income credit the family now receives and start paying for school lunches for his children.
“I don’t demand that the government does this for me,” he said. “I don’t feel like I need the government.”
How about Social Security? And Medicare? Can he imagine retiring without government help?
“I don’t think so,” he said. “No. I don’t know. Not the way we expect to live as Americans.”
A Starring Role
Bob Kopka and his wife often drive to the American Legion hall in North Branch on Thursday nights, joining the crowd gathered in the basement bar for the weekly meat raffle. Almost everyone present relies on the government to pay for their medical care.
Mr. Kopka, 74, has had three heart procedures in recent years. His wife recently had surgery to remove cataracts from both eyes.
Without Medicare, Mr. Kopka said, the couple could not have paid for the treatments.
“Hell, no,” he said. “No. Never. She would have to go blind.”
And him?
“I’d die.”
Few federal programs are more popular than Medicare, which along with Social Security assures a minimum quality of life for older Americans.
None are more central to the nation’s financial problems. The Congressional Budget Office projects that government spending on medical benefits, even taking into account the cost containment measures in the 2010 health care law, will rise 60 percent over the next decade. Then it will start rising even more quickly. The cost of caring for each beneficiary continues to increase, and the government projects that Medicare enrollment will grow by roughly one-third as baby boomers enter old age.
Spending on medical benefits will account for a larger share of the projected increase in the federal budget over the next decade than any other kind of spending except interest payments on the federal debt.
Medicare’s starring role in the nation’s financial problems is not well understood. Only 22 percent of respondents to the New York Times poll correctly identified Medicare as the fastest-growing benefits program. A greater number of respondents, 27 percent, chose programs for the poor. That category, which includes Medicaid, is slightly larger than Medicare today but is projected to add only half as much to federal spending over the next decade.
Medicare’s financial problems are much worse than Social Security’s. A worker earning average wages still pays enough in Social Security taxes to cover the benefits the worker is likely to receive in retirement, according to an analysis by the Urban Institute. Social Security is still running out of money because the program must also support spouses who do not work and workers who earn lower wages. But Medicare’s situation is even more dire because a worker earning average wages still contributes only $1 in Medicare taxes for every $3 in benefits likely to be received in retirement.
A woman who was 45 in 2010, earning $43,500 a year, will pay taxes that will reach a value of $87,000 by the time she retires, assuming the money is invested at an annual interest rate 2 percentage points above inflation, according to the Urban Institute analysis. But on average, the government will then spend $275,000 on her medical care. The average is somewhat lower for men, because women live longer.
Medicare is often described as an insurance program, but its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for.
But many older residents in Chisago say this problem belongs to younger generations. They paid what they were told; they want to collect what they were promised.
Some, like the Kopkas, have savings they can tap. Mr. Kopka still owns the landscaping business he started after leaving the Navy in the early 1960s. He and his wife own a three-bedroom home on three acres, valued by the county at $153,700. The mortgage is paid. They hope to pass the house to their children.
Others have nothing else. Barbara Sullivan, 71, moved last year to the apartments above the Chisago County Senior Center in North Branch. Waiting on a recent Friday for the hot lunch, which costs $3.50, she watched roughly 20 people play bingo for prizes including canned soup and Chef Boyardee pasta.
“Most of the seniors around here are struggling to make it,” she said.
She counts herself among them. She lives on $1,220 a month in Social Security benefits and relied on Medicare to pay for an operation in November.
She believes that she is taking more from the government than she paid in taxes. She worries about the consequences for her grandchildren. She said she would like politicians to propose solutions.
“We’re reasonable people,” she said. “We’re not going to say, ‘Give it to me and let my grandchildren suffer.’ I think they underestimate seniors when they think that way.”
But she cannot imagine asking people to pay higher taxes. And as she considered making do with less, she started to cry.
“Without it, I’m not sure how I would live,” she said. “With the check I’m getting from Social Security, it’s a constant struggle on making sure that I pay my rent and have enough left for groceries.
“I haven’t bought a Christmas present, I haven’t bought clothing in the last five years, simply because I can’t afford it.”
Keeping a Promise
Representative Cravaack often says he entered politics to lift the burden of debt from the shoulders of his two sons.
“I vision that I open up their backpacks and I put in a 50-pound rock and zip it back up again,” Mr. Cravaack told the Minnesota Freedom Council in October 2010. “And I say, ‘Sorry, son, you’re going to have to hump this the rest of your life.’ Because that’s exactly what we’re doing to our national debt right now to our children.”
Mr. Cravaack, a 53-year-old Navy veteran and a retired pilot for Northwest Airlines, was grounded by sleep apnea in 2007. He and his wife, an executive at the drug company Novo Nordisk, decided he would stay home with their sons. He soon became the first man to serve as president of the Chisago Lakes Parent Teacher Organization.
In August 2009, while driving the children to North Branch, he heard a talk radio host urging people to protest President Obama’s health care legislation. Mr. Cravaack and about two dozen others spent more than two hours the next day in Mr. Oberstar’s North Branch office before a staff member told them the congressman would not meet them. The rejection convinced Mr. Cravaack that Mr. Oberstar should be replaced. One of the other protesters, a woman who had taken her six children to the office, became Mr. Cravaack’s campaign scheduler.
Two weeks after speaking to the Freedom Council, he beat Mr. Oberstar by 1.6 percentage points, or 4,407 votes. Voters in Chisago, the southern tip of an expansive district, provided the margin of victory.
“We have to break away,” Mr. Cravaack told supporters, “from relying on government to provide all the answers.”
Mr. Cravaack has said he drew unemployment benefits during a furlough from Northwest in the early 1990s. He did not respond to several requests for an interview, nor to an e-mail with questions about his views and about whether his family has drawn on other benefits programs. This account is based on a review of his public statements.
Shortly after arriving in Congress, Mr. Cravaack voted with a vast majority of House Republicans for a plan to remake Medicare by providing money to its beneficiaries to buy private insurance. Senate Democrats have rejected that plan.
But Mr. Cravaack has also consistently said the government should not reduce its largest category of spending — benefits for the current generation of retirees. He also says he does not support cuts for people who will turn 65 over the next decade.
“If you’re 55 years and older, you don’t have to listen to this conversation because we have to keep those promises,” Mr. Cravaack told The Daily Caller last April. “People like myself, 52, if you’re 54 or younger, we’re going to have a conversation.”
Tomorrow, Tomorrow
The government helps Matt Falk and his wife care for their disabled 14-year-old daughter. It pays for extra assistance at school and for trained attendants to stay with her at home while they work. It pays much of the cost of her regular visits to the hospital.
Mr. Falk, 42, would like the government to do less.
“She doesn’t need some of the stuff that we’re doing for her,” said Mr. Falk, who owns a heating and air-conditioning business in North Branch. “I don’t think it’s a bad thing if society can afford it, but given the situation that our society is facing, we just have to say that we can’t offer as much resources at school or that we need to pay a higher premium” for her medical care.
Mr. Falk, who voted for Mr. Cravaack, said he did not want to pay higher taxes and did not want the government to impose higher taxes on anyone else. He said that his family appreciated the government’s help and that living with less would be painful for them and many other families. But he said the government could not continue to operate on borrowed money.
“They’re going to have to reduce benefits,” he said. “We’re going to have to accept it, and we’re going to have to suffer.”
One of the oldest criticisms of democracy is that the people will inevitably drain the treasury by demanding more spending than taxes. The theory is that citizens who get more than they pay for will vote for politicians who promise to increase spending.
But Dean P. Lacy, a professor of political science at Dartmouth College, has identified a twist on that theme in American politics over the last generation. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates.
Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues.
Chisago has shifted over 30 years from dependably Democratic to reliably Republican. Support for the Republican presidential candidate has increased relative to the national vote in each election since 1984. Senator John McCain won 55 percent of the vote here in 2008.
Residents say social issues play a role, but in recent years concerns about spending and taxes have predominated.
Voters in the North Branch school district have rejected increased financing for local schools in each of the past three years. In 2010, the district switched to a four-day school week, striking Monday from the calendar to save money.
Some of the fiercest advocates for spending cuts have drawn public benefits. Many, like Mr. Falk, have family members who rely on the government. They often cite that personal experience as the reason they want to cut government spending.
Brian Qualley, 49, has a sister who survived a brain tumor but was disabled by its removal. The government pays for her care at an assisted-living facility. Their mother scrapes by on Social Security.
Mr. Qualley said that the government should provide for those who need help, but that too much money was being wasted. Mr. Qualley, who owns a tattoo parlor in Harris, north of North Branch, said some of his customers paid with money from government disability checks.
“They’re getting $300 or $400 tattoos, and they’re wearing nice new Nike shoes that I can’t afford,” he said, looking up from working a complicated design into the left leg of a middle-aged woman. “I guess I shouldn’t say it because it’s my business, but I think a tattoo is a little too extravagant.”
But Mr. Qualley said he did not want to reduce benefits for the current generation of retirees. Rather, he said his own generation should get less, because they have time to prepare. This is a common position among the young and healthy in Chisago.
Mr. Qualley said he was saving some money for retirement, although, he added, “I don’t have a 401(k) or anything like that.”
“I also have a job that I don’t necessarily ever want to — or have to — retire from,” he said.
What if his hands start to shake as he gets older?
“Actually,” he said, the electric needle falling silent in his hand, “it’s my shoulders and neck that bother me most.”
Safety in Numbers
Barbara Nelson has little patience for people who say they will not need government help. She considers herself lucky she has not, and obligated to provide for those who do.
“Catastrophes happen in life,” she said, sitting in a coffee shop in Taylors Falls. “To be so arrogant that you think it won’t happen to you, that somehow you’re going to be one of the special ones, I disagree with that.”
Ms. Nelson, 61, who describes herself as a centrist Democrat, also dismisses the claim that people cannot afford to pay more taxes.
“Anyone who can come into a coffee shop and buy coffee is capable of paying more,” she said. “If someone’s life can be granted, in terms of adequate health care, if that means I give up five cups of coffee a month, that is a small price to pay.”
Gordy Peterson, 62, who has used a wheelchair for 30 years since a construction accident, has reluctantly reached a similar conclusion.
“I’m a conservative,” he said by way of introducing himself. He built his own house before his injury and paid for it in cash. He still thinks the government should operate that way. He never intended to depend on federal aid and said he sometimes felt guilty about it.
But for the last three decades, he has received a regular check from the Social Security disability insurance program, and Medicare has helped to pay his medical bills.
“Here I’m getting money, and everybody is struggling,” he said. “Even though it ain’t no cakewalk for me.”
Mr. Peterson used a workers’ compensation settlement to buy a farm that he managed with his brother-in-law, who is mentally handicapped and also on government disability.
“He was my legs, and we worked it,” Mr. Peterson said.
They grew corn, soybeans and rye, and even kept steers for a while. In good years they earned enough to live on. In bad years they lived on the government’s checks. Life would have been very difficult without them, he said.
Mr. Peterson, an easygoing man who looks down when he thinks and smiles sheepishly when he offers an opinion, looked down after completing the story of his own dependence on the safety net.
“It’s hard to beat up on the government when they’ve been so good to you,” he finally said. “I’ve never really thought about it, I guess.”
Lately, the government has been very good, indeed. The county, with federal financing, bought a corner of Mr. Peterson’s farm to build a new interchange for Interstate 35. He used the money to open a gas station at the edge of the farm in 2008 to serve the traffic that rolls off the new ramp. The business is prospering, and he no longer worries that he will need to depend on Social Security.
“But you can’t take that away,” he said. “My own sister has only Social Security. That’s all. That’s all she’s going to have. And if you take that away from her, Christ, she’d be a street person. I don’t think we can cut them off on that.”
How about higher taxes?
Maybe a little higher, he said. Maybe.
“I’m glad I’m not a politician,” he said. “We’re all going to complain no matter what they do. Nobody wants to put a noose around their own neck.”
There's not much that comes out of conservative mouths these days that I find agreeable. However, Republican Governor of Indiana Mitch Daniels, in his rebuttal to President Obama's State of the Union Speech, mentioned an idea for saving the government money which I heartedly (I won't say whole- heartedly) endorse. He said:
"There is a second item on our national must-do list: we must unite to save the safety net. Medicare and Social Security have served us well, and that must continue. But after half and three quarters of a century respectively, it’s not surprising that they need some repairs. We can preserve them unchanged and untouched for those now in or near retirement, but we must fashion a new, affordable safety net so future Americans are protected, too.
“Decades ago, for instance, we could afford to send millionaires pension checks and pay medical bills for even the wealthiest among us. Now, we can’t, so the dollars we have should be devoted to those who need them most. [ed. note: Amen!]
...
"It’s absolutely so that everyone should contribute to our national recovery, including of course the most affluent among us. ... The better course is to stop sending the wealthy benefits they do not need, and stop providing them so many tax preferences that distort our economy and do little or nothing to foster growth."
First I should add that there is $2.5 trillion in the Social Security Trust Fund so it is not exactly in dire need of reform and also eliminating the cap on income on which people pay Social Security and Medicare taxes will bring in additional money. Medicare, on the other hand, is in dire need of reform, but increasing the amount on which the rich pay into the system in Medicare taxes will help to fix that.
But why do liberals, like Thom Hartmann, disagree with the sentiment "to stop sending the wealthy benefits they do not need"? By Hartmann's convoluted logic we must continue to make payments to the rich just so they won't eliminate payments to the poor and middle class. Thom Hartmann says that this would be the "camel's nose under the tent" for those who want to destroy Social Security and Medicare. His logic is the same as those who say we must give tax breaks to big corporations just so they will continue to provide jobs. Means testing according to him will give Republicans all the leeway they need to eliminate Social Security and Medicare altogether. Bullshit! They don't need the pretext of "means testing" to accomplish that. Hartmann doesn't realize that all social programs in the US are under attack by the right wing and the only thing standing in the way of their entire elimination is the determination of the middle class and Democratic politicians to fight for their continuance and even expansion.
So liberals will resist even a rational idea for reform because it might lead to the complete destruction of these venerable programs? Let me tell you something. Their nose is already under the tent. They don't need this pretext for wanting to destroy Social Security and Medicare. Why they have already boldly proposed privatizing both of these programs. Check out Paul Ryan's plan, "The Path to Prosperity" (for the rich). For liberals or progressives to oppose a rational idea just because it comes from someone that I for one disagree with on everything else he is trying to do, like destroying unions in the state of Indiana, is utter irrational nonsense. It goes under the same principal of not giving subsidies and tax breaks to highly profitable corporations like the oil companies.
President Obama is proposing an alternative minimum tax for millionaires. Why not apply this alternative minimum tax to corporations? Why should Exxon and GE actually get back taxpayer dollars and pay absolutely nothing in? There should be an alternative minimum tax for them too. By the same token senior citizens who have retirement incomes in the $100,000. range or higher don't need another $1000. a month in social security benefits. The money would be better spent by giving it to people whose only retirement income is social security and whose social security income places them below the poverty line. If you are getting $10,000. a month in retirement income, you don't need another $1000. a month in Social Security. It's absolutely ridiculous. By the same token, you don't need Medicare either. You're perfectly capable of buying a gold plated private health insurance policy which the rich would probably do anyway since the finest doctors (unfortunately) do not even accept Medicare patients.
To take a truly conservative approach to government spending is to make everyone (including corporations which according to the Supreme Court are people) pay their fair share and to not receive government benefits which they don't deserve. By definition they don't deserve government benefits if they are fantastically wealthy in the first place although the rich have hired lobbyists whose main goal is to provide them with government benefits at the expense of the poor and middle class. This has turned the goal of reducing government spending on its head. According to them (in defiance of the hypocritical words that come out of their mouths) there is no government spending so large that goes to the wealthy that should be eliminated. Their goal is to shower government benefits on the rich while denying them to the poor. That's why there is so much inequality in the US - because they have been actively promoting it regardless of the hypocritical words they say. They are only for reducing the size of government when it comes to reducing government programs and subsidies which benefit the poor and middle class.
The top 1% of Americans own 40% of the nation's wealth. The bottom 80% own 7%. The top 1% take home 24% of the nation's income. In 1976 they took home just 9%. Their share of national income has almost tripled in just over 30 years. How was this accomplished? Not by hard work, but by incessant lobbying to change laws that benefit the rich like the 1999 Financial Services Modernization Act and the Commodities Futures Modernization Act of 2000 that overthrew Glass-Steagall leading to the merger of commercial and investment banks, unregulated derivatives, credit default swaps, collateralized debt obligations and all the other paraphernalia of the financialization and globalization of the US economy. Leveraged buyout artists or vulture capitalists like Mitt Romney can give $100,000,000. to each of his five sons without paying any gift tax while ordinary middle class folks pay taxes through the nose. On Romney's income of $21 million last year, for which he did no work to earn it, he paid less than 14% in taxes while most middle class folks are taxed in the 30% range. Romney also paid practically nothing in Social Security or FICA taxes. If he had paid FICA taxes on all his income, this would have helped to bail out Social Security and Medicare right there.
Capital gains is how the rich make their money and they are taxed right now at half the rate that the middle class is taxed. Here is the history:
In the 1970s under President Carter capital gains were taxed at 40%. In the 1980s under President Reagan they were lowered to 20% and under George W Bush they were lowered to 15%. All this was done under the noses of the middle class while they were sleeping or watching football on television. What me worry? Meanwhile lobbyists for the rich were hard and persistently at work. It's pretty clear that Democratic Presidents have raised capital gains taxes while Republican Presidents have lowered them.
A true conservative would want to conserve the safety net while insuring that the rich pay their fair share. Instead all they talk about is lowering taxes (primarily on the rich) while eliminating government programs which primarily benefit the poor and middle class. If they want to reduce the size of government a good place to start would be to reduce the size of the bloated military-industrial complex. Presdident Obama is already striking a populist tone with his talk about an "alternative minimum tax" on millionaires while Defense Secretary Leon Panetta is busy ending wars and reducing the size of the military-industrial complex. They should follow up by embracing Social Security and Medicare reform and by reducing or eliminating payouts of all kinds to the rich. They should also enact a Financial Transactions Tax to be used for debt reduction so that the banks can pay back their fair share to the taxpayers who bailed them out.
When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.
But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?
Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.
Why can’t that work come home? Mr. Obama asked.
Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.
The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
Apple has become one of the best-known, most admired and most imitated companies on earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.
However, what has vexed Mr. Obama as well as economists and policy makers is that Apple — and many of its high-technology peers — are not nearly as avid in creating American jobs as other famous companies were in their heydays.
Apple employs 43,000 people in the United States and 20,000 overseas, a small fraction of the over 400,000 American workers at General Motors in the 1950s, or the hundreds of thousands at General Electric in the 1980s. Many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products. But almost none of them work in the United States. Instead, they work for foreign companies in Asia, Europe and elsewhere, at factories that almost all electronics designers rely upon to build their wares.
“Apple’s an example of why it’s so hard to create middle-class jobs in the U.S. now,” said Jared Bernstein, who until last year was an economic adviser to the White House.
“If it’s the pinnacle of capitalism, we should be worried.”
Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.
A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”
Similar stories could be told about almost any electronics company — and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.
But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What’s more, the company’s decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.
“Companies once felt an obligation to support American workers, even when it wasn’t the best financial choice,” said Betsey Stevenson, the chief economist at the Labor Department until last September. “That’s disappeared. Profits and efficiency have trumped generosity.”
Companies and other economists say that notion is naïve. Though Americans are among the most educated workers in the world, the nation has stopped training enough people in the mid-level skills that factories need, executives say.
To thrive, companies argue they need to move work where it can generate enough profits to keep paying for innovation. Doing otherwise risks losing even more American jobs over time, as evidenced by the legions of once-proud domestic manufacturers — including G.M. and others — that have shrunk as nimble competitors have emerged.
Greenspan's Fraud is the title of a book by Dr. Ravi Batra. In light of what's currently happening in Washington regarding the extension of the payroll tax cut, it is prescient. Greenspan engineered an increase in the payroll or FICA or Social Security tax in the 1980s at the behest of then President Ronald Reagan which effectively raised taxes on the poor while Reagan cut the income tax and effectively lowered taxes on the wealthy. The ostensible reason for this increase in payroll tax was a crisis in funding Social Security 35 years out (sound familiar). Republicans worked themselves and the American public up into a lather over a non-existent Social Security crisis. The real purpose of this supposed crisis was to shift the tax burden from the rich to the poor just as it is with Republicans today who don't really want to extend the payroll tax cut engineered by President Obama. Instead, they have pledged Grover Norquist not to raise taxes except ... they might make an exception for the payroll tax. In other words their pledge is to not raise taxes on the rich while they have no problem with raising them on the poor. They are showing their true colors ... again: protect the finances of the rich while exploiting those of the poor and middle class. Such was the brilliance of Greenspan's plan in the early eighties that hardly any Americans knew or realized what he was actually up to including the Democrats who went along with it. Personally, I've been self-employed since 1976, and I never realized that Greenspan had doubled my FICA taxes in 1983 so that I ended up paying higher payroll taxes than rich people paid in capital gains tax. Such is the reality of Republican subterfuge.
From Greenspan's Fraud, the book:
Greenspan's economics has extracted trillions of dollars in taxes from the American middle class and sharply enriched the rich, who are essentially people like himself and his friends - multimillionaires, politicians, and businessmen. ... His policies have led to the pooring of America as well as the world, while a tiny minority has raked in millions, even billions, in profit. He may be a legendary figure in the eyes of many, but when you carefully explore what he has wrought, the aura of public reverence around him can evaporate quickly.
This book will show that because of Greenspan's beliefs or support for certain policies, family income and real wages have declined for a broad swath of Americans, while CEOs have earned millions in stock options and capital gains; US manufacturing has been decimated and the country is saddled with more than half a trillion dollars of trade deficit per year; nearly two million lucrative jobs have vanished since 2000, and millions of people have been downsized.
In December 1981 President Reagan selected Greenspan to chair a blue ribbon commission to "save" social security. When it became obvious that the Federal budget deficit was ballooning due to Reagan's 1981 tax cuts, Greenspan ginned up the Social Security crisis which allowed the payroll tax to be increased, and, since Social Security and the general fund had been part of the unified budget since 1969, the increase in revenues from the increased payroll taxes masked the Federal budget deficits due to Reagan's tax cuts. In simple terms the excess revenues from social security taxes offset the deficit in the general fund due to Reagan's tax cuts. But rather than raise the income tax, which would have increased taxes disproportionally on the wealthy, Greenspan's plan was to raise the payroll tax which is a tax primarily on the poor and middle class. In addition Greenspan also later proposed cutting benefits for social security beneficiaries.
