Monday, March 29, 2010

Why GOP Policies Are a Cruel Fraud

by Len Hart, The Existentialist Cowboy

As U.S. GDP declines during GOP regimes, it does so because 'wealth' is literally transferred upward to a 'ruling elite' class, a laundered pay-off to the 'base'. At present, just one percent of the nation's total population owns, by some estimates, more wealth than is owned by about 95 percent of the rest of the population. *

This is the culmination of a trend that began in the era of infamous 'robber barons'. Their banker of choice was J.P. Morgan. The trend reversed during WWII but resumed with Ronald Reagan's tax cut for the very wealthy in 1982.

Wealth inequalities are measured with the GINI index. These indices always rise as GDPs decline during depression years. The effect of GOP tax cuts are best visualized in graphics based upon the data that is available from the Bureau of Labor Statistics and the Census Bureau.

Few make the connection between declines in GDP and 'transfers of wealth' upward to an increasingly tiny elite. Fewer connect these trends with the periodic recessions/depressions which are historically/mathematically more numerous during GOP regimes. The 'Great Depression' which began during the Hoover administration was clearly the result of the preceding GOP administrations of Warren G. Harding (a George Bush of his day) and Calvin Coolidge.

Historically, the U.S. is most productive when it is egalitarian. The era beginning with the end of World War II is the best example. It was an era of egalitarian growth and prosperity that did begin to end until the inauguration of Ronald 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 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 U.S. is just a place to dump product while it pollutes its own environment. To make the point even more dramatically, German wages and benefits today are higher than those in America even as it maintains a much higher and better 'safety net'. Germany alone disproves just about everything the GOP ever told you about economics.

The GOP is mum on several facts, specifically, that periodic depressions are beneficial to ruling elites. It is during depressions that they get richer and everyone else gets poorer. It is during periods in which prices decline that the 'robber baron' mentality picks up bargains among stocks and properties. But even worse, market panics are triggered when 'traders' decide that the time has come to take their profits or, as was often said in the sixties: 'take the money and run!'.

The timing of rallies is controlled by and for the benefit of concentrated wealth which alone has the power to control the behavior of markets. A small trader is generally just kidding himself. A small trader is probably a stupid trader or, more accurately, stupid because he/she indulges the delusion that he can 'play' with the big boys. In fact, the big boys have the power to change the rules and do so when it is beneficial to them. Big money controls big money movements. The market is by and for the rich; the chances you will get rich by 'trading' are slim and none.

Hoover said of the jobless/homeless 'Let them sell oranges and pushcarts from a cart!' The Great Depression was followed and was the result of the transfer of wealth upward, a trend that had begun with the GOP regimes of Harding, Coolidge and Hoover. A careful study of the Great Depression is the best evidence, the proof of everything posited here.

Why a 'flat tax' is a scam

How is wealth re-distributed? It is to the GOPs advantage that a so-called 'flat tax' only sounds equitable but is --in fact --the most unfair, the most inequitable tax of all. A flat ten percent will cut into what you budget for essentials --housing, food, and transportation to and from your job if you are lucky enough to have one. Ten percent of several millions each year has absolutely NO affect on the amount of monies the super-rich spend on food, housing and clothing. A 'flat tax', therefore, is an unfair tax.

Taxes raise revenues from all taxpayers yet redistribute disproportionately among the top 1% of income earners via the tax cut. Simply, money is taken out of my pocket and put into the pocket of a George Bush fat-cat!

A bankrupt nation cannot be either productive or wealthy

GOP policies since the rise of Ronald Reagan have made of the U.S. the world's largest net debtor nation with the world's largest negative current account balance. China, to whom the US has been sold and sold out, boasts the world's largest positive current account balance.

The 'Great Depression' followed a period in which wealth had become increasingly concentrated in very few hands proportionally. It occurred during a period in which an increasingly tiny elite had become increasingly, obscenely wealthy while many more, millions became increasingly, extremely poor. Death by starvation increased. What do you think caused the great depression? It was a top heavy collapse! When those who had 'engineered' the boom had milked it to the max, they took their 'winnings' and dealt themselves out. Margin speculators were caught flat-footed. The House of cards collapsed.

Wealthy, healthy economies are productive economies. Every major economist agrees: labor creates value. It follows, therefore, that the most egalitarian societies are the most productive societies. Conversely --those societies, like the US, in which just one percent owns more than some 90 to 95 percent of the rest of the population combined are --as to be expected --the very least productive. A society which is no longer productive should expect to find itself at the bottom of the CIAs World Fact Book with the world's largest NEGATIVE Current Account Balance, sometimes called the balance of trade deficit. Click the link and scroll down. You will find the U.S. on the very bottom of the list, enslaved by China which alone benefits from the U.S. consumer's addiction to Wal-Mart.

As its position at the bottom of the CIA's list proves, the US, as a result of the policies of the Ronald Reagan, George Bush Sr and, later, Bush Jr, has become a third world nation, the World's Largest Net Debtor nation. Simply --the US is bankrupt.

The U.S. is Bankrupt!

It may have been John Maynard Keynes who said: "If you want a prosperous economy, you must create wealth." If it was not, it's true in any case. A nation which does not produce does not create value. A nation that does not create value i.e, 'wealth' is either bankrupt or headed there.

