Saturday, June 13, 2009

A Feast of Unrepentant Wingnuts

by Len Hart, The Existentialist Cowboy

Egalitarian societies are more productive than societies in which a mere one percent owns more than some 90 percent of the rest of the population. Since 1980, US productivity declined with the dollar in a race to the bottom. The results may be seen quantified at the CIA's 'World Fact Book' where the US is at the bottom of a list of nations with the world's largest negative current account balance. It is not coincidental that America became the world's largest net debtor nation as it joined the ranks of the most inequitable.
American politics has been hijacked by a tiny coterie of right-wing economic extremists, some of them ideological zealots, others merely greedy, a few of them possibly insane. The scope of their triumph is breathtaking. Over the course of the last three decades, they have moved from the right-wing fringe to the commanding heights of the national agenda. Notions that would have been laughed at a generation ago--that cutting taxes for the very rich is the best response to any and every economic circumstance or that it is perfectly appropriate to turn the most rapacious and self-interested elements of the business lobby into essentially an arm of the federal government--are now so pervasive, they barely attract any notice.

The result has been a slow motion disaster. Income inequality has approached levels normally associated with Third World oligarchies, not healthy Western democracies. The federal government has grown so encrusted with business lobbyists that it can no longer meet the great public challenges of our time. Not even many conservative voters or intellectuals find the result congenial. Government is no smaller--it is simply more debt-ridden and more beholden to wealthy elites.

--Feast of the Wingnuts: How economic crackpots devoured American politics
The US won the race to the bottom begun with the ascension of Ronald Reagan to the White House.
In 1981, the top federal income-tax rate was 70 percent. Today it is 35 percent. Looked at in another way, the retention rate — the rate of income that individuals keep after taxes — went from 30 percent to 65 percent, an increase of well-over 100 percent since 1981.

Rohmann goes on to identify what he calls a “corollary hypothesis,” the so called trickle-down theory, where greater spending and investing power unleashed by tax cuts for those at the top of the economic ladder eventually “trickles down” in the form of increased employment, benefiting all of society. The term “trickle down” is a derogatory term invented by detractors of supply-side ideas. An appropriate description of the effects of supply-side policies was captured by John F. Kennedy in reference to the importance of economic growth in driving up the well-being of all Americans. Said JFK, “a rising tide raises all boats.”

--Tom Nugent, Laffer Lines
The US will remain on bottom or eventually collapse entirely unless and until it repudiates the failed and incompetent policies that got us there!

Egalitarian societies are more productive. Higher employment makes possible increased spending and supports economic expansion from the bottom up --not from the top down!
US wages have stagnated for the past three decades, while the
work force has also faced an erosion of job security, health care, and pension plans. This increasing economic insecurity has coincided with rapid globalization. Is there a causal relationship between the two? This policy brief probes domestic and international economic changes over the past half century to argue that the main causes of eroding US living standards have been “made in the USA,” as the postwar consensus in favor of egalitarian economic policy has broken down.

The domestic consensus that supported a relatively egalitarian US economy and good living standards for a broad middle class had seriously eroded before the current phase of globalization began. Globalization revealed and exacerbated, rather than created, the basic problems with the US system.

...

Currently, over 30 million workers—one-fifth of the US work force—earn less than the $9.80 per hour that would be required for a sole wage earner to lift a family of four out of poverty. The minimum wage should also be indexed to inflation and increases in worker productivity. This productivity link would help to distribute the gains from productivity more broadly across the economy and correct the disproportionate capture of gains by investors and corporate executives. This would be good for both low-income households and domestic demand. If the minimum wage grew with average productivity gains, it would also steer capital toward more productive firms that succeeded by increasing the productivity of minimum-wage workers rather than toward firms relying on sweatshop wages. This would increase the overall efficiency of the economy.

--US Living Standards in an Era of Globalization, Sandra Polaski, Senior Associate and Director, Trade, Equity, and Development Project, Carnegie Endowment for International Peace
Of course, I deny that anyone can lift themselves, let alone a family, out of poverty on some nine bucks per hour. Nevertheless, Polaski makes her point succinctly and effectively.

The Rise of Reaganism; the Fall of America

Since Ronald Reagan, GOP tax cuts have benefited only the upper classes, an increasingly tiny percentage of the population, now just one percent of the entire population. The promise that these 'tax cuts' would trickle down or result in increased investment and thus jobs was not merely false but disingenuous. The right wing [GOP] leadership knew better but proceeded in any case. It was apparently a quick and painless way to pay off the base for its continuing support.

