Monday, March 23, 2009

Why Tax Cuts and Ruinous War Make this Crisis Worse Than the 'Great Depression'

by Len Hart, The Existentialist Cowboy

Democrats have occupied the executive but eight of the last thirty years. The GOP, therefore, owns the decline and fall of both the American republic and its short lived empire. GOP policies are the cause of the collapse made even worse by the calamitous and lost war of aggression in Iraq.

Aggravating the crash are the lasting legacy and the bone-headed policies of Reagan, Bush, and Shrub! We are living the consequences of several major, pernicious trends that began with the inauguration of Ronald Reagan:
  • the rich began to get much, much richer and the poor much, much poorer
  • the labor movement was subverted and all but destroyed;
  • within but a few years the US would 'boast' of the world's largest NEGATIVE 'current account balance';
  • US industries of all types declined or disappeared entirely;
  • acts of terrorism against US interests increased.
All of the above trends reversed but only briefly during the Clinton years, most notably the gaping disparity between filthy rich elites and everyone else. The respite did not last long enough. The administration of the Junior Bush may be thought of as a mere continuation of the decline of the American empire begun under the regimes of Reagan and the senior Bush. Bush Jr will certainly be remembered as a latter-day Nero --insane, self-absorbed, moronic and megalomaniacal. Junior worked to undo the good done by Clinton. It is his only success however dubious and harmful.

A financial collapse is well-underway, thanks to almost thirty years of GOP criminality, insanity, incompetence and greed. But because Americans have not learned the lessons of history, we are now forced to endure a 'crash' that has the potential to be much worse than the depression which followed the crash of 1929. In 1929, the US, at least, had industries that would be resurrected --automotive, steel, mining, construction, and manufacturing of many types.

In Reagan's wake, what is left to fall back on; what is left to be restored? Most of the goods you buy are no longer made in the US. They come from China, Japan, and Taiwan. Programming is done in India. These deals can be traced back to Nixon's famous trip to China and Reagan's subsequent sellouts and betrayals of the both American industry and American labor.

How GOP Tax Cuts Cause Recessions and have Destroyed the US Economy

NOW --about one percent of the nation owns more than about 90 percent of the entire population combined! No accident, this is by GOP/right wing design:
  1. unfair tax cuts which have --in fact --shifted the tax burden to poor and middle class families;
  2. well-timed recessions which benefit only the investor class, providing them with opportunities to buy up cheap stocks, depressed real estate, and 'discounted' loans;
  3. the Military/Industrial complex which wages war for its living and in the process enriches only the big defense contractors.
GOP policies have made of the US a bloated, impotent, ridiculous empire. What do we export but arms and weapons of mass destruction from whom only an increasingly tiny elite have benefited? Americans abroad are hard pressed to glimpse anything of American manufacture because our top two exports are death and destruction. Even worse, Americans are hard pressed to find the result of American industry in America itself. The aisles of Wal-Mart, for example, are lined with Chinese products. The clothing aisles are filled by sweat shops throughout the so-called 'Third World'. If the US is to rebound, what song will it sing for it supper?

It is easy enough to say that if Obama wishes to succeed, he must figure out how to get money into the hands of 'just folk' who will spend the money in ways that will stimulate production. The question is complicated by the fact, that millions are reduced to shopping at Wal-Mart. Expenditures at Wal-Mart have negative effect on the US economy. Even if, as John Maynard Keynes proposed, the government put dollars in mason jars, buried them in a landfill and let people dig them up, it might not help. Chances are those 'bucks' would, likewise, be spent on foreign goods, stimulating foreign economies --not the failing economy of the US. Most monies spent at Wal-Mart wind up in China where they most certainly will not help the US out of the hole it's in. Wal-Mart, China's distribution wing in the US, is the economic Kudzu that ate America!

Efforts to rehabilitate the US economy are hindered by an apparent obsession with big banks. Here's the bad news:

After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.

And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.

It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone.

--Paul Krugman, Financial Policy Despair
The big banks are to the investor classes what Wal-Mart is to bargain shoppers. They facilitate the transfer of American wealth abroad and that is the very source of America's financial downfall. In the fictional 'Bedford Falls' of the motion picture, 'It's a Wonderful Life', for example, monies deposited in George Bailey's 'Building and Loan' were re-invested in Bedford Falls, creating jobs and purchases in Bedford Falls. I doubt that there exist today any locally owned 'Buildings and Loans'.

