5 Reasons Capitalism Has Failed

The root cause of our recent turmoil is the failure of the dominant economic paradigm — global corporate capitalism.

By Bob Burnett, The Smirking Chimp, via AlterNet

(N.B.: Marx was right, after all…)

We live in interesting times. The global economy is splintering. U.S. voters hate all politicians and there’s political unrest throughout the world. The root cause of this turmoil is the failure of the dominant economic paradigm — global corporate capitalism.

The modern world is ruled by multinational corporations and governed by a capitalistic ideology that believes: Corporations are a special breed of people, motivated solely by self-interest. Corporations seek to maximize return on capital by leveraging productivity and paying the least possible amount for taxes and labor. Corporate executives pledge allegiance to their directors and shareholders. The dominant corporate perspective is short term, the current financial quarter, and the dominant corporate ethic is greed, doing whatever it takes to maximize profit.

Five factors are responsible for the failure of global corporate capitalism. First, global corporations are too big. We’re living in the age of corporate dinosaurs. (The largest multinational is JP Morgan Chase with assets of $2 Trillion, 240,000 employees, and offices in 100 countries.) The original dinosaurs perished because their huge bodies possessed tiny brains. Modern dinosaurs are failing because their massive bureaucracies possess miniscule hearts.

Since the Reagan era global corporations have followed the path of least resistance to profit; they’ve swallowed up their competitors and created monopolies, which have produced humongous bureaucracies. In the short-term, scale helps corporations grow profitable, but in the long-term it makes them inflexible and difficult to manage. Gigantism creates a culture where workers are encouraged to take enormous risks in order to create greater profits; it’s based upon the notion that the corporation is “too big to fail.”

Second, global corporations disdain civil society. They’ve created a culture of organizational narcissism, where workers pledge allegiance to the enterprise. Corporate employees live in a bubble, where they log obscene hours and then vacation with their co-workers. Multinationals develop their own code of ethics and worldview separate from that of any national state. Corporate executives don’t care about the success or failure of any particular country, only the growth and profitability of their global corporation. (Many large corporations pay no U.S. income tax; in 2009 Exxon Mobil actually got a $156 M rebate.)

Third, global corporations are modern outlaws, living outside the law. There is noinvisible hand that regulates multinationals. In 1759 Philosopher Adam Smith argued that while wealthy individuals and corporations were motivated by self interest, an “invisible hand” was operating in the background ensuring that capitalist activities ultimately benefited society. In modern times this concept became the basis for the pronouncements of the Chicago School of Economics that markets were inherently self regulating. However, the last five years have demonstrated that there is no “invisible hand”unregulated markets have spelled disaster for the average person. The “recovery” of 2009-10 ensured that “too big to fail” institutions would survive and the rich would continue to be rich. Meanwhile millions of good jobs were either eliminated or replaced by low-wage jobs with poor or no benefits.

Fourth, global corporations are ruining our natural capital. Four of the top 10 multinational corporations are energy companies, with Exxon Mobil leading the list. But there are many indications that our oil reserves are gone. Meanwhile, other forms of natural capital have been depleted — arable land, water, minerals, forests, fish, and so forth. Multinational corporations have treated the environment as a free resource. When the timberlands of North America began to be depleted, lumber corporations moved to South America and then Asia. Now, the “easy pickings” are gone. Global corporations have ravished the world and citizens of every nation live with the consequences: dirty air, foul water, and pollution of every sort.

Fifth, global corporations have angered the world community. The world GDP is $63 Trillion but multinational corporations garner a disproportionate share — with banks accounting for an estimated $4 trillion (bank assets are $100 trillion). Global black markets make $2 trillion — illegal drugs account for at least $300 billion. In many parts of the world, a worker is not able to earn a living wage, have a bank account or drive a car, but can always obtain drugs, sex, and weapons. And while the world may not be one big village in terms of lifestyle, it shares an image of “the good life” that’s proffered in movies, TV, and the Internet. That’s what teenagers in Afghanistan have in common with teenagers in England; they’ve been fed the same image of success in the global community and they know it’s inaccessible. They are angry and, ultimately, their anger has the same target — multinational corporations (and the governments that support them).

We live in interesting times. The good news is we’re witnessing the failure of global corporate capitalism. The bad news is we don’t know what will replace it.”

