Falling For The Cliff

The "fiscal cliff" was a contrivance Democrats and Republicans, Obama and Boehner/McConnell, all thought would work for them. It should have worked for Obama and the Democrats.

Obama won reelection convincingly, and his most salient deficit-cutting issue was raising taxes on the wealthy with incomes over $250,000. That was part of his proposal to reduce the deficit with proper balance between expenditure cuts and revenue increases. Polls showed high levels of support. So, why did he give in to Republicans at all?

Sure, the Biden/McConnell tentative agreement is an admission by Republican Senators that they are on the wrong side of the tax issue, unemployment insurance extensions and low-income enhancers like the Earned Income Tax Credit.

On the other hand, for Democrats, trying to avoid the 'fiscal cliff' was bad strategy, because allowing tax increases to go up temporarily would have increased Obama's leverage: the no-tax-hike GOP can be assailed for opposing tax cuts, if the deadline of the fiscal cliff really passes with no agreement. Isn't it more plausible that they'd vote for tax cuts to everyone with incomes below $250,000, instead of raising taxes on the wealthy? They wouldn't even break the Norquist no-tax-hike pledge. And people wouldn't blame them for a stalemate, which growing numbers of people--and financial rating institutions--will do if they don't go along.

But, no, Obama, after months campaigning on the $250,000 figure, opens his latest bid with raising the rate to $400,000, a position Speaker Boehner had taken less than a month before.

Obama has already sounded conciliatory about cutting Social Security benefits--through adjusting the Cost of Living--yet Social Security is self-funding and its surpluses have financed some of the deficits for a long time. He's tried out cuts to Medicare eligibility, but Medicare proponents--Democratic activists--through much pressure, have persuaded him to withdraw the proposal.

Why doesn't he, or other Democrats, propose cuts to oil and coal subsidies? We have no business continuing to promote these polluters in the face of accelerating global warming.

Obama and "moderate" Democrats are either afraid of the money big oil, banks, etc. can wield against them, or they’ve been bought out by it. The same could be said of "defense" expenditures: no one spends anywhere near as much as we do on military and surveillance, yet neither Democrats nor Republicans see the mandated Pentagon cuts as an opportunity.

The US, through its dysfunctional politics and polarization, its obeisance to status quo interests and its fear of crossing capitalists, is leading the world to a violent conflagration brought on by increasingly disruptive climate change. Capitalists, said Lenin, will sell you the rope to hang them.

In fifth-century Rome, Senators even bought the rope, and applied it to their own necks.

We Won't Pay!

The Portuguese Communist Party is campaigning against the Euro-IMF bailout; their slogan: "We won't pay!"

It makes sense in the US, too. Who caused the global recession, and what is causing the world economy to lean towards a renewal of it? The banks speculated and committed fraud on all of us, and got away with it--at our expense. The American economy is limping towards a "double-dip" in part because of all the government cutbacks (federal, state and local). It's also because jobs in the private sector are not returning; there was too little stimulus--except for the trillions thrown at Wall Street.

In Greece, Ireland and Portugal, the bankers demand huge cutbacks to services, pensions, any public expenditure, but it was the bankers who caused the crisis, yet the banks are not being asked to pay for it. The bailouts will probably doom those countries to continued recession; their governments won't be allowed to re-stimulate their economies.

The US may be doomed as well, by political shortsightedness, greed, ideological blindness and the overweening power of the Selfish Class, our contemporary Roman Senators.

When you have persistent unemployment rates (officially now 9.1% and unofficially 16-18%), with wages flat and workers scared, you are not going to have expansive demand. Without growing demand, corporations are not going to hire, whether their taxes are raised or lowered. Corporations have been sitting on piles of money and neither hiring, nor investing.

Ordinary people have been left in the lurch. Any commitment on the part of the Obama administration to stimulate hiring, or to aid the housing market by mortgage reform has been abandoned in the face of Republican demands. Impose the same kind of draconian cuts and restructuring as the IMF: huge cuts in services, pensions (like Social Security and Medicare) and jobs, to pay for the debts incurred by the finance nightmare, two unfunded wars and a series of unfunded tax cuts that have enriched a tiny 1% of the nation.

