Thursday, January 29, 2009

On the brink of a great depression, the GOP is still lying its ass off

There are two kinds of Republicans:
  • the rank and file stupid who don't know any better;
  • the evil bastards up top who know better and don't give a crap!
Senate goppers oppose what may be a last chance to save the US from the Bush/Reagan legacy of idiocy. GOP opposition to Obama's stimulus bill has lambasted a 'debt' that they say will be inherited by future generations.

Pinch me!

I did not hear those arguments when Ronald Reagan tripled the national debt and doubled the Federal Bureaucracy. I did not hear those arguments when Reagan's tax cut was followed quickly by a depression of some two years --the worst, longest and deepest since Herbert Hoover's Great Depression of 1929.

I did not hear a peep of protest from gops when, more recently, George W. Bush cut taxes for his increasingly tiny elite of support even as he ran up the deficits like a binge drinker, leaving even Ronald Reagan in the shade. Oh...I get it! It's bone headed if Democrats do it! But it is 'sound fiscal policy' if the GOP does it.

Bollocks!

Here's the difference. GOP deficits result from tax cuts from which only the rich benefit. Tax cuts do not work for the GOP because GOP tax cuts for the rich do not 'trickle down'. 'Trickle down' tax cuts did not work for Reagan. They did not work for Bush. The record is with Obama. Every Democratic President since WWII (or even much longer) has outperformed EVERY GOP President on every issue having to do with the economy. Here's why: the GOP believes that welfare for the rich will 'trickle down' but, in fact, it never does and never has. GOP tax cuts wind up offshore, in numbered accounts, tax havens and/or tax dodges. GOP tax cuts are --in practice --payoffs if not outright bribes for support of GOP candidates. The GOP is worse than the mob. The mob never had at its disposal nukes, ICBMs or cruise missiles.

The GOP fails --as a party --because GOP policies never put money into the hands of those who would actually spend it and, thus, create jobs. That wealth trickles up --never, ever down --is a demonstrable fact. A working person's tax cut will find its way back into the economy with purchases. Purchases added up equals 'demand'. It is 'demand' that drives the economy --not the idiotic 'stimuli' given to robber barons and offshore investors.

The GOP would rape a nation that is now poised to slide off into an economic black hole, in fact, a world wide depression that has the potential of making Hoover's GOP debacle look like a walk in the park. What Americans call the 'Great Depression' is often called the 'Great Contraction' because economies, in these times, literally 'contracts'. The US economy is currently 'contracting' at a rate of six percent per year, alarming and catastrophic if it is not restrained and soon.

Congressional goppers, however, propose to accelerate the decline with another impotent 'stimulus' benefiting only those who created the crisis in the first place --supply-siders, and slick talking get-rich-quick artists. It was this 'right wing' that must bear most of the blame for the Great Depression of 1929. Wealth did not trickle down then. It will not trickle down now. When there is no demand there is no economic growth. There is no demand when those who might have purchased are broke, unemployed or, worse, desperate. But facts mean nothing to goppers and there is little to be gained and much time to be lost by 'negotiating' with them.
What President Obama will soon discover (and I suspect is already well aware) is that negotiating with Republicans in Congress is a pointless endeavor unless you absolutely need their votes. This is particularly true of Republicans in the House of Representatives who, as I've written several times before, are a whole different breed of crazy. The last two election cycles have purged the House GOP of virtually all members who represent anything but the safest, reddest districts in the country. Those who remain are either unpersuadable ideologues or shameless partisans who can be counted on to act in bad faith at all times.

They may string you along for a while, but at the end of the day, these folks are not going to support any Democratic initiatives in significant numbers. I suspect that Obama (and Rahm Emmanuel especially) know this and are just trying to go through the motions now so they can later claim that they made a good faith effort at bipartisanship. Many are suggesting that is yet another example of Lucy pulling the football away from Charlie Brown at the last second. That may be true, but I suspect that the Obama team is knowingly playing that role. After all, everyone likes Charlie Brown and no one likes Lucy. And in this case, Charlie has his own holder as backup.

--Anonymous Liberal, Negotiating With Republicans
Democrats must be prepared to go to mat. They must challenge the GOP to put up or shut up! They must be challenged to dare oppose a stimulus that will never benefit working folk or create jobs. The GOP must be made to pay the price of lies and idiocy! Go ahead! Watch the economy collapse. Prove Karl Marx to have been right! Die of your own idiocy and good riddance to your sorry ass! I would say that were I not concerned about the fate of millions, eventually billions who will be ruined by GOP idiocy and systemic criminality.

