Original Link: http://smirkingchimp.com/thread/william-rivers-pitt/36956/clarence-thomas-must-go
By William Rivers Pitt
"Ethics is knowing the difference between what you have a right to do and what is right to do."
-- Supreme Court Justice Potter Stewart
For the sake of full disclosure, I will tell you that I do not like Supreme Court Justice Clarence Thomas. In my opinion, he has no business sitting on the high court after the reprehensible treatment he forced Anita Hill to endure, and has been a disgrace to the bench lo these last twenty years. Anthony Weiner, one of Clarence Thomas' most ardent critics, was just run out of Washington DC on a rail for behavior far less offensive; Mr. Thomas is lucky there was no such thing as Twitter when he was sexually harassing Hill, or he'd be chasing ambulances outside of muni court like the hack he is. He sits up there like a lump, never speaking or offering questions to petitioners, and has not had an original thought since his shameful Senate approval.
But his vapid intellectual presence on the bench is only a small part of the story. Mr. Thomas has, by all appearances, turned his position on the court into a license to print money for himself, his family, and a few choice friends.
Conservative corruption is nothing new in Washington, but Mr. Thomas has taken the practice to bold new heights, and finally, people are beginning to sit up and take notice. Thomas has been playing fast and loose with judicial ethics for a long time now, and though Supreme Court Justices are not technically beholden to judicial rules of ethics, his behavior has become so egregious as to warrant deep attention, and in my opinion, removal from the high court.
Justice Thomas is in possession of a gorgeous bust of Abraham Lincoln, which was cast in 1914 by the noted sculptor Adolph Alexander Weinman. The bust was given as a gift to Thomas in 2001 by Christopher DeMuth, president of the notoriously right-wing American Enterprise Institute. The value of the bust was $15,000. In the intervening years, AEI has filed briefs on three separate occasions regarding cases before the high court, and on each occasion, Thomas has ruled in their favor, often going beyond the scope they were seeking.
Thomas has attended fundraisers sponsored by the Koch Brothers in support of far-right media outlets, think tanks and groups. His habit of openly supporting right-wing causes has earned him an enormous amount of financial largesse from heavy-hitting right-wing donors, most notoriously Mr. Harlan Crow, who helped finance the "swift-boating" of John Kerry in the 2004 presidential election. Crow financed a library project dedicated to Thomas, and gave Thomas' wife $500,000 to create a Tea Party group that has since been throwing its weight all around the country. Crow, it should be noted, is a trustee of AEI, which gave Thomas that bust of Lincoln.
The list of his brazen improprieties runs long, but the real show centers around his wife, Ginni. Harlan Crow's massive donation allowed her to create Liberty Central (and later Liberty Consulting), an advocacy group dedicated to the overthrow of President Obama's health care reform legislation. The conflict of interest inherent in this - given that Mr. Obama's health care legislation will certainly appear in some form before the Supreme Court - is manifest. The high court's decision in Citizens United, which Thomas voted in favor of, has opened the financial floodgates for groups like Liberty Central, so Thomas' family appears to be reaping wonderful monetary gains from that decision. And there is the fact that Thomas failed to disclose nearly a million dollars of income earned by his wife, and brushed off that failure to disclose with an "Oops, didn't understand the paperwork" excuse.
As has been stated, Supreme Court Justices are exempt from following the judicial code of conduct, but Mr. Thomas' behavior has been so egregious as to create a groundswell towards changing that. Nan Aron of the Alliance for Justice recently penned an editorial for the Washington Post which argued:
The behavior of Supreme Court justices has come under increasing scrutiny. Questions have been raised, for instance, about the propriety of Justices Antonin Scalia and Clarence Thomas appearing at political strategy conferences hosted by the conservative Koch brothers. Other justices' activities have also prompted concerns that the line between justice and politics is increasingly blurred.
Regardless of whether one shares fears of politicization, disputes are inevitable so long as the nation's highest court operates with almost no compulsory ethics rules to guide - or constrain - behavior. The Supreme Court, whose members are shielded with lifetime appointments, is the only entity in our government that is not subject to mandatory ethics requirements. That is why reformers are calling for the Code of Conduct that governs all other federal judges to apply to the justices. Surely it makes no sense to have lesser standards for the highest court than those in place for lower courts.
The Code of Conduct doesn't frown on ideological activity but does prohibit political activity, and that's where Scalia and Thomas crossed the line. The fact that they did so with seeming impunity demonstrates that voluntary adherence to ethical standards doesn't always work. How to enforce such a code would be the hardest question, but there are options - possibilities include adjudication by other sitting justices, retired justices, lower court judges, the judicial conference or some combination of these. Exact methods could be explored in congressional hearings.
The bottom line is that if the judicial Code of Conduct becomes mandatory the number of events that would be placed off-limits is small. Meanwhile, the effect on the integrity of the court would be large. Some suspect this is an effort by progressives to tweak justices they don't like. But the Supreme Court itself effectively answered that charge in 2009. In Caperton v. A.T. Massey Coal Co., a case that dealt with a West Virginia Supreme Court justice who ruled in favor of a corporation that had made large contributions to his campaign, the high court said that "codes of conduct serve to maintain the integrity of the judiciary and the rule of law."
The lifetime appointment for a Supreme Court Justice is not set in stone, as Justice Abe Fortas found out to his woe forty years ago. Fortas, who was appointed to the bench by President Lyndon Johnson in 1968, was found to have taken large sums of money from litigants who appeared before the high court, including Phillip Morris. After a second pay-for-play arrangement benefiting Fortas was discovered, he was forced to resign in disgrace. As Ian Millhiser of ThinkProgress argues:
It is difficult to distinguish Fortas' scandal from Thomas'. Like Fortas, Thomas accepted several very valuable gifts from parties who are frequently interested in the outcome of federal court cases. One of Thomas' benefactors has even filed briefs in his Court since giving Thomas a $15,000 gift, and Thomas has not recused himself from each of these cases.
Of course, Thomas is also the least likely Justice to actually follow the command of precedent. Thomas embraces a discredited theory of the Constitution which would return America to a time when federal child labor laws were considered unconstitutional. His fellow justices criticize him for showing "utter disregard for our precedent and Congress' intent." Even ultra-conservative Justice Antonin Scalia finds Thomas' approach to the law too extreme - in Scalia's words, "I am a textualist. I am an originalist. I am not a nut."
But Thomas' disregard for what has come before him changes nothing about the precedent he faces. If Abe Fortas had to resign his seat, so too should Clarence Thomas.
Given the simple, unavoidable fact that Mr. Thomas is bereft of both shame and a code of personal ethics, it is highly unlikely he will resign, especially if his wife is raking in the cash thanks to his decisions. In that event, the final remedy of impeachment must be deployed. The Supreme Court must not be a place for partisan political fundraising or friendly-donor back-slapping. It is the place of last recourse in our system of laws, and must be as far above reproof as can be humanly managed. Clarence Thomas is an embarrassment to the ideals of our system of government, and must go. He can choose to leave, or be removed by Constitutional remedy, but his time on the bench must be concluded.
He and Ginni will just have to go find honest work like everyone else.
Saturday, June 25, 2011
8 Reasons Justice Clarence Thomas Must Step Down
Original Link: http://www.alternet.org/story/151400/8_reasons_justice_clarence_thomas_must_step_down
By Adele M. Stan
Plagued by ethical breaches and links to groups calling for armed insurrection against the U.S. government, Clarence Thomas must resign his seat on the Supreme Court.
Time was when, at any right-wing gathering, chances were that you'd hear the justices of the Supreme Court derided as black-robed usurpers of democracy. Today, not so much. Ever since the seating of the Roberts court, the right has been pretty happy with high court's decisions, especially the outcome of Citizens United v. FEC, the case through which the court, in a decision handed down last year, opened the floodgates of corporate money into the electoral system.
No single justice has been more stalwart for the causes of the right -- indeed, even the far right -- than Justice Clarence Thomas, who, notes ThinkProgress, may just be the most ethically challenged justice since Abe Fortas was forced to step down from the court in 1969 for accepting tens of thousands of dollars from wealthy benefactors.
While Thomas does not appear to have accepted direct donations (though he has accepted gifts, and possibly luxury travel aboard private jets and a yacht), it is clear that the conduct of his relationships with the wealthy and powerful -- and one magnate, Harlan Crow, in particular -- present some pretty obvious conflicts of interest, especially in regard to the court's decision in Citizens United, in which Thomas sided with the majority in declaring corporate campaign funding to be constitutionally protected. Thomas could have recused himself from the case, but he did not.
A New York Times exposé published on June 19 detailed the role of Clarence Thomas' friend, real estate magnate Harlan Crow, in bankrolling a pet project of the justice's, the Pin Point Museum and Cannery outside Savannah, Georgia. Crow also funded a Savannah library dedicated to Thomas, and Thomas was given a bust of Lincoln valued at $15,000 by the American Enterprise Institute, to which Crow is a donor, and which files briefs in Supreme Court cases. But other aspects of Thomas' relationship with Crow are far more troubling, especially Crow's involvement in providing the seed money for the Tea Party group founded by Thomas' wife, Ginni.
Now, it appears that Ginni Thomas may have derived a direct benefit from the Citizens United decision. And that is not the only ethically troubling incident in the annals of the Thomases' professional lives, which we detail below. But if there's any one big lesson to be learned from the saga of Clarence Thomas and the sullying of the high court, it's that Supreme Court justices are not bound by the code of ethics that applies to other members of the federal bench; it seems they are not legally bound by any code of ethics at all. In the wake of the Thomas problems, that fact has led more than 100 law professors to sign a letter calling on Congress to make the ethics code for federal judges apply to those who grace the bench of the highest court in the land.
Because of this legal loophole, Thomas cannot be forced off the bench. But, for the sake of the republic he claims to love, he could step down -- and should. (A Credo Action petition calling for just that is here. UPDATE: And Rep. Chris Murphy, D-Conn., called today for an investigation of Thomas, as reported by ThinkProgress' Ian Millhiser.) At AlterNet, we've followed the antics of Thomas and his wife, Ginni, closely since the launching of her Tea Party-aligned advocacy group made news last year. Here we detail the reasons that Thomas must go -- both for reasons of conflict, and for the appearance of Thomas' alignment with groups that have called for armed insurrection against the U.S. government.
1. Conflict of interest - Citizens United and Liberty Central: In November 2009, just two months before the Supreme Court decision in Citizens United was handed down -- but just after the case was argued before the court -- Ginni Thomas incorporated her Tea Party advocacy group, Liberty Central, as a tax-exempt 501(c)(4). As an issue-advocacy organization that sponsors advertising and endorses candidates, Liberty Central stood to gain directly from the outcome of Citizens United. Assuming that Ginni Thomas drew a salary and/or expenses from the group, the onus on Clarence Thomas was to recuse himself from participating in the Citizens United case, which he did not.
2. Conflict of interest - Harlan Crow's bankrolling of Liberty Central: When AlterNet first reported on the launching of Liberty Central with Ginni Thomas at the helm, we noted that the group was formed with an initial donation of $500,000 by a then-unnamed donor. Politico has since revealed that donor to be Harlan Crow, a Dallas real estate magnate who is a major donor to political causes, and a good friend of Clarence Thomas -- such a good friend that he bestowed upon the justice a Bible that once belonged to Frederick Douglass, a gift valued at $19,000.
3. Soliciting donations? Unanswered questions: The Times revealed that it was Thomas himself who suggested that Algernon Varn, owner of the Pin Point Cannery (where Thomas' mother once worked), hit up the justice's good friend, Harlan Crow. Varn told Times reporter Mike McIntire:
“And Clarence said, ‘Well, I’ve got a friend I’m going to put you in touch with,’ ” Mr. Varn recalled, adding that he was later told by others not to identify the friend.
The land was subsequently purchased from Varn, to the tune of $1.5 million, by a real estate partnership run by Crow. If Thomas felt no compunction at sending Varn to seek backing, with his imprimatur, from Crow for what may have amounted, according to the Times, to $2.8 million in land and construction costs, it is not unreasonable to suspect it was Thomas' influence that compelled Crow to donate $500,000 to Ginni Thomas' organization. Clarence Thomas refused to answer questions submitted by the Times.
4. Calls for insurrection: If Crow's half-million-dollar donation to Ginni Thomas' Liberty Central were not troubling enough, there's Liberty Central itself. As AlterNet reported, at its inception Liberty Central was linked to two groups -- the Missouri Sovereignty Project and Gun Owners of America -- whose leaders called for the making of war on the U.S. government, and one, Tradition Family and Property, whose leader called the Spanish Inquisition "a beautiful thing." Each of these groups were listed on the Liberty Central Web site as "Friends of Liberty Central." Liberty Central officials refused to comment on whether or not the groups had paid a fee or donation to Liberty Central in order to earn the listing.
If a justice of the Supreme Court solicited a donation for a group whose success not only would benefit the justice's own household, but is also linked to groups that called for war on the government whose constitution the justice is sworn to uphold, that should be enough to warrant his stepping down. (In the wake of controversy over Ginni Thomas' role at Liberty Central, she stepped down and Liberty Central merged with the Patrick Henry Center. Ginni Thomas then opened a lobbying shop called Liberty Consulting, run from the same address as Liberty Central -- an address that turns out to be a mailbox in a UPS store, according to this video by Brad Blog.)
5. Conflict of interest - health-care reform: No sooner had the Affordable Care Act -- the health-care reform law that set off the Obama administration's battle royal with the American right -- passed into law than it became apparent that challenges to the law launched by Republican state attorneys general would likely make their way before the Supreme Court. Liberty Central opposed the bill, and appeared at a Tea Party rally sponsored by FreedomWorks calling for its repeal.
It's one thing for the spouse of a justice to be politically active on issues that may appear before the court, but quite another for a justice to solicit donations, whether implicitly or explicitly, for an organization headed by his spouse that advocates for cases that could appear before the court. At the very least, Clarence Thomas needs to account for his role in securing Liberty Central's $500,000 in start-up money from Crow.
6. Conflict of interest - Koch Industries fundraiser: In January 2008, Clarence Thomas addressed a fundraising gathering convened in Palm Springs, California, by Koch Industries, the privately held conglomerate helmed by Charles and David Koch, for major backers of the Tea Party movement and right-wing think tanks, including the Heritage foundation, for which Ginni Thomas worked for a number of years. Although, according to the New York Times, a court spokesperson described Thomas' appearance as "a brief drop-by," Thomas' own financial disclosure forms claim reimbursement for an undisclosed sum by the Federalist Society -- an organization that receives Koch funding -- for four days at Palm Springs.
Either way, the justice appeared at a gathering that is designed to raise money for right-wing institutions that advocate legal opposition to policies enacted by Congress and the Obama administration. Revelations of Clarence Thomas' appearances before the Koch gathering prompted Common Cause to launch a petition earlier this year, calling on the Department of Justice to investigate the involvement of both Thomas and Justice Antonin Scalia in the Koch Industries gathering. The Koch brothers, as both donors to and creators of right-wing institutions, were major beneficiaries of the Citizens United decision (in which Scalia, naturally, also sided with the majority).
7. Failure to disclose spouse's income: Taken alone, Clarence Thomas' failure to disclose, for 20 years, his wife's income from such right-wing institutions as the Heritage Foundation -- which also files briefs for Supreme Court cases -- might not be reason enough to demand his ouster from the court. After all, he did amend his disclosure forms to provide the relevant information once the "oversight" was reported in the media. But taken in aggregate with the other ethics breaches and questionable activities noted here, it simply adds more fuel to the fire.
8. Travel questions: Thomas has refused to answer questions about whether or not he has been treated to high-style gratis travel to speaking engagements on Harlan Crow's private plane and his yacht. The Times exposé reveals coincidences that suggest he has.
At a time when Americans' faith in their institutions of governance is at record lows, the continuing presence of Clarence Thomas on the Supreme Court undermines the very underpinnings of democracy. It's time for him to go.
By Adele M. Stan
Plagued by ethical breaches and links to groups calling for armed insurrection against the U.S. government, Clarence Thomas must resign his seat on the Supreme Court.
Time was when, at any right-wing gathering, chances were that you'd hear the justices of the Supreme Court derided as black-robed usurpers of democracy. Today, not so much. Ever since the seating of the Roberts court, the right has been pretty happy with high court's decisions, especially the outcome of Citizens United v. FEC, the case through which the court, in a decision handed down last year, opened the floodgates of corporate money into the electoral system.
No single justice has been more stalwart for the causes of the right -- indeed, even the far right -- than Justice Clarence Thomas, who, notes ThinkProgress, may just be the most ethically challenged justice since Abe Fortas was forced to step down from the court in 1969 for accepting tens of thousands of dollars from wealthy benefactors.
While Thomas does not appear to have accepted direct donations (though he has accepted gifts, and possibly luxury travel aboard private jets and a yacht), it is clear that the conduct of his relationships with the wealthy and powerful -- and one magnate, Harlan Crow, in particular -- present some pretty obvious conflicts of interest, especially in regard to the court's decision in Citizens United, in which Thomas sided with the majority in declaring corporate campaign funding to be constitutionally protected. Thomas could have recused himself from the case, but he did not.
