Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset – their home – keeps shrinking in value.
Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on – such as schools and roads, or safety nets such as health care for the elderly and poor.
Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power.
These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices – all of which make the financiers even richer, because they own so many of shares of stock and run the casino.
Now, imagine that among these richest of these financiers are people called “private-equity” managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit.
Although these private-equity managers don’t even risk their own money – they round up investors to buy the target companies – they nonetheless pocket 20 percent of those fat profits.
And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent – even though they themselves made no investment and didn’t risk a dime.
Finally, imagine there is a presidential election. One party, called the Republican Party, decides to nominate as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes – a lower tax rate than many in the middle class.
Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more – so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on – Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement.
What happens next?
There are two endings to this fable. You have to decide on which it’s to be.
In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled – beyond your imagination. The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.”
And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway).
But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back. They repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone.
Just a fable, of course. But its ending is up to you.
President Obama didn’t wait. He kicked off his 2012 campaign against Mitt Romney with a hard-hitting speech centered on the House Republicans’ budget plan – which Romney has enthusiastically endorsed.
That plan, by the way, is the most radical reverse-Robin Hood proposal propounded by any political party in modern America. It would save millionaires at least $150,000 a year in taxes while gutting Medicaid, Medicare, Food Stamps, transportation, child nutrition, college aid, and almost everything else average and lower-income Americans depend on.
Here’s what the President had to say about it:
Disguised as a deficit reduction… it is really an attempt to impose a radical vision on our country. It is thinly veiled social Darwinism.
We are likely to hear a lot more about social Darwinism in the months ahead. It was the conservative creed during the late 19th century – legitimizing a politics in which the lackeys of robber barons deposited sacks of money on legislators’ desks, and justifying an economy in which sweat shops were common, urban slums festered, and a significant portion of America was impoverished.
Social Darwinism encapsulated the idea of survival of the fittest (a phrase Charles Darwin never actually used) as applied to societies as a whole. Its chief apostle in America was Yale Professor William Graham Sumner.
Here’s what Sumner had to say in his social-Darwinian classic “What Social Classes Owe to Each Other” (1883):
Let it be understood that we cannot go outside of this alternative: Liberty, inequality, survival of the fittest; not-liberty, equality, survival of the unfittest. The former carries society forward and favors all its best members; the latter carries society downwards and favors all its worst members.
Could there be a better summary of what today’s regressive Republicans believe?
Anyone who says you can get rich through gambling is a fool or a knave. Multiply the size of the prize by your chance of winning it and you’ll always get a number far lower than what you put into the pot. The only sure winners are the organizers – casino owners, state lotteries, and con artists of all kinds.
Organized gambling is a scam. And it particularly preys upon people with lower incomes – who assume they can’t make it big any other way, who often find it hardest to assess the odds, and whose families can least afford to lose the money.
Yet America is now opening the floodgates.
In December, the Department of Justice announced it was reversing its position that all Internet gambling was illegal. That decision is about to create a boom in online gambling. Expect high-stakes poker to be available on every work desk and mobile phone.
Meanwhile, states are increasingly dependent on revenues from casinos, lotteries, and the “Mega Millions” game (in which 42 states pool their grand prize) to partly refill state coffers.
Given who plays, this is one of the most regressive taxes in the nation. In the most recent Mega Millions game – whose winning tickets were drawn last week and whose jackpot rose to $640 million – lottery ticket buyers shelled out some $1.5 billion, most of which went to state governments.
And then there’s the “Jumpstart Our Business Startups” or “JOBS” Act, which President Obama is expected to sign into law Thursday. It allows so-called “crowd funding” by which people whose net worth is less than $100,000 can gamble away (invest) up to 5 percent of their annual incomes in any get-rich-quick scam (start-up) that any huckster (entrepreneur) may sell them.
Forget the usual investor disclosures or other protections. In the interest of “streamlining,” Congress has streamlined the way to fraud. Although start-ups will have to market themselves through third-party portals approved by the Securities and Exchange Commission, this is like limiting Bernie Madoff to making pitches over the radio. The SEC can barely keep track of Wall Street let alone thousands of Internet portals. Small wonder SEC Chair Mary Schapiro has been one of most outspoken critics of bill.
The bill was sold to Congress as a way to promote jobs (note the acronym) on the supposition that small start-ups create huge numbers of them. Wrong. That assumption comes from research by the Kauffman Foundation, which counted as a “start-up job” every laid-off worker who morphed into an independent contractor.
I’m all in favor of more entrepreneurship, and it’s good to give investors another way to participate in emerging companies. But this bill doesn’t do nearly enough to protect the vulnerable.