I suspect that 'Building and Loans' have gone the way of classic black and white films, 78s, 45s and vinyl LPs. They are but shadows and memories of a simpler but better time in which Americans demonstrated the resolve to rebound and rebuild a nation that still belonged to them, a nation that had not yet been sold out to China. Like American jobs, American monies, jobs, and futures are gone with the wind!

Screw the big banks!

It would help if Americans, the media, and the administration of Barack Obama stopped focusing on the 'big banks'. But not before seizing their assets. Creating a responsible financial institution to replace them is not rocket science. It is a task, rather, that must be undertaken by the Obama administration if it is to succeed. Reagan/Bush rich elites do not drive economies; the imminent collapse of our economy is the proof of it. Governments do not drive economies. Big corporations do not drive economies though many board chairs are deluded into believing themselves to be 'captains of industry'.
More than 83 corporations have offshore subsidiaries where their funds are protected in tax havens in the Caymen islands such as: The Bank of America, Citigroup, Morgan Stanley, AIG, JP Morgan Chase, Wells Fargo, and even Pepsi and General Motors who received 13.4 billion have hundreds of millions of dollars in tax havens offshore. All these corporations receive protection from paying the US government their taxes and the loss to the US is into the 100 billion dollars of lost tax revenue.

Senator Carl Levin a democrat from Michigan and Byron Dorgan, Democrat of North Dakota requested the report to be released and are pushing for new laws prohibiting these bailout scam corporations from being tax dodgers while asking for bailouts from the taxpayer.

The Government Accounting Office includes 63 of the 100 largest contractors who receive government contracts also have accounts in tax haven countries.

--Bailout Corporation Tax Havens in Caymen Islands
The bailouts failed because the wrong people got the money. The culprits are to be found in the 'Axis of GOP Moneterists'.
... in 1963, Milton Friedman and Anna J. Schwartz transformed the debate about the Great Depression. That year saw the publication of their now-classic book, A Monetary History of the United States, 1867-1960. The Monetary History, the name by which the book is instantly recognized by any macro economist, examined in great detail the relationship between changes in the national money stock--whether determined by conscious policy or by more impersonal forces such as changes in the banking system--and changes in national income and prices.

--Ben S. Bernanke, The Federal Reserve Board, Money, Gold, and the Great Depression
If Obama were a part of the 'revolution', he would have nationalized the crooks and seized their assets in the name of the people.

The trend in which an increasing tiny elite of about one percent of the total population would end up owning more than the rest of us combined is, perhaps, the number one cause of many for the current economic malaise. Millions of Americans cannot afford to make both the mortgage payment and the food bill, let alone plan for educations or retirement! Indeed! Where DID the money go?

The answer is simple and straight-forward: by way of GOP tax breaks for the rich, the money went straight into the coffers of an increasingly tiny elite, a class of oligarchs that now comprises but one percent of the entire population. This transfer of wealth is, in fact, a 'contraction' of the total money supply --the root cause of economic depression.

Of course, the 'elites' do not shop at Wal-Mart! As every decent American has lost faith in the despotic regime inside China, there is almost no one living outside the US who believes in the 'American' ideal. Bush had absolutely ho moral authority from which he could dictate a 'Pax Americana'. Inside the US, our own 'ideals' were disdainfully repudiated by a would-be emperor. The entire world sees this for what it is: a cruel fraud upon the American people and the world.

The average American HAS NOT benefited from US/China 'trade'.
  • In 1960, the wealth gap between the top 20 percent and the bottom 20 percent of Americans was thirty fold. Four decades later it’s more than seventy-five-fold.
  • Either way -- wealth or income – America is more unequal, economists generally agree, than at any time since the start of the Great Depression…
  • And more unequal than any other developed nation today.