Deja Vu All Over Again

The causes of the 'Great Depression' are many and in almost every instance analogies may be made to the current crisis. For example, the costs and debts incurred by World War I most certainly had catastrophic effects not unlike the huge debt the US has run up fighting an aggressive war in Iraq.

A world wide conspiracy of bankers was blamed for the Great Depression, often called the 'Great Contraction'. Certainly, the big banks and especially the FED in the US, control the currencies. The FED, for example, simply creates money, a 'loan' to the US sufficient to cover whatever level of spending that the government is inclined to indulge. No new currency is run off the press. No new stores of gold are mined or discovered.

At present, the US economy is contracting at an alarming rate of some six percent (projected) per year. This occurs at a time when the distribution of wealth is worse than that of the Great Depression when, in 1929, the richest 1 percent owned 40 percent of the nation's wealth. Today, as a result of GOP 'trickle down' economics, the richest 1 percent own more than 90 percent of the rest of us combined.

The worst is yet to come. Foreclosures are rising for a number reasons. Because of widespread job losses, millions cannot make their mortgage payments. It is heard to see how an utter collapse can be avoided unless some real purchasing power can be put into the hands of those who will spend it.

The lack of spending is a root cause of depressions. By robbing the spending classes, i.e, the middle and lower incomes of spending power, the GOP elites create recessions and, stupidly, cut off their own noses. The era leading up to the crash is remembered for the celebration and practice of unbridled 'laissez faire' or worse --what is now called 'supply side economics'. Laissez-faire is simplistically defined as 'economic freedom' but in practice it amounts to 'license' for the upper classes. 'Freedom' and 'license' must never be confused. 'License' is another set of rules for the rich. But if you are poor, 'freedom's just another word for nothing left to lose'! Apologies to Bobby Magee.

Supply-side economics is not a 'hands off' policy at all. It is, in fact, an active, deliberate distribution of wealth upward to an increasingly tiny elite. It is pseudo-economics touted to justify big tax breaks for the upper ten percent of the nation's income recipients and wealth-holders. Reagan's own budget director, David Stockman, called 'supply-side economics', a trojan horse.

If the US should slide off into another great depression, it will be because consumers of all classes and primarily the middle and lower classes do not have money to spend. Another great depression will result for two basic reasons:
  • the investor class has put their tax cut windfalls offshore causing net declines --not increases --in jobs;
  • The productive (working) class is taxed disproportionately effectively robbing them of the purchasing power which alone drives the economy.
It is easy to understand, then, why economies contract.
  • GOP supply-siders have a stake in promoting the simplistic 'thoery' that the great 'Stock Market Crash of 1929' was the primary cause of the Great Depression. As class warfare propaganda, this myth is matched only by 'supply side (trickle down) economics. Indeed, many believe that the crash of Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, there were many cases for the Great Depression and the contraction of the money supply among those who were most likely to spend is at the very top, perhaps the root cause. Nevertheless, the crash is significant. Stockholders lost more than $40 billion dollars within two months of the crash. The market had regained some of its losses by the end of 1930, but it was not enough to prevent the nation from entering what is called the Great Depression.
  • Bank Failures

  • More significant, is the fact that millions lost their 'savings'. People save to spend and it is spending that might have kept a viable economy afloat. Over 9,000 banks failed at a time when bank deposits were uninsured. Surviving banks stopped making new loans, reducing total amount of money in circulation. It was, indeed, a 'great contraction'! As a result of the crash, fears, and bad news, millions of all classes just stopped buyng, leading to sharp reductions in production and thus jobs. As unemployment increased, people fell behind in their installment payments; homes and items were repossessed. Inventories increased, sat idle, and could not be sold. Meanwhile, the unemployment rate rose above 25%. The jobless are, of course, unable at pre-depression levels if at all.

  • American Economic Policy with Europe
  • As businesses failed, it was hoped that the Hawley-Smoot Tariff of 1930 would protect American companies. The act charged a high tax for imports causing a reduction in US-foreign trade.

  • Drought Conditions.
  • While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. This was the topic of John Steinbeck's The Grapes of Wrath
GOP policies are clearly responsible for the income and wealth disparities that are at the root of every GOP recession/depression since 1900. Ronald Reagan's GOP tax cut of 1982 is the easiest target. Several points should be made about this improvident move. One --if 'tax cuts', the GOP panacea for every evil, were in any way effective against depression, then why did a depression of two years follow the Reagan tax cut?

