The stock market's plunging as of this writing, as the global economy reels from the destructive consequences of austerity economics. Yet in Washington, politicians are moving full speed ahead in their determination to impose a rigorous new program of... austerity economics.
What's wrong with this picture?
Politicians are finally discussing the country's urgent need for jobs. But they're still determined to push their job-killing spending cuts instead. In a week that marked the 34th anniversary of Elvis Presley's death, it's once again time to sing his old hit:
"We need a little less conversation, a lot more action."
Shock Doctrine America
It's all straight out of the "Shock Doctrine" playbook, where corporate forces use every crisis to cut taxes and impose the failed Milton Friedman philosophy of deregulation and downsized government. This crisis was caused by deregulation and a bank-fueled bubble, adding to government deficits that had been created in large part by the tax cuts Republicans are determined to protect.
What's the Republican response? Even lower taxes and even less regulation. But Democrats are drinking the Kool-Aid too. Austerity rhetoric is flowing on a daily basis from the White House, Capitol Hill, and Wall Street, driving the misguided mission of the Congressional "Super Committee" and its secret deliberations.
Bracket Creeps
This week Michele Bachmann had a crowd sing "Happy Birthday" to Elvis. Unfortunately, it was the anniversary of his death. And Rick Perry tried to steal some of the momentum Ron Paul has gained with his audit of the Federal Reserve (co-sponsored by Bernie Sanders). Unfortunately, Perry did it by criticizing a potentially helpful action -- and by suggesting that it might be appropriate to use violence against its head.
Republicans have officially become the "Happy Deathday" party. And about those taxes ...
"Colonel" Tom Parker, the former carnival who managed Elvis, said in the late 1950s that "I consider it my patriotic duty to keep Elvis up in the 90 percent tax bracket." We had a Republican president back then, we were experiencing a period of enormous postwar growth and prosperity, and the marginal tax rate for the nation's highest earners was 90%.
Today's crisis calls for urgent government spending measures to create short-term jobs and growth, and highest earners in the country pay only 35% in taxes -- if they even pay that. (And hedge fund managers may pay as little as 15%.) Yet the Republicans are calling for brutal spending cuts -- and for lower taxes on the highest earners. Behind closed doors many of them acknowledge that they are willing to consider some "revenue enhancements" -- on the struggling middle class.
Apparently they, and their backers, have forgotten that the wealthy have a patriotic duty to pay their fair share of taxes.
Caught in a trap
Three Senators on the Super Committee just wrote an editorial for the conservative Wall Street Journal entitled "Together We Can Beat the Deficit," that sounds a false alarm about a urgent "deficit problem" -- that doesn't exist.
These misguided Senators even cite the downgrade of U.S. debt by the discredited rating "agency" Standard & Poor's as if it were a legitimate assessment by a knowledgeable organization, ignoring the recent reaffirmation of of U.S. creditworthiness by S&P's main competitor, Moody's. Their editorial reaffirms the misguided mission of their committee, with only the thinnest rhetorical nod in the direction of jobs and growth.
And they're the Committee's Senate Democrats.
Sens. John Kerry, Patty Murray, and Max Baucus wrote that "the shockwaves that roiled financial markets after the downgrade was a condemnation of Congress's inability to address the unsustainable trajectory of our current fiscal policies."
Let's take a lot at the Dow Jones over the last six months:
Remember when all the pundits and politicians were bemoaning the fact that "Washington" couldn't "get its act together" and cut spending? That's the period on the leftmost three quarters of the graph -- the one where the curve goes up. Remember when everybody started saying that maybe they really were going to get their act together and do a deal? That where it goes down.
The vertical black line is when S&P issued its downgrade, on August 5. Does it look like that pronouncement sent "shockwaves that roiled financial markets"? Actually, they went up. The lowest point on this chart, represented by the right-hand dot, was on July 31/August 1. That's when Washington announced its big spending-cut deal.
It's plain that the markets hate austerity economics and couldn't care less about the downgrade. As for investor confidence, Treasury bonds are doing just fine, thank you very much. (Or is that thankyouverymuch?)
Why wouldn't the markets hate austerity plans? They've been a disaster in Europe, as Robert Reich explains. The Super Committee's been charged with making cuts that would affect the next decade's government spending. But government debt during that period is by no means a serious problem, as Dean Baker and James Kwak have documented.
So we'll ask again: the political obsession with government debt?
3.5 Billion Lobbying Dollars Can't Be Wrong
Kerry, Murray, and Baucus claim that "Standard & Poor's downgrade of America's credit rating was an unprecedented wake-up call for those who have for too long acted as if overheated rhetoric and dysfunction in Washington has no consequences for Main Street and working families."
