Extreme Wealth Corrodes Democracy

The United States was, for a short time, a democracy, if only of white male property owners--much like early Athens. Counterrevolution began with the Constitutional Convention.

Democratic forces were predominant in other eras in the US, but they didn't last. There was the Democracy of Andrew Jackson and brash new western men. There was the early radical Republicanism of the Civil War. There was the Progressive era: the overweening power of the trusts was busted, at least temporarily. There was the New Deal, extending through the Great Society, in which government made it its business to extend equality and its benefits.

But each democratic era has been followed by a period of reaction and hardening elite rule. However, up until now, America has always had an upwardly mobile society: the son of the worker, farmer, or clerk becoming the new rich. And always before, the elite made way for them, even if they hated "upstarts" and "new money."

Today, class mobility in America is lower than in class-bound Britain; American society is becoming rigid and stratified--though no one will admit they are anything but "middle class." The difference between the new financial wealthy and everyone else has never been greater; CEO's are paid 100's or 1000+ times more than their workers, a greater margin of difference than other developed nations. Inequality increased even more rapidly after the so-called Great Recession and subsequent "recovery" under Obama's leadership. More than 90% of the gains since 2009 have gone into the pockets of the extremely wealthy, while unemployment hovers around an official 7.8% and is nearly twice that when counting workers who have given up looking for work.

The intransigence of conservative Republicans is not surprising, nor the timidity of Democrats: they both reflect the changing balance of power in the US. Unions have declined to single digits of the private sector workforce, and Republicans have sharpened their knives to eliminate the power of public sector unions, as well.

Meanwhile, state legislatures and Congress promote austerity, and cut programs benefiting the less affluent, while attempting to lower taxes and eliminate regulations that irritate the resurgent wealthy.

Why not? Politicians easily accumulate wealth from their connections. Anyone in government, even idealistic Obama staff, can legally line his/her nest by cooperating with the moneyed, our Roman Senators. None live in ghettos, or working-class neighborhoods. None see or hear the people who are hurt by the wealthy bias in media and politics.

And the media, largely owned by our Roman Senators, naturally reflects their bias; so even the poor tend to accept the agenda of the wealthy, insisting that austerity is necessary and even Social Security benefits must be cut.

This isn't just the swing of the pendulum; this smells like "takeover" by the very wealthy, like the Roman Senators' monopoly of power in Fifth Century Rome--before its fall.

Sequestration

Is a fancy word: it means, in the memorable phrase of Congressman, Sean Maloney, "Congress screwing up the economy for no reason."

It's true that the projected government deficit is over $1.1 trillion, a mind-boggling number, but cutting spending would make that number worse. Why? As the miniscule retreat in GDP last quarter demonstrated, when we cut government spending, the whole economy is negatively affected. We teeter between recovery and renewed recession. Further, the experience of European countries, demonstrates that austerity does not create prosperity; it created renewed recession in the UK (triple dip) and depression in Greece.

The "sequester" has the Republicans worrying about cuts to Defense, complaining that this will cost jobs (it will), but they're not worrying about, and want to increase cuts to domestic programs. The cuts already mandated would not only cost even more jobs (civilian programs create more jobs per dollar than defense), but they would hurt our most vulnerable, and our future prosperity.

Cuts to domestic programs will: cut 70,000 children from Headstart, deny treatment to 373,000 mentally ill (adults and children) and reduce small business loan guarantees by $540 million. In addition, the $85 billion in cuts on Mar 1, could include, according to Congresswoman Nita Lowey, "furloughs of air traffic controllers, food inspectors, border patrol, reduced investment in safe drinking water and medical research, diminished military readiness and embassy security."

Think about this logically: if you reduce expenditures March 1st by $85 billion, how is that going to help us recover from the Great Recession? It will cut that amount of money (US multiplier estimated at 1.29 to 1.73) from flowing into the economy, cutting jobs, cutting purchases--as well as needed services. It won't "grow" the economy; it will shrink it by at least $109 billion--in one month.

Greece, subjected to radical austerity, has seen tax receipts plummet with government cuts: its ability to pay back debts is reduced, not enhanced by austerity.

Austerity proponents speak as if "business confidence" will be restored by cuts, and prosperity and jobs will magically return. Why? If everyone, except for banksters and one-percenters, have less money, who's going to buy what businesses sell? The wealthy are too few to create enough demand, so there's no reason for businesses to hire more workers, or produce more goods, if austerity means everyone--except the wealthy--will buy less than they did before. So where are more jobs to come from?

The Roman Empire was in a centuries long depression before it collapsed; its gold standard prevented expansion of the money supply; further, when Senators hoarded gold, money contracted, deepening the depression. Today, the Federal Reserve can expand the money supply, as can the Federal government. When demand is lacking, Government should build demand, not cut it. Only during a full recovery, should long-term budget deficits be cut, by tax and health care reform and withdrawal from an empire the US can no longer afford.