The Reagan-Greenspan theology required that the income [taxes] remain small even if it became necessary to coax money out of the destitute because this is essentially what the commission proposed in 1983. Instead of the general budget that actually faced a massive deficit, the commission insisted that the Social Security Trust Fund faced a giant shortfall, some 30 to 75 years in the future, when baby boomers would retire in large numbers. Never mind that in 1983 itself, the Trust Fund's receipts began to rise because of increasing employment, while the general budget suffered an even larger deficit of $208 billion.
In fact, by the end of the year, the Fund earned a small surplus. But the Greenspan commission relied on "forecasts" that showed a gargantuan deficit looming in the Fund, not five to ten years hence, but more than half a century later. It proposed eliminating the Social Security deficit expected from 1983 all the way to 2056 by overtaxing workers in advance, and generating an adequate surplus in the process.
So the money taken in in payroll taxes which was not used to actually make payments to social security recipients was transferred to the general fund and used to defray the budget deficits brought about by Reagan's tax cuts on the wealthy. In place of the money so used non-marketable Treasury bonds of an equivalent amount were placed in the Social Security Trust Fund (SSTF). Today they amount to $2.5 trillion. This is the amount owed to the SSTF by the general fund. Every year the surplus payroll tax revenues were spent in the general fund and IOUs of a similar amount were placed in the SSTF. The surplus dwindled over the years until today more money is actually being paid out to Social Security recipients than is being taken in in payroll taxes. That means that those non-marketable Treasury bonds in the SSTF must be cashed in and money taken from the general fund to make up the difference. Hence the general fund must accumulate an even larger deficit or it must raise taxes to make up the difference. This is why Republicans are again insisting that Social Security is in crisis. Pay-go demands that the amount paid out from the general fund to make up the difference between what is received in payroll taxes and what is paid out be paid for. Republicans want to make up the difference, as Greenspan wanted to do years ago, by cutting benefits. What they don't want to do is to raise income taxes on the wealthy to do so. Instead of honoring the special non-marketable Treasury bonds in the SSTF which would require either higher deficits or raising the income tax, Republicans want to cut benefits either by raising the retirement age or cutting the cost of living allowance. More extreme right wing Republicans, such as Paul Ryan, want to privatize social security so that the IOUs in the SSTF never will have to be honored. Both Paul Ryan and Alan Greenspan are devotees of Ayn Rand whose philosophy consisted mainly of unadulterated greed and to hell with the poor and middle class.
But Greenspan reserved his most draconian tax increase for the self-employed.
The Greenspan proposal would prove to be a crippling burden for the poor and the self-employed, because it sought to lift rates over and above those provided by a 1977 law. Today, [2005] a full-time minimum-wage earner, working for 2000 hours annually at a wage of $5.15 per hour, earns about $10,000 annually On that she has to pay a Social Security and Medicare tax of 7.65 per cent, or $765. which leaves her with $9,235. Add to this a state and local sales tax averaging 8% in big cities, and she forks over another $739 to meet her minimum consumption.
This sum of over $1500 in taxes can make a difference between homelessness and living in an apartment, between three meals a day and malnourishment, between a doctor visit and living with illness.This is why the commission's tax propopsals amounted to coaxing money out of the destitute, i.e., the millions who subsist on the minimum wage.
A worse outcome awaited for those working for themselves. Today [2005], a self-employed individual earning $30,000 a year, has to pay nearly 15% in Social Security taxes. Once $4500 is deducted in self-employment contributions, an individual is left with little to support a family, especially when his income is subject to the sales and income tax as well.
The Social Security or FICA tax is regressive; there are no deductions or exemptions. It's a flat tax that everyone, rich or poor, pays at the same rate. And it is only paid on the first $106,000. of income. All income over that amount is tax free as far as FICA taxes are concerned. This is why it's essentially a tax on the poor and middle class while the income tax which has higher tax rates for higher income earners is progressive and hits the rich more than the poor although today the highest tax bracket is 35% for income over about $380,000. That means that millionaires and billionaires pay income tax at the same rate as someone earning $380,000. There are no higher tax brackets for the truly rich.
Greenspan convinced his fellow commissioners and Congress to go along with his scheme and his proposals were enacted as Social Security Amendments in 1983. Greenspan's proposals also guaranteed that the maximum taxable wage base (which today is $106,000) would increase year after year so that Social Security taxes would increase on an annual basis. The reality of the situation is that the payroll tax increases of 1983 have been used primarily to fund the tax cuts of wealthy individuals and corporations. They don't want to give up the financial benefits they gained by having payroll taxes reduce their income taxes for 38 years. So they are in the process of reducing social security benefits by a combination of raising the retirement age, scaling back cost of living adjustments or possibly raising the payroll tax rates. The point is that there is no Social Security crisis if the non-marketable Treasury bonds in the SSTF are honored which is essentially the social contract entered into in 1983 by Greenspan and Reagan. If in fact these Treasuries were marketable instead of unmarketable bonds, they could be redeemed on the open market by the SSTF. In that case they would simply be rolled over by the Treasury Department and effectively become part of the ever increasing deficit and national debt. Alternatively, revenues could be sought from other sources most likely the income tax which has been kept low for decades due to the pilfering of the SSTF by the general fund.
Since Congress controls the rules regarding Social Security, they can change them at any time without any recourse by the American people. This means that they can bypass the implied contract to reimburse the IOUs in the SSTF with impunity effectively finessing the whole situation. A better way to place more money in the SSTF would be to lift the $106,000 cap on income subject to the Social Security tax meaning effectively that the rich would pay Social Security tax on all of their income, the same way the poor do.
What a difference 40 years makes! The New Left radicals of the sixties treated the middle class with about as much respect as Rush Limbaugh treats liberals. The middle class was put down, demeaned and vilified. Today the protest movement is all about defending the beleaguered middle class. The middle class and the treatment thereof is the axis on which turns the raison d'etre of the two movements. It's why the movement of the sixties failed and why the Occupy Wall Street Movement may very well succeed in radically restructuring the US government and economy.
First of all in the sixties the protest movement was basically a cultural rather than a political movement despite the attempts of the New Left to make it political. The protest was mainly an anti-war movement combined with cultural overtones. It was the Age of Aquariius. There was a big change coming because Bob Dylan and the Beatles told us there was. It was Blowin' in the Wind. If you didn't wear bell bottoms and grow your hair long you were not part of the movement. Magic was in the air. But when it came right down to it, the Beatles didn't want a revolution because after all they were making too much money. So was relatively speaking the middle class, Nixon's silent majority. They were pretty well off in the sixties and early seventies. They just wanted the US out of Vietnam so their sons wouldn't have to be drafted. Hardly anyone had a student loan. College was relatively free compared to today.
Where I went to school at the University of California San Diego in the late sixties, tuition was free. There was a $73. a quarter incidental fee, and I rented a room for $40. a month. Middle class wages came with benefits - a pension and health care. Wives didn't have to work outside the home to make mortgage payments. I bought my first home for less than what you pay for a mid range car today. There were no adjustable rate mortgages. Everybody had it pretty good. Is it any wonder that the vast middle class did not join the radicals in their attempt to foment a revolution? People were too well off. And the cultural aspects were easily co-opted by commercial interests. You want tie dye. Hey, we'll sell it to you. You want bell bottoms. You can find them at Macy's.
The put down of the middle class was mainly a put down of middle class mores. Things like staying a virgin until you were married, buying ticky tacky houses in tract developments, having to go to church on Sunday, participation in the Rotary club. People didn't want to buy their Grandfather's Oldsmobile. So capitalist society geared up to sell them something else. You want long hair. Hey there's the Broadway musical, Hair. Down to here. Down to there. The same old imperatives to sell, sell, sell - only updated for a new generation. The Students for a Democratic Society were isolated because what people really wanted was new mores to replace their parents' mores. They didn't want to do away with capitalism. Capitalism had been very, very good to them.
Today the situation is different. The middle class is under siege. Far from putting down the middle class, today's Left is trying to defend it. The right wing is reduced to trying to defend the very wealthy, the upper 1%, using their vast wealth for TV advertising and smoke and mirrors. The 99% have lost the prosperity of the sixties. The Occupy Wall Street Movement is aimed right at the heart of capitalism - Wall Street. College tuition at UCSD is over $13,000 today. Along with room and board, books and other expenses, the cost for a year of college education at UCSD is almost $30,000. A far cry from when I was paid to go there as a graduate student with a research assistantship and expenses were minimal. One of my classmates even took flying lessons with the money that was left over from his assistantship. No one went into debt to go to college. Student loans were unheard of. People could work their way through college as I did as an undergraduate on the co-op plan where I worked for a quarter and went to school for a quarter. People could work their way through college with a waitressing job at Howard Johnson's.
Foreclosures are running rampant. People are being forced out of their homes even though the banks don't have the proper documentation to prove ownership. People whose homes are underwater, meaning they owe more than their homes are worth, are stuck there not being able either to refinance or to sell. Their choice is to go on paying exhorbitant mortgage payments every month or to walk away to an uncertain fate and ruined credit. 50 million people have no health care. Jobs are hard to come by. Recent college graduates are lucky to get a job as a barrista at Starbucks. Teachers, firemen, librarians and policemen are being laid off in droves. Manufacturing has moved to China. The middle class is under attack. That is the difference between the demonization of the middle class in the sixties and the attempt to save the middle class that is happening today.
Ed Schultz who has a talk show on msnbc was the first person I know that made a point of defending the middle class, long before it became fashionable, on his previous radio talk show. Now everyone is jumping on the bandwagon. Why? The upper 1% owns most of the wealth and makes most of the income, and they are accelerating their financial predominance. The bankers on Wall Street, having been bailed out by middle class taxpayers and the Fed to the tune of trillions of dollars, are giving themselves even larger bonuses today than they were before the financial crisis which they precipitated. Unions are under attack in Wisconsin, Michigan, Florida and elsewhere where Republican governors and legislatures are in control of state governments. The American Dream has turned into the American Nightmare for masses of people. People are waking up to the fact that government has been taken over by the large corporations who pay politicians, all the Republicans and a number of Democrats, to do their bidding. 30,000 lobbyists swarm Capitol Hill. They are not there to protect the interests of the middle class. They are there to curry financial favors for the upper 1%. Their money floods TV with ads favoring their politicians and their interests. Money runs politics and the American government.
The American government is gridlocked and dysfunctional. Republican filibusters kill any legislation President Obama would like to get enacted to create jobs, forestall the student debt crisis, or help underwater home owners. So now he is trying to get something done by executive orders, but so far it's just frittering around the edges. He needs to make much bolder moves by executive order such as starting an infrastructure bank and reincarnating FDR's CCC and WPA. If the American divided government continues on its present path it will inevitably be replaced by a more functional political system such as a parliamentary system or some system that can't be gridlocked and obstructed to death. Republican intransigence is just making the need for a different system of government more obvious. And it's not about replacing the American government with socialism or communism. It's about replacing a democratic system that doesn't work or only works in the interests of the rich with another democratic system that works in the interests of the middle class. As far as an economic system, there is not a country in the world that has a purely socialistic or communistic system. Even China's economic system is a synthesis of communism and capitalism. So no one in his right mind is advocating replacing capitalism with pure socialism or pure communism. There are societies which have adopted the best features of a number of disparate systems to create societies that are democratic both politically and economically. Economic democracy, in which the middle class is predominant and not beholden to the big banks which sit at the beating heart of American capitalism, is indeed a real possibility. The Occupy Wall Street Movement will eventually have to demand radical changes in the American system in order even to accomplish its minimal goals. Bankruptcy protection for student loans, which was taken away by the Bankruptcy Act of 2005 will have to be reestablished, and that will be an arrow aimed at the heart of capitalism and in particular Wall Street. But what was changed six years ago can be changed back. It's not so set in stone. It's a fight worth fighting.
So the New Left radicals of the sixties were way ahead of their time in wanting a political and economic revolution. The vast middle class was too comfortable and well off to support such a major change. Cultural revolution was co-opted and amounted to nothing. Today, however, with more and more income and wealth flowing upward to the 1% leaving the 99% further and further in the dust, with a political system which is wholly owned by the wealthy, with poverty at record levels and more and more people falling out of the middle class, there is the possibility of a true political and economic revolution in the US which would take back democratic control in favor of the vast majority and create a fairer and ultimately more prosperous society.
by Senator Bernie Sanders, the Guardian, October 7, 2011
It's time for us to end the financial oligarchy so destructive to our economy. If a bank is too big to fail, it is too big to exist
An Occupy Wall Street protester in New York City. Photograph: Amy Sussman/Corbis
The protest movement called Occupy Wall Street has struck a nerve. The demonstrators' goals may be vague but their grievances are very real. If our country is to break out of this horrendous recession and create the millions of jobs we desperately need, if we are going to create a financially-stable future, we must take a hard look at Wall Street and demand fundamental reforms. I hope the protesters provide the spark that ignites that process.
The truth is that millions of Americans lost their jobs, their homes and their life savings because of the greed, recklessness and illegal behavior of Wall Street. Even Federal Reserve Chairman Ben Bernanke agreed when I questioned him this week at a joint economic committee hearing that that there was "excessive risk-taking" by Wall Street. Bernanke also said the protesters "with some justification" hold the financial sector responsible for "getting us into this mess", and added, "I can't blame them."
The demonstrators and millions of sympathetic Americans understand that odds are stacked in Wall Street's favor because of the extraordinary economic and political clout of the big banks. Believe it or not, the country's six largest financial institutions (Bank of America, CitiGroup, JP Morgan Chase, Wells Fargo, Morgan Stanley and Goldman Sachs) now have amassed assets equal to more than 60% of our gross domestic product. The four largest banks issue two-thirds of all credit cards, half of all mortgages, and hold nearly 40% of all bank deposits. Incredibly, after we bailed out the behemoth banks that were "too big to fail", three out of the four are now even bigger than they were before the financial crisis.
Not only do these financial institutions have enormous economic clout, their wealth makes them an extremely potent political force. From 1998 through 2008, in order to achieve their goal of repealing Glass-Steagall and other financial regulations, they spent more than $5bn on lobbying and campaign contributions. They also spent hundreds of millions to water down last year's Dodd-Frank reform bill. After the law was passed, hundreds of millions more were spent to repeal provisions and weaken regulations. They never give up.
Where do we go from here? How do we convert the protesters' enthusiasm into concrete results?
For starters, we should break up the giant financial institutions. Left to their own selfish devices, Wall Street bankers will continue to gamble with other people's money. Sooner or later, when their bets go wrong, they will come back to Congress asking to be bailed out again. Why not nip that in the bud? There also is a sound economic argument against too few owning far too much. The idea that six giant financial institutions can exert such enormous control over the economy should frighten anyone who believes in a competitive free-market system. Good Republican presidents like William Howard Taft and Teddy Roosevelt broke up Standard Oil, the railroad trusts and other huge monopolies a century ago.
Now is the time for us to end the financial oligarchy that has been so destructive to our economy. If a bank is too big to fail, it is too big to exist.
Wall Street reform also must address the powerful and secretive Federal Reserve. A Government Accountability Office audit that I requested found that the central bank provided $16tn in revolving, low-interest loans to every major financial institution in this country, multinational corporations and some of the wealthiest people in the world. The Fed even helped bail out other central banks around the world. When Wall Street was on the verge of collapse, the Fed acted boldly. Today, with the middle class collapsing, the Fed must act with equal vigor.
Under emergency provisions already in law, the Fed has the authority to provide low-interest loans to small businesses that are starving for capital so that they can create the millions of jobs our economy needs. It should do so. The Fed also has authority to make credit card issuers stop bilking consumers with sky-high fees and interest rates of 30% or more. Especially in a recession, working people use credit cards to stretch their paychecks for basic needs. Usury is already regarded as a sin in the eyes of every major religion. It should be a crime. The Fed has the authority to limit interest rates and fees. It should do so.
The Occupy Wall Street demonstrators are shining a light on one of the most serious problems facing the United States: the greed, recklessness and power of Wall Street. Now is the time for the president and Congress to follow that light – and act. The future of our economy is at stake.
President Obama can get on the stump and promise action to create more jobs, tax the rich, defend the middle class, have the government provide more Pell grants, take care of children in poverty, whatever... But he need not say all that because, even if he's reelected, he can provide none of it unless the Democrats have a majority in the House and a filibuster proof majority in the Senate which translates to 60 Senators. If the statistics in Congress don't align, Mr. Obama will accomplish exactly nothing even if he gets four more years. Therefore, the most honest campaign speech he can make is "If you elect a majority of Democrats in the House and 60 Democrats in the Senate, I will give you x number of jobs on Day 1 of my second term. Otherwise, you will get nothing but gridlock for the entirety of my second term because the Republicans in Congress will block everything I propose." All this emphasis on what Mr. Obama can or cannot do is ridiculous if he doesn't have the power to do it, and the only way he will have the power to do anything is if he has a Democratic Congress and a filibuster proof Democratic Senate. Mr. Obama has shown that he is not bold enough to defy convention, and the conventional wisdom is that the executive branch in and of itself can do nothing except fight wars and plead with Congress.
Sure now it seems Obama has gotten over his predilection for appeasing the Republicans in Congress realizing that it's absolutely futile to believe in "compromise" with that bunch of jive turkeys. Today he's talking tough, but he's resigned to doing nothing. Might as well start campaigning now for 2012 because nothing will be getting done by government until after the election a year from now. But nothing will get done even then if Mr. Obama doesn't have an agreeable Congress to go along with him, and, reading the tea leaves, it doesn't seem that Democrats will be elected in large numbers unless Democrats including Mr. Obama start making that clear now. Congress has a low approval rating, 12%, which tells the American people "throw the bums out," the good ones along with the bad. In other words the American people will throw out the baby with the bath water unless they start to discriminate between Republicans and Democrats in Congress and start to realize that the blame for nothing getting done lies with the REPUBLICANS IN CONGRESS and not just with some kind of generic CONGRESS. Americans are simple minded. You have to spell it out for them. The campaign of 2012 is not just for the Presidency as if that were the all important thing. No, it's for the Presidency AND Congress combined, and, if the right balance isn't achieved, that is to say a Democrat in the White House and a Democratic controlled House and Democratic controlled filibuster proof Senate, then the American people might as well say bye-bye to solving the deficit problem by taxing the rich and solving the jobs problem by government direct creation of jobs.
The fact of the matter is that corporations and the wealthy are sitting on $2 trillion in cash. They could hire more workers if they wanted to without any additional tax breaks or loans from Wall Street, but they obviously don't just want to hire workers for the sake of hiring workers. They will only hire workers if it adds to their bottom line. A lot of Democratic oreiented economists like Reich and Krugman are saying they will only hire workers if there is more demand so, therefore, we need to use Keynesian economics to pump money into the economy to create demand. However, why would corporations hire more workers even if there were more demand when instead they could make more capital investment in automated and computerized machines? If they are given economic incentives, they will preferably use the money to invest in robots and other computer driven equipment to increase output like they've been doing for the last 20 years. They have driven up productivity not by hiring more workers but by investing in intelligent machines and laying off workers. There is no reason to believe they will do anything different even if demand suddenly increases. Therefore, Obama's economic advisers are full of you know what. Nothing the government can do in the way of giving incentives to corporations to hire more workers will actually work because it makes more sense to them to invest in capital equipment which can work 24 hours a day and doesn't require expensive health insurance.
So where does that leave the government's role in creating jobs even if, come 2012, there should happen to be elected by some miracle a Democratic President and a Democratoc Congress. As I see it, it only leaves one alternative: direct job creation by the Federal government as was used during the Great Depression when FDR created jobs with the Civilian Conservation Corps and the Work Projects Administration. And money has to be funneled off of the most profitable upper few percent of the population who have obtained the lion's share of the national income over the last 30 years in order to make this possible so that the nation doesn't go even more deeply into debt. Class war, anyone? It comes down to taking from the rich in order to dole out welfare benefits or taking from the rich in order to put the poor and lower middle class to work in CCC and WPA type jobs. Lord knows, there's tons of work both in conservation (think environmental rehabilitation) and infrastructure repair and development so that direct government job creation in those areas would be anything but make work. Jobs in those areas are much needed and vital to the overall economy not to mention the general welfare of the people. And private enterprise will never create those jobs unless it is given contracts to do so by the government which would entail much more money in order to build in large profits to the private sector which are not necessary if government provides the jobs directly. Think about all the money that has been wasted by lavishing it on private contractors in Iraq and Afghanistan.
Obama's economic team including Fed Chairman Bernanke seems to think that the key to getting the economy moving is to make interest rates so low that loans will be easy to get as if the only thing holding the private sector back from expanding and hiring workers is the ease with which they can get a loan. But this is belied by the fact that the corporations don't need loans to expand: THEY ARE ALREADY SITTING ON $2 TRILLION IN CASH. Why do they need to borrow money? Duhhh! How stupid are these people? They are deluded to think that the only way things get done in this economy is to create more debt. Why would I borrow money to do something if I am sitting on all the cash I would ever need to do it and more? Obama made the mistake of taking advice from Larry Summers and Tim Geithner, Wall Street types who think the only way to get the economy moving is to cater to Wall Street and appease the rich by giving them even more favors: deregulation and lower taxes. This top down approach hasn't worked. That should be obvious by now! Instead the rich are richer than ever, more and more money has been funneled to the top 2% and middle class interests have been neglected. People have lost their homes who shouldn't have had to if the government had acted in their interests. Now investors are sueing the big banks because they were screwed. But what about the people who lost their homes to foreclosure? Little if anything is being done in their behalf.
All in all, it's not all about Obama. If he's not elected in 2012 and Republicans run the table, God help us. The US will become a nation of serfs and a small class of economically powerful and dominant aristocrats. The safety net will be eliminated and more and more people will become homeless and die on the streets for lack of health care. Children's growth will be stunted and they will become increasingly ignorant and uneducated. The country will be by, for and of the rich and powerful. Better to have Obama reelected and a Republican Congress which will mean nothing will get done for four more years, but even that is better than sliding back into another Dark Age. The best scenario, however, would be that Democrats control the Presiency and Congress. This would also guarantee that a liberal would be appointed to the Supreme Court when a vacancy occurs which is very likely in the next 5 years and which would tilt the balance there from the conservative oriented majority which now obtains. If such were the case, then America might well be back on the path towards being a sane and progressive nation again instead of the repudiation of Enlightenment values it was founded on which it is now in danger of becoming.