A New York Times exposé published on June 19 detailed the role of Clarence Thomas' friend, real estate magnate Harlan Crow, in bankrolling a pet project of the justice's, the Pin Point Museum and Cannery outside Savannah, Georgia. Crow also funded a Savannah library dedicated to Thomas, and Thomas was given a bust of Lincoln valued at $15,000 by the American Enterprise Institute, to which Crow is a donor, and which files briefs in Supreme Court cases. But other aspects of Thomas' relationship with Crow are far more troubling, especially Crow's involvement in providing the seed money for the Tea Party group founded by Thomas' wife, Ginni.
Now, it appears that Ginni Thomas may have derived a direct benefit from the Citizens United decision. And that is not the only ethically troubling incident in the annals of the Thomases' professional lives, which we detail below. But if there's any one big lesson to be learned from the saga of Clarence Thomas and the sullying of the high court, it's that Supreme Court justices are not bound by the code of ethics that applies to other members of the federal bench; it seems they are not legally bound by any code of ethics at all. In the wake of the Thomas problems, that fact has led more than 100 law professors to sign a letter calling on Congress to make the ethics code for federal judges apply to those who grace the bench of the highest court in the land.
Because of this legal loophole, Thomas cannot be forced off the bench. But, for the sake of the republic he claims to love, he could step down -- and should. (A Credo Action petition calling for just that is here. UPDATE: And Rep. Chris Murphy, D-Conn., called today for an investigation of Thomas, as reported by ThinkProgress' Ian Millhiser.) At AlterNet, we've followed the antics of Thomas and his wife, Ginni, closely since the launching of her Tea Party-aligned advocacy group made news last year. Here we detail the reasons that Thomas must go -- both for reasons of conflict, and for the appearance of Thomas' alignment with groups that have called for armed insurrection against the U.S. government.
1. Conflict of interest - Citizens United and Liberty Central: In November 2009, just two months before the Supreme Court decision in Citizens United was handed down -- but just after the case was argued before the court -- Ginni Thomas incorporated her Tea Party advocacy group, Liberty Central, as a tax-exempt 501(c)(4). As an issue-advocacy organization that sponsors advertising and endorses candidates, Liberty Central stood to gain directly from the outcome of Citizens United. Assuming that Ginni Thomas drew a salary and/or expenses from the group, the onus on Clarence Thomas was to recuse himself from participating in the Citizens United case, which he did not.
2. Conflict of interest - Harlan Crow's bankrolling of Liberty Central: When AlterNet first reported on the launching of Liberty Central with Ginni Thomas at the helm, we noted that the group was formed with an initial donation of $500,000 by a then-unnamed donor. Politico has since revealed that donor to be Harlan Crow, a Dallas real estate magnate who is a major donor to political causes, and a good friend of Clarence Thomas -- such a good friend that he bestowed upon the justice a Bible that once belonged to Frederick Douglass, a gift valued at $19,000.
3. Soliciting donations? Unanswered questions: The Times revealed that it was Thomas himself who suggested that Algernon Varn, owner of the Pin Point Cannery (where Thomas' mother once worked), hit up the justice's good friend, Harlan Crow. Varn told Times reporter Mike McIntire:
“And Clarence said, ‘Well, I’ve got a friend I’m going to put you in touch with,’ ” Mr. Varn recalled, adding that he was later told by others not to identify the friend.
The land was subsequently purchased from Varn, to the tune of $1.5 million, by a real estate partnership run by Crow. If Thomas felt no compunction at sending Varn to seek backing, with his imprimatur, from Crow for what may have amounted, according to the Times, to $2.8 million in land and construction costs, it is not unreasonable to suspect it was Thomas' influence that compelled Crow to donate $500,000 to Ginni Thomas' organization. Clarence Thomas refused to answer questions submitted by the Times.
4. Calls for insurrection: If Crow's half-million-dollar donation to Ginni Thomas' Liberty Central were not troubling enough, there's Liberty Central itself. As AlterNet reported, at its inception Liberty Central was linked to two groups -- the Missouri Sovereignty Project and Gun Owners of America -- whose leaders called for the making of war on the U.S. government, and one, Tradition Family and Property, whose leader called the Spanish Inquisition "a beautiful thing." Each of these groups were listed on the Liberty Central Web site as "Friends of Liberty Central." Liberty Central officials refused to comment on whether or not the groups had paid a fee or donation to Liberty Central in order to earn the listing.
If a justice of the Supreme Court solicited a donation for a group whose success not only would benefit the justice's own household, but is also linked to groups that called for war on the government whose constitution the justice is sworn to uphold, that should be enough to warrant his stepping down. (In the wake of controversy over Ginni Thomas' role at Liberty Central, she stepped down and Liberty Central merged with the Patrick Henry Center. Ginni Thomas then opened a lobbying shop called Liberty Consulting, run from the same address as Liberty Central -- an address that turns out to be a mailbox in a UPS store, according to this video by Brad Blog.)
5. Conflict of interest - health-care reform: No sooner had the Affordable Care Act -- the health-care reform law that set off the Obama administration's battle royal with the American right -- passed into law than it became apparent that challenges to the law launched by Republican state attorneys general would likely make their way before the Supreme Court. Liberty Central opposed the bill, and appeared at a Tea Party rally sponsored by FreedomWorks calling for its repeal.
It's one thing for the spouse of a justice to be politically active on issues that may appear before the court, but quite another for a justice to solicit donations, whether implicitly or explicitly, for an organization headed by his spouse that advocates for cases that could appear before the court. At the very least, Clarence Thomas needs to account for his role in securing Liberty Central's $500,000 in start-up money from Crow.
6. Conflict of interest - Koch Industries fundraiser: In January 2008, Clarence Thomas addressed a fundraising gathering convened in Palm Springs, California, by Koch Industries, the privately held conglomerate helmed by Charles and David Koch, for major backers of the Tea Party movement and right-wing think tanks, including the Heritage foundation, for which Ginni Thomas worked for a number of years. Although, according to the New York Times, a court spokesperson described Thomas' appearance as "a brief drop-by," Thomas' own financial disclosure forms claim reimbursement for an undisclosed sum by the Federalist Society -- an organization that receives Koch funding -- for four days at Palm Springs.
Either way, the justice appeared at a gathering that is designed to raise money for right-wing institutions that advocate legal opposition to policies enacted by Congress and the Obama administration. Revelations of Clarence Thomas' appearances before the Koch gathering prompted Common Cause to launch a petition earlier this year, calling on the Department of Justice to investigate the involvement of both Thomas and Justice Antonin Scalia in the Koch Industries gathering. The Koch brothers, as both donors to and creators of right-wing institutions, were major beneficiaries of the Citizens United decision (in which Scalia, naturally, also sided with the majority).
7. Failure to disclose spouse's income: Taken alone, Clarence Thomas' failure to disclose, for 20 years, his wife's income from such right-wing institutions as the Heritage Foundation -- which also files briefs for Supreme Court cases -- might not be reason enough to demand his ouster from the court. After all, he did amend his disclosure forms to provide the relevant information once the "oversight" was reported in the media. But taken in aggregate with the other ethics breaches and questionable activities noted here, it simply adds more fuel to the fire.
8. Travel questions: Thomas has refused to answer questions about whether or not he has been treated to high-style gratis travel to speaking engagements on Harlan Crow's private plane and his yacht. The Times exposé reveals coincidences that suggest he has.
At a time when Americans' faith in their institutions of governance is at record lows, the continuing presence of Clarence Thomas on the Supreme Court undermines the very underpinnings of democracy. It's time for him to go.
Inside the Koch Brothers' Expensive Echo Chamber
Original Link: http://www.huffingtonpost.com/robert-greenwald/inside-the-koch-brothers_b_882057.html
By Robert Greenwald
Documents and interviews unearthed in recent months by Brave New Foundation researchers illustrate a $28.4 million Koch business that has manufactured 297 commentaries, 200 reports, 56 studies and six books distorting Social Security's effectiveness and purpose.
Together, the publications reveal a vast cottage industry comprised of Koch brothers' spokespeople, front groups, think tanks, academics and elected officials, which have built a self-sustaining echo chamber to transform fringe ideas into popular mainstream public policy arguments.
The Koch brothers' echo chamber has successfully written the messaging for the AARP, a traditional defender of Social Security for all generations, which recently opened the door to cutting benefits.
The Koch echo chamber begins with think tanks like the Cato Institute, Heritage Foundation and Mercatus Center at George Mason University and the Reason Foundation, which owe their founding and achievements to Koch backing. These think tanks take their $28.4 million in Koch funding and produce hundreds of position papers distorting the long-term health of Social Security.
The authors of these hundreds of self-described policy studies, newsletters, commentaries and books are then paraded through television, print and online news media. Their distorted message is amplified through shows like Hannity, with its 3.3 million viewers per episode, or CNBC's Kudlow Report and its roughly 300,000 viewers per episode night after night after night.
Eventually, elected officials react to the Koch echo chamber and typically shift their position for reelection or the next campaign.
The investigation revealed Koch-supported policy fixes, and specific language repeated across each document, such as raising the retirement age or eliminating cost of living adjustments for Social Security dependents and beneficiaries.
These Koch ideas percolate through the echo chamber and into the mainstream. The frequency and repetition of the arguments supplant more popular policy recommendations like scrapping the Social Security tax cap, which would free individuals earning more than $106,800 annually to pay taxes on all of their wages, like everyone else.
"The Koch brothers job is to do everything they can to dismember government in general," Sen. Bernie Sanders says in this video. "If you can destroy Social Security, you will have gone a long way forward in that effort."
The Koch echo chamber has been so effective that AARP, a traditional advocate and defender of Social Security, has repositioned its policy to open the door to cut Social Security benefits for dependents and beneficiaries.
Counter the Koch billions and protect social security. Create an echo chamber of truth and share this video with your friends and family.
The echo chamber, coupled with AARP's shift toward cutting Social Security, pushes the argument further toward the Koch brothers' goals. Influential opinion-shapers in venerable news outlets will react and have already begun to referee disputes on new 'middle ground' that has, over time and through the actions of AARP and the Koch echo chamber, grown tolerant of the Koch brothers' talking points.
"The Koch brothers fund organizations, and you have economists and political scientists working there and they are very, very good at getting on television," Sanders said. "They are very effective in getting their positions out into the media."
That's further personified by the Koch brothers' lobbying. Koch Industries spent $857,000 on lobbyists in 2004, one year before George W. Bush tried and failed to privatize Social Security. They also donated $104,660 to his campaign. The attacks on Social Security needed more time to stew in the echo chamber before they could be mainstream, and given the increase in lobbyists, they have risen dramatically. AARP's shift is more proof of the Kochs' achievements.
In the first two years of the Obama administration, the brothers have spent $20 million on lobbying, according to the Center for Public Integrity. And they've diversified their donations to a slew of Republican opinion leaders and strategic Democrats who oppose revenue increases like Sen. Ben Nelson and Gov. Andrew Cuomo. And, with AARP's action, the Koch echo chamber has broken ground on a new political terrain favorable to their ideological and financial goals.
Almost overnight, a historic and popular service, like Social Security, faces extinction. But behind this outcome, the Koch echo chamber has been churning for years.
By Robert Greenwald
Documents and interviews unearthed in recent months by Brave New Foundation researchers illustrate a $28.4 million Koch business that has manufactured 297 commentaries, 200 reports, 56 studies and six books distorting Social Security's effectiveness and purpose.
Together, the publications reveal a vast cottage industry comprised of Koch brothers' spokespeople, front groups, think tanks, academics and elected officials, which have built a self-sustaining echo chamber to transform fringe ideas into popular mainstream public policy arguments.
The Koch brothers' echo chamber has successfully written the messaging for the AARP, a traditional defender of Social Security for all generations, which recently opened the door to cutting benefits.
The Koch echo chamber begins with think tanks like the Cato Institute, Heritage Foundation and Mercatus Center at George Mason University and the Reason Foundation, which owe their founding and achievements to Koch backing. These think tanks take their $28.4 million in Koch funding and produce hundreds of position papers distorting the long-term health of Social Security.
The authors of these hundreds of self-described policy studies, newsletters, commentaries and books are then paraded through television, print and online news media. Their distorted message is amplified through shows like Hannity, with its 3.3 million viewers per episode, or CNBC's Kudlow Report and its roughly 300,000 viewers per episode night after night after night.
Eventually, elected officials react to the Koch echo chamber and typically shift their position for reelection or the next campaign.
The investigation revealed Koch-supported policy fixes, and specific language repeated across each document, such as raising the retirement age or eliminating cost of living adjustments for Social Security dependents and beneficiaries.
These Koch ideas percolate through the echo chamber and into the mainstream. The frequency and repetition of the arguments supplant more popular policy recommendations like scrapping the Social Security tax cap, which would free individuals earning more than $106,800 annually to pay taxes on all of their wages, like everyone else.
"The Koch brothers job is to do everything they can to dismember government in general," Sen. Bernie Sanders says in this video. "If you can destroy Social Security, you will have gone a long way forward in that effort."
The Koch echo chamber has been so effective that AARP, a traditional advocate and defender of Social Security, has repositioned its policy to open the door to cut Social Security benefits for dependents and beneficiaries.
Counter the Koch billions and protect social security. Create an echo chamber of truth and share this video with your friends and family.
The echo chamber, coupled with AARP's shift toward cutting Social Security, pushes the argument further toward the Koch brothers' goals. Influential opinion-shapers in venerable news outlets will react and have already begun to referee disputes on new 'middle ground' that has, over time and through the actions of AARP and the Koch echo chamber, grown tolerant of the Koch brothers' talking points.
"The Koch brothers fund organizations, and you have economists and political scientists working there and they are very, very good at getting on television," Sanders said. "They are very effective in getting their positions out into the media."
That's further personified by the Koch brothers' lobbying. Koch Industries spent $857,000 on lobbyists in 2004, one year before George W. Bush tried and failed to privatize Social Security. They also donated $104,660 to his campaign. The attacks on Social Security needed more time to stew in the echo chamber before they could be mainstream, and given the increase in lobbyists, they have risen dramatically. AARP's shift is more proof of the Kochs' achievements.
In the first two years of the Obama administration, the brothers have spent $20 million on lobbying, according to the Center for Public Integrity. And they've diversified their donations to a slew of Republican opinion leaders and strategic Democrats who oppose revenue increases like Sen. Ben Nelson and Gov. Andrew Cuomo. And, with AARP's action, the Koch echo chamber has broken ground on a new political terrain favorable to their ideological and financial goals.
Almost overnight, a historic and popular service, like Social Security, faces extinction. But behind this outcome, the Koch echo chamber has been churning for years.
Friday, June 24, 2011
America, land of the free to go hungry
Original Link: http://www.guardian.co.uk/commentisfree/cifamerica/2011/jun/24/food-stamps-welfare-cuts
By Eric Augenbraun
The GOP's Ryan plan caricature of food stamps as a welfare entitlement out of control will tug the safety net from millions
As unfortunate as our current age of austerity is claimed to be, legislators at both the federal and state levels seem to relish the opportunity it has provided them to dismantle the last vestiges of the social safety net. If the economic crisis taught us anything, after all, it is that there is too much government regulation on Wall Street, and too many government safeguards for those most in need, right?
With the latest set of proposals, "belt tightening" will have a very literal meaning for millions of Americans as Republicans in Congress have now proposed cutting and radically restructuring the Supplemental Nutrition Assistance Programme (Snap) – the programme more commonly known as food stamps – despite record numbers of people presently on the rolls. Without question, these cuts and changes would prove devastating for many of those to whom food stamps represent a last line of defence against hunger.
Food stamps were first instituted in 1939 at the tail end of the Great Depression, but were discontinued in 1943. It was more than two decades later that the programme was established on a permanent basis with the Food Stamp Act of 1964 – as a part of President Lyndon B Johnson's "Great Society". Since then, it has undergone some changes but remains essentially intact.
And it is a good thing it has.
In March 2011, a record 44.5 million Americans received food stamps, which was an 11.1% increase over the year before. Even more illustrative of the profound impact the economic recession has had on poor and working-class Americans is the fact that this represents a 64% increase over the number of recipients in March 2008.
Faced with this evidence of increased need, on 31 May, the House appropriations committee nevertheless approved the fiscal year 2012 agricultural appropriations bill, which includes $71bn for Snap – $2bn less than President Obama's recommendation. On 16 June, the bill was just barely approved with a 217-203 vote in the House.
Meanwhile, Wisconsin Republican and House budget committee chairman Paul Ryan's "Path to Prosperity" budget proposes deep cuts to Snap, and even more fundamental changes to how it is administered:
"[P]rogrammes that subsidise food and housing for low-income Americans remain dysfunctional, and their explosive growth is threatening the overall strength of the safety net."
His plan would turn Snap into a block grant programme in 2015 (along with Medicare, starting 2013), meaning the funds would be delivered to the individual states with only loose stipulations about how they are to be used. The belief is that this improves flexibility and promotes innovation and creativity in the delivery of federal funds. But coupled with Republicans' intention to slash Snap by 20% over the next ten years – or $127bn, as the Centre on Budget and Policy Priorities calculates – Ryan's plan could leave millions in danger of going hungry.