Americans HAVE NOT benefited from the rise of leeches like Wal-Mart. Here’s why:
  • Despite bringing in over $378 billion last year, Wal-Mart repeatedly underpays its American workforce. More than 80 wage & hour lawsuits, including a recently certified class action lawsuit in California, are currently pending against the company. Plus, it faces more than 200 discrimination lawsuits for unfair promotion practices, pay discrepancies and other issues, including the nation’s largest workplace gender discrimination lawsuit. By failing to fairly compensate its employees, Wal-Mart cheats states out of income tax revenues.
  • Wal-Mart’s low wages means store employees have little or no disposable income to spend to stimulate the economy. Think about what even a small raise for Wal-Mart’s 1 million+ workers would mean nationally, or what it would mean to your city or town if everyone at your local Wal-Mart got a raise.
  • Wal-Mart sources the vast majority of its products from countries overseas, meaning most of the cost of a given Wal-Mart product doesn’t go into the U.S. economy. Rather than boosting the U.S. economy, Wal-Mart has played a major role in exporting U.S. manufacturing jobs to countries with low labor and environmental standards. Meanwhile, the company has embraced unions in its Chinese stores and has negotiated with them to raise Chinese salaries. Apparently, what is good enough for China is not good enough here at home.
  • Wal-Mart underfunds its health care plan and cuts corners whenever possible, forcing many of its employees to postpone care, thus decreasing their productivity and increasing the eventual cost of their treatment. In desperation, many of them rely on state-sponsored care and drain yet more funds from American communities. That means when Wal-Mart employees end up in emergency rooms, it’s U.S. taxpayers who end up footing the bill. If Wal-Mart were truly interested in stimulating the economy, it would begin to adequately fund its health care plan and take care of its own Associates.
  • Wal-Mart routinely dodges state and local taxes, meaning money spent at a Wal-Mart store won’t end up in your community. Wal-Mart actively works to challenge property tax assessments and creates complex real estate arrangements to obscure how much taxes the company owes. When Wal-Mart dodges its tax burden, it takes precious revenues away from cities and states to pay for roads, schools and other services. In turn, individual taxpayers are forced to pay more to make up the difference (which takes more money out of their pockets) or get by with less.
--The Quaker Agitator, Why Wal-Mart Does Not Strengthen Our Economy
Monies spent at Wal-Mart winds up in China! Monies thrown at the ruling elite who don't need a 'bailout' winds up in offshore accounts and the purchase of merchandise not produced in the United States. $billions$ are thus exported to be forever lost to the US economy, a loss no less important than $billions$ that are unfortunately spent at Wal-Mart.

How the War on Iraq Continues to Depress the US Economy

It is naively suggested that the 'defense industry'--the MIC --creates jobs and stimulates the economy. The US is left with a morally moribund economy built up around a handful of robber baron corporations like Halliburton, it's subsidiary KBR and, of course, Murder Inc., otherwise called Blackwater USA. What industries are left to America? Answer: industrialized death and destruction!

If you wish to build an entire economy upon death itself, wars of naked aggression, war crimes and outright murder, then this is definitely the way to go. But it is not a recipe upon which a viable, growing economy is based. There is a choice to be made between 'gun's and 'butter'.

The GOP administration of George W. Bush and Darth Cheney learned much from the Nazi collaboration with I.G. Farben, Thyssen, Krupp and America's own Henry Ford, an idiot whose portrait 'graced' Adolph Hitler's office. Indeed! There was money to be made in appalling acts of state sponsored genocide. Money was made by this ilk in Iraq. But it's not the kind of businesses I want to get juicy contracts that are paid by my tax monies. It is not a sustainable economy; it is rather a Faustian bargain in which riches result in the short term but financial collapse and living hells in the longer term.

Like Rome, the US has become a bloated, inefficient empire which produces very little of lasting value. Indeed, the biggest US exports, like those of Rome earlier, are death and destruction via the war business.

The cost of Bush's war on Iraq has surpassed one trillion dollars but there is no evidence of it benefiting the US economy. It is time to drive a stake through the heart of the malicious lie that wars are good for the economy. Only the Military/Industrial complex benefits from war but what is good for the MIC is has been harmful, perhaps, fatal for the country.

The MIC is a drag on the economy, an economic black hole into which is drained the economic and creative resources of the nation. War itself is a Faustian bargain. The hour of midnight is approaching.

The economic benefits of building a tank are temporary. Once built, the tank is a drag, requiring more to upkeep than war booty can justify. It returns absolutely nothing for the investment. In the end, only the military contractors building the tank or maintaining it have benefited and they will have done so at taxpayer (your) expense. On a larger scale, the Pentagon is an economic black hole, having sucked the life blood from the US economy. It should not be surprising, then, that the Pentagon is more akin to organized crime than legitimate enterprise. The 'Pentagon' is a 'gang'.
One of the most pernicious economic myths is the idea that war helps the economy. In reality, war is destructive and it always results in economic retrogression and misery.

The US economy didn’t really recover until 1946, when the immediate postwar period witnessed the dismantling of the command economy in favor of a much more liberalized market economy. Peace brought military demobilization, deregulation, and perhaps most importantly, a seventy-five percent reduction in government spending. This was a genuine peace dividend and it set the stage for America’s legendary post-war economic boom.

