Sunday, September 09, 2007

"Polishing a turd" --or How the GOP Spins Bush's Disastrous Economic Policies

Bush's economic vampires alone have benefited from a war of endless death and carnage. In January George W. Bush deigned to acknowledge what the rest of us have known for years --the growing gap between rich and poor in America. America's GOP had always denied, ignored or excused the verifiable fact that the rich get richer and the poor get poorer. It is understandable that the GOP would do this. Inequalities are historically worse under GOP regimes going back, at least, to Herbert Hoover.

Bushies and Reagan-heads had embraced a failed theory called trickle down theory or supply side economics, not because it was true but because it made them feel good about themselves. Briefly, trickle down theory is the absurd notion that by shifting the proportionate tax burden to working class families while giving a tiny elite whopping tax cuts, the increase in investment capital will eventually increase and trickle back down. I am still waiting. Wealth has never trickled down in America. It invariably trickles up --by design.

Why not "leave" that capital where it is working, supporting small business, hiring people and putting food on tables? Unfair tax cuts --GOP tax cuts favoring only the rich --have never trickled down. It is no coincidence that when the US was most egalitarian it was also most productive. The US led the world in numerous areas.

That's ancient history.

To be fair, trickle down theory might have worked to a limited degree but only if the US were a "closed economy", if the US did not import goods from abroad. If only US produced goods were purchased, an inequitable tax cut might, indeed, trickle down to those workers employed to make those goods. But that is not the world Ronald Reagan and George Bush created. We have what is euphemistically called "globalization" amid Ronald Reagan's orgy of union-busting, offshore tax havens and outsourcing, to blame for the fact that the US imports most of its automobiles, appliances, and electronic goods --items that had been the staple of the US economic engine. Compounding the tragedy, Ronald Reagan slashed taxes for millionaires and everyone else got poor. The US now pulls up the rear, behind China, Japan, Europe and much of the world. Everything from jeans to binoculars now come from China, IT is outsourced to India, and I see few Americans driving anything but Japanese cars.

Given this hole dug over more than twenty years, I am as outraged as I am unimpressed with the crumbs now thrown the rest of us by this profligate administration, this profligate, arrogant party.
Meanwhile, the nation’s official poverty rate declined for the first time this decade, from 12.6 percent in 2005 to 12.3 percent in 2006. There were 36.5 million people in poverty in 2006, not statistically different from 2005. The number of people without health insurance coverage rose from 44.8 million (15.3 percent) in 2005 to 47 million (15.8 percent) in 2006.

--US Census Bureau Release, AUG. 28, 2007

Capital "trickling up" to Bush's base is money lost to productive investment, lost to small business, lost to consumers who might have spent it in ways that would have created jobs here in the US.

It has never been proven or supported that the increased wealth of those benefiting most from tax cuts have trickled down in any way whatsoever. There is no data at BEA or the Bureau of Labor Statistics to support the insane idea that tax cuts have ever in any way created more job or trickled down to benefit working, productive people. The reverse is true. The transfer of wealth, since Reagan's infamous "tax cut" of 1982, has been up and up to a tiny elite. As this elite grows richer, the GOP rewards the base by excluding them entirely from some forms of taxation.

For example, Senate Republicans have made ending the estate tax their number one priority. Supply-side economics has become the GOP's raison d'etre, a defining issue above even Iraq. Click the image for a larger, readable version.

Being wrong has never stopped the GOP. Party faithful believe that if the right wing noise machine repeats something often enough and loudly enough, many will begin to think it true. The GOP, meanwhile, trots out a tired, old labeling tactic. With a classic strawman, they label critics "liberals" or "commies" favoring the re-distribution of income. In fact, everyone favors the re-distribution of income and every government --right or left --does it! The GOP, especially, embraces those re-distributions of income which transfer wealth and income from middle and poorer families up to an increasingly tiny elite, the GOP base. This results in a less efficient economy, a fact that is of no concern to GOP mainstays.

Indeed, I favor re-distributing the re-distribution. I support un-doing every stupid thing ever done by the GOP. I favor a more efficient and egalitarian society that might have resulted had the GOP not robbed the poor to give it to the extremely wealthy who did not need it and have not used it wisely.