The term 'supply side economics' is just an advertising slogan focus group tested for its effectiveness. The theory itself is said to have been cooked up by Arthur Laffer and drawn on a napkin.
Starting in 1972, Wanniski came to believe that Laffer had developed a blinding new insight that turned established economic wisdom on its head. Wanniski and Laffer believed it was possible to simultaneously expand the economy and tamp down inflation by cutting taxes, especially the high tax rates faced by upper-income earners. Respectable economists-- not least among them conservative ones--considered this laughable. Wanniski, though, was ever more certain of its truth. He promoted this radical new doctrine through his perch on The Wall Street Journal editorial page and in a major article for The Public Interest, a journal published by the neoconservative godfather Irving Kristol. Yet Wanniski's new doctrine, later to be called supply-side economics, had failed to win much of a following beyond a tiny circle of adherents.

That fateful night, Wanniski and Laffer were laboring with little success to explain the new theory to Cheney. Laffer pulled out a cocktail napkin and drew a parabola-shaped curve on it. The premise of the curve was simple. If the government sets a tax rate of zero, it will receive no revenue. And, if the government sets a tax rate of 100 percent, the government will also receive zero tax revenue, since nobody will have any reason to earn any income. Between these two points--zero taxes and zero revenue, 100 percent taxes and zero revenue--Laffer's curve drew an arc. The arc suggested that at higher levels of taxation, reducing the tax rate would produce more revenue for the government.

...

At that moment, there were a few points that Cheney might have made in response. First, he could have noted that the Laffer Curve was not, strictly speaking, correct. Yes, a zero tax rate would obviously produce zero revenue, but the assumption that a 100-percent tax rate would also produce zero revenue was, just as obviously, false. Surely Cheney was familiar with communist states such as the Soviet Union, with its 100 percent tax rate. The Soviet revenue scheme may not have represented the cutting edge in economic efficiency, but it nonetheless managed to collect enough revenue to maintain an enormous military, enslave Eastern Europe, fund ambitious projects such as Sputnik, and so on. Second, Cheney could have pointed out that, even if the Laffer Curve was correct in theory, there was no evidence that the US income tax was on the downward slope of the curve--that is, that rates were then high enough that tax cuts would produce higher revenue.

--Feast of the Wingnuts
Thus was removed from the economy revenues/monies that might have driven expansion, growth, or the creation of new jobs had any class but the increasingly tiny elite benefited. The utter failure of 'trickle down/supply side economics' has proven that for the US industrialist, a tax cut is just a windfall --not an incentive. Such windfalls are simply transferred offshore to numbered accounts or other dodges. If 'demand' had justified additional investment in equipment or labor, the industrialist would have already made the decision and taken the 'investment tax credit' up front. There is no need to wait for tax cuts. Therefore, GOP tax cuts misstate the issue, compound the problem and are at the root cause of the decline and fall of American productivity, living standards and 'would-be' empire.
Glyn identifies five internal constraints on an egalitarian economic policy: (1) sluggish private capital accumulation, (2) conflicting claims, (3)government deficits, (4) financial markets, and (5) taxation and the costs of expansion. Each of these items sounds familiar. It is as if nothing fundamental regarding the economy's structure has changed since the early 1970s. In varying degrees, each of these constraints was present then, and the implication is that the only barrier against returning to the relatively more egalitarian economic outcomes of that period is changed political climate.

--The Unbalanced Economy: Business Domination as the Real Constraint on Egalitarian Policies, Thomas I. Palley, Assistant Director of Public Policy, AFL-CIO
Wal-Mart rose as American purchasing power and the dollar fell. Not coincidental. The CIA's 'World Fact Book' puts the US as the bottom of a list with the world's largest negative current account balance. Of equal importance is the overlooked fact that Wal-Mart is patronized by the American working class which is impoverished of late. Again --not coincidental.

In better times, the American working class, especially highly skilled auto workers or steel workers, might have patronized a better version of Wal-Mart where moneys spent remained in the community and enriched it. But Wal-Mart is not a characteristic of 'better times' It is a symptom of America's broken promise and economic demise.

