Reading time 15 minutes max.
Right before Obama and the Democrats caved-in (I expect "the revolt" to turn tepid then disappear.) to the Republicans - AGAIN - , I sent a message to the Democratic party. (I've added to it, but the basic points remain the same.) I've also listened to the President's excuse for jeopardizing the future growth of our economy and the recovery of the working class. He is, simply put, wrong.
Obama and the Democrats tepid approach during the past two years put them in the position of irresponsible compromises. They were warned that was what they were doing very early, but they did not heed the warnings. After Obama abandoned single payer health care and reneged on a myriad of other important campaign issues (I would say promises but politicians always cloak the back-track space.), the Republicans knew that he and the Democrats would cave again. The pattern had been set for the tax extension for the wealthy, regardless of the cost to this short-sighted approach to the economy.
The President's notion that the battle to let the tax cuts for the wealthy expire will be fought again in two years assumes that he will be in office and that Congress will be controlled by Democrats. That is highly unlikely to happen; thus, the tax cuts will be made permanent by a Republican government (this is the Republicans strategy), and the debt will balloon and the disparity between the rich and the working class will widen drastically. In addition, whatever important fiscal issues arise, the Democrats (who need funds from wealthy people and corporations to compete for reelection) will cave or at the very least telegraph their weak commitment and willingness to compromise.
Signaling ahead of negotiations a fallback, starting position is a poor, if not irresponsible, negotiation strategy - unless Obama and the Democrats lied to appease or trick the public about what they really wanted. Between the President's pre-compromising negotiations and the Democrats caving, I only see a dismal future for the country. I fully expect, as was the case with the Great Depression, a second and a third stage of this financial crisis. Many times there appeared to be a recovery only to be followed by a decline.
The economy is starving and the Republicans plan is a bread and water stimulus diet for the working class, and the Democrats and the President are allowing it to happen. The increase in the debt (the result of NOT allowing the tax cuts to expire) will slow the economy even more. (I'll explain that later.) This is irresponsible. (A reminder: killing Glass Steagal, allowing other ENRON type deregulations, and deficit spending would not have taken place without the Democrats and President Clinton's complicity.)
Doing what we are doing now ensures that we will face a more dismal economic future. (Keep in mind that the Great Depression lasted 11 years and only WWII - government spending - brought us out; otherwise, it could easily have gone on another five or more years.) In a time when the economy cannot sustain even a modest level employment, leaders talk about cutting back national, state and local government spending. That is counterproductive and simply STUPID. Those lost incomes are devastating because when people have less money, they do not buy enough products and services; thus, fewer workers are needed so the people providing the jobs cut employment so that they can continue to make a profit. What the economy needs are more people buying more products, but the money to do that is taken out with each person who is laid off or whose wages are cut or frozen.
There needs to be a steady source of money put into the hands of people who must spend it. The government, not business, has the only sure methods of raising revenues (spending money) - tax - borrow - print. Borrowing exacerbates the problem in the future in the form of explosive debt. Printing exacerbates the problem in the future in the form of runaway inflation which can only be reined-in by increasing borrowing rates which in turn slows down the economy. What the government needs is money which is not being used on which they don't have to pay interest. The money which is sitting around is in the hands of the wealthy. The way to get it out of their hands and into the hands of the people who will spend it is in the form of taxation. The taxes collected are then given to the people who will spend it, the working class and the poor and government employees. The organization that can immediately employ people who will spend the money is the government; so, they should not be laying people off or freezing pay. That's counter productive and, basically, idiotic. Again, the place to put the money is in the hands of the unemployed and the working class because they must spend the money to survive. Is this redistribution of wealth? No. It is re-re-distribution of wealth. The re-distribution of wealth started with Ronald Reagan and continued through Bush 2. (By checking the history of tax rates, the redistribution has occurred many times.)
The President and congress must keep in mind that the economy is powered by the 98 percent who buy the vast amount of products and services, not the wealthy two percent with the vast amount of money sitting around making more money from money and employing no one to do it except their broker.
