Saturday, August 07, 2010

(STICKY) (OPEDNEWS US) The Republican plan to wreck the economy and then blame the Dems

COMMENT - The same goes for Zambia. For 'economic elite', you can fill in 'foreign owned mines' ($5 billion of Zambia's GDP). For 'Republican Party', fill in the IMF and World Bank, because they are of one and the same ideology.

The Republican plan to wreck the economy and then blame the Dems. Will it work?
By Richard Clark

The Republican Party and its powerful allies in the right-wing news media made it clear from the moment Barack Obama took office that they would demonize everything he tried to do, especially with respect to the economy.

Knowing that progressives had no comparable media infrastructure with which to respond and that many Democrats would cower when attacked the Republicans now appear to have convinced many Americans to hand congressional power back to the GOP, a situation that Stephen Crockett addresses in this Consortium News article, a synopsis of which follows here.

Republicans in Congress have decided that sabotaging economic recovery and employment growth is their best tactic for electoral gains in November as long as they can pin the blame for all the joblessness and the bad economy on the Democrats. And this it seems fairly likely they will succeed in doing, given that most Dem voters are essentially asleep at the wheel when it comes to really understanding how our political economic system works. Signs of this Republican plan have been cropping up since the Democratic victories in 2008.

Here are the things you need to understand, to clearly see how this Republican plan will work:

1. Economic recessions and depressions almost always result from insufficient "effective" consumer demand for goods and services produced domestically. In economic terms, merely wanting something does not constitute "effective demand." For a want to become an "effective" demand for goods or services, it must be accompanied by the monetary ability to actually make the purchase.

2. Jobs are not created by just having large pools of investment money available, as most big corporations and banks now do. There must also be the opportunity to invest in a business that will have customers who have the money to buy the goods and services. Then and only then will investment money flow into business opportunities and job creation.

3. Over the last 30 years, the Republican-Right economic theory that economic prosperity and employment automatically "trickle-down from the wealthy" has been proven again and again to be fallacious. Tax cuts for the wealthy create huge investment money pools -- but not jobs.

4. Republicans are seeking to extend the tax cuts for the wealthy by falsely stating that increases in taxes for the upper 2% of income earners would hurt demand and prolong the economic downturn. Experience and history prove otherwise. The large majority of buying is done by the remaining 98% of the population. The top 2% invest much of their income, not spend it on consumer goods. Besides, there are not that many of them.

Implications for the larger economy

Tax cuts at the highest marginal income brackets simply serve to concentrate wealth and political power in the hands of the economic elite. This power of the economic elite then pushes government policy in directions that dramatically cut the percentage of the nation's wealth and income that goes to the large majority of Americans. And this has been happening for at least the last 30 years. Hence the decimation of America's middle class.

The ever reduced incomes and wealth holdings of the middle class cuts into the ability of most Americans to buy goods and services. As a result, the economy falters because most customers do not have enough disposable income to keep the flow of goods and services at a level that is sufficient to generate the number of jobs and the kind of incomes that a vibrant economy and a healthy middle class requires.

That part of the national income that previously (prior to 1975) would have ended up in the hands of America's great middle class, as disposable income, has for more than 30 years been increasingly diverted into the pockets of our economic elite who, because they already had more money than they could possibly spend on goods and services, have used most of this recent "windfall money" to invest in things that turned out to be "bubbles." As a result, sound business enterprises lacked the numbers of middle class customers they had always depended upon. As a result, many such businesses faltered and had to start laying off employees and/or moving their factories or other operations to low-wage countries.

Why middle-class tax cuts are important

Middle-class tax cuts increase the disposable income of those members of society who spend the vast majority of their incomes and have little left over to save. The money changes hands over and over again (instead of either creating some kind of bubble or sitting idle). This is the great multiplier effect that people learn about when they take a course in, or read a basic text on, economics. Extending unemployment benefits has a huge multiplier effect as well. This is because unemployment benefits are so very badly needed by the recipients that virtually every penny of it gets spent on goods and services, immediately.