--War and Economic Decline
The idea that wars and military spending increases are good for the economy is sold and promoted. In fact, new studies now confirm what I have always believed and what Gore Vidal had stated in his classic: The Decline and Fall of the American Empire.
Nobel Prize-winning economist Joseph Stiglitz has blamed the Iraq war for sending the United States into a recession. On Wednesday, he told a London think tank that the war caused the credit crunch and the housing crisis that are propelling the current economic downturn. Testifying before the Senate's Joint Economic Committee the following day, he said our involvement in Iraq has long been "weakening the American economy" and "a day of reckoning" has finally arrived.

--Is the Economy a Casualty of War?
Now --war critics have the economic data and models proving that military spending 'diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.' This thesis is likewise confirmed in a paper by Thomas E. Woods at:

The obvious lies about the war have been exposed. Not enough attention has been focused on the one of the biggest con jobs of them all ---right up there with WMD.
White House economic adviser Lawrence Lindsey was the exception to the rule, offering an "upper bound" estimate of $100 billion to $200 billion in a September 2002 interview with The Wall Street Journal. That figure raised eyebrows at the time, although Lindsey argued the cost was small, adding, "The successful prosecution of the war would be good for the economy.”

--Cost of Iraq war could surpass $1 trillion
The US has been in a state of near perpetual war since the so-called Spanish-American war made of this nation an empire. But it was, specifically, according to Gore Vidal in The Decline and Fall of the American Empire, the moment at which the US became a net debtor nation that the US empire ceased to be an 'empire'. Americans are led to believe that the US can simply 'war' its way out of economic disaster. In fact, the US has been fighting wars with monies it doesn't have. The Iraq war may finish us off.

For Immediate Release: May 1, 2007

Contact: Lynn Erskine, 202-293-5380 x115

Washington, DC: The Center for Economic and Policy Research released a report today estimating the economic impact of increased US military spending comparable to the spending on the Iraq war. The report, presenting the results of a simulation from the economic forecasting company Global Insight, shows the increased level of military spending leads to fewer jobs and slower economic growth.

For the report, The Economic Impact of the Iraq War and Higher Military Spending, by economist Dean Baker, CEPR commissioned Global Insight to run a simulation with its macmacroeconomic del. Global Insight's model was selected for this analysis because it is a commonly used and widely respected model. It estimated the impact of an increase in annual US military spending equal to 1 percent of GDP (approximately equal to the military spending increase compared with pre-September 11th baseline).

The projections show the following:

-- After an initial demand stimulus, the effect of increased military spending turns negative around the sixth year. After 10 years of higher defense spending, there would be 464,000 fewer jobs than in the baseline scenario with lower defense spending.

-- Inflation and interest rates are considerably higher. After 5 years, the interest rate on 10-Year Treasury notes is projected to be 0.7 percentage points higher than in the baseline scenario. After 10 years, the gap would rise to 0.9 percentage points.

-- Higher interest rates lead to reduced demand in the interest-sensitive sectors of the economy. After 5 years, annual car and truck sales are projected to go down by 192,200 in the high military spending scenario. After 10 years, the drop is projected to be 323,300 and after 20 years annual sales are projected to be down 731,400.

-- Construction and manufacturing are the sectors that are projected to experience the largest shares of the job loss.

"It is often believed that wars and military spending increases are good for the economy," said Baker. "In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment."

The report recommends that Congress request the Congressional Budget Office produce its own projections of the economic impact of a sustained increase in defense spending. If wars are disastrous for the economy, then why does government insist upon fighting them when clearly 'national security' is simply not at risk?

--Report Shows Increased US Military Spending Slows Economy
The bottom line is that everything the GOP has told us about the economy is untrue, most certainly lies of the worst sort. This party has overtly courted a 'base' of just one percent of the total population. This 'base' of just one percent has been enriched beyond the ability of words to describe [See: L-Curve]. This was the deliberate and considered policy of the GOP leadership. To accomplish their goals, George Bush was 'selected' to lead this nation into an economically ruinous war of naked aggression in violation of federal law and international conventions. This act alone is punishable by death and these charges should be returned in federal indictments against George W. Bush, Dick Cheney (who, we have learned supervised a squad a professional murderers) and every other Republican of rank, responsibility and crucial decision making powers with respect to this panoply of heinous crimes not seen since the rise of the Third Reich!

[John Maynard] Keynes seemed to be the right man for the time as he was reflecting the increasingly common view that blamed the capitalists themselves for the situation. In the General Theory Keynes rejected the view that the boom-bust cycle was due to over-expansive government monetary policy and that the stubbornness of the Depression was due to government interference with market mechanisms. He labeled all economists who believed such views as “classical”—in other words, hopelessly out of touch with reality. Instead, Keynes proposed a “general theory” that he thought capable of explaining not only the good times but also the bad.