While Ryan has not made clear the specifics of how the cuts would be instituted, Dottie Rosenbaum of the CBPP speculates that they would most likely come in two areas: a change in eligibility requirements and an across-the-board cut in the benefits available. Additionally, she argues, block-granting Snap would render it "unable to respond automatically to increased need resulting from rising poverty and unemployment during an economic downturn" and would also give individual states the option of placing their own restrictions on the programme. Finally, Rosenbaum responds to Ryan's claim that Snap has undergone "relentless and unsustainable growth" by pointing out that "[t]he recent growth in the number of people participating in Snap closely tracks the increases in poverty associated with the recent recession."
A fuller appreciation of the potentially disastrous effects of these cuts is gained by examining their possible impact at the local level. "Nobody really wants to see what it will look like if they block-grant Snap, because it's going to be ugly," says Carey Morgan, the executive director of the Greater Philadelphia Coalition Against Hunger. Her organisation screens 6,000–7,000 Philadelphia-area households per year for eligibility for food stamps, of which about 70% qualify. Then, they assist families with the application process and provide them with case work services for dealing with what can be a complex bureaucracy.
Morgan, who recognises the structural roots of poverty and its inherent relationship to hunger, notes that Ryan's plan would hit Philadelphia particularly hard:
"When we see the rates of poverty being 27%, which is what it is in Philadelphia, of course you're going to have high rates of hunger."
Moreover, the costs of cutting food could have attendant effects in other areas. She adds:
"If you can't eat, you're going to get sicker and you're going to be sick more often, and those medical costs will go up. Food is a great preventative tool."
It seems like common sense, but apparently, not to Ryan and his ilk.
One enduring legacy of the Reagan administration has been the extent to which it greased the ideological rails for the continued destruction of the welfare state – long after he had his crack at it by perpetuating lurid fantasies about the purportedly pathological (largely urban and black or hispanic) poor. Who could forget Reagan's most notorious and nefarious tall tale? That of the "welfare queen":
"She has 80 names, 30 addresses, 12 social security cards and is collecting veteran's benefits on four non-existing deceased husbands. And she is collecting social security on her cards. She's got Medicaid, getting food stamps, and she is collecting welfare under each of her names. Her tax-free cash income is over $150,000."
This and similar anecdotes have framed the rightwing discourse about poverty for the past 35 years. If the poor are a fundamentally defective, lazy and criminal underclass, the logic goes, what good can government aid possibly do?
But nothing could be further from the truth, which is obvious if one just talks with some of the people who rely on these benefits. For instance, Tamika Finn is a 34-year-old, recently-unemployed single mother from West Philadelphia. She cares for her mother and son – both of whom are disabled – while she completes an associates degree in information technology. "I'm grateful to have food stamps," she says. But, she maintains, "the goal is always to get off and do something different – do something better." Dispelling the notion that recipients wish to remain on food stamps indefinitely, Morgan points out that "99% of the people we talk to are not proud of getting the benefit and are not looking to scam the system."
The assault on the welfare state has hardly been the work of Republicans alone. Lest we forget, it was Bill Clinton who signed Personal Responsibility and Work Opportunity Reconciliation Act of 1996 into law, keeping his promise to "end welfare as we know it". Among many other things, this act made significant cuts to Snap. Incidentally, it was also Bill Clinton who, in 1999, repealed the Glass-Steagall Act of 1933, which prevented speculation by banks. This move is now believed to have contributed to the current economic crisis.
Indeed, the logic of slashing the social safety net fits cozily with an upwardly redistributive programme of tax cuts and deregulation. And, of course, this is the path we have been on for the last 30 years. Morgan sums up bankruptcy of this trend nicely: "Our priorities are completely messed up if we are cutting food, which is a basic right to the most vulnerable populations we have." As the oft-repeated maxim goes, the true test of a society is how it treats its weakest members.
By Eric Augenbraun
The GOP's Ryan plan caricature of food stamps as a welfare entitlement out of control will tug the safety net from millions
As unfortunate as our current age of austerity is claimed to be, legislators at both the federal and state levels seem to relish the opportunity it has provided them to dismantle the last vestiges of the social safety net. If the economic crisis taught us anything, after all, it is that there is too much government regulation on Wall Street, and too many government safeguards for those most in need, right?
With the latest set of proposals, "belt tightening" will have a very literal meaning for millions of Americans as Republicans in Congress have now proposed cutting and radically restructuring the Supplemental Nutrition Assistance Programme (Snap) – the programme more commonly known as food stamps – despite record numbers of people presently on the rolls. Without question, these cuts and changes would prove devastating for many of those to whom food stamps represent a last line of defence against hunger.
Food stamps were first instituted in 1939 at the tail end of the Great Depression, but were discontinued in 1943. It was more than two decades later that the programme was established on a permanent basis with the Food Stamp Act of 1964 – as a part of President Lyndon B Johnson's "Great Society". Since then, it has undergone some changes but remains essentially intact.
And it is a good thing it has.
In March 2011, a record 44.5 million Americans received food stamps, which was an 11.1% increase over the year before. Even more illustrative of the profound impact the economic recession has had on poor and working-class Americans is the fact that this represents a 64% increase over the number of recipients in March 2008.
Faced with this evidence of increased need, on 31 May, the House appropriations committee nevertheless approved the fiscal year 2012 agricultural appropriations bill, which includes $71bn for Snap – $2bn less than President Obama's recommendation. On 16 June, the bill was just barely approved with a 217-203 vote in the House.
Meanwhile, Wisconsin Republican and House budget committee chairman Paul Ryan's "Path to Prosperity" budget proposes deep cuts to Snap, and even more fundamental changes to how it is administered:
"[P]rogrammes that subsidise food and housing for low-income Americans remain dysfunctional, and their explosive growth is threatening the overall strength of the safety net."
His plan would turn Snap into a block grant programme in 2015 (along with Medicare, starting 2013), meaning the funds would be delivered to the individual states with only loose stipulations about how they are to be used. The belief is that this improves flexibility and promotes innovation and creativity in the delivery of federal funds. But coupled with Republicans' intention to slash Snap by 20% over the next ten years – or $127bn, as the Centre on Budget and Policy Priorities calculates – Ryan's plan could leave millions in danger of going hungry.
While Ryan has not made clear the specifics of how the cuts would be instituted, Dottie Rosenbaum of the CBPP speculates that they would most likely come in two areas: a change in eligibility requirements and an across-the-board cut in the benefits available. Additionally, she argues, block-granting Snap would render it "unable to respond automatically to increased need resulting from rising poverty and unemployment during an economic downturn" and would also give individual states the option of placing their own restrictions on the programme. Finally, Rosenbaum responds to Ryan's claim that Snap has undergone "relentless and unsustainable growth" by pointing out that "[t]he recent growth in the number of people participating in Snap closely tracks the increases in poverty associated with the recent recession."
A fuller appreciation of the potentially disastrous effects of these cuts is gained by examining their possible impact at the local level. "Nobody really wants to see what it will look like if they block-grant Snap, because it's going to be ugly," says Carey Morgan, the executive director of the Greater Philadelphia Coalition Against Hunger. Her organisation screens 6,000–7,000 Philadelphia-area households per year for eligibility for food stamps, of which about 70% qualify. Then, they assist families with the application process and provide them with case work services for dealing with what can be a complex bureaucracy.
Morgan, who recognises the structural roots of poverty and its inherent relationship to hunger, notes that Ryan's plan would hit Philadelphia particularly hard:
"When we see the rates of poverty being 27%, which is what it is in Philadelphia, of course you're going to have high rates of hunger."
Moreover, the costs of cutting food could have attendant effects in other areas. She adds:
"If you can't eat, you're going to get sicker and you're going to be sick more often, and those medical costs will go up. Food is a great preventative tool."
It seems like common sense, but apparently, not to Ryan and his ilk.
One enduring legacy of the Reagan administration has been the extent to which it greased the ideological rails for the continued destruction of the welfare state – long after he had his crack at it by perpetuating lurid fantasies about the purportedly pathological (largely urban and black or hispanic) poor. Who could forget Reagan's most notorious and nefarious tall tale? That of the "welfare queen":
"She has 80 names, 30 addresses, 12 social security cards and is collecting veteran's benefits on four non-existing deceased husbands. And she is collecting social security on her cards. She's got Medicaid, getting food stamps, and she is collecting welfare under each of her names. Her tax-free cash income is over $150,000."
This and similar anecdotes have framed the rightwing discourse about poverty for the past 35 years. If the poor are a fundamentally defective, lazy and criminal underclass, the logic goes, what good can government aid possibly do?
But nothing could be further from the truth, which is obvious if one just talks with some of the people who rely on these benefits. For instance, Tamika Finn is a 34-year-old, recently-unemployed single mother from West Philadelphia. She cares for her mother and son – both of whom are disabled – while she completes an associates degree in information technology. "I'm grateful to have food stamps," she says. But, she maintains, "the goal is always to get off and do something different – do something better." Dispelling the notion that recipients wish to remain on food stamps indefinitely, Morgan points out that "99% of the people we talk to are not proud of getting the benefit and are not looking to scam the system."
The assault on the welfare state has hardly been the work of Republicans alone. Lest we forget, it was Bill Clinton who signed Personal Responsibility and Work Opportunity Reconciliation Act of 1996 into law, keeping his promise to "end welfare as we know it". Among many other things, this act made significant cuts to Snap. Incidentally, it was also Bill Clinton who, in 1999, repealed the Glass-Steagall Act of 1933, which prevented speculation by banks. This move is now believed to have contributed to the current economic crisis.
Indeed, the logic of slashing the social safety net fits cozily with an upwardly redistributive programme of tax cuts and deregulation. And, of course, this is the path we have been on for the last 30 years. Morgan sums up bankruptcy of this trend nicely: "Our priorities are completely messed up if we are cutting food, which is a basic right to the most vulnerable populations we have." As the oft-repeated maxim goes, the true test of a society is how it treats its weakest members.
Right-leaning think tank says Rove group "misrepresented" its data in ad attacking public employee unions
Original Link: http://voices.washingtonpost.com/plum-line/2011/03/right-leaning_think_tank_says.html
By Greg Sargent
As you may have heard, Crossroads GPS, the group founded by Karl Rove, has gone up on the air with a new 60-second ad that attacks public employees and the Democrats who support them as greedy thugs. The spot, which is backed by a $750,000 buy, represents a national, high-profile effort to turn around a public opinion war the right seems to be losing as the Wisconsin standoff drags on.
But now the fiscally conservative think tank that the ad itself cites as the source for one of its central claims is accusing Crossroads GPS of misusing the think tank's data. The author of the Cato Institute study cited in the ad tells me the spot "misrepresents" his study's findings.
One of the core claims in the ad, which you can watch below, is that unions and Dems are trying "to protect a system that pays unionized government workers 42 percent more than non-union workers." To back up this claim, the ad cites a Cato Institute study from March 2010 that is generally critical of public sector unions. That study is right here.
But the author of the study, Cato director of tax policy studies Chris Edwards, tells me the ad's claim distorts his data in two key ways. The ad says that unionized government workers get paid 42 percent more than non-unionized workers in general, a charge that seems intended to turn non-unionized workers of all kinds against unionized public employees.
In fact, Edwards points out, Cato's study compared unionized government workers only with non-unionized government workers, not with non-union workers overall, and found the first group doing better. In other words, even if the study's overall thrust is critical of public unions, Cato's actual finding on wages would be likely to persuade workers that unions are a good thing -- if you're unionized, you make more than those in the same sector who are not unionized. Instead, the ad misrepresented the finding.
That's not all. Edwards points out that the ad rips the 42 percent figure out of context, further distorting what his study actually found in another way. The study did claim the 42 percent number, but it went on to state specifically that this difference can be partly explained by "general labor market variations across states," because "states with generally higher wages tend to be more unionized."
The study concluded that once you factor in that variable, public sector unions can be said to increase pay levels by approximately 10 percent -- not 42 percent, as the ad claimed.
"The ad misrepresents the gap between union and non-union government workers, and it appears to misrepresent the 42 percent statistic as if it were between government and private workers," Edwards told me.
Crossroads GPS's willingness to use data supplied by a fiscally conservative think tank in a way that even the study's pro-free market author finds objectionable tells you all you need to know about the lengths some conservatives will go to in order to turn public opinion in this fight to their advantage.
By Greg Sargent
As you may have heard, Crossroads GPS, the group founded by Karl Rove, has gone up on the air with a new 60-second ad that attacks public employees and the Democrats who support them as greedy thugs. The spot, which is backed by a $750,000 buy, represents a national, high-profile effort to turn around a public opinion war the right seems to be losing as the Wisconsin standoff drags on.
But now the fiscally conservative think tank that the ad itself cites as the source for one of its central claims is accusing Crossroads GPS of misusing the think tank's data. The author of the Cato Institute study cited in the ad tells me the spot "misrepresents" his study's findings.
One of the core claims in the ad, which you can watch below, is that unions and Dems are trying "to protect a system that pays unionized government workers 42 percent more than non-union workers." To back up this claim, the ad cites a Cato Institute study from March 2010 that is generally critical of public sector unions. That study is right here.
But the author of the study, Cato director of tax policy studies Chris Edwards, tells me the ad's claim distorts his data in two key ways. The ad says that unionized government workers get paid 42 percent more than non-unionized workers in general, a charge that seems intended to turn non-unionized workers of all kinds against unionized public employees.
In fact, Edwards points out, Cato's study compared unionized government workers only with non-unionized government workers, not with non-union workers overall, and found the first group doing better. In other words, even if the study's overall thrust is critical of public unions, Cato's actual finding on wages would be likely to persuade workers that unions are a good thing -- if you're unionized, you make more than those in the same sector who are not unionized. Instead, the ad misrepresented the finding.
That's not all. Edwards points out that the ad rips the 42 percent figure out of context, further distorting what his study actually found in another way. The study did claim the 42 percent number, but it went on to state specifically that this difference can be partly explained by "general labor market variations across states," because "states with generally higher wages tend to be more unionized."
The study concluded that once you factor in that variable, public sector unions can be said to increase pay levels by approximately 10 percent -- not 42 percent, as the ad claimed.
"The ad misrepresents the gap between union and non-union government workers, and it appears to misrepresent the 42 percent statistic as if it were between government and private workers," Edwards told me.
Crossroads GPS's willingness to use data supplied by a fiscally conservative think tank in a way that even the study's pro-free market author finds objectionable tells you all you need to know about the lengths some conservatives will go to in order to turn public opinion in this fight to their advantage.
Karl Rove's Secretly-Funded Crossroads GPS Attacks Unions in Nationwide Ad
Original Link: http://www.prwatch.org/news/2011/03/10329/karl-roves-secretly-funded-crossroads-gps-attacks-unions-nationwide-ad
By Brendan Fischer
Karl Rove's secretly-funded Crossroads GPS is spending $750,000 airing a terribly misleading ad attacking public-sector labor unions. With support declining for the GOP's anti-union stance, Rove's group is looking towards the 2012 elections and aiming to counteract that slide by unfairly demonizing unions.
The ad also attempts to lay the blame on President Obama, directing viewers to tell Obama "You've had enough." The group spent at least $17 million in the 2010 midterm elections, and along with Rove's American Crossroads PAC, is planning to spend $120 million in the 2012 elections. Here is what the ad says, and why it is wrong:
"Why are Democrats shutting down state capitols to protect a system that pays unionized government workers 42% more than non-union workers?"
False. As The Center for Media and Democracy (CMD) has reported, an Economic Policy Institute report finds that, when controlling for education and taking benefits into account, "full-time state and local government employees in Wisconsin are undercompensated by 8.2% compared with otherwise similar private sector workers." In other words, it is unfair to compare compensation for an unskilled worker with a teacher who holds a master's degree. *
"A system that collects hundreds of millions in mandatory dues to back liberals who support government unions..."
False. See the U.S. Supreme Court decision Communication Workers of America v. Beck, 487 U. S. 735 (1988): nonunion employees cannot be required to pay dues to support political activities. In a unionized workplace, employees who choose not to join the union still reap the benefits of union representatives bargaining on their behalf, but they can only be required to pay dues towards that representation.
"One union boss explains..." the ad says, quoting from a July 2009 speech by National Education Association General Counsel Bob Chanin that, taken out of context, makes unions sound like money-sucking power-hogs.
False -- through misleading editing. Chanin's full quote is actually a reminder to teachers that their interests and those of their students will not be guaranteed by the dignity of the profession, or their passion for teaching:
So the bad news, or depending on your point of view, the good news, is that NEA and its affiliates will continue to be attacked by conservative and right-wing groups as long as we continue to be effective advocates for public education, for education employees, and for human and civil rights. And that brings me to my final and most important point. Which is why, at least in my opinion, NEA and its affiliates are such effective advocates. Despite what some among us would like to believe, it is not because of our creative ideas. It is not because of the merit of our positions. It is not because we care about children. And it is not because we have a vision of a great public school for every child. NEA and its affiliates are effective advocates because we have power. And we have power because there are more than 3.2 million people who are willing to pay us hundreds of millions of dollars in dues each year because they believe that we are the unions that can most effectively represent them, the unions that can protect their rights and advance their interests as education employees.