A nation that has disparaged labor should expect to slide into Third World Status. Every major economist --from David Ricardo to Paul Krugman, from Karl Marx to John Maynard Keynes --has recognized the truth of the Labor Theory of Value. The way to create 'wealth' by putting money to work. Wealth is not created by 'outsourcing' jobs, most recently, to China. Wealth is not created by rewarding an idle elite investor class with whopping tax cut which inevitably wind up in tax havens offshore. Tax windfalls winding up in offshore tax havens is money that is perhaps forever lost to the American economy. The results of GOP tax cuts are 'contractions' of the economy as evidenced by real declines in monies circulated.

Egalitarian nations are not only more productive and prosperous, they are are happier, a fact that is revealed in numerous studies. People in such societies enjoy a much higher standard of living than is found in those nations like the US which has been plundered to bankruptcy by the right wing and the Republican party specifically.

The recession of 1990 began four months before Bush broke his "no new taxes" pledge, in July 1990; Bush signed his tax increases into law in November 1990.

I was asked the following question: "You do realize Keynes's theories were demolished in the 1970's right?"

When I stopped laughing, I responded:

FACT: OVER 24 MILLION JOBS WERE CREATED DURING THE 70s:
While ONLY about 18 million jobs were created in the 80s.

3.4 percent more of the population was put to work during the 70s but only 2.6 percent during the 80s.

Reagan-heads falsely claim that Reagan's was the longest peacetime expansion since World War II. The truth is the Kennedy-Johnson expansion was considerably longer: 106 months compared to Reagan's 92.1

Sadly for right wingers and/or supply-siders and Reagan's adoring, non-thinking multitude, it was Keynesian economics that was responsible for the longest economic boom in the post World War II era. The GOP adoration of Milton Friedman is misplaced. Friedman does not have the track record to disprove anything that resulted as a result of the application of Keynesian principles.

It is sometimes said by those leaning right wing that "...attempts to push up demand at the expense of the "wealthy" have always failed miserably and always will fail. " Bluntly --this is a strawman fallacy but undermines 'conservative' arguments' that cutting taxes for the rich stimulates the economy. The burden of proof is on conservatives to name a single time in the 20th century that productivity increased following a 'tax cut' benefiting only the wealthy. It has not happened once! Not one time! Ever! It is time to consign this bullshit to the dustbin of history. I tire of writing about it.

Keynesian economics --not Milton Friedman -- may and should claim credit for the 80s. Some have tried to rewrite history, saying that Reagan was --in fact --a closet Keynesian. If that were so, why does 'Keynesian' policies work for Democrats but not for the GOP. The facts of the matter are this: 1) Reagan's tax cut of 1982 was quickly followed by a depression of some two years, the deepest and worst since the great depression of 1929. The very definition of 'depression' involves a contraction of the money supply. That raises the question: if the tax cut benefited anyone, then where did the money go? Where, indeed, did it go? Did anyone bother to check the offshore accounts of those benefiting from the tax cut? Did anyone bother to correlate the contraction of the projected U.S. money supply with actual increases in accounts offshore? Is there, in fact, anyway to police these robber barons?

The Reagan/Friedman era is a TOTAL FAILURE

The fact is: the US has the lowest general tax rate in the entire industrialized world and, at the same time, the very worst savings and investment rates! Nothing predicted by Friedman came to pass. Instead of jobs, we got depression. Instead of universal increases in the standard of living, the standard of living declined for every but the upper quintile, Reagan's base.

As a result of Friedman's policies and during the Reagan regime a trend began that was not reversed until Clinton's second term, that is: only the very wealthy benefited and only the very, very wealthy got even richer. Everyone else lost ground. That's right. If you were only middle class, even upper middle class, you lost ground. Concurrent with this trend was Reagan's 'Recession', in fact, a 'depression' of some two years in which the nation's GDP declined and millions were made homeless and forced to live in tents under bridges even in boomtown Houston.

The following chart is from the U.S. Commerce Department - Bureau of Economic Analysis. It just about sums it all up in terms of job growth. That's because a nation that is not working is an economy that is not working.
Job Growth Per Year Under Most Recent Presidents8

Johnson 3.8%
Carter 3.1
Clinton 2.4
Kennedy 2.3
Nixon 2.3
Reagan 2.1
Bush 0.6

Source: US DEPT OF COMMERCE - BEA
Three well-known Republicans pull up the rear: Nixon, Reagan, Bush. All are failures.

I am asked:
If government is so great at wealth redistribution and running the economy, what about the Great Depression?
That's too easy. The question itself betrays an appalling ignorance of U.S. history. My critic may never have heard of Calvin Coolidge, may never have known about the feverish stock market speculation, margin purchases, the heady almost euphoric belief that unfettered laissez-faire capitalism could turn ordinary schmucks into new J.P. Morgans or Rockefellars. It was all an illusion, smoke and mirrors, a cruel hoax, a fraud!

The Great Depression was the result of the policies of every GOP Prez since Woodrow Wilson and resulted when 'wealth' was re-distributed upward under the regimes of Warren Harding, Calvin Coolidge and Herbert Hoover. All three were Republicans and Hoover was President at the time of the 1929 crash.

It was Hoover who said of the jobless/homeless: "Let them sell oranges from a pushcart"! And, much later, it was Reagan who said that homeless folk living under bridges were crazy and accused a 'welfare grandma' of driving a Cadillac. The fact of the matter is, there was NO such 'gran'ma'. Reagan lied his ass off! Hey! He was a Republican!

* sources: U.S. Department of Commerce - BEA, Bureau of Labor Statistics


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