(N.B.: Perhaps we do – see peoplesworld.org)

Bob Burnett is a writer and activist in Berkeley, Calif.

Emphasis Mine

see:http://www.alternet.org/story/152118/5_reasons_capitalism_has_failed?page=entire

The Dangerous Reagan Cult

Exclusive: Ronald Reagan’s anti-government philosophy inspires Tea Party extremists to oppose any revenue increase, even from closing loopholes on corporate jets. Democrats try the spin that “even Reagan” showed flexibility on debt and taxes. But Robert Parry says it is the “Reagan cult” that is at the heart of America’s crisis.

From RSN, by Robert Parry

“Exclusive: Ronald Reagan’s anti-government philosophy inspires Tea Party extremists to oppose any revenue increase, even from closing loopholes on corporate jets. Democrats try the spin that “even Reagan” showed flexibility on debt and taxes. But Robert Parry says it is the “Reagan cult” that is at the heart of America’s crisis.

In the debt-ceiling debate, both Republicans and Democrats wanted Ronald Reagan on their side. Republicans embraced the 40th president’s disdain for government and fondness for tax cuts, while Democrats noted that “even Reagan” raised the debt limit many times and accepted some tax increases.

But Reagan – possibly more than any political leader – deserves the blame for the economic/political mess that the United States now finds itself in. He was the patriarch for virtually every major miscalculation that the country has made over the past three decades.

It was Reagan who slashed taxes on the rich to roughly their current level; he opened the flood gates on deficit spending; he accelerated the decline of the middle class by busting unions and slashing support for local communities; he disparaged the value of government regulations; he squandered money on the Pentagon; he pushed more militaristic strategies abroad; and he rejected any thoughtful criticism of past U.S. foreign policies.

Reagan also created what amounted to a “populist” right-wing cult that targeted the federal government as the source of nearly all evil. In his First Inaugural Address, he famously declared that “government is not the solution to our problem; government is the problem.”

It is that contempt for government that today is driving the Tea Party extremists in the Republican Party. Yet, as with many cults, the founder of this one was somewhat more practical in dealing with the world around him, thus explaining some of Reagan’s compromises on the debt ceiling and taxes.

But once the founder is gone, his teachings can become definitive truth to the disciples. Flexibility disappears. No deviation is permitted. No compromise is tolerated.

So, at a time when government intervention is desperately needed to address a host of national problems, members of this Reagan cult apply the teachings of the leader in the most extreme ways. Since “government is the problem,” the only answer is to remove government from the equation and let the corporations, the rich and the magical “market” dictate national solutions.

It is an ironic testament to Ronald Reagan’s enduring influence that America’s most notable “populist” movement, the Tea Party, insists that tax cuts for the wealthy must be protected, even minor ones like tax loopholes for corporate jets. Inside the Tea Party, any suggestion that billionaire hedge-fund managers should pay a tax rate equal to that of their secretaries is anathema.

Possibly never in history has a “populist” movement been as protective of the interests of the rich as the Tea Party is. But that is because it is really a political cult dedicated to the most extreme rendering of Ronald Reagan’s anti-government philosophy.

Astro-Turf ‘Populists’

Granted, the Tea Party also can be viewed as an astro-turf outfit financed by billionaires like the Koch brothers and promoted by billionaire media mogul Rupert Murdoch. But Election 2010 proved that the movement is capable of putting like-minded politicians into office, especially when discouraged elements of the American Left choose to sit on the sidelines.

During the debt-ceiling battle, the GOP’s Tea Party caucus showed it was strong enough to block any compromise that included a revenue increase. The thinking is that the “evil” government must be starved even if that means defending indefensible tax loopholes and shoving the world’s economy to the brink of catastrophe.

The Tea Party’s rabid enforcement of the Reagan orthodoxy instills such fear among top Republicans that every one of the eight presidential hopefuls at a recent Iowa debate vowed to reject a deal that would include just $1 of higher taxes for each $10 in spending cuts. Even supposed moderates like Mitt Romney and Jon Huntsman threw up their hands.

But the Reagan cult reaches far beyond the Republican Party. Last February, a Gallup poll of Americans cited Reagan as the greatest president ever, with a five percentage point lead over Abraham Lincoln.

These days, virtually no one in Washington’s political or media circles dares to engage in a serious critique of Reagan’s very checkered record as president. It’s much easier to align yourself with some position that Reagan took during his long career, much like a pastor selectively picking a Bible passage to support his theological argument.