We are told that the US is broke; it's not. The problem is that the wealthy and the corporations are looting the nation--as they looted Portugal and Greece--and they have the political clout (and paid media support) to persuade the political elite, that massive cutbacks are necessary--on others' backs. They even insist, via Republicans like Ryan, that they are over-taxed; the opposite is true.

Many corporations avoid paying any taxes, despite huge profits; many wealthy find enough loopholes, too, to reduce their already low, 33% top tax rate. In the booming 50's, the top rate was 91%, and it was still 70% in the prosperous 1960's.

Shout: "Hell no! We won't pay!" The people and corporations who created this mess should pay for it. Governments should create jobs with their money. To accept the cutbacks is to reinforce the takeover by our Roman Senators. We'll retreat to Fifth Century society made up of Senators and serfs.

Budget Insanity

How can Republicans believe that they'll win votes for "courage" to stand up to the poor on behalf of all those victimized rich guys? Unlike the Beatles' song, they seem to think that money can buy them love.

If Fox and corporations can spin this, then we have wholly entered into a corporate-run nation, in which only the CEO's and billionaires count--perhaps GOP activists will gain perks like the apparatchiks in the Soviet CP, or the higher ups in Germany's NSDAP. The rest of us just better keep our heads low, and work hard for our diminishing crusts of bread.

Congressman Ryan, the GOP budget boss, proposes draconian cuts to services, eventual privatization of Medicare at the likely expense to future seniors, and then proposes cutting high-end tax rates by a whopping 10%, while closing middle class loopholes like the mortgage deduction.

So, let's be clear about what he's proposing: take from the poor and middle class, who are hurting from this recession. Take from them some of the services that are enabling them to survive, take from them the loopholes that make middle class tax rates affordable, take from the people who are being thrown out of work, losing their homes--or, know they are at risk for one or both. Take from them the assurance that in their old age, their health care will be there for them.

What does this great subtraction buy? The first thing is tax cuts for the rich and corporations (almost half of which avoid paying any taxes). What will that buy? More speculation, not more jobs. The rich are already sitting on trillions of dollars; they are not investing in job creation--except possibly in places like China or Brazil.

A large enough cut in government spending to reduce the size of government, could also buy a renewed recession--unless we're lucky enough to have a real recovery before it takes effect.

Which brings us to the budget impasse on the 2011 budget: Boehner and his cohorts demand huge cuts, but they also demand programmatic cuts, like defunding NPR and Planned Parenthood. The programmatic cuts won't cut the deficit, so their argument for them is disingenuous. But the huge cuts to states, to services, to health care, to programs could be a recessionary strong right fist to the economy, especially since the tax cuts to everyone have only enabled unemployment to be pushed back a little; the elite aren't investing their gains in jobs; they're just expecting their workers to work harder--without unions, of course.

So, Ryan and Boehner, and those behind them, want to shove us on the economic path built by the late Roman Empire, in which a few own virtually everything, and everyone else is a slave or a serf.

It weakened Rome, too.

If They Were Really Democrats

There's a class war going on, and instead of siding with the so-called 'middle class', Democrats are saying, "Okay, okay, cut that nasty ol' deficit! Okay, okay, don't tax people with money, we'll sock it to the kids, seniors, poor--and public employees."

The Republicans were voted in on a wave of anger driven by the falsehoods of Foxvestia, and Limbaugh/Pravda, and by the billions from people like the Koch's and the executive class controlling corporations like Goldman Sachs and Exxon.

Democrats can't win the deficit-cutting game. Whatever concessions Democrats make, they are only furthering the agenda of the class that wants to destroy them, and wants to subject the rest of us to their maleficent control. That's what Walker's war on collective bargaining is about.

What Democrats should be doing, if they really are the Party of the People-- their perennial slogan--is fighting loudly for tax increases on the wealthy. The wealthy may have lost a bit in the recession, but they've amassed more wealth in the last two decades than all the rest of the nation combined. The wealthy made off with all but about 10% of US productivity gains since the 1970's: those gains have been prodigious. That's why the top 1% earns as much income as the bottom 95%. Wages and salaries below the top have been nearly flat since the 1970's, yet the size of our economy has doubled.

Why have Democrats caved? The debate is completely one-sided: Republicans say, cut taxes, period, and cut government spending on programs that help people not corporations. Democrats only counter with: let's not cut it that much.

