USA Today has a cover story that attempts to rationalize the state of the economy. Part of the blame, rather incomprehensibly, is due to consumers’ own “greed.” This is not precisely explained, although it could either mean either over-use of credit cards or meanly saving money instead of spending it. Both of these explanations are easily debunked when one considers the reason for slow decline of the middle class and the growing gap between the rich and the poor: Instead of investing their profits in new manufacturing or raising worker wages, corporations prefer to bag their unearned income in their own pockets, while access to easy credit (via credit cards) in “exchange” for lower wages was a phony prop for the economy—while enriching banks who charged exorbitant finance charges.
But in an aside the story noted that U.S. corporations are sitting on a stockpile of $1 trillion in unused profits. The question is why this money isn’t being used to invest in new industries or hiring—or rather, rehiring—people. The answer, according to USA Today, is that businesses are “worried” about the federal deficit and waiting for a “favorable” political climate. Of course, this newspaper also continues to puff-up the Tea Party movement is something other than what it is: mostly fringe-right whites who always appears when their “privileges” are “threatened,” this time by a black president.
In 1982 and 1983, the average unemployment rate under the Reagan administration was 9.7 percent; it didn’t dip below 7 percent until 1987. The Reagan recession was in part fueled a tight rein on the money supply, but also because of a spate of deregulation allowed banks to engage in the kind of irresponsible speculating that that helped to create the current financial situation. Nearly a hundred banks failed, and the Reagan administration’s refusal to consider re-regulation of the Savings and Loan industry merely worsened that sector’s troubles. Things became so bad in the S & L sector that in 1989 a re-regulation act was finally seen as necessary. Meanwhile, the 1980s saw the largest budget deficits since World War II, not in any way helped by Reagan’s 1981 tax cut, which played almost no role in getting the economy out of its worst recession since the Great Depression (since eclipsed by the current recession). Reagan would quickly be forced to face reality and sign the Tax Equity and Fiscal Responsibility Act of 1982, which along with the 1986 tax “simplification” bill, raised taxes on corporations. Taxes increases on corporations occurred under Bush I in 1990, and (using budget reconciliation) in 1993. GDP and job creation, strangely enough, increased dramatically during the Clinton administration, in spite of these tax increases.
What does this all mean? That the current economic experience is nothing new, we’ve been there before; even Reagan, the patron saint of the right-wing, was forced to bow to common sense. Corporate American cried Doomsday, but eventually the desire to make money over-road that of not making money. In business, you can’t make money unless you create products and hire people to make them. Although job growth generally lags behind economic growth, as long as two years after the start of recovery, it is plainly slower now than it should be because Corporate America has largely stood still. The question is why are corporations, with history as a guide, playing scared? The current budget deficit is ballooning, but the blame may more justly placed at the doorstep of financial institutions that gambled away investors’ money instead of investing it in the economy, and businesses that sought to maximize profit and personal wealth by lowering disposable income and far busier shedding jobs than creating them during the Bush years. Even more ominously, so-called “99ers”—those people who have been unemployed so long that they no longer qualify for unemployment benefits—are already bankrupting state social services.
Again, why does it appear that Corporate America seemingly deliberately stalling the economy? 70 percent of the economy is driven by consumer spending, yet businesses don’t seem to understand that. Low wages and cutting rather than hiring will do nothing to improve the level of consumer spending. It is as if they flunked Economics 101 in college. I read a comment by one economist who said that the economy will not get better unless we produce more and consume less. How you can have one without the other doesn’t make much sense to me. Mort Zuckerman, who made most of his billions in the real estate business, had this excuse to make:
“He (Obama) has lost the confidence of much of the business community, whose worries over taxes, the dramatically increased costs of new regulation, and a general perception that the administration is hostile toward them and may take yet harsher steps, are holding back investment and growth.”
The Wall Street Journal, meanwhile, opined:
“One negative revelation has been the way he (Obama) has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.”