According to Keynes, what drives the economy is aggregate demand or aggregate expenditures. Aggregate demand can be broken down into three main components: personal consumption (C), private investment (I), and government expenditures (G). The relationship can be summed up with this formula: AD = C + I + G. If Aggregate Demand is strong, the economy will be strong. However, if Aggregate Demand falters, businesses will end up with large unsold inventories and will cut back on production to avoid surpluses in the future. As they cut back they will of course need fewer inputs—including labor—and high unemployment will result.

The culprit in this story, the element that throws the entire system out of whack, is private investment. Private investment consists of business expenditures on machines, buildings, factories, and so on. In other words, investment is capital formation. Keynes claimed that private investment is inherently unstable due to what he called the “animal spirits” of businessmen/capitalists. He believed that businessmen are ultimately irrational and prone to herd-like behavior. Like sheep that blindly follow other sheep in the herd, it is easy for businessmen to become “irrationally exuberant”—as well as irrationally lethargic. Investment lethargy would trigger a large decrease in private investment, thus decreasing aggregate expenditures and triggering an economic downturn.

--Ivan Pongracic, Jr, The Great Depression According to Milton Friedman
Following are just some of the 'accomplishments' of the GOP as they come to me. With any effort at all, you will find hundreds more. The following I dashed 'off the top of my head".
  1. Total and humiliating defeat for the US in Iraq
  2. The utter collapse of the US economy
  3. The export of American jobs to China and anywhere BUT the US.
  4. Selling out the American consumer to Wal- Mart; most Americans no longer earn enough to shop anywhere else. Wal-Mart depresses local economies, has forced employees to work 'off the clock', in other words, 'work for free'. Wal-Mart has destroyed the 'downtown' areas of small towns. You can still see them. But only in Norman Rockwell prints.
  5. Dividing the US into those who have and those who have not where those who have not make up over 90 percent of the population and those have are but a about one percent and own MORE than 90 percent combined.
  6. The dumbing down of America with 'faith-based' initiatives'; what had been needed was fact-based initiatives that encouraged intelligence --rather than gullibility and the belief in economic voodoo. Like 'trickle down theory' and other GOP 'economic voodoo', 'faith-based initiatives' was a callous fraud exemplified by the "Houston Miracle" often attributed to Bush protoge Rod Paige. It was a fraud. The test scores were phony baloney. Like Enron, they cooked the books.
  7. The destruction of New Orleans because black folk dared to live there. Recently it has been learned that residents of the white suburb of Algiers Point murdered black residents trying to escape rising flood waters in New Orleans. As New Orleans tried to recover, Bush infamously said: "Brownie, you're doing a heck of a job"
  8. The subversion of American jurisprudence by packing SCOTUS with ideologues and idiots who clearly thought that it was their job to re-write the Constitution --not apply it. Clue: Antonin Scallia cannot carry James Madison's shit! Scalia had all but admitted his bias even before the debacle in Florida was taken to the high court. Scalia himself admitted that his aim was to prevent Bush from falling behind in the recount. He would try to undo the laws of common-sense and logic to do it: "Count first and rule upon the legality afterward is not a recipe for producing election results that have the public acceptance that democratic stability requires!" Excuse me, Antonin! The guy getting the fewer number of votes is supposed to lose! Fact is, Antonin never had a stupid idea that he could not intellectualize with big words and bullshit!

    But --as Scallia himself opined: "I'm too smart for this court!" Of late, that may be true. And that is enough to give one night terrors.
  9. The destruction of the US environment.
  10. Presiding over US descent into third world, possibly fourth world status.
  11. Turning American cities into sprawling out-of-control carbuncles the purpose of which was to inspire car sales and increased oil consumption. This is especially stupid as 'car making' was essemtially 'outsourced' to Japanese plants paying MUCH LOWER wages inside the US. Toyota was allowed to build cars in the US and pay much less than autoworkers would have made in Detroit. Workers who make less money, spend less mony --unless they are extended credit. Credit seems like FREE MONEY! Until the bill comes due!
  12. Gerrymandering congressional districts such that the GOP might get majorities in both houses of Congress.
  13. Openly deriding the Constitution --as George W. Bush did numerous times in various ways.
  14. Encouraging stupidity, rewarding incompetence, elevating ideology above intelligence.
  15. Turning American cities into ugly carbuncles in which robber baron corporations brainwash a captive audience in Potemkin villages called 'suburbs' or --worse --'planned communities' which come with an implicit guarantee that you will not see a 'negro'.
  16. Becoming a blood-sucking parasite that killed its host.

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