The anger propelling Republican wins has subsided, according to polls: majorities oppose high-handed policies pushed by Wisconsin Governor Walker and other anti-union Republicans.

Democrats should campaign single-mindedly on growing jobs. They should point out: the stimulus worked, but not enough; more is needed: to go from 190,000 new jobs a month to 300-400,000, to get people back to work, to get the economy moving again. Democrats should point out that Republican deficit-cutting policies: gutting programs, laying off workers, will actually increase deficits and cut jobs since they will likely slow growth. They will also impoverish the nation in the future. Democrats should argue that tax-cuts for the wealthy will go mostly to speculation and investments overseas, not more jobs.

Instead, Yeats describes the Democrats: "the best lack all conviction," while their opponents "are full of passionate intensity." "And what rough beast, its hour come round at last/slouches towards Bethlehem to be born?"

Democrats shouldn't cave; they should organize, speak smarter and shout louder than Republicans--truth and the issues are on their side, if only they'd champion them.

Deficit-mongering Endangers Dollar

If you scream about the deficit, but then don't do anything about it, or pass tax cuts that increase it, you actually endanger the nation more than the deficit, itself. The Republicans are forcing this to happen. They are shortening the time before the world's nations will jettison the US Dollar as the world's reserve currency, because US fiscal policy will lose credibility even faster, while the nation will be mired in non-recovery. However, the dollar is likely to lose its special status, anyway, sooner more likely than later.

What matters is not the government deficit, but the trade deficit: the two are not necessarily related. Deficit spending that enhances US jobs, productivity and creativity would actually cut the trade deficit and delay a move away from the dollar. Deficit spending that simply increases our national debt, like the tax cut for the wealthy, will bring us closer to the time when the US Dollar becomes just another currency; it increases our trade deficit and makes the US poorer.

The dollar losing international reserve status will be a very big deal. It will be a disaster for the US, unless the way has been carefully prepared. What's the likelihood of that?

This is what will happen: the US can no longer so freely borrow on international markets: the Fed can't blithely create money as it is doing now with Quantitative Easing. The bigger problem would be: how do we repay (by far) the largest trade deficit in the world? We won't be able to just print dollars for payment. We'll have to earn Renminbi, or Marks or Rials to buy from those places.

Imports will cost much more. Three-dollar gas will be a faint memory: prices would be comparable to Europe's ($5-7 per gallon now), or much higher.

We also won't be able to continue our military mission to control every corner of the globe. That, to me, would be a positive outcome, both for the US and the world. Who would lend to us at the low interest our bonds now pay? Interest costs to maintain our military could bankrupt us, something that happened not only to the Romans, but also led to the overthrow of the Bourbons, ushering in the French Revolution.

Any dollar-denominated asset would be worth much less outside the US. Americans would have to produce more, at lower cost--through subsistence wages, perhaps, or greater efficiency, or probably both--and import less.

Perhaps, an increasingly impoverished majority would demand Equality, as rebelling masses did on the streets of Paris, but it might come too late. The billionaires may have decamped, with their tons of gold (not dollars), just like Tunisia's Ben Ali!

Loss of reserve status could end the American empire. While temporarily poorer, Americans could end up freer and better off--if they throw out the corporate octopus impoverishing us all.

Tax Cuts a Bad Deal

So, the tax-cut compromise is a done deal.

The Republicans were clever; they repeated ad infinitum: don't raise taxes in a recession. But continued tax-cuts for the wealthy will be counterproductive.

We'll have to borrow $700-$800 billion (probably from China or Saudi Arabia) to pay for their lower taxes. But that money will not stimulate the economy. It will buy speculation on the stock market, or investment overseas long before it creates a single job here. It will also exacerbate US inequality. Already the US has one of the most unequal distributions of wealth among developed nations.


Tax cuts for those below $250,000 income, will mostly be spent in the US, on consumer goods, and on homes, creating demand for jobs. Even here, many of the consumer goods would be imports, so many of those dollars will fly out of the country. Leakage of any kind of spending, except direct government expenditures on something like a WPA, is to be expected in an economy as open as ours.