From Julianne Escobedo Shepherd’s post / AlterNet / August 9, 2011
MoveOn has created a new petition to protest the debt deal and apparent fact that barely anyone in Congress cares about job creation. From a press release:
In the wake of the debt deal that does nothing to create jobs, and fails to make corporations and the rich pay their fair share, MoveOn.org and Rebuild the Dream today announced the new Contract for the American Dream. The Contract, born out of the new American Dream Movement, is a progressive economic vision crafted by 125,000 Americans who came together online and in their communities, and put forth their ideas to get the economy back on track. Members of the American Dream Movement will take the Contract directly to Congress during the August recess to demand “Jobs Not Cuts,” beginning with hundreds of actions around the country on August 10th.
MoveOn rally outside Cong. Hunter's office, August 2, 2011. Photo by Grok Surf.
There are 3 actions in San Diego County tomorrow, Wed., August 10th, at local Congressional offices. See here. There are events at Bilbray’s, Hunter’s, and Susan Davis’ offices. Go to link for times and locales.
The Times ad is worth reading—it lays out several solutions for both job creation and repairing the economy—though the August 10th actions seem to be more imperative than the petition, per se (see: London).
Here’s the Contract for the American Dream:
[ See below for the full text of the Contract and then click here to sign your name to it.]
MoveOn crowd outside Hunter's office, Aug. 2, 2011. Grok Surf.
”I have a dream. It is a dream deeply rooted in the American Dream.” –Rev. Dr. Martin Luther King, Jr., 1963 March on Washington
We, the American people, promise to defend and advance a simple ideal: liberty and justice… for all. Americans who are willing to work hard and play by the rules should be able to find a decent job, get a good home in a strong community, retire with dignity and give their kids a better life. Every one of us—rich, poor or in-between, regardless of skin color or birthplace, no matter their sexual orientation or gender—has the right to life, liberty and the pursuit of happiness. That is our covenant, our compact, our contract with one another. It is a promise we can fulfill—but only by working together.
Today, the American Dream is under threat. Our veterans are coming home to few jobs and little hope on the home front. Our young people are graduating off a cliff, burdened by heavy debt, into the worst job market in half a century. The big banks that American taxpayers bailed out won’t cut homeowners a break. Our firefighters, nurses, cops and teachers—America’s everyday heroes—are being thrown out onto the street. We believe:
AMERICA IS NOT BROKE. America is rich—still the wealthiest nation ever. But too many at the top are grabbing the gains. No person or corporation should be allowed to take from America while giving little or nothing back. The super-rich who got tax breaks and bailouts should now pay full taxes—and help create jobs here, not overseas. Those who do well in America should do well by America.
AMERICANS NEED JOBS, NOT CUTS. Many of our best workers are sitting idle, while the work of rebuilding America goes undone. Together, we must rebuild our country, reinvest in our people and jump-start the industries of the future. Millions of jobless Americans would love the opportunity to become working, tax-paying members of their communities again. We have a jobs crisis, not a deficit crisis.
To produce this Contract for the American Dream, 131,203 Americans came together online and in their communities. We wrote and rated 25,904 ideas. Together, we identified the 10 most critical steps to get our economy back on track and restore the American Dream:
INVEST IN AMERICA’S INFRASTRUCTURE. Rebuild our crumbling bridges, dams, levees, ports, water and sewer lines, railways, roads and public transit. We must invest in high-speed Internet and a modern, energy-saving electric grid. These investments will create good jobs and rebuild America. To help finance these projects, we need national and state infrastructure banks.
CREATE 21ST-CENTURY ENERGY JOBS. We should invest in American businesses that can power our country with innovative technologies like wind turbines, solar panels, geothermal systems, hybrid and electric cars, and next-generation batteries. And we should put Americans to work making our homes and buildings energy efficient. We can create good, green jobs in America, address the climate crisis, and build the clean energy economy.
INVEST IN PUBLIC EDUCATION. We should provide universal access to early childhood education, make school funding equitable, invest in high-quality teachers, and build safe, well-equipped school buildings for our students. A high-quality education system, from universal preschool to vocational training and affordable higher education, is critical for our future and can create badly needed jobs now.
OFFER MEDICARE FOR ALL. We should expand Medicare so it’s available to all Americans, and reform it to provide even more cost-effective, quality care. The Affordable Care Act is a good start and we must implement it—but it’s not enough. We can save trillions of dollars by joining every other industrialized country—paying much less for health care while getting the same or better results.
MAKE WORK PAY. Americans have a right to fair minimum and living wages, to organize and collectively bargain, to enjoy equal opportunity and to earn equal pay for equal work. Corporate assaults on these rights bring down wages and benefits for all of us. They must be outlawed.
SECURE SOCIAL SECURITY. Keep Social Security sound, and strengthen the retirement, disability, and survivors’ protections Americans earn through their hard work. Pay for it by removing the cap on the Social Security tax, so that upper-income people pay into Social Security on all they make, just like the rest of us.
RETURN TO FAIRER TAX RATES. End, once and for all, the Bush-era tax giveaways for the rich, which the rest of us—or our kids—must pay eventually. Also, we must outlaw corporate tax havens and tax breaks for shipping jobs overseas. Lastly, with millionaires and billionaires taking a growing share of our country’s wealth, we should add new tax brackets for those making more than $1 million each year.
END THE WARS AND INVEST AT HOME. Our troops have done everything that’s been asked of them, and it’s time to bring them home to good jobs here. We’re sending $3 billion each week overseas that we should be investing to rebuild America.
TAX WALL STREET SPECULATION. A tiny fee of 1/20th of 1% on each Wall Street trade would raise tens of billions of dollars annually with little impact on actual investment. This would reduce speculation, “flash trading,” and outrageous bankers’ bonuses—and we’d have a lot more money to spend on Main Street job creation.
STRENGTHEN DEMOCRACY. We need clean, fair elections—where no one’s right to vote can be taken away, and where money doesn’t buy you your own member of Congress. We must ban anonymous political influence, slam shut the lobbyists’ revolving door in D.C. and publicly finance elections. Immigrants who want to join in our democracy deserve a clear path to citizenship. We must stop giving corporations the rights of people when it comes to our elections. And we must ensure our judiciary’s respect for the Constitution. Together, we will reclaim our democracy to get our country back on track.
From time to time, someone under 30 will ask me, "When did this all begin, America's downward slide?" They say they've heard of a time when working people could raise a family and send the kids to college on just one parent's income (and that college in states like California and New York was almost free). That anyone who wanted a decent paying job could get one. That people only worked five days a week, eight hours a day, got the whole weekend off and had a paid vacation every summer. That many jobs were union jobs, from baggers at the grocery store to the guy painting your house, and this meant that no matter how "lowly" your job was you had guarantees of a pension, occasional raises, health insurance and someone to stick up for you if you were unfairly treated.On August 5, 1981, President Ronald Reagan fired every member of the air traffic controllers union (PATCO) who'd defied his order to return to work and declared their union illegal. They had been on strike for just two days.
Young people have heard of this mythical time -- but it was no myth, it was real. And when they ask, "When did this all end?", I say, "It ended on this day: August 5th, 1981."
Beginning on this date, 30 years ago, Big Business and the Right Wing decided to "go for it" -- to see if they could actually destroy the middle class so that they could become richer themselves.
And they've succeeded.
On August 5, 1981, President Ronald Reagan fired every member of the air traffic controllers union (PATCO) who'd defied his order to return to work and declared their union illegal. They had been on strike for just two days.
It was a bold and brash move. No one had ever tried it. What made it even bolder was that PATCO was one of only two unions that had endorsed Reagan for president! It sent a shock wave through workers across the country. If he would do this to the people who were with him, what would he do to us?
Reagan had been backed by Wall Street in his run for the White House and they, along with right-wing Christians, wanted to restructure America and turn back the tide that President Franklin D. Roosevelt started -- a tide that was intended to make life better for the average working person. The rich hated paying better wages and providing benefits. They hated paying taxes even more. And they despised unions. The right-wing Christians hated anything that sounded like socialism or holding out a helping hand to minorities or women.
Reagan promised to end all that. So when the air traffic controllers went on strike, he seized the moment. In getting rid of every single last one of them and outlawing their union, he sent a clear and strong message: The days of everyone having a comfortable middle class life were over. America, from now on, would be run this way:
* The super-rich will make more, much much more, and the rest of you will scramble for the crumbs that are left.
* Everyone must work! Mom, Dad, the teenagers in the house! Dad, you work a second job! Kids, here's your latch-key! Your parents might be home in time to put you to bed.
* 50 million of you must go without health insurance! And health insurance companies: you go ahead and decide who you want to help -- or not.
* Unions are evil! You will not belong to a union! You do not need an advocate! Shut up and get back to work! No, you can't leave now, we're not done. Your kids can make their own dinner.
* You want to go to college? No problem -- just sign here and be in hock to a bank for the next 20 years!
* What's "a raise"? Get back to work and shut up!
And so it went. But Reagan could not have pulled this off by himself in 1981. He had some big help:
The AFL-CIO.
The biggest organization of unions in America told its members to cross the picket lines of the air traffic controllers and go to work. And that's just what these union members did. Union pilots, flight attendants, delivery truck drivers, baggage handlers -- they all crossed the line and helped to break the strike. And union members of all stripes crossed the picket lines and continued to fly.
Reagan and Wall Street could not believe their eyes! Hundreds of thousands of working people and union members endorsing the firing of fellow union members. It was Christmas in August for Corporate America.
And that was the beginning of the end. Reagan and the Republicans knew they could get away with anything -- and they did. They slashed taxes on the rich. They made it harder for you to start a union at your workplace. They eliminated safety regulations on the job. They ignored the monopoly laws and allowed thousands of companies to merge or be bought out and closed down. Corporations froze wages and threatened to move overseas if the workers didn't accept lower pay and less benefits. And when the workers agreed to work for less, they moved the jobs overseas anyway.
And at every step along the way, the majority of Americans went along with this. There was little opposition or fight-back. The "masses" did not rise up and protect their jobs, their homes, their schools (which used to be the best in the world). They just accepted their fate and took the beating.
I have often wondered what would have happened had we all just stopped flying, period, back in 1981. What if all the unions had said to Reagan, "Give those controllers their jobs back or we're shutting the country down!"? You know what would have happened. The corporate elite and their boy Reagan would have buckled.
But we didn't do it. And so, bit by bit, piece by piece, in the ensuing 30 years, those in power have destroyed the middle class of our country and, in turn, have wrecked the future for our young people. Wages have remained stagnant for 30 years. Take a look at the statistics and you can see that every decline we're now suffering with had it's beginning in 1981 (here's a little scene to illustrate that from my last movie).
It all began on this day, 30 years ago. One of the darkest days in American history. And we let it happen to us. Yes, they had the money, and the media and the cops. But we had 200 million of us. Ever wonder what it would look like if 200 million got truly upset and wanted their country, their life, their job, their weekend, their time with their kids back?
Have we all just given up? What are we waiting for? Forget about the 20% who support the Tea Party -- we are the other 80%! This decline will only end when we demand it. And not through an online petition or a tweet. We are going to have to turn the TV and the computer and the video games off and get out in the streets (like they've done in Wisconsin). Some of you need to run for local office next year. We need to demand that the Democrats either get a spine and stop taking corporate money -- or step aside.
When is enough, enough? The middle class dream will not just magically reappear. Wall Street's plan is clear: America is to be a nation of Haves and Have Nothings. Is that OK for you?
Why not use today to pause and think about the little steps you can take to turn this around in your neighborhood, at your workplace, in your school? Is there any better day to start than today?
P.S. Here are a few places you can connect with to get the ball rolling:
Everyone is talking about how to get the economy moving again and how to create jobs. President Obama talks about "winning the future." This means more education, more entrepreneurialism, more new industries, more new products for consumers to buy. Surely, all this new economic activity is exactly what we need or is it? Since the GDP of the US is dependent on consumers consuming to the tune of 70% of the entire economy, it stands to reason that for the economy to expand, consumers need to consume more. But wait a minute. We are already stuffed to the gills with products rammed down our throats by TV advertisers. Maybe what we need is less consumption. Americans are already experiencing an epidemic of obesity. We should be consuming less fast food. But that would bring the profits of McDonald's down. They might even have to lay off employees. Their stock might plummet. Wal-Mart offers us a plethora of cheap crap made in China. But if we stopped buying it, Wal-Mart's profits would go down, their stock price would tumble and the Dow Jones average might even find itself in bear market territory. Everyone agrees that this would be terrible for the economy. But it might be good for the citizens.
I say we need to participate less in the market economy and be more self-subsistent. This would result in a decrease in GDP, but an increase in citizen independence. The more we rely on ourselves to fulfill our needs, the less we rely on the market economy and the better off we are when that economy goes kerflooey. The recent economic meltdown was all about Wall Street and their shenanigans. It was of paramount importance to bail out Wall Street and then all good things would follow. Such was the conventional wisdom. Only good things didn't follow. People's homes were foreclosed on en masse even when banks couldn't prove that they held title to the houses. Main Street, the middle class - they were not protected at all. The culprits who caused the crisis were bailed out. The average citizen who lost his job and his house and maybe even his wife was not bailed out at all. In fact Republicans are doubling down on destroying what remains of the safety net which might have helped these unfortunates to maintain the skeleton of a half way decent way of life. Congress has continued to sponsor and uphold legislation that encourages corporations to outsource jobs. The budget is to be balanced on the backs of the poor and middle class and not by asking the rich to contribute a little more. We are rapidly retreating to the Dickensian era where to ask for a little more porridge was to be answered with a "certainly not!"
What we need is not more consumption of cheap Chinese produced crap or even newly minted crap from our own entrepreneurs. What we need is a better system of distributing the immense amount of stuff that we are already capable of producing. And in particular we are in need of a more widely distributed system of ownership so that profits redound to the average citizen and not to the upper .1% who are becoming immensely wealthy far beyond their needs while the poor and middle class are being reduced to penury and poverty. What we need is a government that looks out for the little guy, not one who is all for the competitive struggle to produce more and more goods and win the future that way. How about winning the future by taking back our ability to be self-sustaining? We need to return to an era when people produced a large amount of their own food by growing it themselves instead of relying on the marketplace of consumer provided food by large agricorporations which use pesticides, herbicides and hormones to provide us with food which in most cases will not kill us right away. That will take place in 30-40 years when cancer sets in. But in a lot of cases of e coli and salmonella brought on by filthy conditions for animals in factory farms, it will kill us or sicken us immediately. So profits are concentrated in the hands of a few corporations instead of being widely distributed which would take place if there were widespread family gardening which also produces healthier foods. If everyone farmed to some extent, we would all be better off but GDP and corporate profits would decline because we wouldn't be participating to such a great extent in the market economy.
Sociologists decry the fact that in many parts of the world people are living on $2. a day. But those in this category that are rural may in fact be 98% self-subsistent. In other words they are providing for their own needs without participating in the market economy or are only participating to the tune of $2. a day. On the other hand the urban poor who are living on $2. a day may not be in a position to be self-subsistent, and they are truly poor because they have to meet all their needs by means of the market economy and $2. a day doesn't go very far. Just recently many Americans met probably 75% of their needs without participating in the market economy. Take my grandparents, for example. My Grandfather lived and worked on a small dairy farm. They had chickens and hogs and a large garden. So they provided perhaps 90% or more of their own food instead of buying it at the market. They sold milk into the marketplace in exchange for dollars which they used to purchase what they could not provide for themselves. Instead of buying oil or gas, my grandfather farmed with horses and he grew the fuel that they consumed with the result that he did his own energy production and did not have to depend on Exxon Mobil or Chevron for energy. And as a bonus horses did not pollute. Since chemicals were not available, his farming was organic by default. He learned carpentry and built his own buildings with the result he didn't have to hire a contractor. They were largely self-sufficient and self-subsistent. Of course, they made their own clothes instead of buying them in a store. Women had a whole variety of functions within the household instead of vying for jobs in the marketplace, another way in which they were self-sufficient. They actually weathered the Great Depression quite well since they weren't dependent on the market economy. Even my parents who had government jobs as teachers, the kind that Republicans are attacking today, raised chickens and had a really large garden from which they provided much of their own food. And women used to bake instead of buying prepared foods.
So maybe the answer to the economic malaise that we find ourselves in today will be solved not by creating new industries to manufacture more and better stuff but by figuring out ways to be less dependent on the marketplace and more self-sufficient. Profit centers need to be more widely dispersed instead of profits ending up in the hands of the Fortune 400. Think about it: when you participate in the market economy, the money you spend ends up in the hands of a very few and select group of corporations and wealthy individuals and families. These individuals, families and corporations have effectively captured government through their paid lobbyists so that government operates solely in their interests. Jefferson envisioned a country of independent yeoman, small farmers and craftsmen. In today's America, there are hardly any such people. Instead most rely on a job to provide them with income which they use to provide for all their needs by purchasing goods and services in the marketplace. As more and more people lose their jobs because the jobs are outsourced or are replaced by automated machines, there is no place to go but down. But the self-employed, the self-sufficient and self-subsistent will be able to provide for themselves and their families irregardless of what is happening in the marketplace. Those absolutely dependent on wages to make a living are already becoming neo-serfs needing two or three minimum wage jobs to make a go of it. The worst off are dependent on charity.
We hear all this blather about how the US is such a wealthy nation. Not true. Before Ronald Reagan became President, the US was the world's largest creditor nation. People and countries owed us more money than we owed them. Now some 30 years later the US is the world's largest debtor nation. This is the definition of a poor - not a rich - nation. China on the other hand holds $3 trillion in international reserves including $1 trillion of US debt. Other nations have sovereign wealth funds which contain vast amounts of money. The US has only a huge pile of debt - some $14 trillion worth. The US used to be the world's largest importer of raw materials and exporter of manufactured goods. Now we're the world's largest exporter of raw materials and importer of manufactured goods with a trade deficit of some $600 billion a year. At the present time the US has a deficit of some $2 trillion in needed infrastructure repairs while China is building high speed rail track at such a rate that it will soon have more miles than the rest of the world combined. Meanwhile, the US spends more on its military establishment than the rest of the world combined while cutting safety nets and education for its own citizens.
Americans have pulled the wool over their own eyes. Despite having a national debt of $14 trillion, despite having gone from a net creditor nation to a net debtor nation in little over 30 years, despite having enormous trade deficits month after month, year after year, despite having an infrastructure in need of $2 trillion worth of repairs, Americans think they live in a wealthy nation. The truth of the matter is that the US is a poor nation within which live a lot of wealthy individuals. China on the other hand holds a little over $1 trillion of US debt making it a fairly wealthy nation albeit with a large but diminishing number of poor people. China is building new infrastructure at an astonishing rate. It's a fallacy to think a wealthy nation is a nation comprised of a large number of wealthy individuals. In fact many Banana Republics are comprised of a small class of wealthy individuals surrounded by a sea of poverty. The US is on track to becoming one of those. A recent survey showed that there is a higher level of inequality in the US than exists in Pakistan, Ethiopia and Ivory Coast.
It is not hard to diagnose why the US is a poor nation which thinks itself rich while China is a rich nation which passes itself off as being poor. All the free trade agreements like NAFTA and CAFTA have resulted in the decimation of the US manufacturing base. US factories are closing in droves:
2010 comes in the midst of a stunning wave of U.S. factory closings that stretches from coast to coast. Once upon a time America was the greatest manufacturing machine that the world has ever seen, but now it seems as though the only jobs available for working class Americans involve phrases such as “Welcome to Wal-Mart” and “Would you like fries with that?” Even though the population of the United States has exploded over the last several decades, the number of Americans employed in the manufacturing sector today is smaller than it was in 1950. America has become a voracious economic black hole that ”consumes” as much as possible and yet actually produces very little. The United States is becoming deindustrialized at a blinding pace, and it is becoming increasingly difficult for blue collar American workers to find jobs that will actually enable them to support their families. The sad truth is that American workers don’t have a whole lot to actually celebrate this Labor Day. 14 million U.S. workers are “officially unemployed” and tens of millions of others have been forced to take part-time or temporary jobs that they are overqualified for just so they can survive. Unfortunately, this is not just a temporary situation for American workers. As millions of good jobs continue to get outsourced and offshored, Labor Day celebrations in coming years will be even more depressing.
Since 2001, The U.S. Has Lost 42,400 factories. The "giant sucking sound" that Ross Perot predicted has become a point of actual fact. But this doesn't seem to bother America's leaders. They are dedicated to the policy that US consumption drives US GDP and as long as US GDP is the largest in the world, who cares? Sales are up! However China, as the world's second largest economy as measured by GDP, is on track to overtake the US in the near future. American politicians only care about transnational corporations, nominally American, and how they can maintain the US consumer appetite (and their profit margins) for buying their goods even though most of those goods are produced overseas. They coddle these corporations by lowering their taxes, having their lobbyists drill loophioles in the tax code and giving them a "tax holiday" during which they can "repatriate" their overseas capital and bring it "home" without any tax consequences.
The model of trickle down economics, long since discredited, is still being championed by right wing politicians with the result that the fig leaf of prosperity is being shredded to reveal a naked transfer of wealth from the middle class to the upper one per cent. Naked power grabs are becoming the order of the day as the recent vote to extend taxpayer subsidies to the five Big OIl companies, despite their being the most profitable corporations in human history, reveals. At the same time those same right wing policticians are demanding that the budget be balanced on the backs of the poor and middle class. While countries such as Norway fund their safety net with royalties from oil drilling, the US gives away its natural resources to oil corporations including BP which is not even headquartered in the US. The neocon model of privatization and eliminating safety nets, although unsuccessful in Argentina and Brazil, is achieving considerably more success when practiced here at home. Trade unions are being decimated. States are being turned into fiefdoms and dictatorships. Public education is being defunded. There is an all out assault on teachers, police and other public workers. The notion that government doesn't work and can't be trusted is being fostered.
The US is becoming the very definition of a Banana Republic. It is becoming a nation largely bereft of a middle class, a nation in which there exists a small class of extremely wealthy individuals surrounded by a sea of impoverishment, a nation of antiquated infrastructure, a nation in which there is no there there. All that exists is a diminshing probablity of getting rich or even making it into the middle class. Students are being saddled with immense and obscene amounts of student loan debt. Middle classers are losing their homes to foreclosure. Poor people are being shunted aside as food stamp programs are being shut down and home heating oil allowances are drying up. The war on the poor is raging. And the American people continue to vote the guys that are screwing them into office because they pander to them with promises of unlimited rights of gun ownership and promises that they won't allow gays to marry
The US in point of fact is not a wealthy nation despite attempts to brainwash us that it is, and it's becoming poorer by the hour. But instead of implementing a rational health care system, we continue to give away billions to the pharmaceutical companies that we wouldn't have to if the government weren't prevented by law from negotiating with them. We continue to give away billions in subsidies to Big Oil and Big Agriculture. We continue to give away billions in tax breaks to the rich. We continue to pour billions down ratholes in Afghanistan, Pakistan, Iraq, Israel and many other places. .