When negative national trends are cited – such as the decline of the middle class or the widening gap between rich and poor – the self-censorship demands that Reagan’s name not be spoken. Instead, there are references to these problems deepening “over the past three decades,” without mentioning whose presidency got things going big time.

Creating an Icon

And there is a self-interested reason for this hesitancy. The Republicans and the Right have made it a high priority to transform Reagan into an icon and to punish any independent-minded political figure or journalist who resists the group think.

The first step in this process occurred in the late 1980s, with aggressive cover-ups of Reagan’s crimes of state, such as scandals over the Iran-Contra arms-for-hostages affair, Contra-cocaine trafficking, and the Iraq-gate support of dictator Saddam Hussein.

Faced with furious Republican defenses of Reagan and his inner circle, most Democrats and mainstream journalists chose career discretion over valor. By the time Bill Clinton was elected in 1992, the refrain from Democrats and Washington pundits was to “leave that for the historians.”

Those who didn’t go along with the cover-ups – like Iran-Contra special prosecutor Lawrence Walsh – were subjected to ridicule from both the right-wing and mainstream media, from both the Washington Times and the Washington Post. Journalists who challenged the implausible Reagan cover-ups also found themselves marginalized as “conspiracy theorists.”

Leading Democrats decided it made more sense to look to the future, not dwell on the past. Plus, acquiescing to the cover-ups was a way to show their bipartisanship.

However, Republicans had other ideas. Having pocketed the concessions regarding any serious investigations of Reagan and his cohorts, the Republicans soon went on the offensive by investigating the heck out of President Clinton and his administration.

Then, having stirred up serious public doubts about Clinton’s integrity, the Republicans trounced the Democrats in the 1994 congressional elections. With their new majorities, the Republicans immediately began the process of enshrining Reagan as a national icon.

By and large, the Democrats saw these gestures, like attaching Reagan’s name to National Airport, as another way to demonstrate their bipartisanship.

But Republicans knew better. They understood the strategic value of elevating Reagan’s legacy to the status of an icon. If everyone agreed that Reagan was so great, then it followed that the hated “guv-mint” must be that bad.

More Accommodations

Increasingly, Democrats found themselves arguing on Republican ground, having to apologize for any suggestion that the government could do anything good for the country. Meanwhile, the Clinton-era stock market boom convinced more Americans that the “market” must know best.

Going with that flow, President Clinton signed a Republican-sponsored bill that removed Depression-era regulations in the Glass-Steagall Act, which had separated commercial and investment banks. With the repeal, the doors were thrown open for Wall Street gambling.

In the short run, lots of money was made, encouraging more Americans to believe that the government and its “safety net” were indeed anachronisms for losers. People with any gumption could simply day-trade their way to riches.

Reagan, it seemed, was right all along: government was the problem; the “free market” was not only the solution but it could “self-regulate.”

That was the political/media environment around Election 2000 when the wonkish Vice President Al Gore ran against the brash Texas Gov. George W. Bush, who came across to many as another version of Ronald Reagan, someone who spoke simply and disdained big government.

Though Gore could point to the economic successes of the Clinton years, including a balanced federal budget and the prospect of the total elimination of the federal debt, the major media mocked him as a know-it-all nerd who wore “earth-toned sweaters.” Meanwhile, mainstream journalists swooned over Bush, the regular guy.

Still, Gore eked out a narrow victory in the national popular vote and would have carried the key state of Florida if all legally cast votes were counted. But Bush relied on his brother’s administration in Florida and his father’s friends on the U.S. Supreme Court to make sure that didn’t happen. Bush was declared the winner in Florida and thus the new president. [For details, see Neck Deep.]

In retrospect, Election 2000 was a disastrous turning point for the United States, putting into the highest office in the land an unqualified ne’er do well who had lost the election.

But this outrage against democracy was largely accepted because of the muscular right-wing machine, the on-bended-knee mainstream media and the weak-kneed Democrats – a political/media dynamic that Reagan had helped create and had left behind.

The progress that the Clinton administration had made toward putting the U.S. financial house in order was quickly undone as Bush pushed through two massive tax cuts benefiting mostly the rich and waged two open-ended wars financed with borrowed money.