In light of the present attack on educators and other public employees by the likes of Scott Walker and Karl Rove, Chanin was correct. The integrity of public education is not being protected by good ideas, sacrifices by teachers, or by widespread recognition that education is an investment in the future. The primary defenders of public education and public educators are unions.
The same goes for unions defending the integrity of other public services against right-wing attacks. The real motivation for Rove, Walker, and the like is to crush union political power. Wisconsin's Senate majority leader has boasted about this partisan political strategy today. And in our post-Citizens United world, the only counterweight looking out for middle-class interests are labor unions. Only labor unions are powerful enough to attempt to counterbalance corporate interests and speak on behalf of working people in the election process. Despite losing one battle today, the fight to protect America's middle class and working people has only just begun.
*Update March 11: While the ad's claim that unionized public employees are paid 42% more than non-union workers came from a March 2010 study by the libertarian Cato Institute think tank, the discrepancy with the EPI report was not the result of biased calculations, but from Crossroads GPS completely twisting Cato's findings. The Cato study's author has denounced the ad's distortion of its findings, and Greg Sargent at the Washington Post writes "Crossroads GPS's willingness to use data supplied by a fiscally conservative think tank in a way that even the study's pro-free market author finds objectionable tells you all you need to know about the lengths some conservatives will go to in order to turn public opinion in this fight to their advantage."
By Brendan Fischer
Karl Rove's secretly-funded Crossroads GPS is spending $750,000 airing a terribly misleading ad attacking public-sector labor unions. With support declining for the GOP's anti-union stance, Rove's group is looking towards the 2012 elections and aiming to counteract that slide by unfairly demonizing unions.
The ad also attempts to lay the blame on President Obama, directing viewers to tell Obama "You've had enough." The group spent at least $17 million in the 2010 midterm elections, and along with Rove's American Crossroads PAC, is planning to spend $120 million in the 2012 elections. Here is what the ad says, and why it is wrong:
"Why are Democrats shutting down state capitols to protect a system that pays unionized government workers 42% more than non-union workers?"
False. As The Center for Media and Democracy (CMD) has reported, an Economic Policy Institute report finds that, when controlling for education and taking benefits into account, "full-time state and local government employees in Wisconsin are undercompensated by 8.2% compared with otherwise similar private sector workers." In other words, it is unfair to compare compensation for an unskilled worker with a teacher who holds a master's degree. *
"A system that collects hundreds of millions in mandatory dues to back liberals who support government unions..."
False. See the U.S. Supreme Court decision Communication Workers of America v. Beck, 487 U. S. 735 (1988): nonunion employees cannot be required to pay dues to support political activities. In a unionized workplace, employees who choose not to join the union still reap the benefits of union representatives bargaining on their behalf, but they can only be required to pay dues towards that representation.
"One union boss explains..." the ad says, quoting from a July 2009 speech by National Education Association General Counsel Bob Chanin that, taken out of context, makes unions sound like money-sucking power-hogs.
False -- through misleading editing. Chanin's full quote is actually a reminder to teachers that their interests and those of their students will not be guaranteed by the dignity of the profession, or their passion for teaching:
So the bad news, or depending on your point of view, the good news, is that NEA and its affiliates will continue to be attacked by conservative and right-wing groups as long as we continue to be effective advocates for public education, for education employees, and for human and civil rights. And that brings me to my final and most important point. Which is why, at least in my opinion, NEA and its affiliates are such effective advocates. Despite what some among us would like to believe, it is not because of our creative ideas. It is not because of the merit of our positions. It is not because we care about children. And it is not because we have a vision of a great public school for every child. NEA and its affiliates are effective advocates because we have power. And we have power because there are more than 3.2 million people who are willing to pay us hundreds of millions of dollars in dues each year because they believe that we are the unions that can most effectively represent them, the unions that can protect their rights and advance their interests as education employees.
In light of the present attack on educators and other public employees by the likes of Scott Walker and Karl Rove, Chanin was correct. The integrity of public education is not being protected by good ideas, sacrifices by teachers, or by widespread recognition that education is an investment in the future. The primary defenders of public education and public educators are unions.
The same goes for unions defending the integrity of other public services against right-wing attacks. The real motivation for Rove, Walker, and the like is to crush union political power. Wisconsin's Senate majority leader has boasted about this partisan political strategy today. And in our post-Citizens United world, the only counterweight looking out for middle-class interests are labor unions. Only labor unions are powerful enough to attempt to counterbalance corporate interests and speak on behalf of working people in the election process. Despite losing one battle today, the fight to protect America's middle class and working people has only just begun.
*Update March 11: While the ad's claim that unionized public employees are paid 42% more than non-union workers came from a March 2010 study by the libertarian Cato Institute think tank, the discrepancy with the EPI report was not the result of biased calculations, but from Crossroads GPS completely twisting Cato's findings. The Cato study's author has denounced the ad's distortion of its findings, and Greg Sargent at the Washington Post writes "Crossroads GPS's willingness to use data supplied by a fiscally conservative think tank in a way that even the study's pro-free market author finds objectionable tells you all you need to know about the lengths some conservatives will go to in order to turn public opinion in this fight to their advantage."
Rove-Associated Groups Vow $120 Million In Attack Ads, Say More Is Needed
Original Link: http://www.huffingtonpost.com/2011/06/24/rove-associated-groups-120-million-attack-ads_n_883898.html
By Dan Froomkin, Paul Blumenthal
The leaders of two behemoth Karl Rove-associated unlimited donation campaign fundraising groups on Friday promised to spend $120 million against Democrats in the 2012 election cycle, much of it in the form of attack ads.
At the same time, the leaders of American Crossroads and Crossroads Grassroots Political Strategies (GPS) tried to cast themselves as underdogs to a Democratic apparatus they predicted will spend $2 billion between now and November 2012. They spoke at a breakfast briefing with reporters organized by the Christian Science Monitor.
"We're going to have $2 billion spent in the suspension of reality," said American Crossroads chairman Mike Duncan.
But lest there be any doubt, Duncan's solution was not for Democrats to spend less, it was for Republicans to spend more.
"There's not too much money in politics," he declared. "I firmly believe that there is a role for various organizations."
Indeed, Duncan railed against one of the few campaign finance restrictions left in the wake of a series of sweeping Supreme Court decisions. The former Republican National Committee chairman said that limiting how much individuals or corporations can contribute directly to political parties constitute "restrictions on free speech."
"I'm a free speech guy, for good and bad," he said. "Why should political parties be limited to the amounts of contribution? What is the direct connection with corruption? There's not. I mean, you're steps removed from corruption…. I would hope that eventually the parties would be restored."
In the meantime, though, there are groups like American Crossroads, which was formed last year shortly after the high court ruled that groups acting independently of political parties or candidates could accept unlimited donations from individuals and corporations. Counseled by President George W. Bush's political guru, Karl Rove, the group also formed Crossroads GPS. The two groups share offices and Steven Law is president of both.
At Friday's breakfast, Law refused to substantively address the issue of whether the GPS group, which organized itself as a nonprofit organization under the 501(c)(4) section of the tax code in order to not have to disclose its donors, actually qualifies under Internal Revenue Service rules. Such groups are supposed to devote more than half of their energies to non-election-related social welfare activities, and the IRS has yet to rule on its status.
Experts consulted by The Huffington Post have said that a denial of the group's 501(c)(4) status would be devastating to its finances. But Law refused to even entertain the notion that the group won't get approved.
"We're well within where we need to be to be compliant," he insisted. Asked what percentage of GPS' budget goes to non-election-related activities, Law simply said he is "very comfortable" with the allocation between the group's social welfare and political activities.
And Law made it clear that neither Crossroads group will be spending their money on positive -- or what he called "defensive" -- ads. Groups like his devote their resources to "pointing out concerns about the other side's record and policies."
Law also said that while the groups won't involve themselves in the Republican primaries, they won't wait until there's a Republican nominee to start bashing President Barack Obama.
The groups' ability to get moving early will likely be fueled by high-dollar funders. A new report filed yesterday with the Federal Election Commission (FEC) shows that American Crossroads has raised $3.8 million this year. Over 90 percent of that money came from just three donors.
The group pulled in $2 million from the living trust of Jerry Perenchio, the owner of Univision, $1 million from Texas businessman Robert Rowling, and an additional $500,000 from Texas home-builder Bob Perry. All are long time Republican Party donors from the network that helped Bush twice win the White House.
Perry and Rowling have consistently been American Crossroads' biggest backers, having now combined to give the group $13.3 million of the total $30 million raised since its founding. These levels of contributions would be impossible under the law as it existed before the the Supreme Court decisions.
The new FEC report comes after American Crossroads ran advertisements in the special election in New York's 26th congressional district.
Despite backing a loser -- the race was won by Democrat Kathy Hochul -- Crossroads was the biggest spender among non-party groups in the special election, with over $600,000 in expenses.
Last year, the two Crossroads groups combined to spend $37 million on congressional races. That total surpasses the $32 million spent by the U.S. Chamber of Commerce, which many thought was the biggest outside group spender during the 2010 midterm elections.
UPDATE: 6:00 p.m. - On Friday afternoon Crossroads president Steven Law announced that Crossroads GPS, the 501(c)4 group, would commence a $20 million advertising campaign targeting President Barack Obama with a $5 million buy next week.
The first ad, titled "Shovel Ready," assails the president's record on the economy showing rises in unemployment, the price of gas, and the national debt.
“President Obama may have inherited a recession, but his policies have made things worse for everyday Americans by running up the debt and causing economic uncertainty,” said Steven Law, president of Crossroads GPS.
The states targeted include swing states and those where Senate races are expected to be tight. The states are Colorado, Florida, Iowa, Missouri, Montana, Nebraska, North Carolina, New Mexico, Nevada, and Virginia.
Crossroads GPS is a nonprofit organization that does not have to disclose its donors to the public. It was reported that the group raised $70 million last year.
By Dan Froomkin, Paul Blumenthal
The leaders of two behemoth Karl Rove-associated unlimited donation campaign fundraising groups on Friday promised to spend $120 million against Democrats in the 2012 election cycle, much of it in the form of attack ads.
At the same time, the leaders of American Crossroads and Crossroads Grassroots Political Strategies (GPS) tried to cast themselves as underdogs to a Democratic apparatus they predicted will spend $2 billion between now and November 2012. They spoke at a breakfast briefing with reporters organized by the Christian Science Monitor.
"We're going to have $2 billion spent in the suspension of reality," said American Crossroads chairman Mike Duncan.
But lest there be any doubt, Duncan's solution was not for Democrats to spend less, it was for Republicans to spend more.
"There's not too much money in politics," he declared. "I firmly believe that there is a role for various organizations."
Indeed, Duncan railed against one of the few campaign finance restrictions left in the wake of a series of sweeping Supreme Court decisions. The former Republican National Committee chairman said that limiting how much individuals or corporations can contribute directly to political parties constitute "restrictions on free speech."
"I'm a free speech guy, for good and bad," he said. "Why should political parties be limited to the amounts of contribution? What is the direct connection with corruption? There's not. I mean, you're steps removed from corruption…. I would hope that eventually the parties would be restored."
In the meantime, though, there are groups like American Crossroads, which was formed last year shortly after the high court ruled that groups acting independently of political parties or candidates could accept unlimited donations from individuals and corporations. Counseled by President George W. Bush's political guru, Karl Rove, the group also formed Crossroads GPS. The two groups share offices and Steven Law is president of both.
At Friday's breakfast, Law refused to substantively address the issue of whether the GPS group, which organized itself as a nonprofit organization under the 501(c)(4) section of the tax code in order to not have to disclose its donors, actually qualifies under Internal Revenue Service rules. Such groups are supposed to devote more than half of their energies to non-election-related social welfare activities, and the IRS has yet to rule on its status.
Experts consulted by The Huffington Post have said that a denial of the group's 501(c)(4) status would be devastating to its finances. But Law refused to even entertain the notion that the group won't get approved.
"We're well within where we need to be to be compliant," he insisted. Asked what percentage of GPS' budget goes to non-election-related activities, Law simply said he is "very comfortable" with the allocation between the group's social welfare and political activities.
And Law made it clear that neither Crossroads group will be spending their money on positive -- or what he called "defensive" -- ads. Groups like his devote their resources to "pointing out concerns about the other side's record and policies."
Law also said that while the groups won't involve themselves in the Republican primaries, they won't wait until there's a Republican nominee to start bashing President Barack Obama.
The groups' ability to get moving early will likely be fueled by high-dollar funders. A new report filed yesterday with the Federal Election Commission (FEC) shows that American Crossroads has raised $3.8 million this year. Over 90 percent of that money came from just three donors.
The group pulled in $2 million from the living trust of Jerry Perenchio, the owner of Univision, $1 million from Texas businessman Robert Rowling, and an additional $500,000 from Texas home-builder Bob Perry. All are long time Republican Party donors from the network that helped Bush twice win the White House.
Perry and Rowling have consistently been American Crossroads' biggest backers, having now combined to give the group $13.3 million of the total $30 million raised since its founding. These levels of contributions would be impossible under the law as it existed before the the Supreme Court decisions.
The new FEC report comes after American Crossroads ran advertisements in the special election in New York's 26th congressional district.
Despite backing a loser -- the race was won by Democrat Kathy Hochul -- Crossroads was the biggest spender among non-party groups in the special election, with over $600,000 in expenses.
Last year, the two Crossroads groups combined to spend $37 million on congressional races. That total surpasses the $32 million spent by the U.S. Chamber of Commerce, which many thought was the biggest outside group spender during the 2010 midterm elections.
UPDATE: 6:00 p.m. - On Friday afternoon Crossroads president Steven Law announced that Crossroads GPS, the 501(c)4 group, would commence a $20 million advertising campaign targeting President Barack Obama with a $5 million buy next week.
The first ad, titled "Shovel Ready," assails the president's record on the economy showing rises in unemployment, the price of gas, and the national debt.
“President Obama may have inherited a recession, but his policies have made things worse for everyday Americans by running up the debt and causing economic uncertainty,” said Steven Law, president of Crossroads GPS.
The states targeted include swing states and those where Senate races are expected to be tight. The states are Colorado, Florida, Iowa, Missouri, Montana, Nebraska, North Carolina, New Mexico, Nevada, and Virginia.
Crossroads GPS is a nonprofit organization that does not have to disclose its donors to the public. It was reported that the group raised $70 million last year.
Offshoring has Destroyed the US Economy
Original Link: http://www.globalresearch.ca/index.php?context=va&aid=25056
By Paul Craig Roberts
These are discouraging times, but once in a blue moon a bit of hope appears. I am pleased to report on the bit of hope delivered in March of 2011 by Michael Spence, a Nobel prize-winning economist, assisted by Sandile Hlatshwayo, a researcher at New York University. The two economists have taken a careful empirical look at jobs offshoring and concluded that it has ruined the income and employment prospects for most Americans.
To add to the amazement, their research report, “The Evolving Structure of the American Economy and the Employment Challenge,” was published by the very establishment Council on Foreign Relations ( http://www.cfr.org/ industrial-policy/evolving-structure-american-economy-employment-challenge/p24366 ).
For a decade I have warned that U.S. corporations, pressed by Wall Street and large retailers such as Wal-Mart, to move offshore their production for U.S. consumer markets, were simultaneously moving offshore U.S. GDP, U.S. tax base, U.S. consumer income, and irreplaceable career opportunities for American citizens.
Among the serious consequences of offshoring are the dismantling of the ladders of upward mobility that made the United States an “opportunity society,” an extraordinary worsening of the income distribution, and large trade and federal budget deficits that cannot be closed by normal means. These deficits now threaten the U.S. dollar’s role as world reserve currency.
I was not alone in making these warnings. Dr. Herman Daly, a former World Bank economist and professor at the University of Maryland, Dr. Charles McMillion, a Washington, D.C., economic consultant, and Dr. Ralph Gomory, a distinguished mathematician and the world’s best trade theorist, understand that it is strictly impossible for an economy to be moved offshore and for the country with the offshored economy to remain prosperous.
Even before this handful of economists capable of independent thought saw the ruinous implications of offshoring, two billionaires first recognized the danger and issued warnings, to no avail. One of the billionaires was Roger Milliken, the late South Carolina textile magnate, who spent his time on Capital Hill, not on yachts with Playboy centerfolds, trying to make our representatives aware that we were losing our economy. The other billionaire was the late Sir James Goldsmith, who made his fortune by correcting the mistakes of America’s incompetent corporate CEOs by taking over their companies and putting them to better use. Sir James spent his last years warning of the perils both of globalism and of merging the sovereignties of European countries and the UK into the EU.
Sir James’s book, The Trap, was published as long ago as 1993. His book, The Response, in which he replied to the “free trade” ideologues in the financial press and academia who denigrated his warning, was published in 1995. (For readers who wish to hear a speech given by Sir James to the U.S. Senate in 1994 warning of the perils of globalism, go to http://www.youtube.com/watch?v=maou TP8vTO0, Also: http://www.youtube.com/watch?v= 4PQrz8F0dBI&feature=related.)