Simply put, it's a matter of toasters. How many toasters do the richest two percent of Americans buy? For example, if there are 40 million households, the richest 2 percent buy 800,000 toasters. However, the 98 percent will buy 39,200,000 toasters. Thus, the toaster purchases of the 98 percent are responsible for employing far more people. They power the job market. They create the jobs; therefore, that's where the money should go.
A toaster lasts an average of three years. Thus, replacing a third of the toasters every year means that 13,066,666 toasters need to be made. Those people who make the toasters are essentially employed by the 98 percent not the paltry 2 percent. Currently, people are putting off buying the new toaster. Give them the money, and they'll buy it and toaster employment will return. Toaster workers will have more money, and they will buy other products and services, and the economy will start to turn around. The 98 percent power the economy, the 2 percent manipulate it and, currently, ravage it.
The stimulus for the financial sector was enormous, but for the middle class and small businesses it was insufficient. That created a jobless recovery. A jobless recovery is not a recovery. It's an escape clause for the wealthy and members of Congress. While an indication of how the wealthy and the financial sector are doing, using the stock market as guide to the health of the real economy (the job market) is wrong-minded. It is no longer a barometer of the economy because it is no longer used to raise capital to expand production to meet demand in the United States. In addition, it no longer creates jobs in America because industries have either moved overseas or become global and cutback the American workforce. The stock market is now a computer controlled investment casino in which the rich participate to become richer electronically.
NOT allowing the tax breaks to expire will starve the economy.
The rich will put the money into investments not the economy (they are not the same thing). A friend of mine, using typical conservative economic theory, wrongly explains that the rich people and corporations put the tax break money into companies, and then the companies produce more products and employ more people, but that's not how it works. No sane company invests money in expansion if there is no growing market for their products. That's a scenario for bankruptcy. Businesses expand because more people need their products. More people out of work means fewer people are able to buy products. That means that businesses lay off people. They don't hire them. And, the spiral continues down. In down times the rich hold their money waiting for the economy to return and demand for their products to return. Extending the tax breaks just maintains the status quo of stashing money, and the status quo is currently a downward spiraling job market, increasing foreclosure market, and a greater disparity between the rich and the rest of us.
In a simple, possibly simplistic, explanation let me clarify human and economic psychology and logic. If my business makes me $200,000 a year and I want to make $220,000 a year, I have to find some way to expand my business. I can cut corners but in the long term I will lose customers and the business will ultimately suffer. So, to expand and keep customers, there either has to be more demand or I have to create more demand, if possible. Of course people have to have the money to buy the products or services. When and if that happens, I need to make more products which means I need to hire more people and buy more equipment and lease more work space. All of those grow the economy. HOWEVER, if I can get that extra $20,000 in the form of a tax break and do not have to take the risk of expansion then the smart thing to do is not expand, especially in down times. Why take the risk? That's one of the reasons that we have not seen real job and wage growth since tax rates for the wealthy went down. What's the incentive to risk expansion when I can get more money with no risk?
This makes the trade-off to extend unemployment insurance even more counter-productive. It will steepen the economic decline as it does not put MORE money into the hands of the unemployed, it only maintains the current amount which is not sufficient to begin with; thus, it wastes the tax break. That strategy will not produce significant growth. It's an issue Obama and the Democrats should have fought separately and far sooner, but they keep letting the Republicans set the agenda and the time table.
There were so many issues that Obama and the Democrats should have dealt with early and with the force of the convictions of the people who elected him. It is pathetic that during a time when the Democrats controlled all three branches, they could not move the economy forward for the working class in an effective manner and significantly effect the plight of the unemployed. So many things were not done because Obama and the Democrats lacked the courage to fight for them against the obstructionist Republicans whose sole intent has been to dislodge the president and dismantle the Democrats who were too busy fighting for the next reelection, a dubious prospect at best. They were more anxious to compromise than fight for the working class in a significant, meaningful, beneficial way. A last second stand by the Democrats following give-aways by Obama and two years of spinelessness by the Democratic Congress is a poor substitute for real, concerted long-term action.
The Republican party has played and continues to play Obama and the Democrats, and they allow it, and they will pay for it in 2012. The Republicans are going to have their cake and eat it too.
He has turned into a sucker, possibly a lollipop.