These countries are taking us for a ride, and the Israeli President Netanyahu lectures our President on why he won't cooperate to bring about mideast peace. They are manipulating us out of our money while actually working and fighting against us as revealed by Pakistan's harboring of bin Laden. If Obama had tried to coordinate bin Laden's capture with Pakistan instead of going it alone, bin Laden would probably have been tipped off with the result that the Seals, to Obama's embarassment, would not have found bin Laden at home. What, no bin Laden? Just innocent women and children.
As China eats the US' lunch and the rest of the world rips off Uncle Sucker for billions of US taxpayer dollars, the American people should get used to the fact that we're not number 1 any more. Far from being the world's richest nation we're fast becoming one of the world's poorest nations where some of the world's richest people happen to reside. But don't worry about them. They also own villas in France, Italy and Spain. They only continue to hold US citizenship as a convenience. They could live anywhere. They could headquarter their corporations anywhere. It's still convenient for them to headquarter here so they can use their lobbyists to rip off American taxpayers and sell into the American consumer market. But as time goes on most of their sales will be to emerging consumer markets in China and elsewhere.
For the past few months, we’ve been witnessing an inspiring, genuinely grass-roots rebellion of average Americans against corporate/financial profiteers savaging our collective well-being for their narrow, private gain.
It’s most powerful manifestation came in Wisconsin, where tens of thousands demonstrated outrage over atrociously arrogant, callously cruel Republican efforts to eviscerate organized labor.
As welcome as this explosion of populist protest has surely been, its amorphous spontaneity and incomplete cohesion evince a weakness that needs correction.
Much greater unity is required, stronger links between separate communities and regions are necessary, and a national people-before-profits agenda has to be drawn up, disseminated, and implemented.
In the interim -- as an effective programmatic counter to constant rape by marauding monopolists is being formulated -- it’s crucial to put forward an overriding progressive theme, expressed tersely in strong language well suited for street chants and bumper stickers, that every fair-minded citizen possessing a good heart can immediately, enthusiastically embrace.
That’s why “Make the wealthy pay to save the USA!” should figure prominently in everything we say or write about the profound systemic injustice under which increasing multitudes of our fellow citizens -- and we ourselves -- painfully suffer.
Most adult Americans are either workaday wage-earners or worked-a-lifetime retirees. They’re the folks to whom ‘government of the people, by the people, and for the people’ should properly apply.
It’s in clear furtherance of their welfare and common good that elected officials are duty-bound to constructively act, as our societal first priority. But just the opposite is happening.
Crony capitalist speculators who tanked our economy through their enormous greed and malfeasance are being shielded by conservative extremists like Scott Walker, Paul Ryan, and the Tea Party.
They would rather decimate collective bargaining, Social Security, Medicare, and Medicaid before eliminating unfair tax loopholes and havens for billionaires.
Constantly putting Wall Street ahead of Main Street is simply wrong. It’s also as socially unsustainable as similarly unfair practices were when ancient empires fell.
Appropriately taxing the mega rich and corporation -- together with ending ill-advised wars and curbing costly militarism -- could fix the deficit moving forward.
Our country’s been damaged long enough by those who treasonously owe primary allegiance to the Almighty Dollar.
As mass poverty and deprivation worsen, while fat cats unconscionably rake in more stolen booty, no reasonable person can fail to agree with what’s just been stated.
More importantly, no conservative can present a countering argument without clearly exposing the elitist, self-serving social irresponsibility that Republicans are afflicted with as if by a diabolical moral disease that’s completely contrary to both Golden Rule Christian teachings and key American ideals that they hypocritically profess to cherish.
We can’t lose if we gather in growing numbers in all venues of public expression to relentlessly speak (shout) these words with an insistent, unified voice:
Make the wealthy pay to save the USA!
Dennis Rahkonen, from Superior, Wisconsin, has been writing progressive commentary with a Heartland perspective for various outlets since the Sixties
Last night President Obama and congressional negotiators cut a deal to keep the government running, cutting “$38.5 billion under current funding levels, per Republican demands,” and $78 billion below what Obama called for in his initial 2011 budget.
Yet as Republicans and Democrats continue to battle over the deficit within a political framing that includes taking aim at Pell Grants for low-income students — which Obama preemptively proposed to cut, calling summer grants “too expensive,” while Republicans want far deeper cuts than that — Head Start funding, and other programs from Main Street Americans, there is one group of Americans that seems to be getting away without having any sacrifices demanded of them: the very richest.
As this chart from from Wealth for the Common Good shows, the top 400 taxpayers — who have more wealth than half of all Americans combined — are paying lower taxes than they have in a generation, as their tax responsibilities have slowly collapsed since the New Deal era as working families have been asked to pay more and more:
There have been a handful of proposals by congressional progressives to once again put requiring more sacrifice from the luckiest among us back on the table. The Congressional Progressive Caucus recently unveiled a “People’s Budget” that would boost taxes on the wealthiest Americans, returning them to levels closer to where they were under Ronald Reagan’s first term — hardly socialism.
Yet these proposals have yet to gain steam, and the budget debate in Washington appears to revolve completely around cutting spending for Main Street Americans who’ve already been asked to pay too much during the recession. That’s why there’s a Main Street Movement demanding fair sacrifice and standing up for the great American middle class. Whether it succeeds may determine the fate of most hard-working Americans for a generation to come.
by Jeffrey Sachs, Economist and Director of the Earth Institute, Columbia University
Just when it seemed that all of Washington had lost its values and its connection with the American people, a bolt of hope has arrived. It is the People's Budget put forward by the co-chairs of the 80-member Congressional Progressive Caucus. Their plan is humane, responsible, and most of all sensible, reflecting the true values of the American people and the real needs of the floundering economy. Unlike Paul Ryan's almost absurdly vicious attack on the poor and working class, the People's Budget would close the deficit by raising taxes on the rich, taming health care costs (including a public option), and ending the military spending on wars and wasteful weapons systems.
There are now four budget positions on the table. Far to the right is Paul Ryan's plan, an artless war on the poor that would take a meat-cleaver to Medicaid (health care for the poor), food stamps, support for child care, the environment, and the rest of government other than the military, Social Security, and Medicare (that is, until 2022, when the slashing would begin on Medicare coverage as well). Ryan would keep taxes below 20 percent of GDP (specifically, 19.9 percent of GDP in 2021), at the cost of destroying entitlements programs and other civilian spending.
Then there is President Obama's budget, which is really a muddled proposal in the center-right of the political spectrum. It would keep most of the Reagan-era and Bush-era tax cuts in place. Like the Ryan proposal, Obama's tax proposals would keep total taxes at around 20 percent of GDP. The result is a major long-term squeeze on vital programs such as community development, infrastructure, and job training. Also, Obama's plan never closes the budget deficit, which remains as high as 3.1% of GDP in 2021.
In the progressive middle is the People's Budget. Like Ryan's plan, the People's Budget would cut the budget deficit to zero by 2021, but would do so in an efficient and fair way. It would close the budget deficit by raising tax rates on the rich and giant corporations, while also curbing military spending and wrestling health care costs under control, partly by introducing a public option. By raising tax revenues to 22.3 percent of GDP by 2021, the People's Budget closes the budget deficit while protecting the poor and promoting needed investments in education, health care, roads, power, energy, and the environment in order to raise America's long-term competitiveness. The People's Budget thereby achieves what Ryan and Obama do not: the combination of fairness, efficiency, and budget balance.
The fourth position is the public's position. The Republicans often say that they want Congress to respect the voice of the people. The voice of the people is crystal clear. In one opinion surveyafter the next, the public says that the rich and the corporations should pay more taxes. The public says that we should tamp down runaway health care costs through a public option, one that would introduce competition to drive down bloated private health insurance costs. The public says that we should get out of Iraq and Afghanistan and reduce Pentagon spending. (Just yesterday, Defense Secretary Gates let loose the predictable Pentagon canard that we should stay in Iraq if the Iraqi government asks for it. Better yet, we should respond to what the American people are asking for: to bring our troops home).
The fact is that the People's Budget is the public's position. That's why it is truly a centrist initiative, at the broad center of the U.S. political spectrum. Ryan reflects the wishes of the rich and the far right. Obama's position reflects the muddle of a White House that wavers between its true values and the demands of the wealthy campaign contributors and lobbyists that Obama courts for his re-election. Many Democrats in Congress have also gone along with the falsehood that deficit cutting means slashing spending on the poor and on civilian discretionary programs, rather than raising taxes on the rich, cutting military spending, and taking on the over-priced private health insurance industry. Only the People's Budget speaks to the broad needs and values of the American people.
The current budget negotiations have been a dialogue among the wealthy. The big debate has focused on which programs for the poor should be axed first. There has been no discussion of raising taxes on the rich, and quite the contrary, the White House and the Republican leadership agreed to further tax cuts last December. Obama has repeatedly expressed regret at slashing community development, energy support for the poor, and other programs, but he is not fighting the trend, only regretting it.
Most of Washington has stopped listening to the people. Campaigns are now so expensive that most politicians do anything to court the favor of the rich. Yet ultimately the public will prevail. Twice before in American history -- during the Gilded Age of the 1880s and in the 1920s, just before the Great Depression -- big corporate money effectively owned Washington. But in both eras great progressive leaders (including the two Roosevelts, Theodore and Franklin) came along to restore the true meaning of American democracy: a government truly of the people, by the people, and for the people. With public protests against government by the rich now spreading in Wisconsin, Ohio and beyond, and with the launch of the People's Budget by the Congressional Progressive Caucus, a great national movement to restore American democracy has begun.
It’s tax time. It’s also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.
Here’s the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.
Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma – even if we cut back on our bloated defense budget – it wouldn’t be nearly enough.
The vast majority of Americans can’t afford to pay more. Despite an economy that’s twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they’re employed they’re earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That’s less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that’s only because so many families now have to rely on two incomes.)
Yet even as their share of the nation’s total income has withered, the tax burden on the middle has grown. Today’s working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.
It’s just the opposite for super rich.
The top 1 percent’s share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent’s share has tripled. And they’re doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 — $135 billion. That’s up 5.7 percent from 2009.
Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it’s 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.
The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it’s 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They’re now taxed at 15 percent.
If the rich were taxed at the same rates they were half a century ago, they’d be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That’s enough to accomplish everything the nation needs while also reducing future deficits.
If we also cut what we don’t need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.
Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That’s why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent – still substantial by today’s standards.)
And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.
But don’t the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here’s the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.
Besides, the reason we have a Democrat in the White House – indeed, the reason we have a Democratic Party at all – is to try to rebalance the economy exactly this way.
All the President has to do is connect the dots – the explosion of income and wealth among America’s super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.
This shouldn’t be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes.
The President has the bully pulpit. But will he use it?
One of the organizing principles of the conservative movement revolves around always cutting taxes and resisting any moves towards raising revenues. Hundreds of conservatives have even signed Grover Norquist’s pledge to never, under any circumstances, support a tax increase.
Gov. Nathan Deal (R-GA) made tax cuts a major part of his campaign promise last fall. In an ad put out by his campaign in February 2010, Deal bragged about running on “tax-cutting policies.” Watch it:
Now that Deal is Governor, the state legislature is currently drafting major tax legislation. Deal has been a guiding hand in the negotiations over the bill, and stands behind the latest version of the bill being debated among senate and house legislators. The bill does, as Deal promised, cut many taxes.
For example, it lowers the state personal income tax rate from 6 to 4.5 percent. Yet at the same time, the bill is being touted as being revenue neutral — meaning that revenue has to come from somewhere. Georgia Republicans, under the leadership of Deal, have decided to make up the difference by eliminating a whole host of tax exemptions and increases in sales taxes. The end result? Georgians making over $180,000 would see steep tax cuts while middle class Georgians making between $20,000 and $180,000 would see tax hikes. This chart compiled by the Atlanta Journal-Constitution’s Jay Bookman using data from Georgia State University’s Fiscal Research Center illustrates this:
While negotiations over the tax bill are far from over, it appears that Deal and his Republican colleagues are standing behind a template that is becoming all too familiar for right-wing legislators: cut taxes on the wealthiest Americans and then demand that middle class and working class Main Street Americans pay out more in tax hikes or in reduced spending to health care, education, and other important investments. As ThinkProgress previously reported, at least a dozen states are currently pursuing corporate tax cuts while at the same time increasing burdens on working families.
Update Georgia Politico's Brett Johns has more details about how the GOP's plan is sizing up to slam the middle class and enrich the already wealthy
Police estimate 5,000 to 8,000 teachers, nurses, Teamsters, electricians, actors and others marched to support their peers in Wisconsin and oppose any similar organized-labor restrictions in California.
Alarmed by recent union losses in a Wisconsin labor battle, thousands of organized workers marched through downtown Los Angeles on Saturday, vowing to fight a similar fate here in cash-strapped California.
Police estimated between 5,000 and 8,000 people attended the protest, which ended in a packed rally at Pershing Square. The event comes in response to the Wisconsin Legislature's approval of a bill this month that curtails the collective bargaining rights of many unions and follows a weeks-long battle.
Marchers cheered speakers such as Teamsters General President James P. Hoffa; Maria Elena Durazo, secretary-treasurer of the Los Angeles County Federation of Labor; and Mahlon Mitchell, president of the Professional Fire Fighters of Wisconsin.
The Wisconsin bill, which was signed by Republican legislators without the support of Democrats, exempted firefighters and other public safety workers. However, Mitchell told the crowd that his union still opposes the action.
"This is a direct attack" on all unions and the entire middle class, Mitchell shouted, warning that similar policies could soon be introduced by politicians in California, which is grappling with an estimated $26-billion deficit. "An injury to one is an injury to us all!"
Mitchell's words were met with loud cheers, chants and beating drums. Flags and placards waved in the air, many of them bashing wealthy corporations and conservative politicians.
Protester Ruben Najara, 49, said he has been working at the Los Angeles Department of Water and Power for just over two decades. A Covina resident who holds an associate's degree from a trade college, Najara said the union job has given him a secure, working-class life and the ability to comfortably raise three children.
He said he fears that on the heels of the Wisconsin law, union collective bargaining power will be steadily eroded throughout the country. "We are willing to make concessions," he said. "But you have to have two sides at the table to bargain."
The march began just outside Staples Center, which served as a staging area for thousands of union members. Leading much of the procession was a sea of burly, black-shirted Teamsters. Behind them, stretching back several city blocks, were nurses, telephone technicians, electricians, truckers, screenwriters, actors, longshoremen, teachers and others.
Among those who showed up to voice support were a group of parents whose children attend Eagle Rock Elementary — a facility they said suffered from inadequate funding.
"Enough is enough," said Amanda Millet, who has two kids at the school. "This year we stand to lose some of our best teachers, the very best. It's amazing that the teachers and their union are being blamed for what is happening with the economy right now.... I see a lot of very nice new buildings housing the LAUSD administration. They should get out of those offices and see what's happening at a school like ours, a place that needs to keep all the good teachers it can."
As these conservatives are cutting these services for hard-working middle class Americans, they are claiming they are acting out of need for “shared sacrifice.” Yet at the same time, the right continues to advocate for massive tax cuts for the wealthiest among us.
Rep. Jan Schakowksy (D-IL), along with a number of her progressive congressional colleagues, has introduced a plan that demands real “shared sacrifice.” Her plan, The Fairness in Taxation Act, calls for creating new tax brackets for the richest Americans, starting at a 45 percent rate for people whose income is $1 million. Her bracket would impose the highest rate — 49 percent — on billionaires.
A chart provided by her congressional office demonstrates that asking the wealthiest among us to pay a little more would actually save more money than all of the House Republicans’ cuts to domestic spending combined. House Resolution 1, which gutted funding on Pell Grants, low-income housing aid, community health centers, and other important programs for Main Street Americans, cut a total of $61 billion. Meanwhile, Schakowsky’s plan saves $78.9 billion, considerably more:
In an interview with ThinkProgress, Schakowsky said that she is “hoping” to build enough momentum within Congress to make her proposal the main alternative to the conservative slash-and-burn budget effort, saying that it is a “winner” for Democrats, both politically and on policy grounds. She said that the House Progressive Caucus is planning to do a road show in the summer to campaign on tax justice and endorsed the Main Street Movement that is defending the middle class across America:
THINKPROGRESS: You’ve mentioned a few times the grassroots movement that’s going on…that’s something that we here at ThinkProgress have dubbed the Main Street Movement, all around this country we’re seeing working families rise up. [...] I wonder if you’ve and your colleagues on the Progressive Caucus have thought about similar kinds of tactics [to the Tea Party], a road show, holding rallies, trying to engender grassroots momentum around your proposals.
SCHAKOWSKY: Well, the Progressive Caucus is planning a road show this summer. This will be a central theme of that. [...] But I think this needs to be bigger than that. [...] I like the idea of branding, I like the idea of the Main Street Movement, and I think it is beginning to seriously come together. I think all of the pieces are out there to put this together right now. This is a moment. I want to capture it right now by introducing this legislation that clearly states an alternative that is very popular.
Listen to it:
Indeed, taxing the super-wealthy is quite popular. A March 2 NBC News/Wall Street Journal poll found that 81 percent of Americans prefer taxing the wealthiest Americans more as their top choice for deficit reduction, while less than a third of Americans endorsed policy options like cutting funding to education and health care.
Update ThinkProgress commenter Jay Kimball used IRS data to put together the following graph showing how the richest 1 percent of Americans is nearly earning more money than they ever have while they are paying the lowest taxes in decades:
A crowd armed with signs gathers at a rally in Lansing on Wednesday, March 16, 2011, to protest Gov. Rick Snyder's budget. / SUSAN TUSA/ Detroit Free Press
After Thousands March in Michigan, Recall of Governor Floated
Yesterday, thousands of Main Street Movement protesters marched on the Michigan Capitol to protest Gov. Rick Snyder’s (R) constitutionally flawed assault on Michigan workers. Michigan’s voters, however, can do far more than simply make their displeasure known to Snyder and his allies in the state legislature. Michigan’s constitution is unusually easy to amend, and Snyder and his allies become eligible for a recall in just over three months.
More than 5,000—and the crowd is growing—Michigan union, community, education and other activists are on the Lansing Capitol grounds and inside the state House this afternoon to protest Gov. Rick Snyder’s (R) new “financial martial law.”
The Detroit Free Press reports that the crowd chanted “Take Michigan Back” as UAW President Bob King told the crowd, “This is one day in a long battle.”
Michigan Main Street Movement Protesters March Against Gov. Snyder’s “Financial Martial Law” Bill
Although Wisconsin Gov. Scott Walker’s (R) anti-union crusade has received the biggest headlines, Michigan Gov. Rick Snyder (R) is poised to sign an even more drastic assault on working Americans into law. Last week, the Michigan legislature passed a “financial martial law” bill that allows Snyder to appoint “emergency financial managers” with the power to terminate collective bargaining agreements:
Contracts & Collective Bargaining Agreements. The bill would authorize the emergency manager to reject, modify, or terminate one or more terms and conditions 0f an existing contract.
After meeting and conferring with the appropriate bargaining representative and, if in the emergency manager’s sole discretion, a prompt and satisfactory resolution were unlikely to be obtained, the emergency manager could reject, modify, or terminate one or more terms and conditions of an existing collective bargaining agreement.
There’s a pretty serious problem with this power grab, however — invoking it would violate the Constitution. The Constitution forbids state laws “impairing the Obligation of Contracts.” This provision provides a robust limit on a state’s ability to dissolve contracts between the government and a private party. As the Supreme Court explained in United States Trust Co. v. New Jersey, state laws impairing such contracts must be “reasonable and necessary to serve an important public purpose.”
The bill does contain some language requiring the emergency manager and the state treasurer to determine that they are not violating this constitutional limit before a collective bargaining agreement can be blown up, but Snyder’s own budget gives the lie to any claim that an assault on working Americans is “necessary” to ensure that Michigan governments can pay their bills. Snyder proposed a massive $1.73 billion business tax cut even as he was arguing that his anti-union power grab was necessary to restore the state’s fiscal balance.
The consequences of Snyder’s actions could be stark. If a state is free to break contracts whenever they feel like it, than no one will agree to do business with the state. Investors will refuse to buy the state’s bonds, and state contractors will demand all payments upfront out of fear that the state will accept their work and then tear up the contract requiring the workers to be paid. Creditors will charge the state enormous interest rates to secure against the risk that the state will just waive its hand and make its obligation to repay go away.
In other words, Snyder is so determined to chip away at collective bargaining, he’s demanded a power that he cannot constitutionally use and that would drive his state into an even deeper financial hole if he ever tried.
Did I hear correctly that Wisconsin passed legislation aimed at eliminating the bargaining rights of workers? If true, it’s clear the ultra-right is determined to turn America into a governing autocratic anachy with the common folk being common servants at slave wages to serve the viscious avarice of the Kochs and like company. If this isn’t symptomatic of the war being declared on working class Americans, then I don’t know what is. It’s the Republican game plan of shifting the blame, shame, and pain onto the middle-class for systemic economic breakdowns caused by the upper class. I’m very sad for my country!
That the money-influenced bought Gov. Scott Walker and his promotion of ending the basic rights of unions to represent workers as a way to reduce a state deficit he helped create is disgusting beyond words. The situation we have now of other crony Republican Governors humping this solution to structural deficit problems – whose primary origin lies in other directions – reminds me of the film, “Saving Private Ryan” in WWII. George Marshall initiated the assignment of an Army Ranger team to rescue Private Ryan since his three brothers had already been killed in battle actions. The code name given this very dangerous mission by the rescue team was “FUBAR.”
FUBAR meant, “F****d Up Beyond All Recognition.” This is exactly how I would describe the state of our governmental affairs today in handling deficits and a steady trend – that has been accelerating the last three decades (see my study of historical job growth) – of destroying and minimum-wage Wall-Marting of middle class jobs.
Wisconsin is setting a destabilizing societal divisive precedent of entrenching the upper 10% class that owns +85% of all wealth while placing all other blue-collar Americans in a fight to simply economically survive, and this struggle is only made worse without fair, effective union representation. Is this what thousands of Private Ryan common folk soldiers nobly fought and died for in WWII? An expanding Have and Have Not Divide making us all ultimately the LOSERS ?