America’s capital market was already a giant casino. Why now turn the rest of America into one?
Luxury retailers are smiling. So are the owners of high-end restaurants, sellers of upscale cars, vacation planners, financial advisors, and personal coaches. For them and their customers and clients the recession is over. The recovery is now full speed.
But the rest of America isn’t enjoying an economic recovery. It’s still sick. Many Americans remain in critical condition.
The Commerce Department reported Thursday that the economy grew at a 3 percent annual rate last quarter (far better than the measly 1.8 percent third quarter growth). Personal income also jumped. Americans raked in over $13 trillion, $3.3 billion more than previously thought.
Yet it’s almost a certainly that all the gains went to the top 10 percent, and the lion’s share to the top 1 percent. Over a third of the gains went to 15,600 super-rich households in the top one-tenth of one percent.
We don’t know this for sure because all the data aren’t in for 2011. But this is what happened in 2010, the most recent year for which we have reliable data, and there’s no reason to believe the trajectory changed in 2011 or that it will change this year.
In fact, recoveries are becoming more and more lopsided.
The top 1 percent got 45 percent of Clinton-era economic growth, and 65 percent of the economic growth during the Bush era.
According to an analysis of tax returns by Emmanuel Saez and Thomas Pikkety, the top 1 percent pocketed 93 percent of the gains in 2010. 37 percent of the gains went to the top one-tenth of one percent. No one below the richest 10 percent saw any gain at all.
In fact, most of the bottom 90 percent have lost ground. Their average adjusted gross income was $29,840 in 2010. That’s down $127 from 2009, and down $4,843 from 2000 (all adjusted for inflation).
Meanwhile, employer-provided benefits continue to decline among the bottom 90 percent, according to the Commerce Department. The share of people with health insurance from their employers dropped from 59.8 percent in 2007 to 55.3 percent in 2010. And the share of private-sector workers with retirement plans dropped from 42 percent in 2007 to 39.5 percent in 2010.
If you’re among the richest 10 percent, a big chunk of your savings are in the stock market where you’ve had nice gains over the last two years. The value of financial assets held by Americans surged by $1.46 trillion in the fourth quarter of 2011.
But if you’re in the bottom 90 percent, you own few if any shares of stock. Your biggest asset is your home. Home prices are down over a third from their 2006 peak, and they’re still dropping. The median house price in February was 6.2 percent lower than a year ago.
Republicans would rather not talk about widening inequality to begin with. The reverse-Robin Hood budget plan just announced by Paul Ryan and House Republicans (and endorsed by Mitt Romney) would make the lopsidedness far worse – dramatically cutting taxes on the rich and slashing public services everyone else depends on.
Fed Chief Ben Bernanke – who doesn’t have to face voters on Election Day – says the U.S. economy needs to grow faster if it’s to produce enough jobs to bring down unemployment. But he leaves out the critical point.
We can’t possibly grow faster if the vast majority of Americans, who are still losing ground, don’t have the money to buy more of the things American workers produce. There’s no way spending by the richest 10 percent – the only ones gaining ground – will be enough to get the economy out of first gear.
As the Supreme Court shows every sign of throwing out “Obamacare” and leaving 30 million Americans without health insurance, another drama is being played out in the quiet corridors of the Federal Reserve system that may affect even more of us.
Taxpayers will be on the hook for another giant Wall Street bailout, and the economy won’t be mended, unless the nation’s biggest banks are broken up.
That’s not just me talking, or the Occupier movement, or that wayward executive who resigned from Goldman Sachs a few weeks ago. It’s the conclusion of the Dallas Federal Reserve, one of the most conservative of the Fed’s regional banks.
The lead essay in its just released annual report says a cartel of giant banks continues to hobble the recovery and poses an ongoing danger to the economy.
Wall Street’s increasing power remains “difficult to control because they have the lawyers and the money to resist the pressures of federal regulation.” The Dodd-Frank act that was supposed to control Wall Street “leaves TBTF [too big to fail] entrenched.”
The Dallas Fed goes on to argue that the Fed’s easy money policy can’t be much help to the U.S. economy as long as Wall Street is “still clogged with toxic assets accumulated in the boom years.”
So what’s the answer, according to the Dallas Fed? It’s “breaking up the nation’s biggest banks into smaller units.”
Thud. That’s the sound the report hitting the desks of Wall Street executives. They and their Washington lobbyists are doing what they can to make sure this report is discredited and buried.