Years of Reaganism also had taken its toll on the government’s regulatory structures. Reagan had consistently appointed regulators who were hostile to the very concept of regulating, such as Anne Gorsuch at the Environmental Protection Agency and James Watt at Interior. He also elevated Alan Greenspan, a “free market” admirer of Ayn Rand, to be chairman of the Federal Reserve Board.

In the 1980s, the looting of America was underway in earnest, but the elites of Washington and New York saw little to protest since they were getting a cut of the plunder. The real losers were the average Americans, especially factory workers who saw their unions broken or their jobs shipped overseas under the banner of “free trade.”

Feeling Good

But many Americans were kept entranced by Reagan’s feel-good magic.

Taking office after a difficult decade of the 1970s, when America’s defeat in Vietnam and the Arab oil price hikes had shaken the nation’s confidence, Reagan simply assured everyone that things would work out just fine and that no excessive sacrifice was in order. Nor should there be any feelings of guilt, Reagan made clear.

By the late 1970s, it was widely accepted even among many Republicans that the Vietnam War had been an abomination. But Reagan simply rebranded it a “noble cause,” no reason for any serious self-reflection on America’s imperial role in the world.

Reagan then allied the United States with “death-squad” regimes all over Latin America and across the Third World. His administration treated the resulting carnage as a public-relations problem that could be managed by challenging the patriotism of critics.

At the 1984 Republican National Convention, Reagan’s United Nations Ambassador Jeane Kirkpatrick labeled Americans who dared criticize U.S. foreign policy as those who would “blame America first.”

To continue this sort of verbal pummeling on those who continued to get in the way, Reagan credentialed a bunch of thuggish intellectuals known as the neoconservatives.

For the rest of the country, there were happy thoughts about “the shining city on a hill” and “morning in America.”

In reality, however, Reagan had set the stage for the tragedies that would follow. When George W. Bush grabbed power in 2001, he simply extended the foreign and economic policies of the Republican cult leader: more tax cuts, more militarism, less regulation, more media manipulation.

Soon, the gap between rich and poor was widening again. Soon, the United States was at open war in two countries and involved in secret wars in many others. Soon, the nation was confronted with new scandals about torture and deception. Soon, the federal budget was flowing with red ink.

And near the end of Bush’s presidency, the de-regulated excesses of Wall Street pushed the country to the brink of a financial cataclysm. Bush supported a bail-out to save the bankers but didn’t do much for the millions of Americans who lost their jobs or their homes.

Second Thoughts?

One might have thought that the financial crack-up in 2008 (plus the massive federal deficits and the botched wars in Iraq and Afghanistan) would have confronted the Reagan cult with an existential crisis of faith. It would seem obvious that Reagan’s nostrums just didn’t work.

However, after only a brief interregnum of Barack Obama, the Republicans seem poised to restore the Reagan cult to full power in the United States. The new apparent GOP frontrunner, Texas Gov. Rick Perry, is already being hailed in the Washington Post as “The Texas Gipper.”

The Washington Times (yes, Rev. Sun Myung Moon’s right-wing propaganda sheet is still around) fairly cooed over Perry’s tough attacks on Obama, depicting America’s first black president as someone who apologizes for America and isn’t deserving of its soldiers in uniform.

“One of the powerful reasons for running for president of the United States is to make sure every man and woman who puts on the uniform respects highly the president of the United States,” Perry said. “We are indignant about a president who apologizes for America.”

As far as Perry is concerned, America has nothing to apologize for.

These are themes right out of Ronald Reagan’s playbook. And it appears likely that Election 2012 will be fought over terrain defined by Reagan, even though he left office in 1989 and died in 2004.

It is already clear that President Obama will be on the defensive, trying to justify a role for the federal government in America and explaining why the Reaganesque policy of low taxes on the rich must finally be reversed. Obama also is certain to shy away from any serious examination of how U.S. foreign policy went so wrong, so as not to be labeled “apologist-in-chief.”

Rick Perry or whatever other Republican gets the party’s nomination will hold the high ground of Reagan’s lofty standing among the American people. The GOP nominee can continue blaming “guv-mint” for the nation’s problems and promising another “morning in America” if only the nation further reduces the size of “guv-mint.”

With Democrats also trying to associate themselves with the “greatest president ever,” it appears doubtful that any serious effort will be made to explain to the American people that the charming Reagan was the pied piper who led them to their current demise.”