Excessive concentration of wealth and income in the hands of the financial elite stifles this kind of middle class spending and thus cripples our economy. And even though all the Republican policies for the past 100 years have been designed to concentrate wealth and income in the hands of the very few, and have always had the effect of crippling the economy, the political-economic dogma of the hard right obviously does not die easily. Why not? Because the very rich spend billions every year keeping it alive! For what purpose? For the purpose of multiplying their incomes, through tax breaks won in Congress by the politicians whose campaigns they pay for, and through the huge sums of money they can "earn" by buying stocks cheap after a market crash, and then selling 'dear' after the market recovers.

Some other ways that the bought-and-paid-for politicians of the rich help their masters stay rich

Failure to enforce anti-monopoly laws, thus permitting price gouging. Failure to cap interest rates, thereby further concentrating wealth in the hands of the rich, which thereby reduces consumer spending and in that way drags the economy down, often leading to a collapse in the stock market, which then allows the rich yet another great stock buying opportunity.

Passage of laws that encourage union-busting, which keeps wages and benefits down, thereby maximizing profits. Problem is, once again, it undermines the purchasing power of workers, leading to a recession.

Passage of laws that lead to the privatizing of government services, which makes plenty of money for the rich but costs consumers more in the way of out-of-pocket expenses that were previously covered by government. This reduces disposable income for these consumers, which of course leads to the same kind of business slowdown already described.

Passage of laws that allow employers to reduce benefits and increase co-pays. This increases the cost-of-living for workers. As a result, these workers once again have less disposable income to spend on goods and services, which, as we've seen, slows down the economy.

Every time the rich reach the levels economic concentration that currently exist, we have a serious depression. Economic concentration of wealth and income are currently at levels very similar to those just before the Great Depression in 1929. And the current level of concentration is a direct result of increasingly "Republicanized" governmental policies which the political whores of the rich have been enacting over the past 30 years, just as their counterparts did before the depression of 1929.

The only reason our current situation has not quite deteriorated to that of the last Great Depression is that the Republicans have not (yet?) been successful in undoing all of the protective reforms (like the Glass-Steagall Act which was repealed in 1999 and which had been enacted after the financial collapse in 1929).

Despite repeated attacks by Republicans, the social safety net remains only damaged but not destroyed. Republican attempts to gut Social Security continue. The attempt to "privatize" Social Security (i.e. make all that money available to Wall Street and the stock market) keeps coming back to threaten the stability and viability of this program. However, simply cutting Social Security benefits (instead of increasing them as should be done) seems to be the avenue of Republican attack most likely to succeed. It is an approach that's being pushed by most Republicans and a few corporatist Democrats.

A wiser economic approach to making sure Social Security will never "go broke" would be to simply remove the income ceiling above which Social Security taxes are not paid. Why should almost all workers be taxed at over 13% to fund social security, while those making a million a year are paying closer to 1% and those making 10 million dollars a year are taxed at around 1/10th of 1% on their income?

Social Security surpluses were "borrowed" by the federal government so they could fund annual deficits created by cutting taxes for the wealthiest Americans, cutting taxes on corporations by huge margins, and nearly eliminating taxes on imports. Therefore it is only fair that corporations, wealthy Americans and foreign exporters selling in the American market pay higher taxes to compensate for these previous decades of "borrowing," since they reaped the benefits of all that "borrowing."

Conventional economic policy says that government should run surpluses in good economic times and deficits during economic downturns. This helps reduce the severity of economic cycles. Under the Republican presidencies of Reagan and both Bushes, however, we did exactly the opposite, and thereby created both the current downturn and the debt crisis. The vast majority of our total national debt was created under these three conservative Republican presidents.

In the service of their masters

Currently, the Republicans in Congress have fought every measure to increase employment and help small businesses. They have fought all kinds of economic reforms that would curb corporate abuses of consumers, shareholders or workers. They have also loyally fought all attempts to curb excessive corporate political or economic power. They have been against any measure that would increase demand for goods and services or levels of employment. It is therefore not hard not to conclude that the Republicans want to worsen the economic downturn until it reaches Great-Depression levels, and then pin the blame on Obama. They believe that most voters, political sleep walkers that they are, will automatically and thoughtlessly blame whatever administration is in power for a collapsed or failed economy. They understand that most voters simply lack the education and knowledge to realize that this economic downturn was created by "Republicanizing" our economy. And with tons of corporate money to fund their efforts, and a corporate dominated media at their disposal, it might very well work.

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