When I spoke with one of the Street’s major defenders in the Capitol this morning he snorted “Dallas represents small regional banks that are jealous of Wall Street.” When I reminded him the Dallas Fed was about the most conservative of the regional banks and knew first-hand about the dangers of under-regulated banks — the Savings and Loan crisis ripped through Texas like nowhere else — he said “Dallas doesn’t know its [backside] from a prairie gopher hole.”
So as Republicans make the repeal of “Obamacare” their primary objective (and Alito, Scalia, Thomas, Roberts, and perhaps Kennedy sharpen their knives) another drama is taking place at the Fed. The question is whether Bernanke and company in Washington will heed the warnings coming from its Dallas branch, and amplify the message.
Not surprisingly, today’s debut Supreme Court argument over the so-called “individual mandate” requiring everyone to buy health insurance revolved around epistemological niceties such as the meaning of a “tax,” and the question of whether the issue is ripe for review.
Behind this judicial foreplay is the brute political fact that if the Court decides the individual mandate is an unconstitutional extension of federal authority, the entire law starts unraveling.
But with a bit of political jujitsu, the President could turn any such defeat into a victory for a single-payer healthcare system – Medicare for all.
The dilemma at the heart of the new law is that it continues to depend on private health insurers, who have to make a profit or at least pay all their costs including marketing and advertising.
Yet the only way private insurers can afford to cover everyone with pre-existing health problems, as the new law requires, is to have every American buy health insurance – including young and healthier people who are unlikely to rack up large healthcare costs.
This dilemma is the product of political compromise. You’ll remember the Administration couldn’t get the votes for a single-payer system such as Medicare for all. It hardly tried. Not a single Republican would even agree to a bill giving Americans the option of buying into it.
But don’t expect the Supreme Court to address this dilemma. It lies buried under an avalanche of constitutional argument.
Those who are defending the law in Court say the federal government has authority to compel Americans to buy health insurance under the Commerce Clause of the Constitution, which gives Washington the power to regulate interstate commerce. They argue our sprawling health insurance system surely extends beyond an individual state.
Those who are opposing the law say a requirement that individuals contract with private insurance companies isn’t regulation of interstate commerce. It’s coercion of individuals.
Unhappily for Obama and the Democrats, most Americans don’t seem to like the individual mandate very much anyway. Many on the political right believe it a threat to individual liberty. Many on the left object to being required to buy something from a private company.
The President and the Democrats could have avoided this dilemma in the first place if they’d insisted on Medicare for all, or at least a public option.
After all, Social Security and Medicare require every working American to “buy” them. The purchase happens automatically in the form of a deduction from everyone’s paychecks. But because Social Security and Medicare are government programs financed by payroll taxes they don’t feel like mandatory purchases.
Americans don’t mind mandates in the form of payroll taxes for Social Security or Medicare. In fact, both programs are so popular even conservative Republicans were heard to shout “don’t take away my Medicare!” at rallies opposed to the new health care law.
There’s no question payroll taxes are constitutional, because there’s no doubt that the federal government can tax people in order to finance particular public benefits. But requiring citizens to buy something from a private company is different because private companies aren’t directly accountable to the public. They’re accountable to their owners and their purpose is to maximize profits. What if they monopolize the market and charge humongous premiums? (Some already seem to be doing this.)
Even if private health insurers are organized as not-for-profits, there’s still a problem of public accountability. What’s to prevent top executives from being paid small fortunes? (In more than a few cases this is already happening.)
Moreover, compared to private insurance, Medicare is a great deal. Its administrative costs are only around 3 percent, while the administrative costs of private insurers eat up 30 to 40 percent of premiums. Medicare’s costs are even below the 5 percent to 10 percent administrative costs borne by large companies that self-insure, and under the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.
So why not Medicare for all?
Because Republicans have mastered the art of political jujitsu. Their strategy has been to demonize government and seek to privatize everything that might otherwise be a public program financed by tax dollars (see Paul Ryan’s plan for turning Medicare into vouchers). Then they go to court and argue that any mandatory purchase is unconstitutional because it exceeds the government’s authority.
Obama and the Democrats should do the reverse. If the Supreme Court strikes down the individual mandate in the new health law, private insurers will swarm Capitol Hill demanding that the law be amended to remove the requirement that they cover people with pre-existing conditions.
When this happens, Obama and the Democrats should say they’re willing to remove that requirement – but only if Medicare is available to all, financed by payroll taxes.
If they did this the public will be behind them — as will the Supreme Court.
Romney spokesman Eric Fehrnstrom couldn’t have said it better – or worse. When asked by CNN Wednesday morning whether Mitt was being pushed so far to the right by Rick Santorum and Newt Gingrich that he’d be handicapped in the general election, Fehrnstrom said “you hit a reset button for the fall campaign. Everything changes. It’s almost like an Etch-A-Sketch. You kind of shake it up and restart all over again.”