[For more on these topics, see Robert Parry’s Secrecy & Privilege and Neck Deep, now available in a two-book set for the discount price of only $19. For details, click here.]

Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book,Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat, and can be ordered at neckdeepbook.com. His two previous books, Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & ‘Project Truth’ are also available there.

emphasis mine

Americans Don’t Realize Just How Badly We’re Getting Screwed by the Top 0.1 Percent Hoarding the Country’s Wealth

With an unprecedented sum of wealth held within the top one-tenth of one percent of the US population, we now have the most severe inequality of wealth in US history.

N.B.: An oft disdained 19th century philosopher would hardly be surprised!

From AmpedStaus  – via AlterNet – by David Degraw

“With an unprecedented sum of wealth, tens of trillions of dollars, held within the top one-tenth of one percent of the US population, we now have the most severe inequality of wealth in US history. Not even the robber barons of the Gilded Age were as greedy as the modern-day economic elite.

As American philosopher John Dewey said, “There is no such thing as the liberty or effective power of an individual, group, or class, except in relation to the liberties, the effective powers, of other individuals, groups or classes.”

In my report, The Economic Elite vs. the People, I reported on the strategic withholding of wealth from 99 percent of the US population over the past generation. Since the mid-1970s, worker production and wealth creation has exploded. As the statistics throughout this report prove, the dramatic increase in wealth has been almost entirely absorbed by the economic top one-tenth of one percent of the population, with most of it going to the top one-hundredth of one percent.

If you are wondering why a critical mass of people desperately struggling to make ends meet are still not fighting back with overwhelming force and running the mega-wealthy aristocrats out of town, let’s consider two significant factors:

1) People are so busy trying to maintain their current standard of living that their energies are consumed by holding onto the little they have left.

2) People have very little understanding of how much wealth has been consolidated within the top economic one-tenth of one percent.

Considering the first factor, it is obvious that people have become beaten down psychologically and financially. A report in the Guardian titled, “Anxiety keeps the super-rich safe from middle-class rage,” suggests that people are so desperate to hold onto what they have that they are too busy looking down to look up: “As psychologists will tell you, fear of loss is more powerful than the prospect of gain. The struggling middle classes look down more anxiously than they look up, particularly in recession and sluggish recovery.”

Considering the second factor, people do not understand how much wealth has been withheld from them. The average person has never personally experienced or seen the excessive wealth and luxury that the mega-rich live in. Wealth inequality has grown so extreme and the wealthy have become so far removed from average society, it is as if the rich exist in some outer stratosphere beyond the comprehension of the average person. As the Guardian report states:

“… having little daily contact with the rich and little knowledge of how they lived, they simply didn’t think about inequality much, or regard the wealthy as direct competitors for resources. As the sociologist Garry Runciman observed: ‘Envy is a difficult emotion to sustain across a broad social distance.’… Even now most underestimate the rewards of bankers and executives. Top pay has reached such levels that, rather like interstellar distances, what the figures mean is hard to grasp.”

In fact, the average American vastly underestimates our nation’s severe wealth disparity. This survey, featured in the NY Times, reveals that Americans think our society is far more equal than it actually is:

“In a recent survey of Americans, my colleague Dan Ariely and I found that Americans drastically underestimated the level of wealth inequality in the United States. While recent data indicates that the richest 20 percent of Americans own 84 percent of all wealth, people estimated that this group owned just 59 percent – believing that total wealth in this country is far more evenly divided among poorer Americans.

What’s more, when we asked them how they thought wealth should be distributed, they told us they wanted an even more equitable distribution, with the richest 20 percent owning just 32 percent of the wealth. This was true of Democrats and Republicans, rich and poor – all groups we surveyed approved of some inequality, but their ideal was far more equal than the current level.”

This chart shows the survey’s results:

The overwhelming majority of the US population is unaware of the vast wealth at hand. An entire generation of unprecedented wealth creation has been concealed from 99 percent of the population for over 35 years. Having never personally experienced this wealth, the average American cannot comprehend what is possible if even a fraction of the money was used for the betterment of society.

Given modern technology and wealth, American citizens should not be living in poverty. The statistics demonstrate that we now live in a neo-feudal society. In comparison to the wealthiest one-tenth of one percent of the population, who are sitting on top of tens of trillions of dollars in wealth, we are essentially propagandized peasants.