Sir James called it correct, as did Roger Milliken. They predicted that the working and middle classes in the United States and Europe would be ruined by the greed of Wall Street and corporations, who would boost corporate earnings by replacing their domestic work forces with foreign labor, which could be paid a fraction of labor’s productivity as a result of the foreign country’s low living standard and large excess supply of labor. Anytime there is an excess supply of labor, or the ability of corporations to pay labor less than its productivity, the corporations bank the difference, share prices rise, and Wall Street and shareholders are happy.
All of this was over the heads of “free trade” ideologues, who threw accusations such as “protectionist” at Sir James, Roger Milliken, Herman Daly, Ralph Gomory, Charles McMillion and myself. These “free trade” ideologues are economically incompetent. They do not know that the justification for free trade is based on the principle of comparative advantage, which means that a country specializes in those economic activities in which it performs best and trades for those goods that other countries do best. Instead, the ideologues think that free trade means the freedom of capital to seek absolute advantage abroad in lowest factor cost. In other words, the free trade incompetents have never read David Ricardo, who formalized the case for free trade.
Other economists, especially those high profile ones in high profile academic institutions, were bought and paid for (see “Inside Job” at http://www.informationclearinghouse.info/article28189.htm ). In exchange for grants from offshoring corporations, these hirelings invented “the New Economy” in which everyone would prosper as a result of getting rid of “dirty fingernail jobs.” The New Economy wouldn’t make anything, but it would lead the world in innovation and in financing what others did make. The “new economists” were not sufficiently bright to realize that if a country didn’t make anything, it couldn’t innovate.
Let’s go now to Michael Spence and Sandile Hlatshwayo, who have provided an honest report for which we should give thanks. Professor Spence could have made many millions using the prestige of his Nobel Prize to lie for the Establishment, but he chose to tell the truth.
Here is what Spence and Hlatshwayo report:
“This paper examines the evolving structure of the American economy, specifically, the trends in employment, value added, and value added per employee from 1990 to 2008. These trends are closely connected with complementary trends in the size and structure of the global economy, particularly in the major emerging economies. Employing historical time series data from the Bureau of Labor Statistics and the Bureau of Economic Analysis, U.S. industries are separated into internationally tradable and non-tradable components, allowing for employment and value-added trends at both the industry and the aggregate level to be examined. Value added grew across the economy, but almost all of the incremental employment increase of 27.3 million jobs was on the non-tradable side. On the non-tradable side, government and health care are the largest employers and provided the largest increments (an additional 10.4 million jobs) over the past two decades. There are obvious questions about whether those trends can continue; without fast job creation in the non-tradable sector, the United States would already have faced a major employment challenge.
“The trends in value added per employee are consistent with the adverse movements in the distribution of U.S. income over the past 20 years, particularly the subdued income growth in the middle of the income range. The tradable side of the economy is shifting up the value-added chain with lower and middle components of these chains moving abroad, especially to the rapidly growing emerging markets. The latter themselves are moving rapidly up the value-added chains, and higher-paying jobs may therefore leave the United States, following the migration pattern of lower-paying ones. The evolution of the U.S. economy supports the notion of there being a long-term structural challenge with respect to the quantity and quality of employment opportunities in the United States. A related set of challenges concerns the income distribution; almost all incremental employment has occurred in the non-tradable sector, which has experienced much slower growth in value added per employee. Because that number is highly correlated with income, it goes a long way to explain the stagnation of wages across large segments of the workforce.”
A d v e r t i s e m e n t
What is Spence telling us? Spence is careful not to say that globalism is the intentional result of enhancing capital’s profits at the expense of labor’s wages, but he does acknowledge that that is its effect and that globalism or jobs offshoring has the costs that Daly, Gomory, McMillion, Milliken, Goldsmith and I have pointed out. Spence uses the same data that we have provided that proves that during the era of globalism the U.S. economy has created new jobs only in nontradable services that cannot be offshored or be produced in locations distant from their market. For example, the services of barbers, waitresses, bar tenders and hospital workers, unlike those of software engineers, cannot be exported. They can only be sold locally in the location where they are provided.
Tradeable jobs are jobs that produce goods and services that can be exported and thus can be produced in locations distant from their market. Tradeable jobs result in higher value-added and, thereby, higher pay than most non-tradable jobs.
When a country’s tradeable goods and services are converted by offshoring into its imports, it is thrown back on low productivity domestic service jobs for its employment. These domestic service jobs, except for dentists, lawyers, teachers and medical doctors do not require a university education. Yet, America has thousands of universities and colleges, and the government endlessly repeats the mantra that “education is the answer.”
But with engineering, design and research jobs offshored, and with many of the jobs that remain within the U.S. filled by foreigners on HB-1 and L-1 visas, we now have the phenomenon of American university and college graduates, heavily indebted with student loans, jobless and living with their parents who support them.
Spence also acknowledges that the change in the structure of American employment from higher productivity to lower productivity jobs is the reason both for the stagnation in U.S. consumer income and for the rising inequality of income. Sending middle class jobs abroad raised the earnings of capital. Spence understands that the lack of growth in consumer income has resulted in a shortfall in domestic demand, resulting in high unemployment. He could have added that jobs offshoring also gave us the Federal Reserve’s policy of pumping up consumer debt as a substitute for the missing growth in consumer income. There is an obvious limit to the ability to maintain the growth of consumer demand via the growth of indebtedness.
The offshored economy is the “New Economy,” which the “free trade” hirelings of Wall Street and the global corporations invented in order to pay, with grants from the offshoring corporations, for their summer homes in the Hamptons.
As a graduate student in economics, I was fortunate to study with a number of professors who had or were subsequently awarded Nobel Prizes. Among these creative people there are two economists whom I did not study under, but whose work I have read, and whose work is of great importance to our economic prospects. The two most important economists of our time, who, without any doubt, deserve the Nobel Prize are Ralph Gomory and Herman Daly.
Ralph Gomory’s book, “Global Trade and Conflicting National Interests,” coauthored with William Baumol, a past president of the American Economics Association, is the most important work in trade theory ever produced. This book and subsequent papers by Gomory prove beyond all doubt that the free trade theory set out by David Ricardo at the beginning of the 19th century is merely a special case, not a general theory.
Economists learn in their graduate courses that free trade is an unchallengeable doctrine and that only ignorant protectionists dispute the theory. This mindset was sufficient for Gomory’s book to be largely ignored, even though Paul Samuelson, the dean of American economics, acknowledged the critical point that there are situations in which free trade is not mutually beneficial.
The other deserving recipient of the Nobel Prize is Herman Daly. On the trade issue, Daly’s point is different from and less revolutionary than Gomory’s. Daly makes the same point that I make, which is that the classic theory of free trade is based on comparative advantage, not on absolute advantage, and that offshoring is based on absolute advantage. Thus, offshoring is not free trade.
Daly’s revolutionary contribution to economics comes from his realization that the production function that is the basis of economic science is wrong.
This production function is known as the Solow-Stiglitz production function. This production function assumes that man-made capital is a substitute for nature’s capital. It follows from this assumption that whatever humans do to use up and destroy the natural environment can be overcome by the resourcefulness of science and technology.
Daly shows that this reasoning is incorrect. If the Gulf of Mexico is destroyed by fertilizer run-offs from agri-business and by oil spills, only nature can correct the problem after many years measured in decades or centuries. In the meantime, humans are without the resource.
Daly’s argument is brilliant in its simplicity. In former times, nature’s capital was enormous, and man’s reproducible capital was small. For example, fish in the oceans were plentiful, but fishing boats were not. Today fishing boats are in excess supply, but ocean fishing stocks are depleted. Thus, the limiting factor is not man-made capital, but nature’s capital. Daly stresses that by leaving ecological and social costs out of the computation of GDP, economists do not have a reliable measure of the effect of economic activity on human welfare.
All of economics is predicated on the notion that resources are inexhaustible, and that the only challenge is to use them most efficiently. But if resources are not inexhaustible and cannot be replicated by human capital, the world economy is being ruthlessly exploited to its detriment and to the detriment of life on earth.
To find a Nobel prize-winner documenting the high cost of globalism to developed economies is extraordinary. For the Council on Foreign Relations to publish it suggests that the Establishment, or some part of it, suspects that its hubris has run away with its fortunes, and that different thinking is needed to restore the U.S. economy.
We must hope that Spence’s paper will encourage thought. On the other hand, the bought-and-paid-for-economists will confront Spence with their fantasies that the U.S. would be enjoying full employment if only government did not discourage employment with unemployment compensation, food stamps, income support programs, unions, minimum wages and regulation.
Stock up with Fresh Food that lasts with eFoodsDirect (Ad)
Recently, yet another high-level warning came from the International Monetary Fund. The IMF report said that the U.S. economy has been seriously eroded and that the age of America is over.
Will the U.S. business and economic establishments heed these warnings, or will the U.S. become a third world country as I predicted at the beginning of this century?
By Paul Craig Roberts
These are discouraging times, but once in a blue moon a bit of hope appears. I am pleased to report on the bit of hope delivered in March of 2011 by Michael Spence, a Nobel prize-winning economist, assisted by Sandile Hlatshwayo, a researcher at New York University. The two economists have taken a careful empirical look at jobs offshoring and concluded that it has ruined the income and employment prospects for most Americans.
To add to the amazement, their research report, “The Evolving Structure of the American Economy and the Employment Challenge,” was published by the very establishment Council on Foreign Relations ( http://www.cfr.org/ industrial-policy/evolving-structure-american-economy-employment-challenge/p24366 ).
For a decade I have warned that U.S. corporations, pressed by Wall Street and large retailers such as Wal-Mart, to move offshore their production for U.S. consumer markets, were simultaneously moving offshore U.S. GDP, U.S. tax base, U.S. consumer income, and irreplaceable career opportunities for American citizens.
Among the serious consequences of offshoring are the dismantling of the ladders of upward mobility that made the United States an “opportunity society,” an extraordinary worsening of the income distribution, and large trade and federal budget deficits that cannot be closed by normal means. These deficits now threaten the U.S. dollar’s role as world reserve currency.
I was not alone in making these warnings. Dr. Herman Daly, a former World Bank economist and professor at the University of Maryland, Dr. Charles McMillion, a Washington, D.C., economic consultant, and Dr. Ralph Gomory, a distinguished mathematician and the world’s best trade theorist, understand that it is strictly impossible for an economy to be moved offshore and for the country with the offshored economy to remain prosperous.
Even before this handful of economists capable of independent thought saw the ruinous implications of offshoring, two billionaires first recognized the danger and issued warnings, to no avail. One of the billionaires was Roger Milliken, the late South Carolina textile magnate, who spent his time on Capital Hill, not on yachts with Playboy centerfolds, trying to make our representatives aware that we were losing our economy. The other billionaire was the late Sir James Goldsmith, who made his fortune by correcting the mistakes of America’s incompetent corporate CEOs by taking over their companies and putting them to better use. Sir James spent his last years warning of the perils both of globalism and of merging the sovereignties of European countries and the UK into the EU.
Sir James’s book, The Trap, was published as long ago as 1993. His book, The Response, in which he replied to the “free trade” ideologues in the financial press and academia who denigrated his warning, was published in 1995. (For readers who wish to hear a speech given by Sir James to the U.S. Senate in 1994 warning of the perils of globalism, go to http://www.youtube.com/watch?v=maou TP8vTO0, Also: http://www.youtube.com/watch?v= 4PQrz8F0dBI&feature=related.)
Sir James called it correct, as did Roger Milliken. They predicted that the working and middle classes in the United States and Europe would be ruined by the greed of Wall Street and corporations, who would boost corporate earnings by replacing their domestic work forces with foreign labor, which could be paid a fraction of labor’s productivity as a result of the foreign country’s low living standard and large excess supply of labor. Anytime there is an excess supply of labor, or the ability of corporations to pay labor less than its productivity, the corporations bank the difference, share prices rise, and Wall Street and shareholders are happy.
All of this was over the heads of “free trade” ideologues, who threw accusations such as “protectionist” at Sir James, Roger Milliken, Herman Daly, Ralph Gomory, Charles McMillion and myself. These “free trade” ideologues are economically incompetent. They do not know that the justification for free trade is based on the principle of comparative advantage, which means that a country specializes in those economic activities in which it performs best and trades for those goods that other countries do best. Instead, the ideologues think that free trade means the freedom of capital to seek absolute advantage abroad in lowest factor cost. In other words, the free trade incompetents have never read David Ricardo, who formalized the case for free trade.
Other economists, especially those high profile ones in high profile academic institutions, were bought and paid for (see “Inside Job” at http://www.informationclearinghouse.info/article28189.htm ). In exchange for grants from offshoring corporations, these hirelings invented “the New Economy” in which everyone would prosper as a result of getting rid of “dirty fingernail jobs.” The New Economy wouldn’t make anything, but it would lead the world in innovation and in financing what others did make. The “new economists” were not sufficiently bright to realize that if a country didn’t make anything, it couldn’t innovate.
Let’s go now to Michael Spence and Sandile Hlatshwayo, who have provided an honest report for which we should give thanks. Professor Spence could have made many millions using the prestige of his Nobel Prize to lie for the Establishment, but he chose to tell the truth.
Here is what Spence and Hlatshwayo report:
“This paper examines the evolving structure of the American economy, specifically, the trends in employment, value added, and value added per employee from 1990 to 2008. These trends are closely connected with complementary trends in the size and structure of the global economy, particularly in the major emerging economies. Employing historical time series data from the Bureau of Labor Statistics and the Bureau of Economic Analysis, U.S. industries are separated into internationally tradable and non-tradable components, allowing for employment and value-added trends at both the industry and the aggregate level to be examined. Value added grew across the economy, but almost all of the incremental employment increase of 27.3 million jobs was on the non-tradable side. On the non-tradable side, government and health care are the largest employers and provided the largest increments (an additional 10.4 million jobs) over the past two decades. There are obvious questions about whether those trends can continue; without fast job creation in the non-tradable sector, the United States would already have faced a major employment challenge.
“The trends in value added per employee are consistent with the adverse movements in the distribution of U.S. income over the past 20 years, particularly the subdued income growth in the middle of the income range. The tradable side of the economy is shifting up the value-added chain with lower and middle components of these chains moving abroad, especially to the rapidly growing emerging markets. The latter themselves are moving rapidly up the value-added chains, and higher-paying jobs may therefore leave the United States, following the migration pattern of lower-paying ones. The evolution of the U.S. economy supports the notion of there being a long-term structural challenge with respect to the quantity and quality of employment opportunities in the United States. A related set of challenges concerns the income distribution; almost all incremental employment has occurred in the non-tradable sector, which has experienced much slower growth in value added per employee. Because that number is highly correlated with income, it goes a long way to explain the stagnation of wages across large segments of the workforce.”
A d v e r t i s e m e n t
What is Spence telling us? Spence is careful not to say that globalism is the intentional result of enhancing capital’s profits at the expense of labor’s wages, but he does acknowledge that that is its effect and that globalism or jobs offshoring has the costs that Daly, Gomory, McMillion, Milliken, Goldsmith and I have pointed out. Spence uses the same data that we have provided that proves that during the era of globalism the U.S. economy has created new jobs only in nontradable services that cannot be offshored or be produced in locations distant from their market. For example, the services of barbers, waitresses, bar tenders and hospital workers, unlike those of software engineers, cannot be exported. They can only be sold locally in the location where they are provided.
Tradeable jobs are jobs that produce goods and services that can be exported and thus can be produced in locations distant from their market. Tradeable jobs result in higher value-added and, thereby, higher pay than most non-tradable jobs.
When a country’s tradeable goods and services are converted by offshoring into its imports, it is thrown back on low productivity domestic service jobs for its employment. These domestic service jobs, except for dentists, lawyers, teachers and medical doctors do not require a university education. Yet, America has thousands of universities and colleges, and the government endlessly repeats the mantra that “education is the answer.”
But with engineering, design and research jobs offshored, and with many of the jobs that remain within the U.S. filled by foreigners on HB-1 and L-1 visas, we now have the phenomenon of American university and college graduates, heavily indebted with student loans, jobless and living with their parents who support them.
Spence also acknowledges that the change in the structure of American employment from higher productivity to lower productivity jobs is the reason both for the stagnation in U.S. consumer income and for the rising inequality of income. Sending middle class jobs abroad raised the earnings of capital. Spence understands that the lack of growth in consumer income has resulted in a shortfall in domestic demand, resulting in high unemployment. He could have added that jobs offshoring also gave us the Federal Reserve’s policy of pumping up consumer debt as a substitute for the missing growth in consumer income. There is an obvious limit to the ability to maintain the growth of consumer demand via the growth of indebtedness.
The offshored economy is the “New Economy,” which the “free trade” hirelings of Wall Street and the global corporations invented in order to pay, with grants from the offshoring corporations, for their summer homes in the Hamptons.