How did Reagan get away with it? It was an age of disillusionment and Iran-inflicted humiliation. Americas were suffering low self-esteem following the seizure of the US embassy in Iran and a failed helicopter rescue attempt in a desert sandstorm. Pat Buchanan's speech to the GOP National Convention in Houston in 1992 was designed to pluck up a party embarrassed by back to back scandals --BCCI, the Savings and Loan Debacle and Iran/Contra. The 1992 convention was a right wing circle jerk, remembered for a phrase about Ronald Reagan that I heard from the floor: "...he made us feel good about ourselves". But a two year recession, the effects of which are still with us, is a very high price to pay for a temporary "feel good", about which Larry Craig and Bush's buddy, Jeff Gannon, may speak from experience. Media whore was a growth profession.

The re-distribution of income via GOP tax cuts is wasteful and inefficient. This nation's elite is an unproductive, economic vampire, living upon investments which, in themselves, produce absolutely nothing. If tax cuts had stimulated the economy, they would have been followed by increases in jobs. That has never happened. Reagan's tax cut of 1982, for example, was followed by a recession of some two years, the worst since Herbert Hoover's Great Depression. If tax cuts had worked as Reagan-heads predicted, more people would have gone to work. Instead --jobs decreased. Unemployment rose. People lost homes and slept in tents. Wealth did not trickle down. Blinded by the right, the GOP saw no people of any color but a whiter shade of pale.

Income inequality is real and getting worse. The gap between rich and poor had grown since the 1970s and more so since the wake up call --Ronald Reagan's disastrous tax cut of 1982. It triggered the upward trend of rising inequities that did not abate until well into Bill Clinton's second term. It was an all too brief respite. If working people do not benefit, who does? The rich, of course. The chart is a picture of the rich, getting richer.

The GOP will tell you that rich folk provide jobs. That conveniently leaves out the other side of the equation. It is the poor who make the rich, rich. The rich get rich and stay that way by paying labor less than the economic value of the labor performed. The difference is "wealth". This is the so-called "labor theory of value", an economic foundation subscribed to by every serious economist from Karl Marx to Milton Friedman, from Adam Smith to John Kenneth Galbraith.

Wealth is not created when a rich guy hires and/or exploits a laborer. Wealth is, rather, created in the act of work. Once wealth is created, it does not trickle down, it trickles up! A ditch digger is paid because the ditch he creates has economic value, utility, to someone who wishes to divert water to crops, for example. The economic value of the ditch exceeds the amount paid for its digging or it does not get dug!

Net debtor nations are not global economic power houses and it is unseemly that the US should continue to behave as if it has not capitulated its position to China and India et al. Globalization and trickle down theory have proven to be the one-two punch that finished off the US as world economic power house. Under the "leadership" of an elite-backed GOP, the US cannot feed its populace nor can it pay anyone but the privileged enough to live moderately well.

According to the Congressional Budget Office, the wealthiest 20 percent of households accounted for 45.4 percent of total U.S. income in 1979, but claimed 53.5 percent in 2004. Households in the bottom fifth dropped from 5.8 to 4.1 percent over the same period.

"There is some good news", Bush says. "Most of the inequality reflects an increase in returns to 'investing in skills.'" This is the modern, moral equivalent of "let them eat cake." For the victims of supply side economics, "investing" is a luxury, something that is done with disposable income. Below a certain level, no income is disposable. The GOP, like flat taxers, have never understood this. Worse -they don't care and don't want to understand.

It is no coincidence that GOP economic policies seem always to lead inexorably to foreign adventures. War is a racket fought by the masses for those who benefit most from GOP tax cuts, "investment incentives" and other GOP pork designed to pay off the loyal base of privileged elites, big corporations, the Military/Industrial Complex and venal politicians. War is just such a racket. The only beneficiary of Bush's quagmire in Iraq are the no-bid contractors like Halliburton and Blackwater. They are financed by America's working poor and middle classes via Reaganomics and Bush tax cuts. These are the people who pay for the war not just out of their pockets and checkbooks but with their lives, their jobs, their homes, their retirement dreams, and their access to health care at home.

By contrast, Bush's base —the nation's elite, his corporate sponsors, and the so-called defense industry —have paid nothing, risked nothing! These are pigs who feed at the trough. The upper one percent of the population has gotten several tax cuts while the big oil companies report record profits rising concurrently with higher prices at the pump.

Just two days after 9/11, I learned from Congressional staffers that Republicans on Capitol Hill were already exploiting the atrocity, trying to use it to push through tax cuts for corporations and the wealthy. ... We now know that from the very beginning, the Bush administration and its allies in Congress saw the terrorist threat not as a problem to be solved, but as a political opportunity to be exploited. The story of the latest terror plot makes the administration’s fecklessness and cynicism on terrorism clearer than ever.