People, including the President, will get just what they deserve if they cannot muster the courage to stand up to the monied-interests’ rape of our democracy by, among other ways, eliminating the average working man´s collective bargaining rights for obtaining a decent standard of living and job growth prospects. Until people unite and say, “Enough is Enough,” cannibalizing middle-class social nets such as Social Security and Medicare/Medicaid will be next on the ultra-right’s hit list. Gov. Scott Walker´s trampling on worker-bargaining rights in concert with job and benefit cut threats is just more nails in the coffin on America’s already sad state of social-cultural cohesion and equity for ALL citizens.
Yes, the right word for our current chaotic, brain-dead approach to “Saving Our Nation’’ and solving in a banking, fiscally and economically balanced, creative fashion (like North Dakota) the nation’s short and long-term structural deficits can also best be described as “FUBAR: F****d Up Beyond All Recognition.”
Benjamin Disraeli (British Prime Minister and Novelist, 1804-1881) long ago principally captured admirably our race to institutionlizing an increasingly morally corrupt, massively class divided society based on money and survival of the fittest:
"Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other's habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets; who are formed by a different breeding, are fed by a different food, are ordered by different manners, and are not governed by the same laws." "You speak of -- " said Egremont, hesitatingly, "THE RICH AND THE POOR."
What a difference two years makes. On March 9, 2009 the Dow Jones Industrial Average hit the bottom — closing at a 12-year low of 6,547. Today the Dow is soaring well over 12,000.
From its peak in October, 2007 until its trough two years ago, the stock market lost almost $8 trillion in value. That value hasn’t been completely restored but the Street is well on the way.
Some say the Street’s buoyant revival should pull the rest of the economy with it. But this is hardly a buoyant recovery.
In theory, at least, the extraordinary bull market should be making Americans feel far wealthier than they felt two years ago. So they should be spending far more, and that spending should be fueling far more job growth than it is.
Why hasn’t it happened? In reality, the vast majority of Americans don’t feel wealthier because they hold few if any shares of stock. In fact most feel poorer because their major asset is their homes – now worth 20 to 40 percent less than they were worth in 2007 (and there’s no sign of a rebound in housing).
The Street’s bull market over the last two years has seriously enriched only the wealthiest 5 percent of Americans who hold the lion’s share of stock. While their earned income starts at $210,000, their unearned income – dividends and capital gains — now puts them considerably above that.
Shouldn’t the shopping of the top 5 percent spur lots of new jobs? Not really. While the top 5 percent are spending more, they’re not spending all that much as a proportion of their earnings. The rich sock away a bigger share of their income than everyone else. After all, being rich means you already have most of what you want.
Moody’s Analytics estimates that the shopping of America’s richest 5 percent now accounts for 35.5 percent of all U.S. consumer spending. Just think how much more spending would be going on — and jobs thereby created — if more Americans shared in Wall Street’s gains.
The remaining 95 percent of Americans are still holding back from the malls because they’re worried about their jobs, their falling wages, their higher health-care deductibles, and their dropping home values. And as long as they continue to hold back, this recovery will be painfully slow.
Happy Birthday Wall Street. Party away. Just know that most Americans aren’t joining the celebration.
All over America, working class people are trying hard just to maintain. Jobs are not plentiful. Good jobs are less so. Most experts on the economy think it will be years, if ever, before the U.S. economy recovers to the point where unemployment dips much below 8 percent.
Think what you will about the will to survive and the drive to achieve, but it is not always possible for people to lift up and out fast enough to avoid horrible consequences for themselves and for their kids.
Last night, I watched a CBS News, 60 Minutes, segment on childhood poverty and homelessness in America. Reluctant as many of us are to praise the mainstream media for doing much investigative reporting at all in recent years, this segment was astounding in its clarity and impact. (http://www.cbsnews.com/video/watch/?id=7358670n)
Listen to the kids in this segment. Some go to bed hungry. And they live in shabby motels within blocks of more touristy attractions near Disneyworld in Orlando. Their shame is palpable. Listen to the one young girl who says what so many of the kids feel – she believes somehow the struggles her family is having with money are her fault.
I wish CBS had gone on to contrast the piece with a swing through the bawdy and haughty neighborhoods where the wealthy Florida CEOs gate themselves off safely from the rest of us and where the recession has done a whole lot less damage to families and children, but I was thrilled to see the piece nonetheless. Children always speak with such clarity and honesty that it’s harder to spin their messages.
I also watched in amazement this weekend as the same mainstream media continued to purposely ignore the tens of thousands of protestors still on the streets in Madison, WI, and the other growing protests by working people across the country. It is a disgrace that we have to watch reports of what Sarah Palin is thinking about doing a few months from now with her political future while thousands of our fellow citizens fight just to make sure they have decent jobs now. Our mainstream media’s devotion to the cult of celebrity is more than disturbing, it is self-fulfilling mass destruction of a whole class of people who are not decadent enough, wealthy enough or well-connected enough to plot the course of public discourse.
Part of me wants to believe that some of our elected officials are apart from and somehow above this cultural worship of wealth and stardom. But in reading this week about what our President and his staff think really matters, I saw this piece by Jackie Calmes of the New York Times:
“...Similarly, the White House mostly has sought to stay out of the fray in Madison, Wis., and other state capitals where Republican governors are battling public employee unions and Democratic lawmakers over collective bargaining rights. When West Wing officials discovered that the Democratic National Committee had mobilized Mr. Obama’s national network to support the protests, they angrily reined in the staff at the party headquarters.
“Administration officials said they saw such events beyond Washington as distractions from the optimistic ‘win the future’ message Mr. Obama introduced with his State of the Union address, exhorting the country to increase spending.”
Surely, surely, we don’t see the children CBS reported on from Central Florida as distractions, do we? The homeless kids elsewhere in America? The jobless? How about the hundreds still dying every day in America who lack access to healthcare when they need it? Distractions, one and all?
The reality is that if the mainstream media were to cover the trauma unfolding in America and cover the enormous protests on-going in Madison and beyond right here in the United States, many would be punished by getting less access to report on and interview the President and his staff or others who might be somehow embarrassed by some real reporting work on conditions in America. Producers and publishers know that if they show too much of the truth, it will cost them dearly in future reporting efforts. And if the media outlets don’t get that access and those interviews, then they fear a loss of revenue that could follow if viewers sought their celebrity-fixes on other celebrity and corporately owned media outlets. I understand the Catch-22.
On the other hand, if reports were straightforward and done as well as the 60 Minutes segment, it would be very difficult for elected officials to run from the reality unfolding from sea to shining sea. Then those same celebrity-hungry leaders might find it more difficult to shield themselves from distractions like pesky homeless children or unemployed citizens or sick people without healthcare and that reality or might at least seem more obvious in their self-selected oblivion.
I still recall the powerful segment 60 Minutes did some time ago about Yolanda Colemen of Las Vegas. Yolanda was a young single-mother with cancer who became too ill to work, lost her job, then lost her insurance benefits, then lost the ability to fully cover her own treatment and finally had the hospital bed in which she was dying repossessed because she couldn’t pay for it out-of-pocket. Creating that sort of “stardom” is what shakes people to act.
When we cannot stand to see the reality is exactly when we need to most. We are not distractions. The average citizens of this nation, the working class and the poor, far outnumber the wealthy and those who profit from our suffering, including the stars both in Hollywood and in Washington, DC. But for today, I actually think I have to thank CBS for letting those beautiful children speak their truth. It may be the only dignity they get in a very rough period of life and maybe in death which ought to be filled with joy – but for the distractions of poverty these beautiful, harmless children face in Mr. Obama’s America in 2011.
The February unemployment rate is 8.9 percent. The broader Bureau of Labor Statistics U6 jobless rate is 15.9 percent. The report shows a net increase of 192,000 jobs. However, we need 127,000 new jobs every month to keep up with population growth. At this rate it will take 11.2 years to get back to full employment.
A Wall Street billionaire, a unionized public employee, and a Tea Party member are sitting at a table eying a plate of a dozen delicious cookies. The financier reaches across and takes 11 cookies, looks at the tea partier and says, "Watch out for that union guy. He wants your cookie."
How did this happen? How did we get to the point where governors all over the place are blaming the economic crisis on working people?
We're here because we didn't take the fight to Wall Street. The White House, Congress, and even trade unions let Wall Street off the hook. And now working people and the middle class all over the country are paying a heavy price.
The battle actually started thirty years ago when our nation embarked on a real-time experiment: Would wholesale financial deregulation and tax cuts for the super-rich drive a massive investment boom that would make all boats rise? It turned out, no. Instead, working families' incomes stalled. But the wealthy were left with such thick wads of cash that they didn't know where to spend it all. So they bought up Wall Street's new toxic "financial innovations." And presto: the largest financial crash since the Great Depression. (My apologies for the self-promotion but please see The Looting of America for an accessible account of the meltdown.)
Remember a couple years back, when Wall Street was on its knees, begging for our support? That was the perfect moment to reverse the 30-year trend and create a new kind of financial system that wouldn't gamble away our nation's wealth. Instead we resurrected too-big-to fail institutions and bailed out virtually every Wall Street investor.
And now, the right wing, which has been banging its drum against unions, government, and taxes for years, is having a field day using our recession-induced budget problems as a cover for slicing their enemies -- the unions -- to smithereens.
There's plenty of blame to pass around.
The White House:
President Obama started out with populist rhetoric that reflected America's disgust with Wall Street's greed. But soon, he tucked behind his Wall Street-friendly corps of advisors -- Geithner, Summers and Bernanke -- who told him there was only one way to avert another Great Depression and start generating jobs: Resurrect Wall Street with trillions of dollars in loans, asset swaps and guarantees -- and throw in a modest stimulus program.
So Obama stopped talking about shrinking Wall Street's profits and wages. He stopped talking about how our best and brightest should forgo Wall Street and instead build productive careers in education, science and medicine. He stopped talking about how appalling it was to be bailing out the very people who'd brought the economy to its knees. What could he say given how much the administration had done for the Wall Street billionaires? Now it's hard even to remember that our cocky financiers were so recently on their knees begging for survival.
It turned out that Geithner, Summers and Bernanke were only half right: The US did avert (or postpone) a Great Depression -- but jobs did not follow. Thanks to the US taxpayer, Wall Street's profits and bonuses went back to record levels, as if nothing much had happened. People stopped talking about financial nationalization and "hair cuts" for investors.
Obama squandered the progressive moment. Because had had refused to make Wall Street pay for the damage it had caused, we had no way to fund serious job creation. As a consequence, the "nationalization" we saw was of deep, persistent unemployment in every corner of the country. And the people getting the hair cut were the Democrats. They were pummeled in the mid-terms not because of health care reform, but because the traditional "Party of Jobs" failed to create them. In my opinion, they were punished for being the Party of Wall Street.
After the massive electoral defeat, the President turned into a deficit hawk, pushing the entire debate to the right. When he called for freezing public employees' wages, he fired the first shot in the war against workers on Main Street.
Congress:
Of course the President had many fainthearted enablers on Capitol Hill. Congress failed miserably to build on Main Street's anger against Wall Street. Lawmakers couldn't even bring themselves to close a simple loophole to force the richest hedge fund financiers -- people making $2.4 million an HOUR -- to pay normal income taxes. Instead these hedge honchos still only pay 15 percent -- a lower rate than their own office cleaners. Closing that loophole on the top 25 hedge fund managers alone would have reduced the deficit twice as much as Obama's two-year wage freeze on federal employees.
Congress members also couldn't bear to break up too-big-to-fail institutions. They couldn't stomach windfall profits taxes or transaction taxes on the financial sector to help pay for our continuing bailout. (Who do you think now owns and guarantees hundreds of billions in toxic assets? You do!) And of course, the Capitol Hill crew didn't have the nerve to put Americans back to work through visionary moves like free higher education or the nationwide weatherization of all our homes and businesses.
The Labor Movement
Unfortunately, most trade unions also missed the moment. They were so invested in Obama and the Democrats that they didn't want (and maybe forgot how) to mobilize en masse against Wall Street. Americans needed a clear narrative explaining how Wall Street caused the financial crisis and a coherent program to create millions of sustainable jobs. They got neither from organized labor.
To be fair, labor had its hands full. With union jobs rapidly evaporating, it had bet the farm that a Democratic administration and Democratic Congress would pass the Employee Free Choice Act. (EFCA aims to level the playing field so that workers who want unions can form them without being fired.) This reform, they hoped, would unleash a great new surge of union organizing. But the bill didn't even come up for a vote. Now, in state after state -- even in old union strongholds like Wisconsin, Iowa and Michigan -- politicians are hacking at workers' basic collective bargaining rights, as if somehow those workers caused the financial crisis. As one savvy union staffer quipped, "Workers don't make synthetic CDOs!"
So let's square up. Where we are, and how did we get to this fateful moment?
1. Because we bailed out Wall Street banks and then let them off the hook, they're now back to collecting record profits. Hedge fund managers are making billions for themselves thanks to our blanket bailout of the financial sector. Not only are they not paying reparations, they're fighting hard to roll back even more regulations so they can run their financial casinos with full impunity. Their contribution to deficit reduction is minuscule. Equality of sacrifice is a joke on Wall Street.
2. Because of the financial crisis set off by Wall Street and Wall Street alone, 8.75 million jobs were lost in one year. With economic growth still feeble and corporations hoarding their money, it will take over 11.2 years to reach full-employment again at the rate we're going.
3. Because of high unemployment and the resulting drop in tax revenues (as well as years of tax cuts for the wealthy and large corporations), state and local government budgets are having a fiscal heart attack. It's open season on public employees, the last bunch of American workers who are a) unionized in large numbers, b) still have decent health care benefits and c) still have defined benefit pension plans (which don't force workers to shoulder all the financial risks in retirement). Meanwhile, no one's going after the ultra-rich for shirking their state and local taxes. In every state of the union, the richest one percent of residents pay a lower percentage of their income in total state and local taxes than do middle- or low-income residents.)
4. Political demagogues are playing working people against each other with the rhetorical cry, "Why should taxpayers pay for public employee benefits that they themselves can only dream of?" The obvious answer is that private sector workers should also have decent health care benefits and pensions. Meanwhile, a windfall profits tax on Wall Street could close every state budget gap in the country.
Thank goodness for the intrepid workers and students in Wisconsin, Indiana, and elsewhere who are resisting the assault. And thank goodness most Americans are on their side, according to a recent New York Times/CBS News poll. It showed that a majority support public sector collective bargaining, favor tax increases over cuts in public sector benefits, and don't think unions are too influential.)
The bagpiping firefighters camped out at the Wisconsin capitol are blocking the maniacal march to lower our standard of living. But that's not good enough. It's time for the bagpipes to march on Wall Street... and for the rest of us to join them.
Ed. Note: There is plenty of redistribution of wealth in the US only it's not from rich to poor as Limbaugh suggests. It's the other way around - from poor and middle class to rich. 30,000 lobbyists on Capitol Hill see to that. And where are the lobbyists for the poor. Oh, I forgot. They can't afford one. Republican governors give tax breaks to the rich, then try to balance their budgets on the backs of the poor and middle class.
There is a war going on in this country and I am not referring to the wars in Iraq or Afghanistan. I am referring to the war waged by the wealthiest people in America on the disappearing and shrinking middle class of our country. The nation’s billionaires are on the warpath. They want more, more, more. Their greed has no end and they are apparently unconcerned for the future of this country if it gets in the way of their accumulation of power and wealth.
On the floor of the Senate, we discuss a lot of things. But one thing we fail to talk about is who is winning in this economy and who is losing, and what that means for parents struggling to survive while working longer hours with lower wages, and worrying about whether their children will have the same kind of standard of living they have.
Right now, the top 1 percent controls more than 23 percent of all income earned in America. The top 1 percent controls more than the bottom 50 percent. It’s not only that the rich are getting richer. The very, very rich are getting richer. In the last 25 years, we have seen 80 percent of all new income going to the top 1 percent.
On top of all this, while the millionaires get richer and there are more and more billionaires, as a result of the Citizens United decision, what we are beginning to see in elections is unbelievable—a group of billionaires getting together and deciding where they are going to spend their money. Billionaires are going to flood states with all kinds of negative, dishonest ads in an effort to defeat people defending the middle class and to elect people who will stand up for right-wing billionaires.
The Republicans’ goal—and to their credit, they have been pretty honest about it—is to bring this country back to where we were in the 1920s. All of the progressive legislation that started with FDR is on the chopping block. Despite the great successes of Social Security over the last 75 years, despite the fact that Social Security today has a $2.6 trillion surplus, they are targeting Social Security. They are targeting Medicare. In Arizona today, people on Medicaid who need transplants are no longer able to get them—that is a real death panel.
Right now, according to a number of studies, we are losing about $100 billion every year because corporate America and the very wealthy are stashing their money in tax havens like the Cayman Islands and Bermuda. We should be aware that in 2009, ExxonMobil made $19 billion in profits and not only did the company not pay anything in taxes, it got a $106 million refund from the IRS. We should also be aware that since 1997, we have almost tripled funding for the military. So if we are serious about reducing the deficit, those are things we need to look at—not at Social Security, not programs everyday Americans need.
Our job now is to rally Americans to put pressure on a handful of Republicans—to tell them, go into your hearts, talk to your constituents and tell me if it is appropriate to hold hostage the future of this country for an agenda that benefits only the very rich.
If we act, we can win this fight. It is crucial that we do, because if we don’t—if they roll over us now—there is no stopping them. It is time we organize.
Bernie Sanders (I-Vt.) was elected to the U.S. Senate in 2006 after serving 16 years in the House of Representatives. He is the longest serving independent member of Congress in American history. Elected Mayor of Burlington, Vt., by 10 votes in 1981, he served four terms. Before his 1990 election as Vermont's at-large member in Congress, Sanders lectured at the John F. Kennedy School of Government at Harvard and at Hamilton College in upstate New York. Read more at his website.
Exciting news, folks. Obama and team say they're recalibrating, recasting, retooling and rebranding his presidency! And they've come up with a dandy new slogan to sum it all up and get America moving again. Ready? "Win the future."
Takes your breath away, doesn't it?
If you're old enough to remember Gerald Ford's hapless presidency, Obama's fabulous new slogan might have a familiar ring to it. In 1974, with rampant inflation gobbling up the paychecks of workaday families, Ford blamed the American people, asserting that they were simply spending too much. So he ordered thousands of red-and-white buttons that said "WIN!" It was an acronym for "Whip Inflation Now," which Ford thought would happen if only the public wore the buttons to remind each other to buy less.
This was, in a word, stupid -- and it helped make Gerry a one-term president.
Obama, however, hopes his slogan will catch on. As explained in his Jan. 25 State of the Union speech, it refers to what he sees as a sort of global Super Bowl in which the U.S.A. is competing to "out-innovate, out-educate and out-build the rest of the world." He has declared that this is "our generation's Sputnik moment," adding that, "My No. 1 focus is going to be making sure we are competitive."
Hooray, let's go! Washington should harness the idealism, creativity, energy and can-do spirit of grassroots people into a bold national program to revitalize America's economy, educational system, infrastructure and middle class.
But, wait -- it turns out that Obama's not proposing a true Sputnik response, like Dwight Eisenhower, John Kennedy and Lyndon Johnson produced in the 1950s and '60s. They launched such public efforts as a national program of science education and the Apollo moon landing. Instead, Obama is trusting Corporate America to "win the future" for us, offering deregulation and more tax breaks to entice them.
Corporate America? Hello, "America's" corporations are abandoning our workers, communities, egalitarian values and America itself as fast as they can. Trusting them to serve any interest but their own is a fool's errand.
As an old adage puts it, you can dance with the devil, but never fool yourself into thinking that you're in the lead.
That would be my 50-cents' worth of advice to President Obama as he rushes to transform his presidency into a Clintonesque corporate enterprise. Apparently discombobulated by Republican gains last fall, he has quickly converted into an irrepressible corporate-hugger, suddenly blowing kisses to CEOs and big-business lobbyists.
He's now filling his White House dance card with them. First up was Bill Daley, the Wall Street banker and longtime corporate lobbyists. Obama brought him to the White House ball, where he's been shaking his corporate bootie as the president's chief of staff, gatekeeper and policy coordinator.
Then, in a bizarre choice, Obama tapped Jeffery Immelt on Jan. 21 to lead his newly created Council on Jobs, which is supposed to "encourage the private sector to hire (Americans) and invest in American competitiveness."
What's bizarre about choosing him is that Immelt is CEO of General Electric and has been a leader in shipping American factories and thousands of GE jobs to Asia and elsewhere. Today, fewer than half of GE's workers are in our country. As an AFL-CIO official notes: "Highly globalized companies don't have the same interests as the United States. There is no company more emblematic of this than GE."
Rather than criticizing these runaway outfits in his State of the Union speech, Obama hailed the rise in their corporate profits and stock prices, citing these as signs that our economy is strong again.
As for the millions of unemployed and barely employed Americans, he expressed regret that it's now so hard "for Americans to find a good secure job." But he offered only cold comfort, noting that "the rules have changed." Well, yes -- and who changed them? Self-serving CEOs like Jeffrey Immelt, that's who.
America's working families -- our endangered middle class -- have a right to expect Obama to fight for rules that are fair to them and our country, not meekly accept rules that have been skewed by an elite corporate class to profit them alone. Instead, our president is waltzing with the devil.
He's rebranding his presidency, all right. It's becoming Obama Inc.
National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be - consumers, working families, environmentalists, small businesses, and just-plain-folks.
President Obama is waxing ebullient on the jobs front. He's partnered up with GE CEO Jeffrey Immelt, and they are both proclaiming that the US will again be a robust manufacturing and exporting nation. They have rejected the model for the US as a mainly consuming and service oriented nation. That's all to the good. But Obama seems to have placed too much faith in the corporate CEOs. He seems to think they're going to stop outsourcing, and, out of the goodness of their hearts, they're going to start creating jobs here at home. But the official US government still has in place laws and policies - and in particular tax policies - that actually encourage outsourcing. Nancy Pelosi, when the Democrats controlled the House, said after passing a bill which would have reined in outsourcing: "In this legislation, which is job creating, it closes the loophole which has allowed businesses to ship jobs overseas. Can you believe that we have a tax policy that enables outsourcing? So if you have one thing to say about this bill to your constituents, you can say that today, you voted to close the loophole to ship U.S. jobs overseas and giving businesses a tax break to do so. It is not right. It will be corrected today.” This was in May, 2010. Of course, this bill never made it into law because it was filibustered by Republicans in the Senate. Sorry, Nancy.