As a graduate student in economics, I was fortunate to study with a number of professors who had or were subsequently awarded Nobel Prizes. Among these creative people there are two economists whom I did not study under, but whose work I have read, and whose work is of great importance to our economic prospects. The two most important economists of our time, who, without any doubt, deserve the Nobel Prize are Ralph Gomory and Herman Daly.
Ralph Gomory’s book, “Global Trade and Conflicting National Interests,” coauthored with William Baumol, a past president of the American Economics Association, is the most important work in trade theory ever produced. This book and subsequent papers by Gomory prove beyond all doubt that the free trade theory set out by David Ricardo at the beginning of the 19th century is merely a special case, not a general theory.
Economists learn in their graduate courses that free trade is an unchallengeable doctrine and that only ignorant protectionists dispute the theory. This mindset was sufficient for Gomory’s book to be largely ignored, even though Paul Samuelson, the dean of American economics, acknowledged the critical point that there are situations in which free trade is not mutually beneficial.
The other deserving recipient of the Nobel Prize is Herman Daly. On the trade issue, Daly’s point is different from and less revolutionary than Gomory’s. Daly makes the same point that I make, which is that the classic theory of free trade is based on comparative advantage, not on absolute advantage, and that offshoring is based on absolute advantage. Thus, offshoring is not free trade.
Daly’s revolutionary contribution to economics comes from his realization that the production function that is the basis of economic science is wrong.
This production function is known as the Solow-Stiglitz production function. This production function assumes that man-made capital is a substitute for nature’s capital. It follows from this assumption that whatever humans do to use up and destroy the natural environment can be overcome by the resourcefulness of science and technology.
Daly shows that this reasoning is incorrect. If the Gulf of Mexico is destroyed by fertilizer run-offs from agri-business and by oil spills, only nature can correct the problem after many years measured in decades or centuries. In the meantime, humans are without the resource.
Daly’s argument is brilliant in its simplicity. In former times, nature’s capital was enormous, and man’s reproducible capital was small. For example, fish in the oceans were plentiful, but fishing boats were not. Today fishing boats are in excess supply, but ocean fishing stocks are depleted. Thus, the limiting factor is not man-made capital, but nature’s capital. Daly stresses that by leaving ecological and social costs out of the computation of GDP, economists do not have a reliable measure of the effect of economic activity on human welfare.
All of economics is predicated on the notion that resources are inexhaustible, and that the only challenge is to use them most efficiently. But if resources are not inexhaustible and cannot be replicated by human capital, the world economy is being ruthlessly exploited to its detriment and to the detriment of life on earth.
To find a Nobel prize-winner documenting the high cost of globalism to developed economies is extraordinary. For the Council on Foreign Relations to publish it suggests that the Establishment, or some part of it, suspects that its hubris has run away with its fortunes, and that different thinking is needed to restore the U.S. economy.
We must hope that Spence’s paper will encourage thought. On the other hand, the bought-and-paid-for-economists will confront Spence with their fantasies that the U.S. would be enjoying full employment if only government did not discourage employment with unemployment compensation, food stamps, income support programs, unions, minimum wages and regulation.
Stock up with Fresh Food that lasts with eFoodsDirect (Ad)
Recently, yet another high-level warning came from the International Monetary Fund. The IMF report said that the U.S. economy has been seriously eroded and that the age of America is over.
Will the U.S. business and economic establishments heed these warnings, or will the U.S. become a third world country as I predicted at the beginning of this century?
10 Things the GOP Doesn't Want You to Know About the Debt
Original Link: http://www.dailykos.com/story/2011/06/23/988055/-10-Things-the-GOP-Doesnt-Want-You-to-Know-About-the-Debt
By Avenging Angel
Just two weeks after he seconded Treasury Secretary Tim Geithner's dire warnings about the August 2 deadline to raise the U.S debt ceiling, House Majority Leader Eric Cantor walked out of the budget talks aimed at reaching a bipartisan compromise over deficit reduction. Like Arizona GOP Senator Jon Kyl, Cantor shifted the burden to Speaker John Boehner, Senate Minority Mitch McConnell and President Obama to "get over this impasse on taxes."
For his part, McConnell promised that no deal to end the GOP's hostage taking of the U.S. economy will include tax hikes. But while McConnell boasted that "If they couldn't raise taxes when they owned the government, you know they can't get it done now," left unsaid was the inconvenient truth that the nation's mounting debt is largely attributable to wars, a recession and tax policies put in place under his party's watch.
Here, then, are 10 things the GOP doesn't want you to know about the debt:
1. Republican Leaders Agree U.S. Default Would Be a "Financial Disaster"
2. Ronald Reagan Tripled the National Debt
3. George W. Bush Doubled the National Debt
4. Republicans Voted Seven Times to Raise Debt Ceiling for President Bush
5. Federal Taxes Are Now at a 60 Year Low
6. Bush Tax Cuts Didn't Pay for Themselves or Spur "Job Creators"
7. Ryan Budget Delivers Another Tax Cut Windfall for Wealthy
8. Ryan Budget Will Require Raising Debt Ceiling - Repeatedly
9. Tax Cuts Drive the Next Decade of Debt
10. $3 Trillion Tab for Unfunded Wars Remains Unpaid
1. Republican Leaders Agree U.S. Default Would Be a "Financial Disaster"
Senator Pat Toomey (R-PA), Rep. Michele Bachmann (R-MN) and White House hopeful Tim Pawlenty are among the GOP luminaries who have joined the ranks of what Dana Milbank called the "default deniers." But you don't have to take Treasury Secretary Timothy Geithner's word for it "that if Congress doesn't agree to an increase in the debt limit by August 2, the United States will be forced to default on its debt, potentially spreading panic and collapse across the globe." As it turns out, Republican leaders (and their big business backers) have said the same thing.
In their few moments of candor, Republican leaders expressed agreement with Tim Geithner's assessment that default by the U.S. "would have a catastrophic economic impact that would be felt by every American." The specter of a global financial cataclysm has been described as resulting in "severe harm" (McCain economic adviser Mark Zandi), "financial collapse and calamity throughout the world" (Senator Lindsey Graham) and "you can't not raise the debt ceiling" (House Budget Committee Chairman Paul Ryan). In January, even Speaker John Boehner acknowledged as much:
"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on election day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."
2. Ronald Reagan Tripled the National Debt
Among the Republicans who prophesied the default doomsday scenario was none other than conservative patron saint, Ronald Reagan. As he warned Congress in November 1983:
"The full consequences of a default -- or even the serious prospect of default -- by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar."
Reagan knew what he was talking about. After all, the hemorrhage of red ink at the U.S. Treasury was his doing.
As most analysts predicted, Reagan's massive $749 billion supply-side tax cuts in 1981 quickly produced even more massive annual budget deficits. Combined with his rapid increase in defense spending, Reagan delivered not the balanced budgets he promised, but record-setting debt. Even his OMB alchemist David Stockman could not obscure the disaster with his famous "rosy scenarios."
Forced to raise taxes eleven times to avert financial catastrophe, the Gipper nonetheless presided over a tripling of the American national debt to nearly $3 trillion. By the time he left office in 1989, Ronald Reagan more than equaled the entire debt burden produced by the previous 200 years of American history. It's no wonder Stockman lamented last year:
"[The] debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."
It's no wonder the Gipper cited the skyrocketing deficits he bequeathed to America as his greatest regret.
3. George W. Bush Doubled the National Debt
Following in Reagan's footsteps, George W. Bush buried the myth of Republican fiscal discipline.
Inheriting a federal budget in the black and CBO forecast for a $5.6 trillion surplus over 10 years, President George W. Bush quickly set about dismantling the progress made under Bill Clinton. Bush's $1.4 trillion tax cut in 2001, followed by a $550 billion second round in 2003, accounted for the bulk of the yawning budget deficits he produced. (It is more than a little ironic that Paul Ryan ten years ago called the tax cuts "too small" because he believed the estimated surplus Bush eviscerated would be even larger.)
Like Reagan and Stockman before him, Bush resorted to the rosy scenario to claim he would halve the budget deficit by 2009. Before the financial system meltdown last fall, Bush's deficit already reached $490 billion. (And even before the passage of the Wall Street bailout, Bush had presided over a $4 trillion increase in the national debt, a staggering 71% jump.) By January 2009, the mind-numbing deficit figure reached $1.2 trillion, forcing President Bush to raise the debt ceiling to $11.3 trillion.
4. Republicans Voted Seven Times to Raise Debt Ceiling for President Bush
"Reagan," Vice President Dick Cheney famously declared in 2002, "proved deficits don't matter." Not, that is, unless a Democrat is in the White House.
As Donny Shaw documented in January 2010, Republican intransigence on the debt ceiling only began in earnest when Bush left the White House for good.
The Republicans haven't always been against increasing the federal debt ceiling. This is the first time in recent history (the past decade or so) that no Republican has voted for the increase. In fact, on most of the ten other votes to increase the federal debt limit that the Senate has taken since 1997, the Republicans provided the majority of the votes in favor.
As it turns out, Republican majorities voted to raise the U.S. debt ceiling seven times while George W. Bush sat in the Oval Office. (It should be noted, as Ezra Klein did, that party-line votes on debt ceiling increases tied to other legislation is not solely the province of the GOP.) As ThinkProgress pointed out, during the Bush presidency, the current GOP leadership team voted 19 times to increase debt limit. During his tenure, the U.S. national debt doubled, fueled by the Bush tax cuts of 2001 and 2003, the Medicare prescription drug plan and the unfunded wars in Iraq and Afghanistan. And Mitch McConnell and John Boehner voted for all of it and the debt which ensued because, as Orrin Hatch later explained:
"It was standard practice not to pay for things."
5. Federal Taxes Now at a 60 Year Low
Even as Vice President Biden leads bipartisan negotiations to trim at least $1 trillion from the national debt, Republican leaders faithfully regurgitate the refrain that tax increases are "off the table." In one form or another, Mitch McConnell, Eric Cantor and just about every other conservative mouthpiece parroted Speaker John Boehner's line that:
"Medicare, Medicaid - everything should be on the table, except raising taxes."
Which purely by the numbers (if not ideology) is an odd position to take. After all, as a percentage of the U.S. economy, the total federal tax bite hasn't been this low in 60 years.
As the chart representing President Obama's 2012 budget proposal above reflects, the American tax burden hasn't been this low in generations. Thanks to the combination of the Bush Recession and the latest Obama tax cuts, the AP reported, "as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way." In January, the Congressional Budget Office (CBO) explained that "revenues would be just under 15 percent of GDP; levels that low have not been seen since 1950." That finding echoed an earlier analysis from the Bureau of Economic Analysis. Last April, the Center on Budget and Policy Priorities concluded, "Middle-income Americans are now paying federal taxes at or near historically low levels, according to the latest available data." As USA Today reported last May, the BEA data debunked yet another right-wing myth:
Federal, state and local taxes -- including income, property, sales and other taxes -- consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8% of income before rising slightly in the first three months of 2010.
"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress.
Or as former Reagan Treasury official Bruce Bartlett explained it this week the New York Times:
In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.
Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.
6. Bush Tax Cuts Didn't Pay for Themselves or Spur "Job Creators"
That Republican intransigence persists despite the complete debunking of two of the GOP's favorite myths.
The first tried and untrue Republican talking point is that "tax cuts pay for themselves." Sadly, that right-wing mythmaking is belied by the massive Bush deficits, half of which (as the CBPP chart in section 3 above shows} were the result of the Bush tax cuts themselves. As a percentage of the American economy, tax revenues peaked in 2000; that is, before the Bush tax cuts of 2001 and 2003. Despite President Bush's bogus claim that "You cut taxes and the tax revenues increase," Uncle Sam's cash flow from individual income taxes did not return to its pre-dot com bust level until 2006.
The second GOP fairy tale, as expressed by Speaker Boehner, is that "The top one percent of wage earners in the United States...pay forty percent of the income taxes...The people he's {President Obama] is talking about taxing are the very people that we expect to reinvest in our economy."
If so, the Republican's so-called "Job Creators" failed to meet those expectations under George W. Bush. After all, the last time the top tax rate was 39.6% during the Clinton administration, the United States enjoyed rising incomes, 23 million new jobs and budget surpluses. Under Bush? Not so much.
On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The dismal 3 million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:
As David Leonhardt of the New York Times aptly concluded last year:
Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.
7. Ryan Budget Delivers Another Tax Cut Windfall for Wealthy
Looking at that dismal performance, Leonhardt rightly asked, "Why should we believe that extending the Bush tax cuts will provide a big lift to growth?" At a time of record income inequality which saw the incomes of the richest 400 Americans taxpayers double even as their tax rates were halved, that's a fair question to say the least.
For Paul Ryan and the Republican Party, the answer is simple: because we said so.
As Ezra Klein, Paul Krugman and Steve Benen among others noted, the House Republicans "Plan for America's Job Creators" is simply a repackaging of years of previous proposals and GOP bromides. (As Klein pointed out, the 10 page document"looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan.") At the center of it is the same plan from the Ryan House budget passed in April to cut the top individual and corporate tax rates to 25%.
The price tag for the Republican proposal is a jaw-dropping $4.2 trillion. And as Matthew Yglesias explained, earlier analyses of similar proposals in Ryan's Roadmap reveal that working Americans would have to pick up the tab left unpaid by upper-income households:
This is an important element of Ryan's original "roadmap" plan that's never gotten the attention it deserves. But according to a Center for Tax Justice analysis (PDF), even though Ryan features large aggregate tax cuts, ninety percent of Americans would actually pay higher taxes under his plan.
In other words, it wasn't just cuts in middle class benefits in order to cut taxes on the rich. It was cuts in middle class benefits and middle class tax hikes in order to cut taxes on the rich. It'll be interesting to see if the House Republicans formally introduce such a plan and if so how many people will vote for it.
We now know the answer: 235 House Republicans and 40 GOP Senators.
8. Ryan Budget Will Require Raising Debt Ceiling - Repeatedly
Largely overlooked in the media coverage of the Republican debt ceiling hostage drama is this: those 235 House Republicans and 40 GOP Senators who supported Paul Ryan's 2012 budget bill voted to add $6 trillion to the U.S. national debt over the next decade. And that means, as Speaker John Boehner acknowledged, Republicans now and in the future would have to increase the debt ceiling - repeatedly.
Of course, you'd never know that based on the incendiary rhetoric from the leading lights of the Republican Party and their right-wing echo chamber. Senator Rand Paul (R-KY) said his vote to bump up the debt ceiling would come at the cost of a balanced budget amendment to the Constitution, "the last time we're doing it." His South Carolina colleague Jim Demint threatened to filibuster the increase, even if it meant the GOP's "Waterloo." The number two House Republican Eric Cantor (R-VA) regurgitated that line, telling Democrats the GOP "will not grant their request for a debt limit increase" without major spending cuts or budget process reforms." For his part, House Budget Committee Chairman Paul Ryan insisted, "We won't raise, just simply raise, the debt limit," adding, "We will vote to have spending cuts and controls in conjunction with the debt limit increase." As giddy right-wing bloggers like Patterico described the right-wing's scorched earth strategy:
If Republicans are going to vote to raise the debt ceiling -- and not to do so will indeed cause financial chaos -- they have to extract concessions sufficient that they can credibly say: this is the last such vote we will ever have to have.
Sadly, as Ezra Klein of the Washington Post explained last month, "Republicans can't meet their own deficit and spending targets." The Ryan plan to privatize Medicare, slash and convert Medicaid into block grants, and deliver another tax-cut windfall for the wealthy nevertheless "blows through both their spending and debt caps":
House Republicans voted to make the Ryan budget law. But the Ryan budget includes $6 trillion in new debt over the next 10 years, which means that to become law, the Ryan budget would require a substantial increase in the debt ceiling. But before the Republicans agree to increase the debt ceiling so that the budget they passed can become law, Republicans are demanding the passage of either a balanced budget amendment that would make the Ryan budget unconstitutional or a spending cap that the Ryan budget would, in certain years (and if you're using more realistic numbers, in all years), exceed.
It's no wonder Klein's Washington Post colleague Matt Miller deemed the Republican budgetary horror story "The Shining - National Debt Edition" before concluding that Boehner's "awe-inspiring hypocrisy on the debt limit" is one of those moments of "political behavior that can only be dubbed Super-Duper Hypocrisy So Brazen They Must Really Think We're Idiots."
9. Tax Cuts Drive the Next Decade of Debt
"President Obama's agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying," the New York Times' David Leonhardt explained in 2009, adding, "The economic growth under George W. Bush did not generate nearly enough tax revenue to pay for his agenda, which included tax cuts, the Iraq war, and Medicare prescription drug coverage." That fall, former Reagan Treasury official Bruce Bartlett offered just that kind of honesty to the born again deficit virgins of his Republican Party. Noting that the FY2009 deficit of $1.4 trillion was solely due to lower tax revenues and not increased spending, Bartlett concluded:
"I think there are grounds on which to criticize the Obama administration's anti-recession actions. But spending too much is not one of them. Indeed, based on this analysis, it is pretty obvious that spending - real spending on things like public works - has been grossly inadequate. The idea that Reagan-style tax cuts would have done anything is just nuts."