The President is being sucked into a trap which will doom his reelection. By ceding to the Republicans and increasing the debt through the extension of the tax breaks for the wealthy and freezing pay and cutting government spending, and cutting stimulus or failing to extend and increase it, money that would help drive the economy will be removed or placed into the wrong hands - the rich. The economy will slow down more or simply not recover enough, and he will take the blame. That's what the Republicans want, and Obama and the Democrats are falling into their trap. The Republicans will do, as they have been, anything to get him out of office (they've got to be chuckling now). Again, increasing the deficit and decreasing government spending and increasing the debt without transferring into the hands of the spenders is a trap and the President is falling into it as he did with bipartisanship. (Bipartisanship is not the Holy Grail. It is a "It's not all my fault. They did it too." excuse. It's a share the blame rationalization.) It's sad to watch the Democrats either fall for the same strategy, tricks, manipulation over and over again. But maybe they're just pretending to care.
Just a little reminder. To give the rich the tax breaks that started in earnest in the eighties, the Treasury had to borrow money. What the rich would have paid in taxes had to be borrowed so that the government could continue to provide services and fund a monstrous, unnecessary defense. For thirty years we did that, and as a result, we incurred a huge debt. The people who could most afford to pay were told they didn't have to, and it's happening again. Once again the Treasury will have to sell more debt so that the people best able to afford taxes don't have to pay them. Interest paid on debt instruments is money that cannot be put into the economy. In addition, since the wealthy people and financial institutions own most of the bonds and notes they benefit even more from the country's debt. That interest adds continually to the debt for up to 30 years. That debt interest pressure in the future will be enormous, and the only way out will be huge tax increases - on everyone - and severe, nearly catastrophic cutbacks. Those severe cutbacks will send the economy into another recession because a huge amount of money will be taken out of the economy just to pay the interest.
Sometimes you have to play chicken all the way to the end just to let the other side know you're willing to. If you never do, they'll always call your bluff.
The President decided as soon as he took office that he was going to compromise with an immovable object, the Republicans and Blue Dog Democrats. Unfortunately, he was not the irresistible force that he lead us to believe he was. Ultimately, he will be known as the President who compromised himself out of office in one term and the Republicans into the House (already done), the Senate and the Presidency (2012). His legacy will be one of failure to live up to promises that he could have kept if at the outset he merely called upon the organization of dedicated people who swept him and congress into office. That force of people could have helped move this country out this financial crisis and into a more humane and supportive role for which all Americans could be proud. But Obama and the Democrats fiddled while Rome burned. They wasted a golden opportunity, and they were being told that from the very beginning. If Obama had kept that organization that put him into office in place and used it from the beginning he would not have had to compromise as he did. The public pressure would have been too great. The Democrats would also not have lost the house.
The Democratic party has finally succeeded in driving a democrat of forty-three years to register as an Independent. I decided that I would not provide any financial support unless the President and the Democrats allowed the tax breaks for Americans earning $250,000 and more to expire. It wasn't the only issue that the party caved on that caused this decision, it was just the final straw for me. The party is no longer the party of the working class and the poor and fiscal responsibility. I gave a substantial amount of money to a different Barack Obama and a different Democratic party. This is not the party that I have supported and contributed to for forty-three years. Unfortunately, I anticipate that the Democrats will follow the President and extend the tax cuts to the wealthy and, thereby confirm to whom they owe their allegiance - the wealthy. For the first time in my 64 years on this planet, I will be registering as an Independent or with another party.
So, in the modified words of Eric Cartman, "Screw you guys, I'm going Independent."
By the way, not once did Obama or the Democrats directly ask the wealthy if they would be willing to pay more taxes to help cut the debt. They just listened to the Republicans and the looney "Something for nothing" TEA Party.
The proper perspective to take and the appropriate message to give to the top two percent is that they are saving the country and the people that made them wealthy. The wealthy need to feed the goose (the economy and the 98 percent who power it) that's laying the golden eggs. Right now they're plucking it bare. Eventually they'll be basting it, then roasting it. They'll get fatter eating it while the rest of us are scratching the ground for a lump of coal to keep warm in our tents.
The Republicans remind me of the little kid who throws fits and the Democrats are the parents who always give in.