The effects of the tax cuts are not only economic; they are also social. Economic inequality increases social distance. When you have escalating social distance, you lose a sense of community. That's why legislators who have lived lives insulated from economic hardship, elected by money from the wealthy, can credibly threaten to cut off an unemployment extension, or argue that poor rich kids need tax breaks even more than the long-term unemployed need benefits. Further, high inequality is an economic handicap to the nation, since consumption by the wealthy cannot substitute for mass consumption as an economic base for a stable economy; inequality makes economic instability more likely: prosperity depends on a small minority.

Inequality is even a health hazard: inequality of wealth is directly correlated with poorer overall health of the population. This is partly due to unequal access to health care, but is also due to higher levels of anxiety, which extends even to the wealthiest. Why? Greater inequality breeds resentment, crime and violence.

Obama's compromise was a bad deal for everyone. The pre-Bush tax rates for the over $250,000, should have been restored. I think they should be raised, because the top 2% have cornered most of the growth in wealth produced by everyone since 1980. That's why wages have hardly budged since the '70's.

Further, corporations are swimming in cash, and only slowly hiring or loaning out money. So, more money in elite pockets will not promote investment, or create jobs--except maybe in China or Malaysia.

As the recent elections demonstrated, large aggregations of wealth skew the balance of political power. The Compromise illustrates the consequences: a one-year unemployment extension vs two years of high-end tax-cuts and a more unstable economy.

Our equivalent of fifth century Roman Senators has prevailed, to even their ultimate detriment. It is one more step towards our own 476 ( (See: Fall of Rome).

A Global Disease?

It's not just the US that's going crazy. We have Tea Party extremists and anti-immigrant nastiness, but now even Sweden, moderate, neutral, social democratic, has elected an anti-immigrant party to parliament. There are strong anti-immigrant parties in Holland, Denmark and Norway, and similar parties in Central and Eastern Europe. France not only has the National Front, but President Sarkozy's Roma removals pander to anti-immigrant anger.

The Middle East is in turmoil, driven by extremist actions of fewer than 5000 militants leveraging millions.

China's phenomenal growth drives changes globally. Mexicans and Central Americans stream northward, not an invasion, but a flood of desperate people, choosing between privation--exacerbated by American trade policy--and a better life that can be won with hard work. They generate anger in America.

The tea party movement expresses anger, frustration and fear. It taps into the zeitgeist. Our lives are changing, and for ordinary Americans they are not getting better. The Tea Party movement exhibits the extremism of a majority fearful of losing dominance: "We want our country back!" they scream. The KKK was a response to similar changes in the Civil War's aftermath. Then and now, elites used white anxiety to blame victims and ignore the perp--the elites. It isn't just the imminent specter of a majority of minorities; that's only what drives tea party fury. The movement expresses the economic frustrations of the non-elite: it shouldn't be ignored or dismissed.

Progressives should harness that anger. The economic takeover engineered by corporate elites, rationalized by "conservative" think tanks, its funders now funding tea party extremism, is the real reason why wages have stagnated, not just this year, but since the 1970's. Productivity since has increased almost exponentially, but through the Reagan counter-revolution and after, the tiny, wealthy elite at the top has captured its rewards.

That's why unions have been savaged; that's why "free" trade has exported our manufacturing base and jobs; that's why the "recovery" isn't creating jobs now; it's cheaper and safer to drive your fearful workers harder--or export operations to China or Poland.

No wonder people are angry!

Don't sneer at Sharron Angle or Christine O'Donnell. Democrats need to counter with emotional content of their own. Rational argument may support the Democrats' case, but doesn't convince angry people. What could: emotional appeals. Against the greedy, who demand an extension of high income tax cuts: block them and demand taxing Wall Street's rip-offs; unveil a big jobs program, a 21st century WPA; campaign against unfair employers for workers' rights; and promote fair trade that protects America and its workers.

Economic issues can cut close to peoples' jugulars.

Are progressives so afraid of feelings?

In the 1930's, nations went two ways: following Nazi rant, or FDR's democratic alternative. Both made emotional appeals.

Which will it be?

To the Barricades!

Unemployment is painfully high, huge numbers are unemployed long-term, and Congress struggles mightily just to pass an extension of unemployment benefits? "Conservative" Democrats (heartless perhaps) and almost all Republicans voted against. Why? Fear of the deficit.