Closing the loophole that has allowed businesses to ship jobs overseas? Well, sorry to say that loophole was never closed! President Obama though wants us to believe that, regardless of that loophole being closed, CEOs like Jeffrey Immelt are going to be nice guys and create local manufacturing jobs here in the US even though it is going to lower their profit margins, even though the loopholes for shipping jobs overseas are still open! Is he being naive? And then there is this from Robert Reich:
General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE’s joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.
Will the real GE please stand up? Corporations are required by law to maximize their profits. This means that they will lower their expenses by getting the cheapest labor wherever they can get it. And American labor is relatively expensive compared to Chinese labor. So Obama is skating on thin ice. His bravado overlooks the underpinnings of law that give American corporations huge incentives for creating jobs overseas and outsourcing American jobs. Sure, GE wants to sell to the Chinese. But this doesn't mean that those products will be exported from the US. In the last ten years 42,000 American factories have closed. Millions of jobs have been lost. And now Mr. Nice Guy, Jeffrey Immelt of GE, is going to forego maximizing profits and his salary and his duty to shareholders in order to do a favor for President Obama and create some jobs in the US? What game is he playing? Mr. President, where are the legal underpinnings that would make sure that this will happen? You have a Congress that won't even close loopholes that would encourage job creation in the US. Do you have the feeling you're teetering on the brink? You said you've moved us back from the abyss. But have you? The abyss still looms because now for sure with a Republican controlled House, no loopholes that encourage and enable outsourcing will ever be closed unless and until Democrats control both Houses and the filibuster rules have been changed. Mr. President, you are whistling Dixie, in the dark, and past the graveyard too!
As President Obama touts the jobs being created at GE's Schenectady plant we have this dated January 14, 2011: "Solar Panel Maker Moves Jobs to China":
BEIJING — Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States.
But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.
It looks like the right hand doesn't know what the left hand's doing. It seems like not only does China have cheaper labor, but they have more government support for American companies that want to build plants and create jobs there! The US on the other hand has no industrial policy, no set of incentives in order to have companies, domestic or foreign, build more plants in the US. And there are no unions to speak of that would fight for the rights of American workers. America, for all intents and purposes, has been deunionized starting with Reagan's firing of the air traffic controllers which effectively put their PATCO union out of business.
The United States is rapidly becoming the very first "post-industrial" nation on the globe. All great economic empires eventually become fat and lazy and squander the great wealth that their forefathers have left them, but the pace at which America is accomplishing this is absolutely amazing. It was America that was at the forefront of the industrial revolution.
It was America that showed the world how to mass produce everything from automobiles to televisions to airplanes. It was the great American manufacturing base that crushed Germany and Japan in World War II. But now we are witnessing the deindustrialization of America. Tens of thousands of factories have left the United States in the past decade alone. Millions upon millions of manufacturing jobs have been lost in the same time period.The United States has become a nation that consumes everything in sight and yet produces increasingly little. Do you know what our biggest export is today?
Waste paper. Yes, trash is the number one thing that we ship out to the rest of the world as we voraciously blow our money on whatever the rest of the world wants to sell to us. The United States has become bloated and spoiled, and our economy is now just a shadow of what it once was. Once upon a time America could literally outproduce the rest of the world combined. Today that is no longer true, but Americans sure do consume more than anyone else in the world. If the deindustrialization of America continues at this current pace, what possible kind of a future are we going to be leaving to our children?
The US is embarked on its own destruction thanks to the "small government" mantra of the Republican controlled Congress. Small government means no industrial policy except by lobbyists seeking special favors for their particular corporate sponsors. It means that US government policy will favor US business but not necessarily US workers. Unless and until the US can adopt policies which favor job creation in the US, US workers will be left out in the cold. And President Obama's soaring rhetoric about cooperation with CEOs like Jeffrey Immelt will be just that: rhetoric.
First Posted: 01-13-11 11:22 AM | Updated: 01-13-11 11:33 AM
SANTA ANA, Calif. -- Three and a half years ago, Kathleen Cooke was breathing easy. Having left her well-paying job for a new career as a teacher, she spent a blissful summer with her kids, sipping lemonade and baking cookies.
But within months, the life she had built evaporated. When she failed to secure a new job, she entered a steady downward spiral that eventually led her to a homeless shelter. Homelessness, once an abstract idea, had become real.
After the worst economic downturn since the Depression, formerly middle-class people like Cooke have found themselves reduced to poverty. With jobs scarce, and with government safety nets shrinking, one misfortune -- a layoff, an injury, a mortgage default -- can transform a person's life beyond recognition. No longer a condition reserved for the margins of society, for drug addicts and the mentally ill, homelessness has infiltrated the heart of America.
As foreclosure and unemployment rates have swelled to epidemic proportions in the past two years, the ranks of the American homeless have grown: the number of homeless families rose 4 percent in 2009, and then 9 percent last year, a pair of new reports show. In effect, even more Americans were homeless than those numbers suggest, stranded in the awkward process of staying with friends and relatives, for lack of a home of their own. Instances of families "doubling up" between 2008 and 2010 rose nearly 12 percent.
"People who I would have gone to as donors of ours I now talk to as clients," said Larry Haynes, executive director of Mercy House, a shelter organization here in Santa Ana. "It's in their consciousness."
For Cooke, in the summer of 2007, things finally seemed to be going her way. Her ex-husband was paying regular child support. Her former boss had been helping her transition into teaching. Her apartment, in a safe, suburban neighborhood in Costa Mesa, Calif., was comfortable.
That summer, with her teaching credential in her pocket and a teaching internship lined up for the fall, Cooke, now 51, decided to reward herself. The job she had just left, as an administrative assistant in risk management for the paint company Behr Process Corporation, had paid her $38,000 a year, with generous quarterly bonuses, she said. With her kids out of school for the summer, she devoted herself entirely to them, and decided to coast for a short while on her savings.
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"I had such a great outlook about what my future was going to be like," she said. "I don't remember thinking about how much money I had, how much money I didn't have."
But then came the financial crisis. As tax revenue withered, local governments across the nation were forced to slash spending. When Cooke finished her internship and looked for a teaching job, she found no one was hiring.
Suddenly, she was stranded. Her ex-husband, out of work himself, stopped regular payments. The work she found as a substitute teacher paid only $100 a day. Without a significant source of income, she was consistently behind on her rent and was finally evicted from her apartment at the end of 2009. By the spring of 2010, after exhausting friends' hospitality, she called a homeless shelter and begged for help.
Cooke's plight has become all too common. In 2009, the number of American homeless increased 3 percent, according to a report released Wednesday by the National Alliance to End Homelessness. During that time, the number of homeless families increased 4 percent.
In 2010, the situation got worse still. During the year ending in September, the number of homeless families increased 9 percent, according to a report released last month by the U.S. Conference of Mayors.
Perhaps even more significant, the number of households "doubling up," as desperate families move in with friends and relatives, increased nearly 12 percent between 2008 and 2010, according to Census Bureau data. Now, over 13 percent of all U.S. homes contain more than one family, the highest proportion since at least 1968.
People once accustomed to middle-class comfort have turned to shelters for aid.
"They have this look on their face like, 'I never imagined this would happen to me. I've worked, I'm educated. This is not supposed to happen to me,'" said Chris Canter, executive director of Shelter Network in San Mateo, Calif. "But for a variety of reasons, it has."
Those reasons can be utterly commonplace. Just a few years ago, shelters were dominated by victims of drug addiction, mental illness or domestic violence. Those remain major causes of homelessness, but another leading cause has emerged.
Today, Canter said, the majority of his clients are homeless because of a job loss. Almost two-thirds, he said, are homeless for the first time.
As home prices continue to fall, and as the national unemployment rate remains stuck near 10 percent, Americans are seeing their wealth erode. More than 2.8 million homes received foreclosure notices in 2009, as foreclosure activity increased more than 20 percent, according to real estate data provider RealtyTrac. Between 2010 and 2012, 7.4 million more homes will likely enter foreclosure, the Federal Reserve predicts.
"Loss of jobs means loss of money, means inability to pay for housing," said Maria Foscarinis, executive director of the National Law Center on Homelessness and Poverty, in Washington. "Some people who are affected in that way end up becoming homeless."
Here in Santa Ana, a suburban city in affluent Orange County, the shelter organization Mercy House has recently detected a shift in its clientele: A growing number have solid jobs on their resume.
Haynes, 46, the Mercy House director, likes to volunteer at his daughter's soccer games, where he has befriended local parents, he said. A spirited conversationalist, Haynes is immediately likable. But some parents have approached him for a more practical reason.
"Usually the conversation is, 'Hey, Larry, what can we do for you?'" he said. "Now, it's, 'Hey, do you think you could help us out?'"
Working-class people, he said, are "terrified."
Cooke is one such working-class client. She called Mercy House after getting the group's phone number from a parent at her kids' school. At first, Cooke said, the organization told her that if she wanted to be housed, she'd have to move out of her neighborhood.
That was not what she wanted to hear. At that point, staying with a second friend, after wearing out her welcome with the first, Cooke had endured two years of steadily increasing desperation. She had been working seven days a week -- five days as a substitute teacher, and weekends as a driving instructor -- and still, she had consistently been about $200 short on her $1,400 rent.
She had played a bitter shell game, choosing which bills not to pay, or which essentials to forgo. While her kids ate government-subsidized lunches at school, and cheap dinners at home, she resorted to selling her belongings for rent money.
Ironically, the choice that was supposed to have given her more time to spend with her kids had instead forced her apart from them. It was that fact which finally broke her spirit.
"I fought so hard to try to stay where I was," she said, barely able to speak as she struggled against tears.
Mercy House, fortunately, was able to help her move into an apartment in her neighborhood, so her kids' schooling would not be disrupted. Today, she's living there largely on the organization's dime, as she finishes training for a new credential, to teach special education children.
Real employment for Cooke still isn't certain, but she is betting that her new qualification will enable her to enter a field that traditionally lacks teachers. For now, she's hopeful. What could have happened to her and her children, she said, is too scary to contemplate. Instead, she thanks Mercy House.
"They really saved my family, from I don't know what," she said. "I don't want to know what."
Obama has been backed into a corner on the extension of the Bush tax cuts. When they were enacted in 2000 under President Bush, it was done in such a way that they were to automatically expire in 2010. These tax cuts added trillions to the national debt so it is only fitting, at a time when the national debt is a big concern, that they expire and, therefore, contribute to a reduction in the debt going forward. However, there is the lingering fact of the Great Recesssion and 10% unemployment. So Obama wedded himself to the idea of letting the Bush tax cuts expire for those earning more than $250,000. a year for a married couple or $200,000. for a single. This expiration of the Bush tax cuts for the rich would save the government $700 billion over ten years.
Well and good. Now enter the Republicans who argue that the Bush tax cuts should not expire for anyone, that the rich should keep their tax cuts too. They are seemingly not the least bit concerned about the tax cuts for the rich adding to the deficit. Not only that, but unemployment benefits should not be extended because this would add a meager amount to the deficit. Republicans have this amazing ability to compartmentalize. When it comes to unemployment insurance they are infinitely concerned about the deficit; when it comes to tax cuts for the rich, they haven't a care in the world about the deficit although these tax cuts are precisely what caused the deficit in the first place. They are hoping that no one will notice this logical discrepancy, or at least that enough of the electorate is so dumb that they won't make this logical connection.
Another connection which American citizens are not making is that, even with Obama's proposal, the rich will still get a bigger tax cut than the middle class. Everyone making more than $250,000. will get a bigger tax cut than everyone earning less than $250,000. because they will still get the tax cut on the first $250,000. of their income. Democrats have failed to explain the meaning of marginal tax rates. The tax cuts for the rich which Obama wants to eliminate only apply to income over $250,000.
Now the New York Times is concerned that Obama has been backed into a corner from which his only course is to give in to the Republicans. Surprise! Surprise! Obama is always placing himself in a position from which his only recourse is to give in to Republicans. In fact he concedes his position in advance. Take the pay freeze for Federal workers. Obama unilaterally announced this pay freeze; it wasn't part of some hard won negotiation. He announced a pay freeze for two years for all non-military Federal workers. The White House says the move will save $2 billion during the rest of the current fiscal year and $28 billion over the next five years. Now wait a minute. First of all $2 billion is a paltry sum compared to the $70 billion per year the government would save by not extending the Bush tax cuts for the rich. Second of all there is an apparant logical fallacy in saying the freeze is for two years but the freeze would save $28 billion over five years. What kind of legerdemain is that? By the way the definition of legerdemain by the online Merriam-Webster dictionary, interestingly enough includes this example: "the reduction of the deficit is due in part to financial legerdemain that masks the true costs of running the government."
Now let's get this straight. The government proposes to freeze workers' pay for two years but it will save money over five years? Maybe this failure to communicate is what got the Dems into the hot water they now find themselves in - with Republicans turning up the heat. After two years government workers' pay will not be frozen any more. Therefore, it could rise to almost any level. How can the government predict what the savings could be over five years? We know what the savings would be over two years because workers' pay is frozen, but who's to say that after two years it wouldn't rise to the point that it would have been at if it hadn't been frozen in the first place? The savings over two years during the course of the freeze is predictable, but the savings after that is not. Hmmm. Unless... Unless ... Unless pay raises for government workers are entirely predictable? But that's ridiculous. Why at least would they not rise based on inflation? What it boils down to is the fact that Obama isn't explaining this sufficiently and is attempting to wow you with these huge savings "over five years." Hey, just tell us the savings over the two years the freeze will be in effect; that would be sufficient.
OK. Now that we've gotten that out of the way and the fact that Obama opens the negotiations by making a unilateral concession, let's get to the heart of the matter. Obama is allowing himself to be backed into a corner because he is wedded to extending the Bush tax cuts for the middle class, and the Republicans know this. Come Hell or high water, Obama thinks he must have these middle class tax cuts. Why? Why not just let all the tax cuts expire as they were supposed to do when they were enacted in 2000? What's the worst that could happen? The middle class would find their taxes had gone up. So what. It would reduce the deficit almost to zero, and that at least would solve one problem. Maybe we wouldn't have to hear the Tea Baggers complain about the debt we're leaving to our grandchildren any more. That would be a good thing.
The Republicans will play chicken with the tax cuts. But Obama starts out from a bargaining position in which he has tipped his hand that he must have these tax cuts for the middle class. So the Republicans say, "Well, we'll give you your tax cuts for the middle class only under the condition that you agree to give them to the rich also." So what is going to happen? Obama will inevitably back down. Instead of drawing a line in the sand and saying "we want tax cuts for the middle class but not for the rich" he'll cave and give them to the rich also. The bargaining, the negotiations are over in advance because Obama is a terrible negotiator. He makes concessions in advance. He tips his hand. He stakes out a position that he must have, and, therefore, the Republicans can make whatever demands they want full in the knowledge that they have Obama by the balls and he must back down to them.
Woe to Obama. Negotiation is not his strong suit. For an intelligent man, he's an imbecile when it comes to negotiating with Republicans. He needs to draw a line in the sand about the tax cuts and risk that the middle class won't get theirs. And Democrats need to make it clear who would be the culprit if the middle class doen't get theirs: the REPUBLICANS. The New York Times is all concerned that, if all the tax cuts expire, Republicans will come back next year with a tax bill that would be even worse than the Bush tax cuts - that it would be an even bigger tax cut for the wealthy and would add even more to the deficit. But why are they in fear of this? Any tax bill not to Democrats' liking originating in the House can just not be acted on in the Senate. The Democrats still control the Senate, remember? And if worse came to worse and somehow it got passed by both the House and the Senate, Obama could always veto it. And the worst that could happen is that the Bush tax cuts would expire for everybody. Not that big a deal in my opinion. But Obama thinks he has to have those middle class tax cuts, and so he puts himself in a weaker bargaining position vis a vis the Republicans.
Here's what Obama should do. Draw a line in the sand and come Hell or high water refuse to budge on eliminating tax cuts for the rich. Democrats need to stand for something. They need to educate the public about something. There is no issue that they absolutely need Republican support for or the world will come to an end. Even if the world was coming to an end, it could be a teachable moment about which party was standing in the way of legislation which would have prevented it. Democratic positions need to be made absolutely clear just as Republicans have made their positions absolutely clear. If it means nothing gets done, this is preferable to caving in to Republicans. The point is that Obama doesn't need Congress to get some things done. What the people really want is not a tax cut but a job. People who don't have a job don't pay taxes anyway.
Obama can get a lot done by executive order. FDR created the Works Projects Administration by executive order. In order to put people back to work, Obama can create a modern WPA in the same way - by executive order. And he doen't have to look to Congress for funding. As Commander-in-Chief, he is in charge of the military-industrial complex budget. He can divert funds from the Pentagon to fund a new WPA. Or he can find the funds somewhere else in the budget that he controls. How about taking money from agricultural and oil and coal industry subsidies? As Commander-in-Chief Obama can commandeer monies that have already been appropriated by Congress. He is the chief decision maker of how those monies are ultimately to be spent. He needs to use his power and not ask Republicans permission to use it.
So here's my prescription for Obama. Draw a line in the sand about no tax cuts for the rich. Make the Republicans concede to you or educate the public about the loss of middle class tax cuts if that's the eventuality. Take a hard line with Republicans. Then create a modern WPA by executive order diverting money to fund it from other programs the monies for which have already been appropriated by Congress. That way you don't have to ask Congress to fund it which you wouldn't get anyway. You don't need to pander either to Republicans or to the middle class although you need to make it clear that you are for middle class interests and won't give in to the rich. The denouement is that Democrats are for every principled position whether it is the supposedly conservative principle of fiscal responsibilty or trying to create jobs for the middle class while Republicans are only out for themselves and political power.
Monday night, Sarah Palin watched from the audience as daughter Bristol danced on ABC. Twenty-three million other Americans joined her from their homes. Tuesday, the former vice-presidential candidate started a 13-state book tour for her new book, “America By Heart,” which has a first printing of 1 million. Her reality show on TLC, “Sarah Palin’s Alaska,” is in its third week. Last Sunday she was the cover story in the New York Times magazine.
It’s all part of The Palin Strategy for becoming president in 2012 — or 2016 or 2020.
Republican leaders don’t believe it. “If she wanted the Republican nomination she’d be working on the inside,” one influential Republican told me a few days ago. “She’d be building relationships with Republican Senators and representatives, governors, and state party officials. She’d be smoothing the feathers she ruffled by backing Tea Party candidates. She’d be huddled with GOP kingmakers.” When I suggested she has a different strategy, the influential Republican smiled knowingly. “That’s how it’s done – how McCain, Bush, and everyone has done it. That’s the only way to do it. But all she really wants is celebrity.”
The Republican establishment doesn’t get it. Celebrity is part of The Palin Strategy – as is avoiding the insider game. She doesn’t want to do what Huckabee, Pawlenty, Gingrich, or Romney have to do. She has an outside game.
Palin’s game plan is directly related to America’ white working class, and the economy it faces – and the economy it’s likely to continue to experience for years.
No prospective candidate so sharply embodies the anger of America’s white working class as does Palin. And none is channeling that anger nearly as effectively.
White working class anger isn’t new, of course, nor is the Republican Party’s use of it. Apart from the South, where the anger came in response to the Civil Rights movement of the 1960s, the more widespread working-class anxiety began in the late 1970s when the median male wage that had been rising for three decades began to stagnate.
As I noted in “Aftershock,” families responded by sending wives and mothers into the paid workforce, working longer hours, and then, finally, going deep into debt. These coping mechanisms allayed but did not remove the growing anxiety.
Over the years, Republicans have channeled the anxiety into anger, through overt appeals to a so-called “silent majority” that were overlooked by Democrats and liberals; through “tax revolts” by working and middle-class families that couldn’t afford to pay more; and in subtle and not-so-subtle appeals to racist fears (Willie Horton).
But now that the Great Recession has eliminated the last coping mechanism – ending the easy borrowing, and ratcheting up unemployment – the working class’s economic insecurities have soared. A recent Washington Post poll showed 53 percent of homeowners worried about meeting their mortgage payments. Home foreclosures have slowed largely because of bad paperwork on the part of banks, but the threat remains. Housing prices are still dropping.
The white working class has not benefitted from the recent rise in corporate profits and stock prices. To the contrary, both have been fueled by foreign sales of goods made abroad and by labor-saving technologies that have allowed American companies to do more with fewer workers here at home.
Joblessness among the white working class is far higher than the 9.6 percent average for the nation. While the unemployment rate among college grads (most of whom are professionals or managers) is around 5 percent, the average unemployment rate for people with only a high school degree or less (blue-collar, pink-collar, clerical) is almost 20 percent.
All of this is spawning a new and more virulent politics of anger in the nation’s white working class, stoked by Republicans – anger against immigrants, blacks, gays, intellectuals, and international bankers (consider the latest Fox News salvos against George Soros).
According to the right-wing narrative, the calamity that’s befallen the white working class is due to the global and intellectual elites who run the mainstream media, direct the government, dispense benefits to the undeserving, and dominate popular culture. (The story and targets are not substantially different from those that have fueled right-wing and fascist movements during times of economic stress for more than a century, here and abroad.)
Sarah Palin has special appeal because she wraps the story in an upbeat message. She avoids the bilious rants of Rush, Sean Hannity, and their ilk. But her cheerfulness isn’t sunny; she doesn’t promise Morning in America. She offers pure snark, and promises revenge. Over and over again she tells the same snide, sarcastic, inside joke, but in different words: “They think they can keep screwing us, but (wink, wink), we know something they don’t. We’re gonna take over and screw them.”
The Palin Strategy is to circumvent the Republican establishment, filled as it is with career Republicans, business executives, and Wall Streeters. That’s why her path to the Republican nomination isn’t the usual insider game. It’s a celebrity game – a snark-fest with the nation’s entire white working class. Vote for Bristol and we’ll show the media establishment how powerful we are! Buy my book and we’ll show the know-it-all coastal elites a real book directed at real people! Tune into my cable show and we’ll show the real America – far from the urban centers with immigrants and blacks and fancy city slickers!
As I believe will become clearer, the Palin Strategy will involve a political threat to the GOP establishment: Deny her the nomination she’ll run as independent. This will split off much of the white working class and guarantee defeat of the Republican establishment candidate. It will also result in her defeat in 2012, but that’s a small price to pay for gaining the credibility and power to demand the nomination in 2016, or threaten another third-party run in 2020.
Once nominated, her campaign for the general election will be purely populist. She’ll seek to broaden her base to become the candidate of the people, taking on America’s vested Establishment.