The Reagan depression --at the time --was the deepest and longest since the Great Depression. I propose that GOP tax cuts neither prevent nor cure 'depressions' because, contrary to what you are told, GOP tax cuts effectively contract the economy. As have seen most recently, George W. Bush's 'bailouts' did not increase the supply of spendable money. The elites and the banking establishment simply squirreled the wind fall away in offshore accounts, tax havens, and other dodges about which they are expert. They did not increase the amount of money in circulation. They did not stimulate the economy with either purchases or new, 'job creating' investments. They did not increase purchases and thus the economy. They did not inspire the purchase of new homes. They did not increase the level of consumer spending. Rather --the economy, as a whole, is contracting at a rate of six percent per year.

The current crisis spotlights many weakness in a 'GOP economy' created by the GOP domination of US policies since 1980, most prominently, the 'balance of trade deficit'. Also called the 'current account', it measures the value of US imports vis a vis its exports. This ratio reflects the financial health of a nation. We've been 'sick' and vulnerable for quite a while.

According to the CIA, the US 'current account' balance puts the US at the very bottom of a list of nations with a NEGATIVE balance of $-731,200,000,000. That's NEGATIVE 731 BILLION dollars. China tops the list in the black with $ 372 billion. The US position mirrors that of China but more so! The steady decline of the value of the 'dollar' is evidence that China et al have been 'dumping' dollars perhaps over the last eight years. [See: Rank Order - Current Account Balance.]

This is not the first time the US has turned up at the bottom of the CIAs list of 'net debtor nations'. The difference now is the exponential rate at which the national debt is increasing. The current crisis is evidence that --because of GOP policies specifically --the US has crossed the event horizon into an economic black hole from which there is now no pulling back.
Yet this "indebtedness" actually results from a massive vote of confidence in the American economy by foreign investors. Strangely, when a business is actively pursued by willingly investors, it is taken as a sign of strength. When foreigners put their money in American industry, however, there is concern that the U.S. has become a "debtor nation."

--Heritage Foundation
Typical Heritage newspeak of the sort I never encountered in University level 'economics'!! Being a net 'debtor nation' is not a good thing when bad things follow from it, like, say the utter collapse of the dollar. Since Heritage issued its predictable apologia on behalf of Ronald Reagan, the nation has enjoyed but one fiscally responsible administration sandwiched between two incompetent Bushes. Things have changed precipitously.
If the U.S. net investment position continues to turn more negative, prospects increase that the positive U.S. net income receipts will turn negative as U.S. income payments overwhelm U.S. income receipts. In such a case, the U.S. economy will experience a net economic drain as income that could be used to finance new U.S. businesses and investments will be sent abroad to satisfy foreign creditors. Such a drain likely will be small at first relative to the overall size of the CRS-14 10 Weisman, Steven R., A Fear of Foreign Investments. The New York Times, August 21, 2007. economy, but it could grow rapidly if the economy continues to import large amounts of foreign capital.

--CRS Report for Congress, The United States as a Net Debtor Nation: Overview of the International Investment Position [PDF]
GOP strategy is simple and simple-minded: blame everyone but themselves and especially Democrats. The GOP blames Democrats not because the Democratic party is wrong but because they are right and have been demonstrably more successful since WWII. The GOP is critical of the Democratic party because the Democratic party succeeds and because it succeeds, the GOP looks like the incompetent failures and liars that they are!

For example, the GOP demonized Jimmy Carter in a planned effort to deflect attention from the new Augustus --Ronald Reagan. Reagan-heads still claim that Carter was responsible for "horrible inflation" and 20% interest rates. So what? Interest rates would be expected to decline under Ronald Reagan's depression of some two years as interest rates, in fact, decline in every depression. Carter, by contrast, presided over one of the most productive economies since WWII. Two years under Unca Ronnie changed all that and the US has not been the same since.

During Reagan's depression, the GDP declined at a rate of 2.2 percent, the biggest such decline since the Great Depression. Their was a brief respite under Bill Clinto but with the ascension of Geoerge 'Would-be-Caesar' Bush, the pernicious trend would resume as a matter of GOP policy. A failed policy! A policy that has --in fact --NEVER succeeded! Millions lost jobs and homes and with another 'great depression' just around the corner, the GOP will, typically, try to blame the new administration for the failures of George W. Bush --the very worst 'President' in US history.

In any case, it was the Federal Reserve Board that slashed interest rates and expanded the money supply, thus reducing prices. Ronald Reagan had nothing whatsoever to do with it! It was the Fed -- not Reagan, not GOP give-aways to the MIC --who was responsible for the following but short-lived recovery.

