Monday, September 27, 2010

Spitting into the wind

Let me try once again to explain economics in simple terms – although I am probably spitting into the wind since it has been proven that the facts do not matter because people are as set in their beliefs as they are set in their ways (see earlier post called “Just the facts, ma’am” – NOT).

Congressional Republicans have fought against enacting all kinds of economic reforms that would have curbed corporate abuse of consumers, shareholders, or workers. They have fought all attempts to curb excessive concentration of corporate political and economic power. They have been against any measures that would increase demand for goods and services. They have been against anything that would increase small business loans (until recently when two Republican senators defected so that the small business law would be enacted).

If you think things will get better with Republicans gaining power in Congress, you should think again. They have promised to reduce Social security, Medicare, Medicaid, and Healthcare Reform in order to “slash spending by $100 billion.” At the same time, they have promised to make the tax cuts for the wealthy permanent which will cost over $700 billion in the short term and over $2 trillion during the next decade. They want to dismantle the new bank regulations so that banks can once again gamble with taxpayer’s mortgages and deposits. But it is these Republicanized policies that got us into this Great Recession.

Republicans are falsely stating that if they do not make the tax cut permanent for the upper 2% of income earners, demand for goods will be hurt and the economic downturn will be prolonged. (Either they are liars or they very stupidly believe this insanity.) The rich already have an enormous amount of money sitting idle in corporate and personal coffers. And corporations have almost $2 trillion dollars sitting idle in corporate accounts at this time.

All doubt about Republicans using the economic downturn as a path to political power has been removed by recent legislative votes. Due to their actions, it is hard not to conclude that Republicans only desire to worsen the economic downturn so that they can win the next election and get their governmental power back. The Congressional Republicans seem to have decided that sabotaging economic recovery and employment growth is their best tactic for electoral gains in the November elections.

What Republicans say about tax cuts for the wealthy is NOT TRUE.Tax cuts at the highest marginal incomes brackets concentrate wealth and political power in the hands of the wealthy. The resulting political power by the very rich pushes government policy in directions that significantly cut into the percentage of the nation’s income held by middle class Americans – reducing the ability of most Americans to buy goods and services. As a result, the middle class has been slowly shrinking since the days of Reagan. The economy continues to unwind because the average American does not have enough disposable income to keep the flow of goods and services at a healthy economic level.

Economic concentration of wealth and income are currently at levels very similar to those just before the Great Depression in 1929. The only reason our current situation has not quite deteriorated to that of the Great Depression is that the Republicans have not been completely successful in undoing the reforms put in place as a result of the New Deal.

All of the Republican policies for the past 100 years have been designed to concentrate wealth and income in the hands of the very few. Every time they reach the economic concentration levels that currently exist, we have a serious economic downturn. The current downturn is a direct result of increasingly “Republicanized” governmental policies over the previous 30 years.

So let me once again repeat some well established, provable facts:

1. Deregulation allows corporations to charge excessive prices. Not enforcing anti-monopoly laws permits price gouging.

2. Not capping interest rates concentrates wealth in a few hands and reduces spending of the average American – which in turn further cripples the economy.

3. Outsourcing jobs to foreign nations reduces incomes. Americans have less money available to buy goods and services.  Therefore, our consumer based economy takes a plunge.  (Duh!)

4. Union-busting keeps wages and benefits down which undermines the purchasing power of workers, which, in turn, depresses the economy.

5. Privatizing government services such as Social Security costs Americans more in out-of-pocket expenses (in fees and penalties) for services once provided by government. And it puts their capital at risk of market downturns. This reduces disposable income for consumers. In addition, when employers reduce benefits and increase co-pays for health insurance, it increases the cost-of-living for workers. As a result, these workers have less disposable income to spend on goods and services.

6. Middle class tax cuts help the economy because they increase the disposable income of those members of society who spend the vast majority of their incomes. The money changes hands over and over again instead of setting idle. This is the multiplier effect in economics.

7. Extending unemployment benefits helps the economy because it has a huge multiplier effect that greatly helps the economy because unemployment benefits are so little that all of it gets spent on goods and services immediately, putting it right back into the economy.

8. Tax cuts for the wealthy create huge pools of money for the rich to gamble with investments but it does not create jobs. The Republican Right’s economic theory – that economic prosperity and employment “trickle-down from the wealthy” – has been proven to be WRONG by recent historical experience over the last 30 years. Jobs are not created by just having large pools of investment money sitting around. There must be the opportunity to invest in a business that will have customers who can buy the goods and services before the investment money flows into job creation activities.

Sound economics says government should run surpluses in good economic times (saving the surpluses for bad times) and run deficits, if necessary, during economic downturns. This policy is taught in the Bible, for heavens sake! Remember the story of Joseph helping the Egyptian Pharaoh put back enough supplies during the seven years of abundance to take care of the predicted seven years of famine? Following this advice helps reduce the severity of economic cycles. But under the Republican Presidencies of Reagan and both George Bushes, we did exactly the opposite. This is what created the current downturn and the debt crisis! The vast majority of our total national debt was created under these three conservative Republican Presidents. But Republicans will deny this fact.

I repeat: excessive concentration of wealth and income is what harms our economy! No, I am not advocating a Marxist theory of spreading all wealth out evenly. I do believe that the wealthy should be able to enjoy the fruits of their “labor”. But I also believe that with wealth comes the responsibility of giving a bit more to support the country that made it possible for them to create their wealth. What’s an extra $100,000 in taxes to a multi-millionaire or a billionaire? They still get to have their huge yachts, several mansions, expensive cars, etc.

I would like to remind the wealthiest among us that they did not acquire their wealth all by themselves. They needed competent workers (educated at public expense), transportation and communications networks, laws and regulations (yes, regulations, such as those making their rarefied air fit to breathe) ... and for this vast web of support, the rich do in fact have a greater debt to society than the poor or even the middle class. So stop whining, stop being so damn greedy, shoulder your responsibility to this nation and pay up!

But I am just spitting into the wind, aren’t I? The majority of Americans don’t get it. Even after reading this, they just don’t get it. And they will very stupidly vote Republicans back into power (against their own best interests) because the Democrats did not fix things fast enough to suit them – regardless of the fact that it was the Republicans who flushed the economy down the toilet in the first place.

American voters gave the Republicans years to ruin the economy but expect the Democrats to fix it in less than two years.