The rise of the GOP, however, seems to have confirmed David Ricardo 's theory of wages in which it was said that wages represented 'labor's natural price —the income which is necessary for the worker to exist'. Not surprisingly, capitalists agreed with Ricardo but only because he seems to support the idea of 'subsistence' wages, keeping workers poor, impoverished, hungry. Things have only gotten worse. Today's capitalist thinks the prototypical conservative Ricardo 'pink' for daring to ascribe to labor any value at all. Even so, it is difficult for even robber barons to ignore the verifiable fact: wealthier workers spend more on a better life. Paying subsistence wages 'contracts' the economy --a recipe for depression. Capitalists are blind and stupid if they insist upon keeping workers poor. Economies are driven by purchases. Poorer people purchase less. Economies contract. Depression results. Basic economics. GOP stupid. GOP blind and dumb.

The Wal-Mart Leech Exposed!

The rise of Wal-Mart is the inverse of the loss of domestic purchasing power. It is a race to the bottom and we've won it! It is said that demand is created when the people have discretionary spending. More accurately, discretionary spending may facilitate or 'satisfy' demand but must not be confused with demand itself.

If one has 'everything' no additional amounts of money will encourage spending; 'tax breaks' for those already among the top one percent will simply wind up offshore. The net effect on the domestic economy is one of 'contraction' i.e, recession/depression. People have diminished capacity for 'discretionary spending' when jobs are exported and the value of the dollar declines as a result. Again --economies contract. Depression results. Basic economics. GOP stupid. GOP blind and dumb.

During WWII, Adolph Hitler derided the US manufacture of refrigerators and other appliances. On another occasion, he and Albert Speer BLEW PAST a US made auto on the new autobahn. In a German Mercedes, Hitler and Speer left the US car in the dust amid great laughter and ridicule. [ src: Inside the Third Reich] The significance of that is that prior to the outbreak of WWII, US auto manufacturers were selling cars in Europe if they were not of Mercedes quality. Some went too far. Henry Ford, for example, helped finance Adolph Hitler who proudly displayed a portrait of Ford in his new Chancellery. I can tell you from experience, you will see precious few US made cars on any major thoroughfare or street in Europe.

As we have established, the most egalitarian societies are most productive. Conversely --those societies, like the US, in which just one percent owns more than 90 percent combined are least productive. Even conservatives in America will tell you: 'if you want a prosperous economy, you must create wealth', a true statement that does not go far enough. It is labor that creates wealth or, if you prefer, value. This is the 'labor theory of value' espoused by almost every major economist from David Ricardo to Paul Krugman, from Karl Marx to John Maynard Keynes. Wealth is created by work alone! If you wish to create wealth with money, you must first put money to work with productive, domestic investment --not offshore dodges.

Wealth is not created by transferring the products of labor upward to the increasingly tiny clique of moneyed elites --just one percent or less of the entire population. Wealth is not created by exporting jobs or by undermining local merchants with Faustian bargains and/or Wal-Mart. Wealth is not created by shipping it offshore to benefit only those who have never worked. Wealth is not created by 'screwing' the working, productive classes, robbing them of jobs, educations, and futures.

Under GOP mismanagement, dishonesty and incompetence, the US has done everything that DOES NOT create wealth while unfairly burdening those who do! Wealth is not created with tax cuts for those already rich. That strategy inevitably results in 'economic contraction'. As Reagan said: here we go again --economies contract. Depression results. Basic economics. GOP stupid. GOP blind and dumb.

Insanity!

Ideologues work backward from conclusions in a frantic search for premises to prove them. Sane, rational, pragmatic or scientific folk will begin with facts rather than conclusions. Wealth is created when wealthy folk are taxed fairly and when working consumers have purchasing power to buy things with the moneys they earn. The GOP system is a race to the bottom. As the rich get richer and the poor, poorer only Wal-Mart prospers by brokering the transfer of US wealth to China. To drive the point home: economies contract. Depression results. Basic economics. GOP stupid. GOP blind and dumb.

It has been aid that when conservatives cut taxes, they cut them for everyone. That has never been true. Ronald Reagan's 'tax cut' resulted in my paying higher taxes, a much higher percentage of my income. That was true primarily because 'breaks' are called 'loopholes' if an individual avails themselves of them, but 'tax incentives' if it is the big corporation that benefits. In any case, across the board tax cuts are meaningless as long as the range from poor to very, very, very rich is plotted on increasingly steeper curves. [See: the L-Curve]

As a percentage of income, everything is cheaper for the rich!