Under Carter, people were at work and productive, buying homes and buying cars. They were not leaving their homes under the threat of imminent foreclosure as was the case with Herr Ronald Reagan and, more recently, Herr George W. Bush.

It was no accident that as Reagan waged war on the trade unions, exported jobs and technology, the nation was plunged into his depression of two years --the very worst since Hoover!

Before Reagan, America had a steel industry. After Reagan, it didn't. Before Reagan, America had a viable automotive industry. After Reagan, the US bought its cars from Japan. Before Reagan, small retailers thrived. After Reagan, Wal-Mart began began to put small stores out business. Main street America was at one time very picturesque inspiring artists from Andrew Wyeth to Norman Rockwell. Now --main street is boarded up, abandoned, and photographed for its historical interest.

Let's take a look at the history before it gets re-written:
  • Any Democratic President has presided over greater economic growth and job creation than any Republican President since World War II.
  • When Bush Jr took office, job creation was worst under a Republican, Bush Sr, at 0.6% per year and best under a Democrat, Johnson, at 3.8% per year.
  • Economic growth under President Carter was far greater than under Reagan or Bush Sr. In fact, economic growth in general was greater under Johnson, Kennedy, Carter, and Clinton than under Reagan or Bush. Democrats always outperform a failed party: the GOP!
  • The job creation rate under Clinton was 2.4% significantly higher than Ronald Reagan's 2.1% per year.
  • The "top performing Presidents" by this standard, in order from best down, were Johnson, Carter, Clinton, and Kennedy. The "worst" (in descending order) were Nixon, Reagan, Bush.
  • Half of jobs created under Reagan were in the public sector --some 2 million jobs added to the Federal Bureaucracy. Hadn't he promised to reduce that bureaucracy?
  • Reagan, though promising to reduce government and spending, tripled the national debt and left huge deficits to his successor. Bush Jr's record will be even worse.
  • By contrast, most of the jobs created on Clinton's watch were in the private sector.
  • Put another way: any Democratic President beats any Republican President since World War II.
Everything posted above is based upon official, government stats from the Census Bureau, Bureau of Labor Statistics, CBO, and BEA among others. They are 'official' and irrefutable unless someone wants to make the outlandish case that the Federal Bureaucracy, the numerous agencies which keep these stats, is somehow biased. That argument is absurd in light of the fact that of those 20 years from the election of Ronald Reagan to the stolen election of 2000, Democrats had the Presidency in only eight of them.

Now --let us consign to the dust bin of history the stupid idea that the GOP 'tax cuts' will end recessions, prevent recessions, or cure recessions. They are, rather, the root cause of absurd, obscene banana republic inequalities and disparities. They are the cause --not the cure for recession/depression. Every dollar that is funneled into offshore tax havens is money taken out of circulation, taken out of the economy. The economy is already contracting. A GOP 'stimulus' for the upper class will only increase the contraction and hasten the end.

Ironically, it was the Federal Reserve Act of 1913 that created the Federal Reserve system, in which the 'Fed' would become a lender of 'last resort' thus providing the economy with a one-two punch: stability and liquidity. It doesn't seem to have worked out that way. If the 'Fed' had been functioning as it was intended, then why, in 1930, were large banks permitted to collapse throughout the South and the Midwest. Why were the 'runs on banks' permitted to spread? Why was the 'Fed' out to lunch?
By December, the bank of the United States in New York closed due [to the ] inability to meet depositors' demand for cash. The bank was sound, as evidenced by its ability to pay off depositors 92.5 cents on the dollar when it was liquidated during the worst of the depression. If the Federal Reserve had done its job, the bank would have remained open. The bank's size and official-sounding name frightened depositors all over the country and led to a general run on the banks. By the time it was over, hundreds of banks had failed reducing the money supply by the amount of their deposits.

--The Great Contraction
Hoover’s fiscal policy accelerated the decline. In December 1929, as a means of demonstrating the administration’s faith in the economy, Hoover had reduced all 1929 income tax rates by 1 percent because of the continuing budget surpluses. By 1930 the surplus had turned into a deficit that grew rapidly as the economy contracted. By the end of 1931 Hoover had decided to recommend a large tax increase in an attempt to balance the budget; Congress approved the tax increase in 1932. Personal exemptions were reduced sharply to increase the number of taxpayers, and rates were sharply increased. The lowest marginal rate rose from 1.125 percent to 4.0 percent, and the top marginal rate rose from 25 percent on taxable income in excess of $100,000 to 63 percent on taxable income in excess of $1 million as the rates were made much more progressive. We now understand that such a huge tax increase does not promote recovery during a contraction. By reducing households’ disposable income, it led to a reduction in household spending and a further contraction in economic activity.