An Etch-A-Sketch, for those of you under twenty, is a thick flat gray screen that comes in a plastic frame with two knobs on the front in the lower corners – one left, one right. Twisting the knobs changes the aluminum powder on the back of the screen, creating completely new images. If you twist the left knob, you alter the powder horizontially; twist the right nob, and you alter it vertically.
Remind you of anyone?
When Mitt ran for governor of Massachusetts he twisted the left knob, moving horizontally to the left. (I know first hand because I ran in the Democratic primary that year.) He became a social liberal, tolerant of abortion and willing to entertain the idea that gays and lesbians should be able to form civil unions. He was also an economic moderate interested in seeking ways to expand health-care coverage.
But ever since Mitt left the governor’s office, he’s been twisting the right nob, moving downward into the muck of regressive Republicanism in pursuit of the Republican nomination.
Etch-A-Sketch was introduced in 1959 near the peak of the baby boom. (It was inducted into the National Toy Hall of Fame in 1998, and in 2003 the Toy Industry Association named it one of the hundred most memorable toys of the twentieth century.)
But Etch-A-Sketch has been replaced by digital toys that have the capacity to play and replay videos. These new video toys aren’t just for kids. Almost every voting adult has one, or has easy access to one.
Get it? It won’t be nearly as easy for Mitt to “shake it up and start all over again” for the general election of 2012, should he get the nomination. Try as he might, Romney won’t be able to twist the knobs and create a brand new picture.
There will be too many videos of him during the primary saying things that were designed to appeal to increasingly far-right, far-out GOP primary voters – but will strike most Americans as bizarre if not despicable.
America has always been the kind of place where people can reinvent themselves, escaping from their pasts by turning the knobs on their own virtual Etch-A-Sketch identities. But the ubiquity of video technology has made this much, much harder to do. Videos have a way of reminding everyone who you are — and were.
If he makes it to the general election, Mitt won’t be able to hide his primary self.
In announcing the Republicans’ new budget and tax plan Tuesday, House Budget Committee Chairman Paul Ryan said “We are sharpening the contrast between the path that we’re proposing and the path of debt and decline the president has placed us upon.”
Ryan is right about sharpening the contrast. But the plan doesn’t do much to reduce the debt. Even by its own estimate the deficit would drop to $166 billion in 2018 and then begin growing again.
The real contrast is over what the plan does for the rich and what it does to everyone else. It reduces the top individual and corporate tax rates to 25 percent. This would give the wealthiest Americans an average tax cut of at least $150,000 a year.
The money would come out of programs for the elderly, lower-middle families, and the poor.
Seniors would get subsidies to buy private health insurance or Medicare – but the subsidies would be capped. So as medical costs increased, seniors would fall further and further behind.
Other cuts would come out of food stamps, Pell grants to offset the college tuition of kids from poor families, and scores of other programs that now help middle-income and the poor.
The plan also calls for repealing Obama’s health-care overhaul, thereby eliminating healthcare for 30 million Americans and allowing insurers to discriminate against (and drop from coverage) people with pre-existing conditions.
The plan would carve an additional $19 billion out of next year’s “discretionary” spending over and above what Democrats agreed to last year. Needless to say, discretionary spending includes most of programs for lower-income families.
Not surprisingly, the Pentagon would be spared.
So what’s the guiding principle here? Pure social Darwinism. Reward the rich and cut off the help to anyone who needs it.
Ryan says too many Americans rely on government benefits. “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency.”
Well, I have news for Paul Ryan. Almost 23 million able-bodied people still can’t find work. They’re not being lulled into dependency. They and their families could use some help. Even if the economy continues to generate new jobs at the rate it’s been going the last three months, we wouldn’t see normal rates of unemployment until 2017.
And most Americans who do have jobs continue to lose ground. New research by professors EmmanualSaez and Thomas Pikkety show that the average adjusted gross income of the bottom 90 percent was $29,840 in 2010 — down $127 from 2009 and down $4,842 from 2000 — and just slightly higher than it was forty-six years ago in 1966 (all figures adjusted for inflation).
They could use better schools, access to higher education, lower-cost health care, improved public transportation, and lots of other things Ryan and his colleagues are intent on removing.
Meanwhile, America’s rich continue to grow richer — and many of them (and their heirs) are being lulled into lives whose hardest task is summoning the help.
Anyone who thought the Great Recession might reduce America’s wild lurch toward wild inequality should think again. The most recent data show that just 15,600 super-rich households – the top 1 tenth of 1 percent – pocketed 37 percent of all the economic gains in 2010. The rest of the gains went to others in the top 10 percent.