The Fiscal Slope

It really isn't a cliff; most people don't pay taxes in January; Congress will have time to fix things after the first of the year and has often written tax and spending bills that are retroactive.

One of the advantages of delay is that a "tax increase" on Dec. 31st, i.e. not extending Bush tax cuts, becomes an opportunity for "tax cuts" on January 1st. The Obama/Democratic program of maintaining the lower tax rates for the middle class, becomes "tax cuts" in January. The higher rates, for those with incomes over $250,000, does not become a tax increase: it would simply remain as part of the agreement reached between Congress and the President, as part of the bargain to cut the deficit and debt. The Republican House agreed to this as the fall-back position for cutting the deficit.

This whole "cut the deficit" mania came from the Tea Party caucus in the House: it's miss-timed. The Great Recession has driven most of the current deficit by stimulus and aid to people in distress, and collecting less revenue because fewer people are working.

The whole mechanism of government spending more in a recession in order to ameliorate misery, despite revenue shortfalls, was an innovation of the New Deal. It's not surprising that reactionary Republicans want to repeal the practice.

Consider what would have happened if we'd adopted the balanced budget amendment long advocated by "fiscal conservatives": as revenue went down in the financial collapse of 2008, government would have been required either to raise taxes on those still working, and/or to cut expenditures--on food stamps, schools and everything else, even Defense. The result would have been an ever deeper, broader and self-reinforcing hole in the economy and mass misery. Today we'd still be in a deep depression with no way to dig ourselves out. We'd be in worse shape than Europe.

Once we've spent enough to create jobs (and hopefully to restructure the economy), then is the time to raise taxes on those who currently can't afford it, or to find other ways to balance the books: now is not that time; the economy is still too fragile and too many people are still out of work.

However, to avoid the so-called cliff, to begin to reduce the deficits in ways the nation can afford, raising taxes on high income earners makes sense. They do not "create jobs," from their rising incomes. The corporations they own will hire when there is demand for the goods and services they produce. Not before. High-income earners have garnered almost all the increased wealth since the start of the Great Recession: they are largely sitting on it, or investing it elsewhere.

The Republican insistence on lower tax rates for the wealthy is like the Roman Senate in 476 refusing to raise their taxes to pay the Ostrogoth palace guard. That action precipitated the "fall of Rome."

What's Wrong with GOP's Hensarling?

Texas Congressman (R) Jeb Hensarling proclaimed: "one of the biggest impediments to job creation today…is a lack of confidence in the future." He blamed this on "an administration where regulators have gone wild…threatening the largest single tax increase in America’s history and…[it] doesn’t take seriously the debt that is threatening our job creators.” [NYT 6/4/11]

What's wrong with this picture? Regulators have gone wild? Polluters went wild under Bush, speculators went wild; banks went wild, causing the recession. The "tax increase" Hensarling mentions, is the expiration of Bush's unfunded top-rate tax cuts. Tax rates for millionaires are lower now than at any time since 1929 and income inequality is higher.

Who are "job creators?" People who put up the money? Neither large corporations nor entrepreneurs are hiring. This is because employers do not "create" jobs. In order for hiring to happen, there has to be demand (or its potential) for goods or services in the economy (demand is not created by the employer), and there have to be people with the requisite skills to fill the jobs needed (provided by good schools). Entrepreneurs take advantage of many things they don't create: people, skills, demand, a legal system, and basic security.

Imbedded in that legal system are regulations, which establish a predictable marketplace. They also force businesses to compensate for damages to society. Polluters, for example, either pay the costs their pollution caused to society, or society has to pay it instead: in poorer health, a major cost. Why should a polluter profit from the lung cancer he causes in a hundred victims downwind?

As for debt: the greatest part of the debt Republicans like Hensarling rail about was caused by: two Bush tax-cuts, two unfunded wars and an unfunded mandate added to Medicare (Part D) by Bush and his Republican Congress. Then, to the debt was added the Great Recession caused by the lack of regulation which culminated with Bush, but had been building since Carter.

In recessions, governments take in less (in revenue) but have to spend more (for things like unemployment payments and Food Stamps), unless they're going to revert to a Dickensian age when people starved in the streets. Our experience in the Depression demonstrated that government programs (contrary to conservative dogma) created jobs, value and demand, and started the US climb out of the Depression--not completed until the massive deficit spending necessary to wage WWII.

Cutting spending does not create jobs, as evidenced by the rise in unemployed state and federal workers here, and renewed recession in budget-cutting UK. But it does increase inequality, and therefore the power of the extremely wealthy, our equivalent of the Senators of Fifth Century Rome.

Those Senators did much the same thing, weakening Rome, laying the stage for its fall, in 476.