--Great Depression, The Concise Dictionary of Economics
  • Herbert Hoover becomes President. Hoover is a staunch individualist
    but not as committed to laissez-faire ideology as Coolidge.
  • More than half of all Americans are living below a minimum subsistence
    level.
  • Annual per-capita income is $750; for farm people, it is only $273.
  • Backlog of business inventories grows three times larger than the year before. Public consumption markedly down.
  • Freight carloads and manufacturing fall.
  • Automobile sales decline by a third in the nine months before the crash.
  • Construction down $2 billion since 1926.
  • Recession begins in August, two months before the stock market crash. During this two month period, production will decline at an annual rate of 20 percent, wholesale prices at 7.5 percent, and personal income at 5 percent.
  • Stock market crash begins October 24. Investors call October 29 "Black Tuesday." Losses for the month will total $16 billion, an astronomical sum in those days.
  • Congress passes Agricultural Marketing Act to support farmers until they can get back on their feet.
  • --Timeline of the Great Depression
Clearly --the FED, the financial community, the big banks, the so-called 'elites' seem to have gotten off the hook. In fact, it is the combination of greed and incompetence that has brought the world to the brink of another great depression.
Let's imagine, for a moment, how different the public debate would be today if it had been unions that had caused the current economic turmoil.

In other words, try to imagine a scenario in which union leaders – not financial managers – were the ones whose reckless behaviour had driven a number of Wall Street firms into bankruptcy and in the process triggered a worldwide recession.

Needless to say, it's heard to imagine a labour leader being appointed to oversee a bailout of unions the way former Goldman Sachs CEO Henry Paulson was put in charge of supervising the $700 billion bailout of his former Wall Street colleagues.

My point is simply to note how odd it is that the financial community has emerged so unscathed, despite its central role in the collapse that has broughtt havoc to the world economy.

Of course, not all members of the financial communityy were involved in Wall Street's wildly irresponsible practices of bundling mortgages into securities and trading credit default swaps. But the financial communityy as a whole, on both sides of the border, certainly pushed heard to put in place an agenda of small government, in which financial markets largely regulated themselves and citizens (particularly high-income investors) would be spared the burden of paying much tax.

--Financial elite have no shame
It has been said that the 'Great Depression' changed the way we thought about economics, the nature of money, banking itself.

Really?

Admittedly, the Keynesian view dominated until the rise of Reaganomics. Richard Nixon famously said: "We all all Keynesians now" though Keynesian economics have not helped any Republican to the degree to which it helped Democratic regimes which are historically stronger than any GOP regime since the Great Depression. Even Nixon ranks among the 'worst performing Presidents' in terms GDP and job growth.

Now we are poised upon the brink of another Great Depression not because we followed Keynes but because we abandoned him for 'Reaganomics'. Stupidly, the GOP has learned nothing.

Those who will not learn are either evil or stupid.

The GOP is both.

It may be bad form and impolite but the fact is --I told you so. If the GOP thinks me impolite, fuck 'em! The following excerpt is from The Existentialist Cowboy, January 18, 2008:
We were warned. In 2005, Treasury Secretary John Snow acknowledged economic growth was limited to a small percentage of Americans. Bush's base? Some things never change. Only a tiny elite experienced what they alone have dubbed the Reagan prosperity. A "prosperity" so limited is not prosperity; it is merely a redistribution of dwindling wealth. If poorer folk lost ground, to whom did wealth trickle? The GOP knows that what it says about economics is wrong. They will say whatever they think they can get you to believe.

A statutory debt limit of $8.184 trillion was reached in mid-February of 2005. The total collapse of the US economy was averted but only because no other country wished to be sucked into the US black hole. The dollar actually retained some value amid fears of a worldwide economic catastrophe.

China had been propping up the dollar so that US consumers could continue buying cheap Chinese crap, primarily via WalMart and other monstrous legacies of Globalization. At the time, US debt was some $8.162 trillion dollars and has only gotten bigger. US credit abroad is strained to breaking or broke. The US credit crisis trickles down to bond markets world wide. No country is too small to remain unaffected. Investors in New Zealand, for example, have this month complained that their interest payments have been suspended, the result of fall-out from the US credit crisis. It would appear that there is no where to run, no where to hide.

--The Existentialist Cowboy, January 18, 2008


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