Which is exactly right. Thanks to the steep recession, as the Congressional Budget Office (CBO) and others have documented time and again, the overall federal tax burden as a percentage of GDP is now down to levels not seen since Harry Truman was in the White House. (The two-year tax cut compromise in December didn't help any, adding $400 billion to the deficit this year and next.) But is the Bush tax cuts themselves, which Republicans want to make permanent and then (as the Ryan budget mandates) lower further, which account for much of the revenue drain into the future.
As a recent analysis by the Center on Budget and Policy Priorities showed, over the next decade the Bush tax cuts account for more of the nation's debt than Iraq, Afghanistan, TARP, the stimulus, and revenue lost to the recession combined:
10. $3 Trillion Tab for Unfunded Wars Remains Unpaid
Over the next ten years, the costs of America's wars in Iraq and Afghanistan will decline as the U.S. commitments there come to an end. But almost ten years, 6,000 U.S. dead and over a trillion dollars after the attacks of September 11, it's time to pay for our wars.
In May, the National Journal estimated that the total cost to the U.S. economy of the war against Al Qaeda will reach $3 trillion. In 2008, Nobel Prize-winning economist Joseph Stiglitz put the price of the Iraq conflict alone at $3 trillion.
But by 2020 and beyond, the direct cost to U.S. taxpayers could reach $3 trillion. In March, the Congressional Research Service put the total cost of the wars at $1.28 trillion, including $806 billion for Iraq and $444 billion for Afghanistan. For the 2012 fiscal year which begins on October 1, President Obama asked for $117 billion more. (That war-fighting funding is over and above Secretary Gates' $553 billion Pentagon budget request for next year.)
But in addition to the roughly $1.5 trillion tally for both conflicts through the theoretical 2014 American draw down date in Afghanistan, the U.S. faces staggering bills for veterans' health care and disability benefits. Last May, an analysis by the Center for American Progress estimated the total projected total cost of Iraq and Afghanistan veterans' health care and disability could reach between $422 billion to $717 billion. Reconstruction aid and other development assistance represent tens of billions more, as does the additional interest on the national debt. And none of the above counts the expanded funding for the new Department of Homeland Security.
But that two-plus trillion dollar tab doesn't account for the expansion of the United States military since the start of the "global war on terror." As a percentage of the American economy, defense spending jumped from 3.1% in 2001 to 4.8% last year. While ThinkProgress noted that the Pentagon's FY 2012 ask is "the largest request ever since World War II," McClatchy explained:
Such a boost would mark the 14th year in a row that Pentagon spending has increased, despite the waning U.S. presence in Iraq. In dollars, Pentagon spending has more than doubled in 10 years. Even adjusted for inflation, the Defense Department budget has risen 65% in the past decade.
Even as the World Trade Center site was still smoldering, Republicans insisted Al Qaeda represented an existential threat to the United States. President Bush repeatedly compared 9/11 to Pearl Harbor and his war on terror to World War II. But he never asked Americans to join the military or sacrifice at home. Instead, Bush told us to go shopping and "get down to Disney World."
From a public policy standpoint, post-9/11 America in no way resembles FDR's response to Pearl Harbor. George W. Bush was the first modern president to cut taxes during wartime. Barack Obama was the second.
It's time, as Bernie Sanders, Al Franken and the Congressional Progressive Caucus each proposed, to begin paying for the unfunded conflicts fought in our name.
By Avenging Angel
Just two weeks after he seconded Treasury Secretary Tim Geithner's dire warnings about the August 2 deadline to raise the U.S debt ceiling, House Majority Leader Eric Cantor walked out of the budget talks aimed at reaching a bipartisan compromise over deficit reduction. Like Arizona GOP Senator Jon Kyl, Cantor shifted the burden to Speaker John Boehner, Senate Minority Mitch McConnell and President Obama to "get over this impasse on taxes."
For his part, McConnell promised that no deal to end the GOP's hostage taking of the U.S. economy will include tax hikes. But while McConnell boasted that "If they couldn't raise taxes when they owned the government, you know they can't get it done now," left unsaid was the inconvenient truth that the nation's mounting debt is largely attributable to wars, a recession and tax policies put in place under his party's watch.
Here, then, are 10 things the GOP doesn't want you to know about the debt:
1. Republican Leaders Agree U.S. Default Would Be a "Financial Disaster"
2. Ronald Reagan Tripled the National Debt
3. George W. Bush Doubled the National Debt
4. Republicans Voted Seven Times to Raise Debt Ceiling for President Bush
5. Federal Taxes Are Now at a 60 Year Low
6. Bush Tax Cuts Didn't Pay for Themselves or Spur "Job Creators"
7. Ryan Budget Delivers Another Tax Cut Windfall for Wealthy
8. Ryan Budget Will Require Raising Debt Ceiling - Repeatedly
9. Tax Cuts Drive the Next Decade of Debt
10. $3 Trillion Tab for Unfunded Wars Remains Unpaid
1. Republican Leaders Agree U.S. Default Would Be a "Financial Disaster"
Senator Pat Toomey (R-PA), Rep. Michele Bachmann (R-MN) and White House hopeful Tim Pawlenty are among the GOP luminaries who have joined the ranks of what Dana Milbank called the "default deniers." But you don't have to take Treasury Secretary Timothy Geithner's word for it "that if Congress doesn't agree to an increase in the debt limit by August 2, the United States will be forced to default on its debt, potentially spreading panic and collapse across the globe." As it turns out, Republican leaders (and their big business backers) have said the same thing.
In their few moments of candor, Republican leaders expressed agreement with Tim Geithner's assessment that default by the U.S. "would have a catastrophic economic impact that would be felt by every American." The specter of a global financial cataclysm has been described as resulting in "severe harm" (McCain economic adviser Mark Zandi), "financial collapse and calamity throughout the world" (Senator Lindsey Graham) and "you can't not raise the debt ceiling" (House Budget Committee Chairman Paul Ryan). In January, even Speaker John Boehner acknowledged as much:
"That would be a financial disaster, not only for our country but for the worldwide economy. Remember, the American people on election day said, 'we want to cut spending and we want to create jobs.' And you can't create jobs if you default on the federal debt."
2. Ronald Reagan Tripled the National Debt
Among the Republicans who prophesied the default doomsday scenario was none other than conservative patron saint, Ronald Reagan. As he warned Congress in November 1983:
"The full consequences of a default -- or even the serious prospect of default -- by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar."
Reagan knew what he was talking about. After all, the hemorrhage of red ink at the U.S. Treasury was his doing.
As most analysts predicted, Reagan's massive $749 billion supply-side tax cuts in 1981 quickly produced even more massive annual budget deficits. Combined with his rapid increase in defense spending, Reagan delivered not the balanced budgets he promised, but record-setting debt. Even his OMB alchemist David Stockman could not obscure the disaster with his famous "rosy scenarios."
Forced to raise taxes eleven times to avert financial catastrophe, the Gipper nonetheless presided over a tripling of the American national debt to nearly $3 trillion. By the time he left office in 1989, Ronald Reagan more than equaled the entire debt burden produced by the previous 200 years of American history. It's no wonder Stockman lamented last year:
"[The] debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."
It's no wonder the Gipper cited the skyrocketing deficits he bequeathed to America as his greatest regret.
3. George W. Bush Doubled the National Debt
Following in Reagan's footsteps, George W. Bush buried the myth of Republican fiscal discipline.
Inheriting a federal budget in the black and CBO forecast for a $5.6 trillion surplus over 10 years, President George W. Bush quickly set about dismantling the progress made under Bill Clinton. Bush's $1.4 trillion tax cut in 2001, followed by a $550 billion second round in 2003, accounted for the bulk of the yawning budget deficits he produced. (It is more than a little ironic that Paul Ryan ten years ago called the tax cuts "too small" because he believed the estimated surplus Bush eviscerated would be even larger.)
Like Reagan and Stockman before him, Bush resorted to the rosy scenario to claim he would halve the budget deficit by 2009. Before the financial system meltdown last fall, Bush's deficit already reached $490 billion. (And even before the passage of the Wall Street bailout, Bush had presided over a $4 trillion increase in the national debt, a staggering 71% jump.) By January 2009, the mind-numbing deficit figure reached $1.2 trillion, forcing President Bush to raise the debt ceiling to $11.3 trillion.
4. Republicans Voted Seven Times to Raise Debt Ceiling for President Bush
"Reagan," Vice President Dick Cheney famously declared in 2002, "proved deficits don't matter." Not, that is, unless a Democrat is in the White House.
As Donny Shaw documented in January 2010, Republican intransigence on the debt ceiling only began in earnest when Bush left the White House for good.
The Republicans haven't always been against increasing the federal debt ceiling. This is the first time in recent history (the past decade or so) that no Republican has voted for the increase. In fact, on most of the ten other votes to increase the federal debt limit that the Senate has taken since 1997, the Republicans provided the majority of the votes in favor.
As it turns out, Republican majorities voted to raise the U.S. debt ceiling seven times while George W. Bush sat in the Oval Office. (It should be noted, as Ezra Klein did, that party-line votes on debt ceiling increases tied to other legislation is not solely the province of the GOP.) As ThinkProgress pointed out, during the Bush presidency, the current GOP leadership team voted 19 times to increase debt limit. During his tenure, the U.S. national debt doubled, fueled by the Bush tax cuts of 2001 and 2003, the Medicare prescription drug plan and the unfunded wars in Iraq and Afghanistan. And Mitch McConnell and John Boehner voted for all of it and the debt which ensued because, as Orrin Hatch later explained:
"It was standard practice not to pay for things."
5. Federal Taxes Now at a 60 Year Low
Even as Vice President Biden leads bipartisan negotiations to trim at least $1 trillion from the national debt, Republican leaders faithfully regurgitate the refrain that tax increases are "off the table." In one form or another, Mitch McConnell, Eric Cantor and just about every other conservative mouthpiece parroted Speaker John Boehner's line that:
"Medicare, Medicaid - everything should be on the table, except raising taxes."
Which purely by the numbers (if not ideology) is an odd position to take. After all, as a percentage of the U.S. economy, the total federal tax bite hasn't been this low in 60 years.
As the chart representing President Obama's 2012 budget proposal above reflects, the American tax burden hasn't been this low in generations. Thanks to the combination of the Bush Recession and the latest Obama tax cuts, the AP reported, "as a share of the nation's economy, Uncle Sam's take this year will be the lowest since 1950, when the Korean War was just getting under way." In January, the Congressional Budget Office (CBO) explained that "revenues would be just under 15 percent of GDP; levels that low have not been seen since 1950." That finding echoed an earlier analysis from the Bureau of Economic Analysis. Last April, the Center on Budget and Policy Priorities concluded, "Middle-income Americans are now paying federal taxes at or near historically low levels, according to the latest available data." As USA Today reported last May, the BEA data debunked yet another right-wing myth:
Federal, state and local taxes -- including income, property, sales and other taxes -- consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. That rate is far below the historic average of 12% for the last half-century. The overall tax burden hit bottom in December at 8.8% of income before rising slightly in the first three months of 2010.
"The idea that taxes are high right now is pretty much nuts," says Michael Ettlinger, head of economic policy at the liberal Center for American Progress.
Or as former Reagan Treasury official Bruce Bartlett explained it this week the New York Times:
In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.
Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.
6. Bush Tax Cuts Didn't Pay for Themselves or Spur "Job Creators"
That Republican intransigence persists despite the complete debunking of two of the GOP's favorite myths.
The first tried and untrue Republican talking point is that "tax cuts pay for themselves." Sadly, that right-wing mythmaking is belied by the massive Bush deficits, half of which (as the CBPP chart in section 3 above shows} were the result of the Bush tax cuts themselves. As a percentage of the American economy, tax revenues peaked in 2000; that is, before the Bush tax cuts of 2001 and 2003. Despite President Bush's bogus claim that "You cut taxes and the tax revenues increase," Uncle Sam's cash flow from individual income taxes did not return to its pre-dot com bust level until 2006.
The second GOP fairy tale, as expressed by Speaker Boehner, is that "The top one percent of wage earners in the United States...pay forty percent of the income taxes...The people he's {President Obama] is talking about taxing are the very people that we expect to reinvest in our economy."
If so, the Republican's so-called "Job Creators" failed to meet those expectations under George W. Bush. After all, the last time the top tax rate was 39.6% during the Clinton administration, the United States enjoyed rising incomes, 23 million new jobs and budget surpluses. Under Bush? Not so much.
On January 9, 2009, the Republican-friendly Wall Street Journal summed it up with an article titled simply, "Bush on Jobs: the Worst Track Record on Record." (The Journal's interactive table quantifies his staggering failure relative to every post-World War II president.) The dismal 3 million jobs created under President Bush didn't merely pale in comparison to the 23 million produced during Bill Clinton's tenure. In September 2009, the Congressional Joint Economic Committee charted Bush's job creation disaster, the worst since Hoover:
As David Leonhardt of the New York Times aptly concluded last year:
Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.
7. Ryan Budget Delivers Another Tax Cut Windfall for Wealthy
Looking at that dismal performance, Leonhardt rightly asked, "Why should we believe that extending the Bush tax cuts will provide a big lift to growth?" At a time of record income inequality which saw the incomes of the richest 400 Americans taxpayers double even as their tax rates were halved, that's a fair question to say the least.
For Paul Ryan and the Republican Party, the answer is simple: because we said so.
As Ezra Klein, Paul Krugman and Steve Benen among others noted, the House Republicans "Plan for America's Job Creators" is simply a repackaging of years of previous proposals and GOP bromides. (As Klein pointed out, the 10 page document"looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan.") At the center of it is the same plan from the Ryan House budget passed in April to cut the top individual and corporate tax rates to 25%.
The price tag for the Republican proposal is a jaw-dropping $4.2 trillion. And as Matthew Yglesias explained, earlier analyses of similar proposals in Ryan's Roadmap reveal that working Americans would have to pick up the tab left unpaid by upper-income households:
This is an important element of Ryan's original "roadmap" plan that's never gotten the attention it deserves. But according to a Center for Tax Justice analysis (PDF), even though Ryan features large aggregate tax cuts, ninety percent of Americans would actually pay higher taxes under his plan.
In other words, it wasn't just cuts in middle class benefits in order to cut taxes on the rich. It was cuts in middle class benefits and middle class tax hikes in order to cut taxes on the rich. It'll be interesting to see if the House Republicans formally introduce such a plan and if so how many people will vote for it.
We now know the answer: 235 House Republicans and 40 GOP Senators.
8. Ryan Budget Will Require Raising Debt Ceiling - Repeatedly
Largely overlooked in the media coverage of the Republican debt ceiling hostage drama is this: those 235 House Republicans and 40 GOP Senators who supported Paul Ryan's 2012 budget bill voted to add $6 trillion to the U.S. national debt over the next decade. And that means, as Speaker John Boehner acknowledged, Republicans now and in the future would have to increase the debt ceiling - repeatedly.
Of course, you'd never know that based on the incendiary rhetoric from the leading lights of the Republican Party and their right-wing echo chamber. Senator Rand Paul (R-KY) said his vote to bump up the debt ceiling would come at the cost of a balanced budget amendment to the Constitution, "the last time we're doing it." His South Carolina colleague Jim Demint threatened to filibuster the increase, even if it meant the GOP's "Waterloo." The number two House Republican Eric Cantor (R-VA) regurgitated that line, telling Democrats the GOP "will not grant their request for a debt limit increase" without major spending cuts or budget process reforms." For his part, House Budget Committee Chairman Paul Ryan insisted, "We won't raise, just simply raise, the debt limit," adding, "We will vote to have spending cuts and controls in conjunction with the debt limit increase." As giddy right-wing bloggers like Patterico described the right-wing's scorched earth strategy:
If Republicans are going to vote to raise the debt ceiling -- and not to do so will indeed cause financial chaos -- they have to extract concessions sufficient that they can credibly say: this is the last such vote we will ever have to have.
Sadly, as Ezra Klein of the Washington Post explained last month, "Republicans can't meet their own deficit and spending targets." The Ryan plan to privatize Medicare, slash and convert Medicaid into block grants, and deliver another tax-cut windfall for the wealthy nevertheless "blows through both their spending and debt caps":
House Republicans voted to make the Ryan budget law. But the Ryan budget includes $6 trillion in new debt over the next 10 years, which means that to become law, the Ryan budget would require a substantial increase in the debt ceiling. But before the Republicans agree to increase the debt ceiling so that the budget they passed can become law, Republicans are demanding the passage of either a balanced budget amendment that would make the Ryan budget unconstitutional or a spending cap that the Ryan budget would, in certain years (and if you're using more realistic numbers, in all years), exceed.
It's no wonder Klein's Washington Post colleague Matt Miller deemed the Republican budgetary horror story "The Shining - National Debt Edition" before concluding that Boehner's "awe-inspiring hypocrisy on the debt limit" is one of those moments of "political behavior that can only be dubbed Super-Duper Hypocrisy So Brazen They Must Really Think We're Idiots."