Republican Social Darwinists are determined that the Bush tax cuts of 2001 and 2003 be made permanent. Those cuts saved the richest 1 percent of taxpayers (roughly 1.4 million people) more money on their taxes last year than the rest of America’s 141 million taxpayers received in total income.
Thank you,House Republicans, for “sharpening the contrast” between your radical Social Darwinism and those of us who still cling to the belief that the most fortunate have a responsibility to the rest.
Republicans are desperate. They can’t attack Obama on jobs because the jobs picture is improving.
Their attack on the Administration’s rule requiring insurers to cover contraception has backfired, raising hackles even among many Republican women.
Their attack on Obama for raising gas prices has elicited scorn from economists of all persuasions who know oil prices are set in global markets and that demand in the United States has actually fallen.
Their presidential ambitions are being trampled in a furious fraternal war among Republican candidates.
Their Tea Party wing wants to reopen the budget deal forged with Democrats after Republicans got bloodied by threatening to block an increase in the debt limit.
So what are Republicans to do now? What they always do when they have nothing else to say.
Call for a tax cut, of course.
It doesn’t matter that their new “tax reform” plan (leaked to the Wall Street Journal late Monday, to be released Tuesday morning) has as much chance of being enacted as Herman Cain has of being elected president.
It doesn’t matter than the plan doesn’t detail how they plan to pay for the tax cuts. Or whether an even bigger whack would have to be taken out of Medicare than Paul Ryan’s original voucher plan – which would drowned many elderly under rising medical costs.
It doesn’t even matter that the plan would probably raise taxes on many lower-income Americans,
All that matters is the headlines.
“House Republican Budget to Propose Lower Income Tax Rates,” says Bloomberg Businessweek. “Republican Budget Plan Seeks to Play Up Tax Reform,” says Reuters. “GOP’s Budget Targets Taxes,” blares the Wall Street Journal.
Presto. Republicans have gotten what they wanted on the basis of saying absolutely nothing.
Gas prices continue to rise, which is finally giving Republicans an issue. Mitt Romney is demanding the President open up more domestic drilling; the super PAC behind Rick Santorum just released a new ad in Louisiana blasting the President on gas prices; and the GOP is attacking the White House on the Keystone XL Pipeline.
But the rise in gas prices has almost nothing to do with energy policy. It has everything to do with America’s continuing failure to adequately regulate Wall Street. But don’t hold your breath waiting for Republicans to tell the truth.
As I’ve noted before, oil supplies aren’t being squeezed. Over 80 percent of America’s energy needs are now being satisfied by domestic supplies. In fact, we’re starting to become an energy exporter. Demand for oil isn’t rising in any event. Demand is down in the U.S. compared to last year at this time, and global demand is still moderate given the economic slowdowns in Europe and China.
But Wall Street is betting on higher oil prices in the future — and that betting is causing prices to rise. The Street is laying odds that unrest in Syria will spill over into other countries or that tensions with Iran will affect the Persian Gulf, and that global demand will pick up as American consumers bounce back to life.
These bets are pushing up oil prices because Wall Street firms and other big financial players now dominate oil trading.
Financial speculators historically accounted for about 30 percent of oil contracts, producers and end users for about 70 percent. But today speculators account for 64 percent of all contracts.
Bart Chilton, a commissioner at the Commodity Futures Trading Commission — the federal agency that regulates trading in oil futures, among other commodities — warns that too few financial players control too much of the oil market. This allows them to push oil prices higher and higher — not only on the basis of their expectations about the future but also expectations about how high other speculators will drive the price.
In other words, a relatively few players with very deep pockets are placing huge bets on oil — and you’re paying.
Chilton estimates that drivers of small cars like Honda Civics are paying an extra $7.30 every time they fill up — and that money is going into the pockets of Wall Street speculators. Drivers of larger vehicles like the Ford Explorer are paying speculators $10.41 when they fill up.
Funny, but I don’t hear Republicans rail against Wall Street speculators. Could this have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?
Wall Street isn’t bankrolling Democrats nearly as much this time around because the Street is still smarting from the Dodd-Frank Wall Street reform law pushed by the Democrats, and from the president’s offhand remark in 2010 calling the denizens of the Street “fat cats.”
The Commodity Futures Trading Commission is trying to limit how much speculators can bet in oil futures — a power it was given by Dodd-Frank. It issued a rule in October, but it won’t take effect for another year.
Meanwhile, Wall Street has gone to court to stop the rule. It’s already won a stay.
As rising gas prices start wagging the election-year dog, the President should let America know what’s really causing prices to rise.