More than anything else, the Palin Strategy depends on the continuing fear and anger of America’s white working class. She’s betting that their economic prospects will not improve by 2012, or even by 2016 and beyond.
Sadly, this is likely to be the case. On Tuesday, the Fed issued a gloomy prognosis. Even if the U.S. economy began to grow at a rate more typical of recoveries than the current anemic 2 percent, unemployment won’t drop to its pre-recession level for 5 to 7 years. A minority of the Fed thought this was too optimistic.
The disturbing truth is the bad economy is likely to continue for most Americans beyond 7 years — maybe for ten or more — because of a chronic lack of aggregate demand. Apart from inevitable inventory replacements and the necessary replacements by consumers of cars, appliances, and clothing that wear out, nothing will propel the U.S. economy forward. So much income and wealth have now concentrated at the top that the broad middle and working class no longer has the buying power to do so. The top will resume buying but their purchases won’t be nearly enough.
Japan lost a decade of economic growth after its real estate bubble exploded. It seems entirely probable that the United States will suffer the same fate. Our economic structure – how we now allocate the gains of growth, the yawning gap between Wall Street and Main Street, the incentives operating on large corporations to pare American payrolls and expand abroad – almost dictates it.
We might change that structure, of course. But at this point that doesn’t seem in the cards. The President seems unable or unwilling to provide the clear narrative that explains what’s happened and what needs to be done, and Republicans are at this moment ascendant.
There are viral emails going around containing lies about Obama that the right wing is continually making up. We've all heard the obvious ones: that Obama is a Muslim, that Obama is a socialist, that Obama wasn't born in the US. Yada yada yada. There are, however, a special group of lies about the economy, and these are the ones that are really more serious. These lies are amplified by the right wing noise machine consisting of talk radio (Rush Limpballs, Glenn Beck) and Fox News (Sean Hannity, Bill O'Reilly). Right wing talk radio is all that most people are exposed to since it represents 90% of all talk radio and 100% in many media markets. They are really in the business of making up and transmitting a bunch of lies about the Obama administration. And they get paid really well for doing so. Between them Rush Limpballs and Glenn Beck make some $80 million a year. Hannity and O'Reilly make somewhat less but still in the tens of millions. Right wing billionaires like the Koch brothers make sure that plenty of money is available for right wing bloggers, think tanks and other activities. There is no lack of money to saturate the airwaves and the internet with right wing lies and propaganda. I am indebted to Thom Hartmann for pointing out these eight lies about Obamanomics.
Here are eight lies about the economy.
1) Obama bailed out the banks. No, it was George Bush who started the TARP program. His Treasury Secretary, Hank Paulson, came to Congress and demanded $700. billion, no strings attached, to bail out the banks. On Oct. 3, 2008, The House of Representatives, after rejecting it the week before, approved Treasury's "Troubled Asset Relief Plan." The Senate had already approved the bill, so President Bush signed it into law pronto. On Oct. 14, 2008 Treasury announced that it was putting $250 billion into nine big banks. Lots more capital injections (to smaller banks and some other financial institutions) followed. On Nov. 4, 2008, The Wall Street Journal reported that Treasury was likely to scrap the whole toxic-asset-buying plan. All this happened under President Bush.
2) Obama raised taxes. No, Obama passed the largest tax cut in the history of country. 40% of the stimulus was in tax cuts.
President Barack Obama talked a lot about economic recovery during his State of the Union address on Jan. 27, 2010, including the benefits of the economic stimulus bill passed last year. The stimulus, formally known as the American Recovery and Reinvestment Act, included tax cuts for many Americans, Obama said.
"We cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses," Obama said. "We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college." Democrats applauded, while Republicans were silent for the most part. In one of the unscripted moments of the night, Obama looked at the Republican side of the room, smiled and said, "I thought I'd get some applause on that one."
While Obama gave working families tax cuts, he didn't give them to those who made more than $200 K for a single or $250 K for a couple. Republicans, who are now in the process of demanding extending the Bush tax cuts for those making more than $250 K, were not too happy that Obama's largest tax cut in American history did not include the rich but went mostly to middle class families.
3) Obama tripled the deficit. Bush's last budget included a $1.4 trillion deficit while Obama's first budget included a $1.29 billion deficit so Obama actually reduced the deficit. $9 trillion of the national debt was run up by 3 Republicans: Reagan and the first President Bush who ran up the debt by $4 trillion and George W Bush who ran up the debt by $5 trillion. Obama inherited Bush's built-in deficits attributable to the two wars Bush started, the Bush tax cuts which the Republicans seek to extend not only for the middle class but for the rich as well and the drug benefit for seniors which was unpaid for. In addition Obama was faced with a financial catastrophe second only to the Great Depression which required additionl government spending to get the economy going again.
Only Jimmy Carter and Bill Clinton proposed balanced budgets in recent history. When George W Bush came to power, he had a surplus left over from the Clinton administration and proceeded to piss it away post haste. Republicans are enamored by Jude Wanniski's Two Santa Claus Theory which is that Republicans should spend like drunken sailors when Republicans are in power and then scream about the deficit once Democrats are elected. This is exactly what they have done and what they are doing today.
4) The stimulus didn't work. According to the nonpartisan Congressional Budget Office the stimulus created between 1.4 million and 3.3 million jobs. Republicans ran on bringing jobs into their districts which were created by the stimulus and then lost no time denouncing the stimulus. The stimulus saved many jobs at the local level including teachers, police and firemen. Now that Republicans hold the purse strings, expect massive layoffs at the local level as the Federal government will no longer come to their aid. Also expect a reduction in unemployment benefits. Under Obama and the Democratic controlled House, unemployment benefits were increased fom 26 to 99 weeks. You can kiss that extension bye bye.
5) Businesses will only hire if they get tax cuts. Business really hires to meet demand. They won't hire if there's no demand for their products. They will sit on their cash or buy back stock or invest in speculative investments which is what is happening today. Working people having money creates demand. They can only create demand if they have jobs. When there is more demand, businesses will hire although they might hire more Chinese, Koreans and Indians than Americans. So even if demand should increase, there is no guarantee that that will create more American jobs or put more money into American pockets. American companies today are just as likely to repond to increased demand by using technology or offshoring jobs. They will simply put tax cuts in their pockets. Most "American" corporations' only interest in America is selling into the American market. They are not interested in paying American taxes or providing American jobs. Major "American" corporations sell 50% or more of their products overseas, and most of their production facilities are now located overseas. They are "American" corporations only in the sense they they originated here and are registered here. But that registration can easily and quickly change as we saw when Halliburton moved to Dubai.
6) Obamacare, the health care reform bill, cost $1 trillion. Actually, the health care reform bill cut the projected budget deficit by $138 billion largely by cuts to Medicare Advantage which is the privatized form of Medicare. Medicare Advantage, created by Republicans, represents the stealth privatization of Medicare. The government pays private health care corporations to provide services equivalent to traditional Medicare. Under Bush they were also paying doctors more to see an Advantage patient than they were paying for a doctor to see a traditional Medicare patient. Private health care corporations are spending millions on advertising to lure away seniors from traditional Medicare. Eliminating that "advantage" to the private health care corporations saves the government $138 billion. Although the Medicare Advantage programs seem at first sight to be better than traditional Medicare, they require a gatekeeper doctor to approve a patient's seeing a specialist. This approval is often denied which is a distinct disadvantage over traditional Medicare in which the patient is free to see any doctor or specialist without a gatekeeper's approval. So the private health care corporations are still in the business of denying treatment so they can pay their CEOs hundreds of millions of dollars.
7) Government spending takes money out of the economy.
“Government spending does NOT take money out of the economy, unless it ships it off to fight wars in Iraq and Afghanistan. The vast majority of government spending stays in America. Be it for roads, bridges, technological advances -- like the computer and the Internet -- schools, disaster relief, Medicare, Social Security, etc. That money stays in this economy. It flows through this economy just as well, if not better, than any private sector transfer.
Do you think it disappears? Do you think that sending your tax dollars to DC somehow means the money disappears? It doesn't. It works its way through the economy every bit as well as a private sector purchase.
It also goes to pay salaries of government workers who spend the money here, in this economy.
If you send your money to the CEO of Apple to buy an Ipad, that money goes for his multi-million dollar salary, which he may spend overseas or hide it in offshore accounts. And Steve Jobs outsources 9 in 10 jobs making that Ipad. That money leaves the United States.
Citizens sending their tax dollars to DC creates at least as much economic activity as sending their dollars to CEOs in the private sector. There is no fundamental difference between the two kinds of exchanges. Both are payments for goods and services.
The key is what the money is spent on, who benefits, and if the purchase results in something that will last. The money flow is virtually the same.”
Actually, Obama has done a lot of good things regarding the economy. The one thing that he hasn't been able to accomplish is to bring down the unemployment rate. His failure to create jobs while saving the banks has not played well in middle America. He expected the economy to recove in a reasonable time from the Great Recession without realizing that there have been structural changes in the economy that prevent this from happening. The main structural change is globalization which makes it preferable for many corporations to outsource jobs to wherever in the world labor is cheapest. As consumers in those countries have more jobs and, therefore, more money to spend, corporate profits are increasingly derived from selling into those economies. From the corporation's point of view they will locate their production and marketing facilities wherever they can make the most profit. At this point in time that happens not to be in the US. Without American jobs, American demand for profucts and services will wither. This is what Obama and his economic team have failed to fully comprehend. They seemingly have a greater concern for Wall Street than they have for Main Street.
And the solution to the jobs conundrum may have more to do with increased rather than decreased government spending. This increased spending, however, does not have to be paid for with borrowed money. Corporations who used to pay 40% of government taxes now pay less than 10% putting the tax burden more on American workers. Perhaps, corporations should be taxed just for the privilege of selling into the American market which they are still very eager to do. One way of doing this is to tax the portion of value created by non-American labor. Since corporations have no allegiance to the US in terms of taxes or provision of jobs, they should be taxed on sales of products produced overseas. This will tend to bring jobs back home.
The clearest explanation yet of the forces that converged over the past three decades or so to undermine the economic well-being of ordinary Americans is contained in the new book, "Winner-Take-All Politics: How Washington Made the Rich Richer - and Turned Its Back on the Middle Class."
The authors, political scientists Jacob Hacker of Yale and Paul Pierson of the University of California, Berkeley, argue persuasively that the economic struggles of the middle and working classes in the U.S. since the late-1970s were not primarily the result of globalization and technological changes but rather a long series of policy changes in government that overwhelmingly favored the very rich.
Those changes were the result of increasingly sophisticated, well-financed and well-organized efforts by the corporate and financial sectors to tilt government policies in their favor, and thus in favor of the very wealthy. From tax laws to deregulation to corporate governance to safety net issues, government action was deliberately shaped to allow those who were already very wealthy to amass an ever increasing share of the nation's economic benefits.
"Over the last generation," the authors write, "more and more of the rewards of growth have gone to the rich and superrich. The rest of America, from the poor through the upper middle class, has fallen further and further behind."
As if to underscore this theme, it was revealed last week (by David Cay Johnston, a Pulitzer Prize-winning former reporter for The New York Times), that the incomes of the very highest earners in the United States, a small group of individuals hauling in more than $50 million annually (sometimes much more), increased fivefold from 2008 to 2009, even as the nation was being rocked by the worst economic downturn since the Great Depression.
Last year was a terrific year for those at the very top. Professors Hacker and Pierson note in their book that investors and executives at the nation's 38 largest companies earned a stunning total of $140 billion - a record. The investment firm Goldman Sachs paid bonuses to its employees that averaged nearly $600,000 per person, its best year since it was founded in 1869.
Something has gone seriously haywire in the distribution of the fruits of the American economy.
This unfortunate shift away from a long period of more widely shared prosperity unfolded steadily, year after year since the late-'70s, whether Democrats or Republicans controlled the levers of power in Washington. "Winner-Take-All Politics" explores the vexing question of how this could have happened in a democracy in which - in theory, at least - the enormous number of voters who are not rich would serve as a check on policies that curtailed their own economic opportunities while at the same time supercharging the benefits of the runaway rich.
The answer becomes clearer when one recognizes, as the book stresses, that politics is largely about organized combat. It's a form of warfare. "It's a contest," said Professor Pierson, "between those who are organized, who can really monitor what government is doing in a very complicated world and bring pressure effectively to bear on politicians. Voters in that kind of system are at a disadvantage when there aren't reliable, organized groups representing them that have clout and can effectively communicate to them what is going on."
The book describes an "organizational revolution" that took place over the past three decades in which big business mobilized on an enormous scale to become much more active in Washington, cultivating politicians in both parties and fighting fiercely to achieve shared political goals. This occurred at the same time that organized labor, the most effective force fighting on behalf of the middle class and other working Americans, was caught in a devastating spiral of decline.
Thus, the counterweight of labor to the ever-increasing political clout of big business was effectively lost.
"We're not arguing that globalization and technological change don't matter," said Professor Hacker. "But they aren't by any means a sufficient explanation for this massive change in the distribution of wealth and income in the U.S. Much more important are the ways in which government has shaped the economy over this period through deregulation, through changes in industrial relations policies affecting labor unions, through corporate governance policies that have allowed C.E.O.'s to basically set their own pay, and so on."
This hyperconcentration of wealth and income, and the overwhelming political clout it has put into the hands of the monied interests, has drastically eroded the capacity of government to respond to the needs of the middle class and others of modest income.
Nothing better illustrates the enormous power that has accrued to this tiny sliver of the population than its continued ability to thrive and prosper despite the Great Recession that was largely the result of their winner-take-all policies, and that has had such a disastrous effect on so many other Americans.
Recently China overtook Japan to become the world's second largest economy. Yet some western observers notably Steven Hill consider China to be a still developing economy. How can this be possible that at one and the same time China has become an economic powerhouse but yet is still developing? This is the paradox of China. The truth of the matter can be found in China's huge population of about 1.3 billion people. There is a split between the urban rich and the rural poor. The urban areas are relatively wealthy and well developed, but the rural areas are relatively poor. Approximately half of China's population is engaged in subsistence farming. These are the people that are "living" on a couple of dollars a day" while the urban areas boast many millionaires and billionaires. In 2009 China had the world's fastest growing group of millionaires, an elite club that rose 31 percent from 2008 to encompass 477,000 people. This growth led China to overtake Britain as the world's fourth largest home to rich people.
So China is a paradox but not an enigma. There are a lot of poor as defined by their contribution to GDP and a lot of rich as defined by their contribution to the market economy. A lot of China's rural farmers migrate to urban areas during certain times of the year to participate in the market economy. The rest of the year they are subsistence farmers. What subsistence farming means is that they are largely self-sufficient in terms of producing enouch to provide for their needs without participating in the market or cash economy. They are, therefore, only poor in the definition of those who only consider wealth as measured by the exchange of goods and services. To those people self-sufficiency doesn't count. It's not included in GDP. Looked at differently though, China could be considered to have the best of both worlds: a self-sufficient rural population and a wealthy urban population. The world's truly poor are the urbanized, jobless poor who make a living scavenging in garbage dumps. If one can't be a self-sufficient farmer, then one must have a job or be really and truly poor. An urbanized poor person living on a couple of dollars a day is in a vastly different situation than a rural poor person engaged in subsistence agriculture living on a couple of dollars a day. On the one hand, you have the desperately poor who are forced to live in a cash economy in which they are jobless. On the other, you have a population which provides for most of its own needs without participating in the cash economy. For the latter group, whatever cash they do make is a bonus on top of what they can provide for themselves.
So I would argue that far from being an impoversished or underdeveloped nation, China really has the best of both worlds. This is contrasted with the US, for example, where the population is almost entirely urbanized. Only 2% of the population is involved in agriculture. So the rest are "urbanized" in a sense regardless of where they live and are dependent on a job to provide for all their needs. They live almost entirely within a cash economy and are almost completely non-self-sufficient. That's why unemployment is such a big deal in the US. China, on the other hand, is lucky not to have the corporate farms which have taken over the job of food production in the US using a combination of highly productive technology and extremely cheap immigrant labor. From my point of view, China, even though many of the self-subsistent farmers still use the water buffalo, is vastly better off because of the distribution of agriculture over a largely self-sufficient population. And we haven't even considered the wealth of China's government which is an entity above and beyond the Chinese people themselves.
To understand the “real” China, it is necessary to see it through the double lens of its paradoxical condition as both a major economy and a still-developing country. China is filled with contradictions and serious challenges. When I visited China in August and September of 2008, after the Olympics, the country that I saw, whether in Shanghai, Beijing or the rural areas, was a long, long way from being a global leader in any meaningful sense. Two hundred million people out of a working population of nearly 800 million are migrants, chafing at their lowly status and rotten wages. Inequality is rampant. Returning from the rural areas—where the vast majority of Chinese still live—to cities is like a form of time travel, moving from feudal conditions where plowing is still done by water buffalo to a land of impressively jutting skyscrapers.
It's true that "inequality is rampant," but China would be much worse off if it had an entirely urbanized economy with little subsistence farming and the vast majority of the poor living in garbage dumps which is the way it is in many countries as detailed in Mike Davis' book, "Planet of Slums". Davis is writing precisely about the urban poor as opposed to the self-subsistence farmers who are only poor in the sense of being virtual non-participants in the market economy. And Steven Hill doesn't even stop to consider the autonomous wealth and power of China's government. To start with, the US government is indebted to the Chinese government to the tune of $772 billion as of May 2009. It has only increased since then. The US is running a trade deficit with China of approximatyely $60 billion per month. This represents a structural indebtedness of the US to China. The US as a whole has a national debt of $13.7 trillion. The China Investment Corporation is a sovereign wealth fund which has $332 billion with which to invest around the world. China is buying up natural resources and cutting deals around the world while the US lavishes its money - more than the rest of the world spends on its military establishments combined - on a military establishment that has military bases throughout the world. The notion of a sovereign wealth fund is beyond the pale of debate within the US where the only discussion is around how much debt is acceptable.
And that's just the beginning of Chinese government wealth. The People's Republic of China has US $2.5 trillion in currency reserves. With the US' growing indebtedness to China, China has really become the US' banker. (See "Uncle Sam, Your Banker Will See You Now.") US goading of China regarding revaluing its currency falls on deaf ears because China can argue that it's still a developing country (with all those self-subsistent farmers they can have it both ways), and, besides, China holds the financial power over the US due to the fact that the US is dependent on China for huge sums of money to pay its bills. China is the creditor nation despite having a lot of poor people while the US is the debtor nation with a middle class rapidly becoming poor.
China's huge governmental wealth puts it in a position to make huge investments in infrastructure. In 2008 China put $586 billion into infrastructure development including high speed rail, airport development and broad band infrastructure. According to press reports:
"The statement said the spending would focus on 10 areas. They included picking up the pace of spending on low-cost housing - an urgent need in many parts of the country - as well as increased spending on rural infrastructure.
"Money will also be poured into new railways, roads and airports. Spending on health and education will be increased, as well as on environmental protection and technology."
Despite the American Infrastructure and Reinvestment Act, it has allocated a relative paltry sum to infrastructure development. James Carlini said:
A $700 billion bailout package would have been enough to do many of these large infrastructure initiatives in the U.S.
Listening to reports of non-deserving executive bonuses, hunting trips, junkets to resorts, and acquisitions coming out of the bailout money in the U.S., it sounds like the Chinese have a better handle on national initiatives and how to prioritize building lasting infrastructure.
China is stepping up to the plate as it allocates resources to clean up the environment and provide a social safety net for its citizens. It is not there yet, but the trend is for rapid development in many directions simultaneously. They are putting their money into economic development while the US puts its money into the military-industrial complex. Meanwhile, the US dithers, not able to get its act together or agree on anything. With no national industrial policy, immense debt and a political system seemingly invented to create gridlock, the US goes backwards while China goes forward. While the US regresses, China is not standing still. If Republicans take over Congress, we'll see a shredding of what little safety net the US has. What now seems like an almost pathetic attempt to institute a national health care plan is likely to be repealed or gutted. All public services are in jeopardy as states and municipalities struggle with huge budget deficits. Is this what 234 years of democracy has wrought?
All indications are that the electorate, fed up with the way things are going in Washington, will vote the Democrats out and Republicans in next Tuesday. Does this make any sense? Shouldn't we stop and ask ourselves why there has been so little progress in Washington? Republicans in the Senate voted "No" on virtually every piece of legislation Democrats brought forth. They filibustered anything and everything on the theory that nothing would get done, people would get dissatisfied and vote out the people who were trying to accomplish something and vote in the party who obstructed every attempt at progress. Sure enough, it appears that they were right. People dissatisfied with a lack of progress are about to vote into office the very party responsible for that lack of progress. Is this insane or what?
Does the voting public even look beneath the surface as to what's going on in Washington? If so they would surely have seen that the Republican strategy was and is to defeat Obama at every turn regardless of how much good his policies would be for the country. Obama certainly doesn't have all the answers and his big mistake, in my opinion, was to cater too much to Republicans and conservatives in the first place. In the prevailing climate the notion of bipartisanship is a joke. Republicans and some Democrats are so venal and self-serving that their only goal is to serve their corporate masters and lap up their financial rewards when they leave Congress to become lobbyists. Obama watered down many of his initiatives in the hopes of winning over some Republcicans. It didn't really work as a general policy. On other issues he adopted more or less the conservative approach despite the abysmal record that 30 years of Reaganism and Bushism has left in its wake. Reagan and Bush policies have created a nation which for all intents and purposes has joined the Third World. Before Reagan took over, the US was a manufacturing nation that was a net creditor. Now all the manufacturing jobs have left for Asia and the US is a debtor nation like no other still trading on the fact that the dollar is the world's reserve currency. Some day we'll realize that that was more of a curse than a blessing because it only allows us to go deeper and deeper into debt.
Obama's big mistake though was failing to properly analyze the causes of the Great Recession. He and the Democrats thought the country would bounce back if only the banking system was not allowed to disintegrate. The result was that they bailed out Wall Street but failed to give much help to Main Street. Of course, Republicans were basically happy with this result but they wouldn't go so far as to give Obama any credit. Much to the current administration's dismay, the economy did not bounce back. Unemployment remains at ridiculous levels with the unemployed losing their houses in record numbers. Foreclosures continue apace. The combination of lack of jobs and people getting kicked out of their homes represents the bankruptcy of the Obama administration's approach to getting the economy back on track. But if the American public thinks the Republicans, having been voted into office and the Democrats thrown out, will do any better, they have another think coming. The Republican approach will be to accelerate joblessness and homelessness. Under the Republicans, the safety net will be shredded totally. The growing transfer of wealth from the poor and middle class to the rich will increase.