Simply put, that's nonsense. The downgrade has had no effect on Main Street or working families. Why does Washington have such an irrational -- and bipartisan -- fixation on spending cuts? Maybe it's because lobbying firms spent more than $3.5 billion in 2010 and are probably spending even more this year. The largest corporations benefit from reduced government spending, which eases pressure to raise their tax rates and close loopholes. It reduces the political pressure to raise taxes on their overpaid senior executives, too.
"Too big to fail" banks are now bigger than ever, and nearly 40% of corporate profits go to the non-productive financial sector. So cuts in government spending don't interfere with their productivity, and a stagnant domestic economy doesn't need to interfere with their profits.
"Don't procrastinate," says the Elvis song, "Don't articulate." It's good to hear all the talk about jobs, but for tens of millions of unemployed or underemployed Americans, that's all it is: talk. "It's getting late, and I'm getting upset waiting around."
Promised Land
The president is scheduled to announce his jobs policy after Labor Day. But he has also said that he will proposed a budget-cutting proposal that goes well beyond the cuts the Super Committee is charged with finding, $4 trillion rather than a total of $2.5 trillion under the recent deal. Unless that's an 11th-dimensional chess move designed to free up $1.5 trillion in job programs, which seems unlikely, he's making a tragic mistake. (And even if it is, he's encouraging the wrong-headed economic fixation on debts that got us in this mess in the first place.)
What would a rational economic plan look like? It would first invest in a strong short-term program to create jobs and economic growth. It would address the systemic problems in our health economy, problems which threaten to bring a crushing cost burden on both public and private budgets in the next fifty years. That means reigning in the for-profit health sector.
A smart plan would also provide massive relief to American homeowners, many of whom were hoodwinked by their banks into acquiring three-quarters of a trillion dollars in total debt for nonexistent real estate value. Eliot Spitzer has some excellent ideas for how to go about it.*
Bachmann led a crowd in singing the Elvis hit, "Promised Land." That's the song where people "won't let a poor boy down." Any rational and humane economic program needs to protect services for lower-income Americans, who will immediately spend any assistance given to them. That will stimulate the economy, too.
Washington needs to drop its fixation on premature and misguided spending cuts. Until it does, Americans gazing at the White House and the Capitol Dome will be forced to conclude that common sense -- like Elvis -- has left the building.
* I do have one quibble with the Spitzer piece, and that's the idea of appointing GE CEO Jeff Immelt as a jobs czar. GE shipped 13,000 to India and another 5,000 to Hungary, Mexico, or China. On the other hand, the GE jobs that have stayed in the US are unionized and have excellent benefits. That's good, but I suspect their are better potential job czars out there.
Follow Richard (RJ) Eskow on Twitter: www.twitter.com/rjeskow
http://www.guardian.co.uk/commentisfree/cifamerica/2010/mar/03/chile-earthquake
In many ways, the U.S. is, already, a third world kleptocracy.
http://en.wikipedia.org/wiki/List_of_countries_by_income_equality
http://www.photius.com/rankings/healthranks.html
That's the real measure of "American Exceptionalism."
http://www.cio.com/article/688079/Outsourced_and_Fired_IT_Workers_Fight_Back?page=4&taxonomyId=3123
Consider that ACS-Xerox is the company to whom many government agencies, including the IRS, outsources their work. And, through them, to India.
I'll bet most people don't know that the U.S. Government is outsourcing its work to India and China.
They don't actually believe that.
Executives of multi-national corporations, and extreme rich do not see themselves as U.S. citizens.
Their children don't serve in the military, they have no "skin in the game."
They simply get benefits of being American for themselves and their companies.
And, for it, they pay 3/7ths what working people do.
Washington is a corrupted corporatist kleptocracy for plutocrats.
Washington politicians are totally owned by corporate executives and the very rich.
HaaaHaaaHaaaaaaaa!!
Is that enough action!
Well I am sick & tired of waiting on them to learn, we need to move on.
Stop wasting time on the Republicans and the staged news shows, we need to get serious.
The rest of us know better, now take the lead and drive forward.
I didn't see the Friedman connection on my quick read here, but you are dead wrong.
Google up ""A Political and Monetary Framework for Economic Stability"" by Friedman.
In it Friedman endorses the monetary system adjustment proposed by Henry Simons, Irving Fisher, Frank Knight and others as The Chicago Plan for Monetary Reform.
That is EXACTLY what is needed today.
It entered the Congressional hopper as the Monetary Control Act of 1934.
And Friedman supported it, despite its progressive roots.
Read Friedman's "A Proposal for Monetary reform", in which his advocacy for government-controlled annual limitations in the growth of the money supply would have PREVENTED WHOLESALE the financial booms of the 90s and the 00s that resulted in (is resulting in) the present crisis.
There were two Milton Friedman's.
Modern day neo-libs forget and ignore Friedman's correct grasp on the need for an honest and stable money system as the level playing field for saving capitalism.