9. Tax Cuts Drive the Next Decade of Debt
"President Obama's agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying," the New York Times' David Leonhardt explained in 2009, adding, "The economic growth under George W. Bush did not generate nearly enough tax revenue to pay for his agenda, which included tax cuts, the Iraq war, and Medicare prescription drug coverage." That fall, former Reagan Treasury official Bruce Bartlett offered just that kind of honesty to the born again deficit virgins of his Republican Party. Noting that the FY2009 deficit of $1.4 trillion was solely due to lower tax revenues and not increased spending, Bartlett concluded:
"I think there are grounds on which to criticize the Obama administration's anti-recession actions. But spending too much is not one of them. Indeed, based on this analysis, it is pretty obvious that spending - real spending on things like public works - has been grossly inadequate. The idea that Reagan-style tax cuts would have done anything is just nuts."
Which is exactly right. Thanks to the steep recession, as the Congressional Budget Office (CBO) and others have documented time and again, the overall federal tax burden as a percentage of GDP is now down to levels not seen since Harry Truman was in the White House. (The two-year tax cut compromise in December didn't help any, adding $400 billion to the deficit this year and next.) But is the Bush tax cuts themselves, which Republicans want to make permanent and then (as the Ryan budget mandates) lower further, which account for much of the revenue drain into the future.
As a recent analysis by the Center on Budget and Policy Priorities showed, over the next decade the Bush tax cuts account for more of the nation's debt than Iraq, Afghanistan, TARP, the stimulus, and revenue lost to the recession combined:
10. $3 Trillion Tab for Unfunded Wars Remains Unpaid
Over the next ten years, the costs of America's wars in Iraq and Afghanistan will decline as the U.S. commitments there come to an end. But almost ten years, 6,000 U.S. dead and over a trillion dollars after the attacks of September 11, it's time to pay for our wars.
In May, the National Journal estimated that the total cost to the U.S. economy of the war against Al Qaeda will reach $3 trillion. In 2008, Nobel Prize-winning economist Joseph Stiglitz put the price of the Iraq conflict alone at $3 trillion.
But by 2020 and beyond, the direct cost to U.S. taxpayers could reach $3 trillion. In March, the Congressional Research Service put the total cost of the wars at $1.28 trillion, including $806 billion for Iraq and $444 billion for Afghanistan. For the 2012 fiscal year which begins on October 1, President Obama asked for $117 billion more. (That war-fighting funding is over and above Secretary Gates' $553 billion Pentagon budget request for next year.)
But in addition to the roughly $1.5 trillion tally for both conflicts through the theoretical 2014 American draw down date in Afghanistan, the U.S. faces staggering bills for veterans' health care and disability benefits. Last May, an analysis by the Center for American Progress estimated the total projected total cost of Iraq and Afghanistan veterans' health care and disability could reach between $422 billion to $717 billion. Reconstruction aid and other development assistance represent tens of billions more, as does the additional interest on the national debt. And none of the above counts the expanded funding for the new Department of Homeland Security.
But that two-plus trillion dollar tab doesn't account for the expansion of the United States military since the start of the "global war on terror." As a percentage of the American economy, defense spending jumped from 3.1% in 2001 to 4.8% last year. While ThinkProgress noted that the Pentagon's FY 2012 ask is "the largest request ever since World War II," McClatchy explained:
Such a boost would mark the 14th year in a row that Pentagon spending has increased, despite the waning U.S. presence in Iraq. In dollars, Pentagon spending has more than doubled in 10 years. Even adjusted for inflation, the Defense Department budget has risen 65% in the past decade.
Even as the World Trade Center site was still smoldering, Republicans insisted Al Qaeda represented an existential threat to the United States. President Bush repeatedly compared 9/11 to Pearl Harbor and his war on terror to World War II. But he never asked Americans to join the military or sacrifice at home. Instead, Bush told us to go shopping and "get down to Disney World."
From a public policy standpoint, post-9/11 America in no way resembles FDR's response to Pearl Harbor. George W. Bush was the first modern president to cut taxes during wartime. Barack Obama was the second.
It's time, as Bernie Sanders, Al Franken and the Congressional Progressive Caucus each proposed, to begin paying for the unfunded conflicts fought in our name.
Wednesday, June 22, 2011
Fight Economic Oppression: Target the Top One Percent
Original Link: http://dissidentvoice.org/2011/04/fight-economic-oppression-target-the-top-one-percent/
By Joel S. Hirschhorn
Massive economic inequality is killing America and we the people. It has already killed American democracy. The rich have captured the political system so they could manipulate the economy and benefit unfairly. Economic freedom and opportunity are gone. Greed among the top one percent has succeeded so well that a true uprising and revolt by Americans, like that seen in Egypt, may be needed to restore America.
US society is riddled through and through with constant lies and political propaganda to keep Americans stupid and distracted. The truth is here, hidden from easy view for most citizens by an epidemic of dishonesty and irresponsibility among elected officials, corporate leaders, cowardly, corporate controlled mass media, and especially right-wing pundits, many of whom are in the top one percent. The truth, of course, is often revealed, but only in venues that relatively few people with sufficient intelligence and critical thinking skills access. Two recent articles should be required reading in every classroom and home.
First, some key numbers tell the true story about the decline of America in recent decades as revealed by acclaimed economist Joseph E. Stiglitz in Vanity Fair. Upper one percent Americans are now taking in nearly a quarter of the nation’s annual income and own 40 percent of the nation’s wealth. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. The top one percent’s incomes rose 18 percent over the past decade as those in the middle have actually seen their incomes fall. As the recession still hurts most Americans, especially the unemployed, hungry and foreclosed, the top one percent, many of whom created the economic meltdown, keeps their tax cuts and riches.
“Most citizens are doing worse year after year,” correctly observes Stiglitz.
Also, in our delusional democracy run by a bipartisan corporate dictatorship: “Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent.” No surprise that those who poisoned the economy have not been prosecuted.
You cannot vote away this insanity by electing Republicans or Democrats, even those claiming Tea Party status, who mostly want to protect rich and corporate elites as evidenced by their disinterest in removing corporate subsidies and welfare, nor raising taxes on the rich. This behavior is brainless for non-wealthy Americans.
Stiglitz says: “The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.” In truth, they own our government.
The second article in The Nation by Robert Scheer smartly noted: “The delusion of a classless America in which opportunity is equally distributed is the most effective deception perpetrated by the moneyed elite that controls all the key levers of power in what passes for our democracy.” Mostly ignored, “the corporate rich reward themselves in direct proportion to the amount of suffering they have caused.”
Scheer referenced this: During Clinton’s presidency the income of the top one percent increased by 10.1 percent per year, while that of the other 99 percent of Americans increased by only 2.4 percent a year. From 2002 to 2006, a period in which the top one percent increased its income 11 percent annually the rest of Americans had a truly paltry gain of 1 percent per year.
What kind of population would endure all this? Submissive, stupid and sidetracked Americans refusing to see the economic oppression strangling the nation.
To be in the top one percent you need an adjusted gross income of about $400,000, most not coming from salaries or wages. And those households with less than 5 million people total have a net worth of at least $8 million each. Do you make the cut? If not, then wake up to reality. You are a victim!
The top one percent people are the enemy. THEY have stolen your financial security and opportunity. THEY have sold us out to China and other nations. YOU have been sacrificed to satisfy their greed. You have a better chance of winning a huge lottery than becoming one of them.
Abusive inequality is no accident of history. It has occurred by design. Forget morality and fairness. The wealthiest of the wealthy have ingeniously engineered the political and economic systems to get exactly what they want and screw the rest of society. They do not fear outright revolution, peaceful or violent class war.
Pause for a moment. Think in terms of an invisible corporate dictatorship run in a bipartisan way by people who know how to use their money to retain a thoroughly corrupt political system. That is the tool used to protect themselves from the wrath of a few hundred million victims of their villainy. The economic oppression by the richest one percent is far greater than that of the British which spurred the American Revolution. We desperately need a second revolution against domestic tyranny.
In addition to the two excellent recent articles, you would benefit from examining the Who Rules America? website. If you appreciate data also peruse this excellent Mother Jones article, which points out most Americans perceive wealth distribution more fairly distributed than it really is, delusional thinking.
To sum up, those not brainwashed by political propaganda should support taking down the top one percent to take back their country. Without action more and more Americans will suffer as the middle class merges into one huge lower class, especially when politicians to address the national debt and deficit cut major federal programs that nearly 50 percent of Americans depend on rather than increasing tax revenues by hitting the rich and corporate welfare.
We outnumber them. Have you had enough economic oppression? Remember, every ruling class can be brought down.
By Joel S. Hirschhorn
Massive economic inequality is killing America and we the people. It has already killed American democracy. The rich have captured the political system so they could manipulate the economy and benefit unfairly. Economic freedom and opportunity are gone. Greed among the top one percent has succeeded so well that a true uprising and revolt by Americans, like that seen in Egypt, may be needed to restore America.
US society is riddled through and through with constant lies and political propaganda to keep Americans stupid and distracted. The truth is here, hidden from easy view for most citizens by an epidemic of dishonesty and irresponsibility among elected officials, corporate leaders, cowardly, corporate controlled mass media, and especially right-wing pundits, many of whom are in the top one percent. The truth, of course, is often revealed, but only in venues that relatively few people with sufficient intelligence and critical thinking skills access. Two recent articles should be required reading in every classroom and home.
First, some key numbers tell the true story about the decline of America in recent decades as revealed by acclaimed economist Joseph E. Stiglitz in Vanity Fair. Upper one percent Americans are now taking in nearly a quarter of the nation’s annual income and own 40 percent of the nation’s wealth. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. The top one percent’s incomes rose 18 percent over the past decade as those in the middle have actually seen their incomes fall. As the recession still hurts most Americans, especially the unemployed, hungry and foreclosed, the top one percent, many of whom created the economic meltdown, keeps their tax cuts and riches.
“Most citizens are doing worse year after year,” correctly observes Stiglitz.
Also, in our delusional democracy run by a bipartisan corporate dictatorship: “Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent.” No surprise that those who poisoned the economy have not been prosecuted.
You cannot vote away this insanity by electing Republicans or Democrats, even those claiming Tea Party status, who mostly want to protect rich and corporate elites as evidenced by their disinterest in removing corporate subsidies and welfare, nor raising taxes on the rich. This behavior is brainless for non-wealthy Americans.
Stiglitz says: “The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.” In truth, they own our government.
The second article in The Nation by Robert Scheer smartly noted: “The delusion of a classless America in which opportunity is equally distributed is the most effective deception perpetrated by the moneyed elite that controls all the key levers of power in what passes for our democracy.” Mostly ignored, “the corporate rich reward themselves in direct proportion to the amount of suffering they have caused.”
Scheer referenced this: During Clinton’s presidency the income of the top one percent increased by 10.1 percent per year, while that of the other 99 percent of Americans increased by only 2.4 percent a year. From 2002 to 2006, a period in which the top one percent increased its income 11 percent annually the rest of Americans had a truly paltry gain of 1 percent per year.
What kind of population would endure all this? Submissive, stupid and sidetracked Americans refusing to see the economic oppression strangling the nation.
To be in the top one percent you need an adjusted gross income of about $400,000, most not coming from salaries or wages. And those households with less than 5 million people total have a net worth of at least $8 million each. Do you make the cut? If not, then wake up to reality. You are a victim!
The top one percent people are the enemy. THEY have stolen your financial security and opportunity. THEY have sold us out to China and other nations. YOU have been sacrificed to satisfy their greed. You have a better chance of winning a huge lottery than becoming one of them.
Abusive inequality is no accident of history. It has occurred by design. Forget morality and fairness. The wealthiest of the wealthy have ingeniously engineered the political and economic systems to get exactly what they want and screw the rest of society. They do not fear outright revolution, peaceful or violent class war.
Pause for a moment. Think in terms of an invisible corporate dictatorship run in a bipartisan way by people who know how to use their money to retain a thoroughly corrupt political system. That is the tool used to protect themselves from the wrath of a few hundred million victims of their villainy. The economic oppression by the richest one percent is far greater than that of the British which spurred the American Revolution. We desperately need a second revolution against domestic tyranny.
In addition to the two excellent recent articles, you would benefit from examining the Who Rules America? website. If you appreciate data also peruse this excellent Mother Jones article, which points out most Americans perceive wealth distribution more fairly distributed than it really is, delusional thinking.
To sum up, those not brainwashed by political propaganda should support taking down the top one percent to take back their country. Without action more and more Americans will suffer as the middle class merges into one huge lower class, especially when politicians to address the national debt and deficit cut major federal programs that nearly 50 percent of Americans depend on rather than increasing tax revenues by hitting the rich and corporate welfare.
We outnumber them. Have you had enough economic oppression? Remember, every ruling class can be brought down.
Tuesday, June 21, 2011
Of the 1%, by the 1%, for the 1%
Original Link:
By Joseph E. Stiglitz
Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.
It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.
Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.
First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.
Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.
But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.
When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.
America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.
Or, more accurately, they think they don’t. Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.
In recent weeks we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies they inhabit. Governments have been toppled in Egypt and Tunisia. Protests have erupted in Libya, Yemen, and Bahrain. The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next? They are right to worry. These are societies where a minuscule fraction of the population—less than 1 percent—controls the lion’s share of the wealth; where wealth is a main determinant of power; where entrenched corruption of one sort or another is a way of life; and where the wealthiest often stand actively in the way of policies that would improve life for people in general.
As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our own country has become like one of these distant, troubled places.
Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.
The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.
By Joseph E. Stiglitz
Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret.
It’s no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.
Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.
First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.
Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.
But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy. Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.
When you look at the sheer volume of wealth controlled by the top 1 percent in this country, it’s tempting to see our growing inequality as a quintessentially American achievement—we started way behind the pack, but now we’re doing inequality on a world-class level. And it looks as if we’ll be building on this achievement for years to come, because what made it possible is self-reinforcing. Wealth begets power, which begets more wealth. During the savings-and-loan scandal of the 1980s—a scandal whose dimensions, by today’s standards, seem almost quaint—the banker Charles Keating was asked by a congressional committee whether the $1.5 million he had spread among a few key elected officials could actually buy influence. “I certainly hope so,” he replied. The Supreme Court, in its recent Citizens United case, has enshrined the right of corporations to buy government, by removing limitations on campaign spending. The personal and the political are today in perfect alignment. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.
America’s inequality distorts our society in every conceivable way. There is, for one thing, a well-documented lifestyle effect—people outside the top 1 percent increasingly live beyond their means. Trickle-down economics may be a chimera, but trickle-down behaviorism is very real. Inequality massively distorts our foreign policy. The top 1 percent rarely serve in the military—the reality is that the “all-volunteer” army does not pay enough to attract their sons and daughters, and patriotism goes only so far. Plus, the wealthiest class feels no pinch from higher taxes when the nation goes to war: borrowed money will pay for all that. Foreign policy, by definition, is about the balancing of national interests and national resources. With the top 1 percent in charge, and paying no price, the notion of balance and restraint goes out the window. There is no limit to the adventures we can undertake; corporations and contractors stand only to gain. The rules of economic globalization are likewise designed to benefit the rich: they encourage competition among countries for business, which drives down taxes on corporations, weakens health and environmental protections, and undermines what used to be viewed as the “core” labor rights, which include the right to collective bargaining. Imagine what the world might look like if the rules were designed instead to encourage competition among countries for workers. Governments would compete in providing economic security, low taxes on ordinary wage earners, good education, and a clean environment—things workers care about. But the top 1 percent don’t need to care.
Or, more accurately, they think they don’t. Of all the costs imposed on our society by the top 1 percent, perhaps the greatest is this: the erosion of our sense of identity, in which fair play, equality of opportunity, and a sense of community are so important. America has long prided itself on being a fair society, where everyone has an equal chance of getting ahead, but the statistics suggest otherwise: the chances of a poor citizen, or even a middle-class citizen, making it to the top in America are smaller than in many countries of Europe. The cards are stacked against them. It is this sense of an unjust system without opportunity that has given rise to the conflagrations in the Middle East: rising food prices and growing and persistent youth unemployment simply served as kindling. With youth unemployment in America at around 20 percent (and in some locations, and among some socio-demographic groups, at twice that); with one out of six Americans desiring a full-time job not able to get one; with one out of seven Americans on food stamps (and about the same number suffering from “food insecurity”)—given all this, there is ample evidence that something has blocked the vaunted “trickling down” from the top 1 percent to everyone else. All of this is having the predictable effect of creating alienation—voter turnout among those in their 20s in the last election stood at 21 percent, comparable to the unemployment rate.
In recent weeks we have watched people taking to the streets by the millions to protest political, economic, and social conditions in the oppressive societies they inhabit. Governments have been toppled in Egypt and Tunisia. Protests have erupted in Libya, Yemen, and Bahrain. The ruling families elsewhere in the region look on nervously from their air-conditioned penthouses—will they be next? They are right to worry. These are societies where a minuscule fraction of the population—less than 1 percent—controls the lion’s share of the wealth; where wealth is a main determinant of power; where entrenched corruption of one sort or another is a way of life; and where the wealthiest often stand actively in the way of policies that would improve life for people in general.
As we gaze out at the popular fervor in the streets, one question to ask ourselves is this: When will it come to America? In important ways, our own country has become like one of these distant, troubled places.
Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.
The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.
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