So what is the public thinkling? If they think that voting the Republicans in will save their jobs or their houses, they are absolutely nuts. The Republicans will revert to the policies of Reagan and Bush which have been tantamount to the destruction of the US economy. Jobs will continue to be outsourced. The unemployed will have their benefits reduced. The long term unemployed will be cut off completely. Any public program that benefits the poor will be eliminated. The hollowing out of the middle class will continue on steroids. While Obama and the Democrats have been reluctant to analyze the structural changes that Bush and Reagan policies have brought about and to propose anything too radical in terms of correcting them, Republicans having regained power will do all they can to run the economy into the ditch again. They will transfer wealth from poor to rich with a vengeance. They will ramp up the War Department and spend more trillions in futile battlefield endeavors and foreign adventurism. They will do all they can to put an end to social security and Medicare.
Is this what the public really wants? Don't they understand that Republican policies of the last 30 years are the problem, not the solution. Do they really want a return to those policies? If so, they will have to bear the responsibility for hastening the destruction of the US as a democratic, largely middle class nation and turning it into a corporatist state where the former middle class will have to get used to the role of being peons and peasants. They will have been responsible for hastening their own demise.
Robert Reich and others have pointed out that income inequality was at a maximum both in 1928 just before the Great Depression and again in 2007 just before the Great Recession. In both cases the share of the nayional income going to the top 1% was greater than 23% as the following graph shows.
If you superimpose a graph of the top income tax rate, you can see that it is almost the inverse of the graph of the share of income going to the upper 1%. In the 1920s the top tax rate was 25%. In the period which Reich calls the Great Prosperity, roughly from 1945 to 1980 the top tax rate was high, 91% under Eisenhauer, 70% under Nixon and 39.6% under Clinton as the following graph shows. Roughly the peaks in the first graph correspond to valleys in the second and vice versa.
We can conclude from these two graphs that income inequality increases as top marginal tax rates decrease. There is almost a direct correlation. But in addition to that government revenues diminish when top tax rates are lowered and increase when they are raised. So lowering taxes produces more income inequality and diminished government revenues. Reagan and the first Bush lowered taxes and quadrupled the national debt from $1 trillion to $4 trillion. The second Bush lowered taxes and doubled the national debt from $5 trillion to $10 trillion. Fiscal responsibility as defined by government revenues exceeding government spending has been achieved by every Democratic President since Johnson and by no Repuiblican President since then as shown by the following graph.
Clinton ran budget surpluses four years in a row, a feat not achieved since the 1920s. Even though top tax rates were low in the 1920s, the government still ran surpluses for all those years. This was because the economy was booming so a lower tax rate was sufficient to produce ample revenues. Supply side economics promised the same result but didn't deliver. Instead lowering taxes produced huge government deficits which added huge sums to the national debt. In the 1930s, when the Great Depression hit, the government started running deficits, but it had built up a relative surplus in the 1920s so it could better afford to run deficits than it can today since such huge deficits were run up during the Bush administration.
Keynsian economics says that the government should spend more and run deficits during recessions and save more and run surpluses during expansions. That theory made some sense during the 1920s and 1930s when the surpluses of the 20s were somewhat balanced by the deficits of the 30s although the deficits were about triple the surpluses. Today, however, we have a dual problem: the need for the government to spend money to stimulate the economy and the need not to add more to the national debt. One way the government can do this is to raise income taxes on the wealthy which would solve two problems. It would reduce income inequality and it would decrease government deficits. Since the wealthy don't add greatly to aggregate demand especially after a certain amount of wealth has been accumulated, this will not affect the economy negatively. Also, as has been proved by the Bush administration, increasing the wealth of the already wealthy does not create jobs.
Another way the government can solve the deficit problem is to find other sources of revenue. Up until approximately the First World War most government revenues were derived from excise taxes (mainly on cigarettes and alcohol) and tariffs. By the 1920s these sources had been largely replaced by the income tax. Excise taxes are taxes on particular products produced and sold within the US. They are similar to the VAT tax which is used in Europe. But the VAT tax applies to all products not just certain selected ones. The VAT tax is basically a national sales tax. Excise taxes could be reinstated and applied to speculative financial products in the form of a Financial Transactions Tax (FTT). This would net hundreds of billions of dollars a year. Hundreds of billions more could be gotten from collecting taxes on profits illegally parked offshore. Tariffs could be applied selectively to certain countries and/or certain products in order to equalize the trade balance which has been running huge deficits. This would mean abandoning free trade in favor of fair trade.
Keynsianism is outmoded today because the government can't afford to go into debt to stimulate the economy. However, the government can raise revenues by instututing increased taxes on the upper 1% and other forms of taxation such as a FTT that won't affect the purchasing power of the middle class. Royalties on oil and minerals extracted from the US by corporations could also be taxed at rates similar to what other countries are taxing their oil. Today the US is practically giving away its natural resources. The problem in today's economy is lack of demand so purchasing power must be increased among those who are in a position to increase demand, namely, the middle class. Government spending that is offset by government revenues is deficit neutral. One of the greatest problems in the currrent economy is lack of job creation. Government spending that directly and indirectly creates jobs will do much to ameliorate the current lack of demand, and if that spending is balanced by increased revenues, the national debt can be paid down at the same time.
The Democrats have not explained this well, but under Obama's plan to extend the Bush tax cuts for the middle class while allowing them to expire for the upper 2%, the wealthy would still get the Bush tax cut on the first $250,000. of their income. The rest of their income above $250,000. would be taxed at a 4.6% higher rate than it is today. The tax rate would go from 35% to 39.6% for high wage earners but only for earnings greater than $250,000. The wealthy would still enjoy a Bush 4.6% tax cut on $250,000. which amounts to $11,500. This amount would still be far higher than what the average middle class individual or family would gain by virtue of having the Bush tax cuts extended.
So what all the fuss is about as far as the Republicans are concerned is huge tax cuts for the wealthy over and above what the whole middle class would get. They would still get more than a 'middle class' household earning $249,999.99 even if the Bush tax cuts for the wealthy are not extended! Last year the 25 largest hedge fund managers earned an average of a billion dollars apiece and paid taxes at a rate of just 17%. So the Republicans want them to have not just an $11,500. tax cut but a whopping additional $45,988,500 tax cut!! To continue the Bush tax cuts for the wealthy would add an additional $700 billion to the national debt over ten years. Republicans and Tea Baggers pretend to be so worried about the national debt, but, when it comes to deficits and debts caused by tax breaks for the wealthy, why their concerns all evaporate and vanish. They only have a problem with narional debt when it comes to providing social security, Medicare, food stamps and other programs which benefit the middle class and the poor.
Democrats should absolutely bring the extension for the Bush tax cuts for the middle class (which also includes a $11,500. tax cut for the wealthy, remember) to a vote before the November elections and let the Republicans vote it down which they will because what they're after is not tax cuts for the middle class which amount to chicken feed and chump change but tax cuts for the wealthy where you're talking about real money. The upward shift in income and wealth from the middle class to the wealthy which has occured over the last 10 years was brought about primarily by the Bush tax cuts. Also the underfunding of the Federal government which directly contributes to the deficit and national debt has been brought about by the Bush tax cuts, two wars, the money for which was borrowed, and the prescription drug benefit for seniors which again was borrowed money. As the US borrows more money from the Chinese, they gain more control over the American economy and political process. While the Chinese economy booms, the US economy languishes.
Although we've been told the Great Recession was over as of June 2009, unemployment is still hovering around 10%, foreclosures are still continuing at a high rate and 15% of Americans live in poverty. Firemen, policemen and school teachers are being laid off. American infrastructure is badly in need of repair. And what do the Republicans have to offer? In their "Pledge to America" they offer more of the Bush policies that created the Great Recession in the first place! More tax cuts for the rich, more deregulation that created the Wall Street meltdown, salmonella in eggs, the Gulf oil spill and the San Bruno gas explosion and more transfer of wealth from the middle class to the rich!
That's a prescription for disaster, and the result will be a Third World America with a super wealthy class and a class of peons, a political system dominated by monied interests and the elimination of all social programs which benefit the poor and middle class.
The super-rich got even wealthier this year, and yet most of them are paying even fewer taxes to support the eduction, job training, and job creation of the rest of us. According to Forbes magazine’s annual survey, just released, the combined net worth of the 400 richest Americans climbed 8% this year, to $1.37 trillion. Wealth rose for 217 members of the list, while 85 saw a decline.
For example, Charles and David Koch, the energy magnates who are pouring vast sums of money into Republican coffers and sponsoring tea partiers all over America, each gained $5.5 billion of wealth over the past year. Each is now worth $21.5 billion.
Wall Street continued to dominate the list; 109 of the richest 400 are in finance or investments.
From another survey we learn that the 25 top hedge-fund managers got an average of $1 billion each, but paid an average of 17 percent in taxes (because so much of their income is considered capital gains, taxed at 15 percent thanks to the Bush tax cuts).
The rest of America got poorer, of course. The number in poverty rose to a post-war high. The median wage continues to deteriorate. And some 20 million Americans don’t have work.
Only twice before in American history has so much been held by so few, and the gap between them and the great majority been a chasm — the late 1920s, and the era of the robber barons in the 1880s.
And yet the Bush tax cuts of 2001 and 2003, which conferred almost all their benefits on the rich, continue.
Democrats have decided to delay voting on whether to extend them for the top 2 percent of Americans or for the bottom 98 percent until after the mid-term elections.
Democrats have thereby given up a defining issue that could have enabled them to show the big story of the last three decades — the accumulation of almost all the gain from economic growth at the top — and to make a start at reversing it.
When will they ever learn?
“AFTERSHOCK: The Next Economy and America’s Future”
Fiscal policy is deadlocked. So, apparently, is monetary policy.
The Fed’s decision today (Tuesday) to keep short-term interest rates near zero is no surprise. What’s odd is its apparent decision not to boost the economy by buying hundreds of billions of bonds — despite its acknowledgment that ”the pace of recovery in output and employment has slowed in recent months,” and that prices are rising too slowly for comfort (i.e., we might be facing deflation).
Every indicator suggests third-quarter growth will be as slow if not slower than in the second quarter. Consumer confidence is down. Retail sales are down. Housing sales are down. Commercial real estate is in trouble.
A growth rate of 1.6 percent means even higher unemployment ahead. Maybe we’re not in a double-dip but we might as well be in one. Growth this slow is the equivalent of heading downward, relative to the growth needed to get us out of the hole we’re in.
The Fed is deadlocked because it harbors hawks who worry near-zero interest rates will lead to another round of speculation, ending in an even bigger bust. Kansas City Fed President Thomas Hoenig, for example, is openly dissenting from the Fed’s near-zero policy and I’m sure he resists doing anything more to stimulate borrowing.
I don’t generally side with the hawks but they have a point.
Even though economy is heading downward, flooding it with more money may not help.
The problem isn’t the cost of capital. Most businesses can get all the money they need. Big ones are still sitting on $1.8 trillion in cash.
The problem is consumers, who are 70 percent of the economy. They can’t and won’t buy enough to turn the economy around. Most don’t qualify for more credit given how much they already owe (or have already defaulted on).
Without consumers, businesses have no reason to borrow more. Except to speculate by buying back their own stock and doing mergers and acquisitions, which is exactly what they’re doing.
Ultimately, even if fiscal and monetary policy weren’t deadlocked, we’d still face the same conundrum. Say the White House and Ben Bernanke got everything they wanted to boost the economy. At some point these boosts would have to end. The economy would have to be able to run on its own.
But it can’t run on its own because consumers have reached the end of their ropes.
After three decades of flat wages during which almost all the gains of growth have gone to the very top, the middle class no longer has the buying power to keep the economy going. It can’t send more spouses into paid work, can’t work more hours, can’t borrow any more. All the coping mechanisms are exhausted.
Anyone who thinks China will get us out of this fix and make up for the shortfall in demand is blind to reality.
So what’s the answer? Reorganizing the economy to make sure the vast middle class has a larger share of its benefits. Remaking the basic bargain linking pay to per-capita productivity.
Let me end with a brief commercial. My new book, “Aftershock: The Next Economy and America’s Future” is out today. In it, I explain this in detail.
Why is there an enthusiasm gap? Let me illustrate.
Today (Monday) at a “town hall” sponsored by CNBC in Washington, the President took questions about the economy. When a hedge-fund manager complained that Wall Street executives “feel like we’ve been whacked with a stick” by the administration, Obama said most of his critics think he’s been too soft on the Street.
He noted he still hasn’t been able to end the practice of taxing some hedge fund and private-equity earnings at the capital-gains rates rather than the higher income-tax rates. “The notion that somehow me saying maybe you should be taxed more like your secretary when you’re pulling home a billion dollars…a year I don’t think is me being extremist or anti-business.”
Good as far as he went. But that’s as far as he was willing to go. It was a golden opportunity for Obama to connect the dots — to make the case that
(1) super-rich financiers on Wall Street and top corporate executives have grown even richer than they were before the Great Recession, even though most Americans are getting poorer or losing their jobs and homes and savings, and more Americans are in poverty.
(2) Yet the lobbyists for the financiers and top corporate executives, and their Republican allies have blocked or tried to block every effort of the Administration to widen the circle of prosperity, including enacting a major jobs program, providing major relief for mortgage holders who are under water, helping working families afford college for their kids, making sure states and cities have enough money to pay our classroom teachers, and cutting taxes on average working people.
(3) They almost scuttled the effort to make sure health care would be affordable to average Americans.
(4) The super-rich say the nation can’t afford any of this because of budget deficits. Yet at the same time their platoons of lobbyists are fighting off efforts to treat their income as taxable earnings rather than capital gains. So last year the 400 richest families in America, with an average income of $300 million each, were taxed at an average rate of only 17 percent. That’s the same tax rate paid by a family earning $30,000.
(5) And they’re fighting off efforts to end the temporary Bush tax cuts. If they’re successful, the richest 1 percent of Americans will get a windfall of $36 billion next year. Millionaire families will avoid paying $31 billion in taxes. Over ten years, they’d avoid paying $700 billion.
(6) And they’re fighting off efforts to restore the estate tax, which only applies to the top 2 percent of Americans, and which has been in effect since Abraham Lincoln introduced it to help finance the Civil War. How do we afford national defense if the richest and most privileged Americans won’t pay their fair share?
(7) Wealth and power in this country are so distorted that the top 25 hedge-fund managers each earned an average of $1 billion last year. $1 billion would support 20,000 classroom teachers. Yet who contributes more to this country — a hedge-fund manager or a teacher?
But he didn’t.
Instead, he challenged tea-party activists to come up with specific spending cuts. “It’s not enough just to say, ‘Get control of spending.’ I think it’s important for you to say, you know, I’m willing to cut veterans’ benefits, or I’m willing to cut Medicare or Social Security benefits, or I’m willing to see taxes go up.”
Who deserves a tax cut more: the top 2 percent — whose wages and benefits are higher than ever, and among whose ranks are the CEOs and Wall Street mavens whose antics have sliced jobs and wages and nearly destroyed the American economy — or the rest of us?
Not a bad issue for Democrats to run on this fall, or in 2012.
Republicans are hell bent on demanding an extension of the Bush tax cut for their patrons at the top, or else they’ll pull the plug on tax cuts for the middle class. This is a gift for the Democrats.
But before this can be a defining election issue in the midterms, Democrats have to bring it to a vote. And they’ve got to do it in the next few weeks, not wait until a lame-duck session after Election Day.
Plus, they have to stick together (Ben Nelson, are you hearing me? House blue-dogs, do you read me? Peter Orszag, will you get some sense?)
Not only is this smart politics. It’s smart economics.
The rich spend a far smaller portion of their money than anyone else because, hey, they’re rich. That means continuing the Bush tax cut for them wouldn’t stimulate much demand or create many jobs.
But it would blow a giant hole in the budget — $36 billion next year, $700 billion over ten years. Millionaire households would get a windfall of $31 billion next year alone.
And the Republican charge that restoring the Clinton tax rates for the rich would hurt the economy — because it would reduce the “incentives” of the rich (including the richest small business owners) to create jobs — is ludicrous.
Under Bill Clinton and his tax rates, the economy roared. It created 22 million jobs.
By contrast, during George Bush’s 8 years, commencing with his big 2001 tax cut, the economy created only 8 million jobs. And as the new Census data show, nothing trickled down. In fact, the middle class families did far worse after the Bush tax cut. Between 2001 and 2007 — even before we were plunged into the Great Recession — the median wage dropped.
It’s an issue that could also be used to expose the giant chasm that’s opened between the rich and everyone else — aided and abetted by Republican policies. As I’ve noted before, in the late 1970s, the top 1 percent got 9 percent of total national income. By 2007, the top 1 percent got almost a quarter of total national income.
These figures don’t even count in taxes. The $1.3 trillion Bush tax cut of 2001 was a huge windfall for people earning over $500,000 a year. They got about 40 percent of its benefits. The Bush tax cut of 2003 was even better for high rollers. Those with net incomes of about $1 million got an average tax cut of $90,000 a year. Yet taxes on the typical middle-income family dropped just $217. Many lower-income families, who still paid payroll taxes, got nothing back at all.
And, again, nothing trickled down.
As I’ve emphasized, the U.S. economy has suffered mightily from the middle class’s lack of purchasing power, while most of the economic gains have gone to the top. (The crisis was masked for years by women moving into paid work, everyone working longer hours, and, more recently, the middle class going into deep debt — but all those coping mechanisms are now exhausted.) The great challenge ahead is to widen the circle of prosperity so the middle class once again has the capacity to keep the economy going.
In other words, this is the right issue. It’s the right time. It allows Democrats to explain what the Bush tax cuts really did, why supply-side economic is bogus, and the economic challenge ahead.
Even if Democrats feel they have to respond to the Republican charge that taxes shouldn’t be raised on anyone when the employment rate is 9.6 percent, they have a powerful fallback: Extend the Bush tax cuts for everyone through 2011, then end them for the rich while making them permanent for the middle class.
Get it, Democrats? Please don’t blow it this time.
Arianna appeared on "The Tonight Show" Friday night to discuss her new book, "Third World America," as well as the rise of the tea party during the current election cycle. Arianna argues that the middle class has been abandoned by politicians and devastated by 30 years of neglect by both parties, but it's not too late to turn things around. (For more news on "Third World America, click here.)
She attributes the Tea Party's rise largely to the growing anger of struggling Americans who don't see politicians addressing their problems.
That fury is mostly directed toward Democrats at the moment because they hold the reins of power, Arianna said, but it's not exclusive to one party. "The anger is because the Democrats and the Republicans have for 30 years now screwed the middle class," she told "Tonight Show" host Jay Leno.
The Senate nomination of Christine O'Donnell in Delaware is one response, Arianna said, and it's not all bad. "Anyone in my book who gets Karl Rove that upset must be doing something right," she told Leno.
Arianna broke with O'Donnell, though, on one major issue. "She seems to think that masturbation is really a huge problem, and I don't think it's as huge a problem for Americans given all the other problems they're facing, like unemployment, foreclosures, et cetera," Arianna said. "Self-love is deficit-neutral."
Study without desire spoils the memory, and it retains nothing that it takes in.
- Leonardo da Vinci
Advertising may be described as the science of arresting the human intelligence long enough to get money from it.
--Stephen Leacock
Canadian economist & humorist (1869 - 1944)
They can't put you in jail for what you're thinking.
--Clifton E Lawrence
If we can't create a good impression, we can at least try to create a bland impression.
-- Ben Weinbaum, my supervisor at General Dynamics
Men are generally idle, and ready to satisfy themselves, and intimidate the industry of others, by calling that impossible which is only difficult.
-- Samuel Johnson
There's a vas deferens between us.
--Paul Desmond to a girlfriend
Lawrence, how do you manage to go through so much shit and come out smelling like a rose?
--a college classmate
Lawrence, you're better on paper than you are in person.
--Guy Carlisle
Lawrencie, you're smart in school, but dumb in life.
--Arthur Hill
In politics you must always keep running with the pack. The moment that you falter and they sense that you are injured, the rest will turn on you like wolves.
--R. A. Butler
Don't put off till tomorrow what you can do today.
--Florence C Lawrence
There's no time like the present.
--Florence C Lawrence
One hand washes the other.
--Clifton E Lawrence
You have to take the bitter with the better.
--Clifton E Lawrence
An inventor is simply a fellow who doesn't take his education too seriously.
--Charles F Kettering
A problem well stated is a problem half solved.
--Charles F Kettering
Any sufficiently advanced technology is indistinguishable from magic.
--Arthur C. Clarke, "Profiles of The Future", 1961 (Clarke's third law) English physicist & science fiction author (1917 - )
The least of learning is done in the classrooms.
--Thomas Merton
Tastes pretty good for an old dead cow.
--Clifton E Lawrence at a family picnic
If the shoe fits, wear it.
--anonymous
If the shoe doesn't fit, don't wear it.
--John Lawrence
Doug Ramsey: Take Five: The Public and Private Lives of Paul Desmond This is a great book! Paul Desmond and Dave Brubeck formed the heart of one of the best all time jazz groups. Paul was the quintessential intellectual, white jazz musician. A talented writer, he never published anything. However author, Doug Ramsey has collected Paul's letters here. How ironic that now his writing in the form of letters to his father and ex-wife, among others, is finally published showing another window on the mind of this talented person.
A sideman, for the most part, his entire life, the Dave Brubeck Quartet might never have happened at all due to the fact that Paul had managed to offend Dave to the point where he never wanted to see him again. It had to do with a gig that Paul actually was the leader of. Paul wanted to take the summer off to play another gig, and Dave wanted Paul to let him take over the gig at the Band Box in Palo Alto, CA. Paul wouldn't let him and Dave, married with two children, proceeded to starve.
Due to an elaborate publicity campaign, when he realized the error of his ways, Paul managed to worm himself back into Dave's good graces. The rest is history.
This book is remarkable for the insight it gives into a working jazz musician's mind, wonderful pictures and interviews with the significant figures in Paul's life. Author Ramsey, not a remarkable penman himself, has nevertheless done a magnificent job of assembling all these various materials. Unlike a lot of jazz authors, he doesn't overly idolize his subject with the result that you get the feeling that you have met a real person and not a idealized version. That's high praise indeed for any biographer. (*****)
On August 5, 1981, President Ronald Reagan fired every member of the air traffic controllers union (PATCO) who'd defied his order to return to work and declared their union illegal. They had been on strike for just two days.
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