Mar 24, 2015

March 24, 2015: Pursuing the Idiot Wrong, Siren Song of Greed, Yearning for "Neverland"

One cannot entirely account for the decline of the American Middle Class by simply pointing to the mendacity of the likes of Governor’s Walker of Wisconsin and Snyder of Michigan, as egregious as they are. Both have now transformed their respective states into ‘right-to-work-for-less" or, more appropriately, "right-to-starve" states; but, in fact, the hollowing out of the industrial economy in the Midwest has been going on for over three decades now. Pursuing the "Idiot Wrong"s policies of cutting taxes on the wealthy, deregulation and ‘free-market’ mythology has led to a rapid disinvestment in infrastructure, the exportation of millions of jobs and trillions of dollars, and the impoverishment not only of the public domain but, as the previous post indicates, the country as well. Robert Reich, in a Facebook post earlier this month delineated the broad outlines:

"Forty years ago, the richest 1 percent of Americans took home 10 percent of national income, and helped finance the U.S. government mainly through their tax payments. From World War II until 1981, the top marginal income tax rate never fell below 70 percent. Today, wealthy Americans are taking home almost twice the share of national income they did then (almost 20 percent), but they’re paying a top tax rate that’s close to half what it was then. And they’re financing the government mainly by lending it money. While most of our national debt is owed to foreigners, over 40 percent is owed to other Americans, mostly the very wealthy.

This switch by the super rich – from paying high taxes to lending the government money – means that the rest of us are paying wealthy Americans large amounts of interest every year through our own tax payments. It’s an upward redistribution that’s hidden and never talked about, but marks one of the biggest changes over the last four decades in how the U.S. government is financed." (1)

Former Congressman Richard Gephardt of Missouri made this point while running for President in 1988. One of the reasons why the wealthy class in this country have supported massive deficits and burgeoning debt is that not only are these deficits and this debt the direct result of the massive tax breaks given to them by Reagan and the Republicans but because the investor class holds the debt and is paid interest on it, money is thereby transferred from the lower classes (who pay a greater proportion of their disposable income) to the coffers of the top 10% and especially the top 5% and 1%.; accentuating the dynamic that the higher up the economic ladder the greater the concentrations leading to the conclusions outlined here by the professor.

Again, none of this is new. The works, in the late ‘80's of Kevin Phillips as well as the shrewd and prescient observations by the Congressman passed an early verdict on the failure of Reaganomics, but such warnings have gone unheeded by the Generation of Swine and the leaders they elected leading, as predicted, to the hollowing out of America to the point where we have lost our pre-eminent position in the world.

Because Michigan was so dependent on its automobile industry, it was an economic adage in my youth that when the country caught an economic cold, Michigan came down with pneumonia. We can take a lesson from what has happened to Michigan and the other industrial states. We have experience of what the benefits and, increasingly, the liabilities are when one’s local economy is so dependent on national prosperity. Increasingly, what Michigan, Wisconsin and the other so-called "Rust-Belt" states are to the nation, the United States is quickly becoming, in this global economy, to the world. With the permanent shift from investments in infrastructure, labor and production, education and social services to banking and finance; and with the resulting exportation of high paying union jobs we have been left with nothing to sell but our markets, which is to say we have nothing left to sell but our money. Once the world’s greatest industrial monolith, its banker, the largest creditor nation, we are now the world’s pauper, the largest debtor nation in the world. This is not because of social spending or government deficits. It is because, heeding the siren song of greed, we have steadfastly refused to tax and then invest in ourselves; borrowing instead and investing in everyone else. This is what happens when you follow an economist named Laffer and a politician fresh off the set of "Death Valley Days".

While the good professor says nothing new here, it bears repeating and repeating. Trickle down has never worked, is not now working, and will never work. To think otherwise is delusional; it is a yearning for "Neverland". What happens to Michigan happens to America; what happens to me, happens to you too.

(1) Robert Reich, Facebook posting March 5, 2015

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