If someone told you that the Great Recession was purposefully engineered by a person or persons at the highest level of the U.S. Government, would you believe them? I don't think I would, but before you answer too quickly, I suggest you read the text of Bill Moyers speech, "Welcome to the Plutocracy!", delivered at Boston University on October 29, 2010.
If someone told you that the 1980 tax cuts were intentionally designed to foster the transfer of wealth to the top, and to create massive deficits, thereby forcing the government to reduce spending by cutting or eliminating entitlements, would you take them seriously? Probably not, but if you were to examine the history of tax cuts, the growing deficits, the upward movement of wealth, the outsourcing of jobs and the decline in income for the bottom 90 percent of wage earners, since 1980, it becomes abundantly clear that this is exactly what has happened. There is a direct cause and effect relationship.
With a national unemployment rate of 9.6%, purported to be as high as 22% by some economists, President Obama has pledged to make jobs and the economy his number one priority, and some Republicans have agreed that this is Congress' main goal. However, neither side has advanced specific plans to address the unemployment issue. An estimated 15 million workers are currently unemployed and without additional funds for jobs programs, it is unlikely that the unemployment rate will be reduced without additional spending.
The U.S. lost six million factory jobs during the last twelve years, one out of every three manufacturing jobs. Nearly 40,000 manufacturing plants closed between 2001 and 2008. If Congress and the President plan to attack the unemployment issue, there will be little time for spending cuts. With a budget deficit of an estimated $1.6 trillion dollars and a national debt of $13.7 trillion, how could the government possibly consider cutting taxes for the richest Americans, whose wealth has grown disproportionately, and who currently hold $1.8 trillion in savings which could be used for investment?
Will the new Congress do anything to create jobs? Senator Mitch McConnell has identified three Republican goals for the 112th U.S. Congress: repeal health care reform, cut spending, and reduce the deficit. Are these goals indicative of job creation initiatives?
As Congress returns for their Lame Duck session next week, the debate over jobs, tax cuts, and spending cuts rages on. Republican leaders Sen. Mitch McConnel (KY), Rep. John Boehner (OH), and Rep. Eric Cantor (VA) are insisting that the Bush tax cuts, which are set to expire on January 1, 2011, be extended only if the tax cuts for the wealthiest Americans are extended as well. It is estimated that "top end" tax cuts would add $700 billion to the national debt over the next 10 years, and four trillion dollars altogether. The size and growth of the debt was a major issue during this years election campaign, but it is a foregone conclusion that national debt will never be paid off under our current economic system, because there are simply not enough dollars in existence to retire it. The U.S. Government could pay down the debt if it had a revenue surplus, but it is estimated that the government will run up a $1.6 trillion deficit this year.
Republican congressional leaders have pledged to balance the budget by cutting programs and entitlements, but here again, the reality is greater than the promise. Even with steep cuts in programs and entitlements, the defense budget and the interest on the debt would make balancing the budget a near impossibility, with the current revenues and unemployment rate. Just the interest on the debt consumes about five months of current annual revenues alone. If the tax cuts are extended, the national debt will continue to increase at an accelerated rate and balancing the budget would be even more difficult. Tax cuts and a balanced budget are diametrically opposed objectives under current economic conditions.
On her MSNBC show Tuesday, Rachel Maddow revealed what the value of the average tax cut would be if the Democratic plan were compared to the Republican plan (http://maddowblog.msnbc.msn.com/). Basically, the plans were nearly identical for all income groups up to $200,000, but widened for those earning $200,000 to $500,000, from $6,743 (D) to $7,152 (R). The "high end" tax savings were much greater under the Republican plan for those earning between $500,000 and $1,000,000 ; $6,701 (D) vs $17,467 (R); and for those incomes over $1,000,000 tax savings increased dramatically; $6,349 (D) vs $103,835 (R). With the tax cuts illustrated as circles Maddow's illustration resembled a series of bubbles, growing increasingly larger, with one giant "bubble" at the bottom. Republican tax cuts would provide the greatest savings to those persons earning over $1,000,000. President Obama has indicated that he may be willing to consider a temporary extension of the tax cuts for highest incomes, but he is opposed to permanent cuts for the wealthiest Americans.