It's large, but mostly because of the recession, two wars and the hungry military. So-called conservatives say they can't help the unemployed, because it will increase the deficit. But they say Congress should pass tax cut extensions for the wealthy--even though that would increase the debt many billions more than minimal unemployment aid.

Aid to the unemployed, means that people can stay in their homes or apartments, can eat regular meals, can minimally get by, and can look for jobs. That money is nearly all spent in the economy, just on survival. It not only keeps people surviving, it also keeps businesses alive, those providing the necessary goods and services for them.

To get the economy out of its demand trap--too little demand, too much supply--you need to pump up demand by the buyer of last resort: the government can either spend directly, or put money in people's pockets.

However, if taxes for the wealthy are cut, not only does that radically increase the deficit, it has only a weak effect on demand, and little on investment. Here's why: the wealthy spend only some of their money, and less in the United States, since they consume more imports, and travel more. They don't need to spend all the money; they can save it. But does that spark investment? Businesses invest when they foresee demand for their product or service, not because rich people have idle cash. Idle cash fuels speculation, as it did until 2007, and would if the economy continues in the doldrums with high unemployment.

The fear of growing deficits and rising interest on the debt and inflation are misplaced. Lowered interest rates boost growth, but they can go no lower; there is real danger of deflation, not inflation. Further, money spent to put people back to work is the best investment this nation could make.

In addition, there is a push to cut entitlements in order to balance the budget, even though the same "deficit hawks" are promoting lower taxes for the wealthy, and continuation of the war effort--or even escalation. They can all make money on a war with Iran. But doesn't entitlement mean you earned it?

The unemployed and long-term jobless, they don't matter. Just write them off. The stock market's doing fine, profits are up.

Just as in fifth century Rome, the political elite (represented by a 41% controlling minority of the Senate), control the empire with their money. Who said the US was a democracy?

We need a real, (hopefully bloodless) revolution in which the people reclaim their power. Everything will get worse, unless that happens.

Tax Cuts For the Wealthy

That seems to be the refrain of conservatives, Republicans and Tea Party activists: they advocate making the Bush tax cuts permanent. Yet, at the same time, they rail about the admittedly huge government debt. Making the tax cuts permanent, would, it's estimated, increase government debt in the next ten years by well over $2 trillion. And Boehner, the House Republican leader, actually said the tax cuts don't have to be paid for!

Republicans are attempting to gain political traction with the "all debt is bad" crowd, while also currying favor with wealthy fundraisers, and indulging in the you-can-get-it-for-nothing thinking that created the disastrous 2007-8 collapse.

Cutting taxes has stimulated the economy, and increased revenue in some limited situations. It worked with JFK's tax-cuts, because tax rates were very high then (they are very low now), and their reduction made money available for consumption and therefore created incentives for investment (from the added spending boosting demand). They didn't work so well from Reagan through Bush II, because wages did not keep pace, increased consumption was based on adding to private debt; foregone taxes benefited the wealthy, who saw "investment" opportunities in financial speculation, or foreign production. So, the famous Bush tax cuts doubled the US debt, and led to speculative excess that caused the collapse.

Obama's stimulus spending has almost doubled the debt again, but without the stimulus we'd be calling this a Great Depression, not a Great Recession. Maintaining tax-cuts for the wealthy would create greater deficits, but would not stimulate the economy. Why? Banks and individuals are sitting on hoards of cash already, rather than investing, because there is little demand for new production: investment in the face of low or shrinking demand is usually considered foolhardy.

Conservatives have an ideological rationale for high-end tax-cuts: encouraging investment and cutting down the size of government. The former works in limited instances, but won't work now. As for the latter, when in power conservatives have increased government size, while still cutting taxes--hence creating structural deficits, i.e. deficits in good times.

A deficit in bad times is a natural outgrowth of need--people need support and can't pay taxes when unemployed--and partially counters the decline in demand: it is an investment for better times. A deficit during a boom is like living high on your credit card.

Tax cuts to the wealthy, now, would inflate speculation, but would not increase consumption enough to stimulate growth. They would balloon the deficit even further. They might also, finally, drive the world away from the dollar as world reserve currency: Americans would have demonstrated their financial recklessness once again. (The US caused the global downturn by encouraging out of control speculation).

Flight from the Dollar could end the American Empire as we know it.