Because billionaires spend infinitesimally less as a percentage of income just staying alive as do those who work, the benefits of a tax cut accrue only to the wealthy. Only a progressive tax addresses this injustice. As a percentage of their income, the prices rich folk pay is much, much, much less than you pay for just about everything. A restaurant meal, for example, is a negligible expense for the wealthy, a precious and expensive luxury for those in the middle class.

As they grow richer, elites bid up the prices of properties and/or goods, a process that puts necessities beyond the reach of the poor, and makes them a luxury for the middle class. In the late fifties and early sixties, thirty thousand dollars would put you in a very fine, two story home in an excellent neighborhood. A comparable home today will cost you millions. If this increase were merely inflationary, your income would have kept pace and kept you in the market. That it did not has created super enclaves affordable only to the super rich.

As recently as 1967 a distinguished economist observed that there were increasingly fewer status symbols available to millionaires that were not also available to someone earning $20,000 per year. A rising tide, it would appear, does not raise all boats.

Moreover, the ruling elite of just one percent of the population has access to tax dodges and offshore accounts that those who work for a living may never have even heard of.
The first bailout gave these companies over 700 billion in bailouts and the main culprit of the insurance derivative fraud AIG that primarily caused the disaster received 150 billion dollars of taxpayers money.

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 those 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.

--Bailout Corporation Tax Havens in Caymen Islands

It is no coincidence that the US was most productive when it was most egalitarian and that was the era that began with the end of WWII and ended with the inauguration of Reagan.
The automobile industry successfully converted back to producing cars, and new industries such as aviation and electronics grew by leaps and bounds. A housing boom, stimulated in part by easily affordable mortgages for returning members of the military, added to the expansion. The nation's gross national product rose from about $200,000 million in 1940 to $300,000 million in 1950 and to more than $500,000 million in 1960. At the same time, the jump in postwar births, known as the "baby boom," increased the number of consumers. More and more Americans joined the middle class.

--The Post War Economy: 1945-1960
Democracy is always the first victim of militarism. Today, Germany, which is said to have lost WWII, is the world’s largest exporter of manufactured goods, ahead of China for whom the US is just a place to dump product while polluting its own environment. To make the point even more dramatically, German wages and benefits today are higher than those in the US even as it maintains a much higher and better 'safety net'.
Back in February–when even the mainstream media was convinced the capitalist economy was in full-blown meltdown mode–Newsweek magazine ran an article titled “Why there won’t be a revolution.” Newsweek wanted to reassure the rich–and convince working people–that the masses weren’t getting ready to dust off their pitchforks and head to the town square.

“Americans might get angry sometimes,” they wrote, “but we don’t hate the rich. We prefer to laugh at them.”

Newsweek couldn’t be more wrong. The 10 percent of Americans who rely on food stamps, the 25 percent of Ohioans who are waiting in lines at food banks, the 500,000 people who lost their jobs last month and the millions more who can’t find work–these people aren’t laughing.

And plenty of Americans–rightly–hate the rich. While our homes go into foreclosure, while our credit card rates go up, while our jobs disappear and college tuition shoots up, the well-heeled “masters of the universe” on Wall Street are still making out like bandits, but now with hundreds of billions of dollars in taxpayer money, courtesy of the Obama administration.

A lot more people would be even angrier if the mainstream media reported the truth about the rich and powerful in America–who they are and how they “made it” to the top. Consider the 10 richest people in the country as of last September, according to the annual Forbes magazine list.

--Adam Turl, How the Other 0.00000003 Percent Lives
The US economy--in obvious decline since 1982 --is 'fragmented, inefficient. Health care has become a luxury that the working classes cannot afford. US investment in research and development is dropping precipitously as a share of GDP. The result: US product quality continues to deteriorate and markets for US goods will continue to decline because of it.

"War is a racket!"

Concurrently, democracy itself is threatened. 'Presumed external' enemies have been exploited to justify subsidies given the Military/Industrial Complex. A crack down on dissent has threatened to undo the US Constitution, called a 'goddamned piece of paper' by the incompetent liar who had recently sworn to uphold it. As America's future dims, there is no 'mea culpa'. There is no remorse. There is no lesson learned. We are not a feast fit for the gods; we are, rather, burgers and fries for unrepentant wingnuts.

Gen. Smedley Butler was precise and correct when he said: "War is a racket!" It's not about external threats, it's about CONTRACTS. As long as industrialists make money facilitating the mass murder of human beings, there will be NO peace! EVER!


Trickle Down Theory Debunked

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