The works of Simons, Fisher and other progressive economists is again in the Congressional hopper, thanks to the most progressive Congressman on the hill.
Read Kucinich's revolutionary proposal here:
http://kucinich.house.gov/UploadedFiles/NEED_ACT.pdf
And know, grudgingly, that it mirrors in almost every respect Friedman's monetary framework.
For the Money System Common
over the last year....because of speculators, because there certainly
is not a 30%+ increase in demand, or loss of production.
It affects the middle class the most, and if we open the
STRATEGIC RESERVES more we will see it drop,
and the economy pick up a little within only a few weeks.
Call the WH and Congress, demand it Now !
Ah, now here we have a slight flaw in your thinking. Near as I can tell your premise is based on the fact that America has a printing press at the Federal Reserve with which it can monetize the US debt when budget deficits continue their exponential spiral upwards. Now I am sitting here thinking, what if I were a Chinese/Russian central banker and creditor to the US and RJ Eskow just told me that the US deserves to keep it's AAA rating because... it has a printing press.
Maybe I'd be thinking of something like this: "...China and Russia agreed late last year to begin trading with one another in their own currencies, not the US Dollar."
http://www.gold-eagle.com/editorials_08/summers050411.html
It is also stupid to think that we will be able to borrow for decades to come as well. The world is already making decisions that are downgrading our financial importance in the world, and it would be better if we start easing into less available credit for our government in the future rather than waiting till we hit an actual catastrophic failure. We don't need to cut everything, but you have to admit that some things like a stealth fighter fleet for fighting our nomadic enemies on goat trails might not be that important.
Keynesian economics are soooo out of date, daar-ling. Austerity economics are de rigueur. So modern and fashionable. It's the latest fad and everybody is doing it. That fact that they don't work, haven't worked and won't is sooo beside the point! It's just all the rage. After all being economically au courant is all that matters.
More importantly, you must address the increasing income disparity. Don't get me wrong, I am NOT a fan of our current tax system. Unfortunately, having the ability to only fix one system leaves the country with limited options and a flat income tax solution will not and cannot bring true taxation "fairness." Look at it this way. If you have two glasses and one is half full and the other is completely full and you pour out the same % from both glass, you get to the bottom of half full glass much faster than the completely full glass. Who then has the larger burden?
The fact that incomes haven't kept up with cost of living has nothing to do with taxes and trying to use taxes as a way to compensate totally avoids the real issue. The whole idea of using withholding to pay for Social Security is a total mess.
Ideally in a fair tax system the current FICA withholding would be factored into the tax rate that had to be paid, this would make everyone pay FICA as a percentage of the tax they pay on all income (including cap gains), and it would equalize the pay-in since you could get rid of the yearly cap on how much a person has to pay in.
[continued]
I get what you're saying about income disparity but that's just a fact of life, some people are going to make more money than others and when they do they keep more of that money, they pass it down to their children, who pass it down to their children, etc... The issue isn't that there isn't so much that there's an income disparity, unless you're one of the jealous types, the issue is that income pooling at the top warps the system for everyone else and that's what really needs to be fixed. Punitively taxing the rich or putting a hard limit on wealth, as some extremist HPers have suggested, is not the solution. I don't know what the solution is but that isn't it.
It's one thing to respect private property, see that low taxes generally
help the economy, but another to ignore that since Reagan, if not
before, we have had Super Capitalism !
It's mainly about the big guys, help them out and let a few
pennies trickle down, maybe finally petering out in the
upper middle class, with Nothing for the rest.
Anyone can see that as the Super Rich get even more so
the economy has become warped. At least Clinton got
it going and helped pretty much everyone, even those
paying a little more taxes. Since Bush 80% of us
are WORSE off.
And yes, right wing war's do have to be paid for, despite
GOP Dick Cheney saying DEBT DOES NOT MATTER !! [ ???]
So we need Shared Sacrifice, because as it is the
Rich will have few to sell to pretty soon. Warren Buffett
is right, a balanced approach makes sense for everyone.
This is what Germany is doing, and their record is better
than our's.
The warping of the economy is a problem, however even if we did a start from zero situation, wiping out all personal wealth above a certain amount, and distributing it to equalize everyone up to the even point, it wouldn't work. Those who had the wealth have the skills, talent, and connections to acquire wealth again, and even those who were born into wealth could leverage their connections to end up at least above the average.
Treating the situation like everyone should be equal and everything is fair is a fallacy. Some people are going to do better than others, others will get lucky and will be born into wealth and they and their children will have a leg up because of it. Everyone (except for the wealthy, Buffett excepted) is looking for a solution but there may not be one.
Fox, Gannett, etc. to brain wash us on the absurd notion
practically 24/7.
What the GOP and rich really want is Socialism, for THEM !
And of course for us to go on fighting their war's, partly
to distract us, partly for more ill gotten gains.