The question a thinking person should ask is “What are they talking about?” These are typical right-wing talking points with little or no evidence to back it up. What, exactly, has Obama done differently than his predecessors (other than the health care reform bill)? What “new taxes?” Where are these“dramatic” increases in cost from new regulation--especially in relation to the cost to the economy from rampant deregualtion? What has Obama done that can be characterized as “hostile,” given that his economic advisers are all Wall Street toadies? I agree that the tax cut was too small to be noticeable, and could have used for more useful purposes. But why do the rich and powerful consider education and health care funding “social programs” that only they are privileged to possess? And what of the $51 billion in tax cuts for businesses, and the $150 billion for infrastructure and green energy?
The suggestion here is that business is “punishing” Obama for not actively doing their bidding, deliberately keeping growth stagnant in the hopes that the Republicans will make large gains in the 2010 and grovel before them. All of their claims are nothing but foul air, almost certainly intent on taking advantage of many whites' discomfort with a black man as president, and the unjustified belief in his alleged thirst for "revenge" against whites and their "privileges." They talk about a “hostile environment” without providing any proof of it. Business leader are trying to blackmail the Obama administration and con the public with fear propaganda that has no basis in reality. They say the Democrats don’t understand what it takes to create jobs. Is that right? During the Clinton years, 22 million jobs were created; subsequently, with the Republicans controlling the White House and Congress, a net of 2 million jobs were created, along with ballooning budget deficits. If anyone doesn’t know how to create jobs, it would seem to be the Republicans.
But there may be a far more contemptible reason why Corporate America, the rich and their Republican flunkies are attacking the Obama administration with lies and deception. The middle class and the poor received the bulk of the stimulus tax cuts, unlike Bush’s 2001 and 2003 tax cuts. Forbes magazine bizarrely called this the “populist revolt against affluence” through “wealth care.” Like a petulant child, in response to this “threat” Forbes does not advice the rich to invest in America to aid economic growth, rather it advices on how to hoard its wealth:
Don’t flaunt your wealth. Put less “impressive” food on the table at your high society blow-out parties—try carrots instead of caviar.
Disguise your shopping. Buy designer clothes at charity events—and save money, too.
Since the idea of being rich to be rich, there are many ways of protecting your wealth—and they don’t necessarily have to be entirely illegal, especially if you have a good lawyer. Trust funds for 40-year-old “children” is one idea; another method is to ship all your money overseas. If the IRS discovers this and decides that you really are trying to hide your money to evade taxes, then it might be a good idea to move to another country to avoid prosecution; however, it is not a good idea to renounce U.S. citizenship, because the IRS will charge a 40 percent “exit tax” on anything over $2 million taken out of the country. A better plan might be to convert paper into diamonds and gold, and put them in a Swiss bank. But just don’t report it to the IRS; it amazes how Forbes “suggests” the many ways that the rich can break at the very least the spirit of the law.
Forbes, surprisingly, is less blinded by other far-right rhetoric in regard to taxes; it is not Obama and congressional Democrats who the rich should worry about in regard to raising their taxes. They should be more concerned with cash-starved state governments looking for ways to cover mandated balanced budget requirements. The idea then is to have an alternate domicile in a state that doesn’t have an income tax. Elaborate and antiquated strategies to avoid taxes should be taken out of mothballs, since the rich don’t have “friends” in high enough places to conduct their extra-legal activities in the open, for the time being anyways. Or invest in “charitable remainder trusts” which I don’t what are, but if Forbes suggests it, then they must be shady.
Adam Smith is quoted saying that being rich is never so complete as being seen as being rich; that is with “opulence which nobody can possess but themselves.” So how to keep ahead of the joneses? Just because the economy’s bad doesn’t mean you have to take out your garbage like the other “riff-raff” only worth $100 million. Yachts and Lear Jets can be had at bargain basement prices; get them while their hot. If you don’t want the neighbors to know that you are not doing as badly as they are (because you are a borderline crook), you can always order your diamonds and crocodile handbags shipped in paper bags.
Life is tough for the ultra rich, “And yet beyond the gaze of tax collectors and congressional aides, life as few of us will ever know it goes on.” “If the revolution is coming, all the more reason to seize the day.”
And USA Today blames the “greed” of the poor and middle class consumer for the current economic stagnation.