The "wealth bubble" has created a dynamic whereby the the deficits cannot be decreased without significant tax increases, drastic cuts in spending, including entitlements and defense, or a boom in economic growth and tax revenues. Since tax increases are considered the third rail of politics, Republicans remain confident that they could stave off any efforts to increase taxes, even though the wealthy are benefiting from some of the lowest rates in history since the early years of the income tax. Current economic conditions offer little promise that the economy will expand fast enough to create jobs or increase tax revenues, possibly for several years. That leaves spending cuts as the primary target for congressional Republicans, with health care reform and entitlements as the most likely victims of the budget cutting knife.
Still, with America's upper class doing so well economically while the remainder of the nation struggles with unemployment, home foreclosures, bankruptcies, tight credit, and declining incomes, dramatic cuts in spending and entitlements will devastate those who rely upon these benefits.
Currently, there are approximately 45 million Americans living in poverty. After the Johnson administration's War on Poverty, the poverty rates declined steadily before reaching a low of 11.1 percent in 1973. Over the next decade, the poverty rate fluctuated between 11.1 and 12.6 percent, but it began to rise steadily again in 1980. By 1983, the number of poor individuals had risen to 15.2 percent. It remained above 12.8 percent for the next 10 years reaching 15.1 percent by 1993. The rate declined for the remainder of the decade, to 11.3 percent by 2000, but it has been increasing ever since.
As poverty rates increased, average income for the bottom 90 percent of Americans remained stagnant. Bill Moyers illustrates this point so well in his "Welcome to the Plutocracy!" speech. Average income for the bottom 90% of workers increased by 75% from $17,719 in 1950, to $30,941 in 1980. However, since 1980, worker income has increased from $30,941 to $31,244, a gain of just $303 in 28 years. During this same period, the price of a new home rose from $72,400 to $283,000 in 2005.
Between 1983 and 2004, of all the new financial wealth created by the American economy, 42% of it went to the top one percent. In 1976, the top one percent earned 19.9% of all income, but by 2004, their share of the income had risen to 34.3 percent, over a third of all earned income. In 1980 the top income tax rates were cut from 70% to 28%. There is a direct correlation between income tax cuts and the top income tax rates, the ballooning debt, and rising incomes for the wealthiest Americans. By 2007, CEO annual pay averaged 344 times the annual pay of typical American workers and the wealthiest 10% were now earning 50% of all income. The top one percent of the population controls as much wealth as the bottom 90 percent.
The wealth bubble, like the housing bubble, represents an eminent threat to the economic stability of the nation, the well-being of the American people, and the principles of democracy. No one can say with any certainty how America's financial problems will ultimately be resolved, but when an Ohio political fund-raiser, Mark Hanna, attempted to establish a Plutocracy under the McKinley administration over a hundred years ago, it disrupted the entire economic landscape of the nation. According to Moyers, "Hanna believed the state (of Ohio) existed for property. It had no other function. Great wealth was to be gained through monopoly, through using the State for private ends; it was axiomatic therefore that businessmen should run the government and run it for personal profit." Moyers describes plutonomy as "an economic system where the privileged few make sure the rich get richer and that government helps them do it."
Inflated by generous tax cuts, supported by government policies and protections, and rescued by TARP, the Wealth Bubble has effectively crushed the base of support for the majority of Americans. While the Plutocrats were padding their bank accounts with huge bonuses and investments, without risk and at public expense, the life support network for the majority was rapidly crumbling. Aside from some token tax cuts plus meager and unreliable unemployment benefits, the victims of this government coup were left at sea without a paddle. Their factories had closed, their jobs were gone, their homes were seized, they were drowning in debt, they had no means of support all while the government squabbled over a health care reform bill, which.offered little more than another economic bonanza for the big insurance providers and pharmaceutical companies.
Will the next Congress operate any differently than the last? The advocates for the Bubbleheads have shown no sign of retreating. In fact they challenged the President outright and he immediately began to capitulate on his position on the tax extension for the rich. Even the most left wing members of Congress shy away from any mention of a possible tax increase, even though they all know that it is the only possible way to balance the budget or to equalize the distribution of wealth, without totally dismantling the federal government. Unfortunately, many of these Bubbleheads no longer have any sense of nationality or empathy for the American people, because most of them now operate in global markets. With a new crop of congressional candidates freshly stuffed into the Bubblehead's back pockets, the American people should expect congress to operate exactly as they have for the past 30 years. This is not a time for negotiation or concession because the people have nothing left to concede. It is time to stand up to the Bubbleheads and demand that they return control of the nation to the people. Your country is now under the control of foreign interests and they are living among you.