Hoping for Fear, by Paul Krugman, Using Fear Commentary, NY Times
Low and middle income families have lost ground since Ronald Reagan's infamous tax cut of 1982, save for a brief respite in Bill Clinton's second term. Only persons of retirement age or those in the very highest income brackets made gains under the dictatorship of the illegitimate GOP government. The Census Bureau called "unprecedented" the increase in poverty for working American households.
The new Census figures are disappointing for the fifth year of an economic recovery -- showing a significant decline in poverty for people over 65 but no significant decline in poverty for children or adults aged 18 to 64, and only a modest improvement in median income. In 2006, the poverty rate remained higher, and median income for non-elderly households remained $1,300 lower, than in 2001, when the last recession hit bottom. It is virtually unprecedented for poverty to be higher and the income of working-age households lower in the fifth year of a recovery than in the last year of the previous recession.

--New Census Bureau Data on Income and Health Insurance, Robert Greenstein, Executive Director, Center on Budget and Policy Priorities

In the same report: "...the number of Americans without health insurance increased 2.2 million in 2006". The number of uninsured children now exceeds 600,000. Recent progress in this area stalled in 2005, reversed in 2006 --the year Bush cut funding for State Children’s Health Insurance Program. This is an ongoing story and the worst is yet to come.
This is particularly noteworthy because the President has vowed to veto legislation that the House and Senate passed (in different versions) that would resume progress in this area and shrink the number of uninsured children by 3 to 4 million. In addition, on August 17, the Administration unveiled a controversial new policy that would force many states to cut back their SCHIP programs, forcing up to several hundred thousand more children into the ranks of the uninsured. Today’s sobering data on the rising number of uninsured children should prompt the President to rethink his positions on children’s health insurance.

--New Census Bureau Data on Income and Health Insurance, Robert Greenstein, Executive Director, Center on Budget and Policy Priorities

Had Bush hoped to pre-empt Democrats and "liberal economists" on their home turf? Can Bush hope to outflank Democrats as long as he is owned by the privileged elite he calls his "base"? As long as "supply siders" continue to spout absurdities, there is little chance of that.

"The term 'income inequality' is a bit misleading because it suggests in a somewhat pejorative way that the rich are getting richer at the expense of the poor..."

-Edward Lazear, Stanford University labor economist, Bush Chairman of Council of Economic Advisers, as quoted by WSJ.

But that is precisely what has happened. With some help from the BEA and Brookings Institution, I can prove it. At the outset, Brookings states that poverty is "less responsive to economic growth". That's a polite, bureaucratic way of saying that wealth does not "trickle down". As the economy grows the poor are left behind.
Headline number one, poverty is becoming less responsive to economic growth. The interest may not be in year-over-year changes, but that is exactly why the news started looking at trends in poverty. . . .The bottom line here is that the economic expansions we have been having have trickled down less well to use Ronald Reagan's phrases. They are not as equalizing as the 1960s expansion when incomes and earnings among the bottom end of the population went up just as fast and in some years faster than at the top end of the income distribution. There are many, many complex stories as to why that is happening which I will not get into here, but we could go into questions and answers if people are interested. So, headline number one, poverty is simply less responsive to the macroeconomy.

Headline number two. Ron showed you the numbers in child poverty which remain stubbornly high: about one-third of black children are poor, about 10 percent of white children are poor, about 27 percent of Hispanic children are poor. The numbers have fallen a little this year. They are high and they are not falling very fast. What's the headline? The headline is elderly poverty is actually at an all-time low. If you look at poverty among people 65 and over, we are at the lowest that has ever been recorded since we started recording poverty statistics in 1959, at 9.4 percent. ....

Headline number three, most Americans faced declining earnings last year, and that is actually also quite stunning. Look at what happened to GDP. Look at what happened to unemployment. GDP was up, unemployment was down, and earnings actually declined at the median and they declined even faster for some groups below the median.

--Poverty and Income, The Brookings Institution

The only good news for Bush is that the nation will have become so inured to his incompetence, his disasters of epic, near Biblical proportions in Iraq, that no one will heed the run o'the mill bad news like kids starving for lack of parents, jobs, or homes. World War III will have relegated the hell Bush has made of every day life to the back pages. And yet another damning report.
The country experienced relatively broad-based wage growth during the latter part of the 1990's, but this growth ended with the 2001 economic downturn. Growth in real wages for low- and moderate-income families began to slow, and by 2003 wages began to decline and have not picked up in real terms. The economic recovery after the recession, one of the weakest recoveries on record, has not been diverse enough to generate the kind of income gains among low- and middle-income families seen over the last decade.

-Income Inequality Has Intensified Under Bush, OMB Watch

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