The fact that the overwhelming majority of Americans are struggling to get by, while tens of trillions of dollars are consolidated within a small fraction of the population, is a crime against humanity.

The next time you are stressed out, struggling to make ends meet and pay off your debts, just think about the trillions of dollars sitting in the obscenely bloated pockets of the financial elites. I still cling to the hope that once enough people become aware of this fact, we can have the non-violent revolution we so urgently need. Until then, the rich get richer as a critical mass with increasingly dire economic prospects desperately struggles to make ends meet.

emphasis mine

see:http://www.alternet.org/story/152010/americans_don%27t_realize_just_how_badly_we%27re_getting_screwed_by_the_top_0.1_percent_hoarding_the_country%27s_wealth?page=entire

Don’t Fall for the GOP Lie

Don’t fall for the GOP lie: There is no budget crisis. There’s a job and growth crisis.

By Robert Reich, Robert Reich’s Blog

Don’t fall for the GOP lie: There is no budget crisis. There’s a job and growth crisis.

“A friend who’s been watching the absurd machinations in Congress asked me “what happens if we don’t solve the budget crisis and we run out of money to pay the nation’s bills?”

It was only then I realized how effective Republicans lies have been. That we’re calling it a “budget crisis” and worrying that if we don’t “solve” it we can’t pay our nation’s bills is testament to how successful Republicans have been distorting the truth.

The federal budget deficit has no economic relationship to the debt limit. Republicans have linked the two, and the Administration has played along, but they are entirely separate. Republicans are using what would otherwise be a routine, legally technical vote to raise the debt limit as a means of holding the nation hostage to their own political goal of shrinking the size of the federal government.

In economic terms, we will not “run out of money” next week. We’re still the richest nation in the world, and the Federal Reserve has unlimited capacity to print money.

Nor is there any economic imperative to reach an agreement on how to fix the budget deficit by Tuesday. It’s not even clear the federal budget needs that much fixing anyway.

Yes, the ratio of the national debt to the total economy is high relative to what it’s been. But it’s not nearly as high as it was after World War II – when it reached 120 percent of the economy’s total output.

If and when the economy begins to grow faster – if more Americans get jobs, and we move toward a full recovery – the debt/GDP ratio will fall, as it did in the 1950s, and as it does in every solid recovery. Revenues will pour into the Treasury, and much of the current “budget crisis” will be evaporate.

Get it? We’re really in a “jobs and growth” crisis – not a budget crisis.

And the best way to get jobs and growth back is for the federal government to spend more right now, not less – for example, by exempting the first $20,000 of income from payroll taxes this year and next, recreating a WPA and Civilian Conservation Corps, creating an infrastructure bank, providing tax incentives for small businesses to hire, expanding the Earned Income Tax Credit, and so on.

But what happens next week if Congress can’t or won’t deliver the President a bill to raise the debt ceiling? Remember: This is all politics, mixed in with legal technicalities. Economics has nothing to do with it.

One possibility, therefore, is for the Treasury to keep paying the nation’s bills regardless. It would continue to issue Treasury bills, which are our nation’s IOUs. When those IOUs are cashed at the Federal Reserve Board, the Fed would do what it has always done: Honor them.

How long could this go on without the debt ceiling being lifted? That’s a legal question. Republicans in Congress could mount a legal challenge, but no court in its right mind would stop the Fed from honoring the full faith and credit of the United States.

The wild card is what the three big credit-rating agencies will do. As long as the Fed keeps honoring the nation’s IOUs, America’s credit should be deemed sound. We’re not Greece or Portugal, after all. We’ll still be the richest nation in the world, whose currency is the basis for most business transactions in the world.

Standard & Poor’s has warned it will downgrade the nation’s debt from a triple-A to a double-A rating if we don’t tend to the long-term deficit. But, as I’ve noted, S&P has no business meddling in American politics – especially since its own non-feasance was partly responsible for the current size of the federal debt (had it done its job the debt and housing bubbles wouldn’t have precipitated the terrible recession, and the federal outlays it required).

As long as we pay our debts on time, our global creditors should be satisfied. And if they’re satisfied, S&P, Moody’s, and Fitch should be, too.

Repeat after me: The federal deficit is not the nation’s biggest problem. The anemic recovery, huge unemployment, falling wages, and declining home prices are bigger problems. We don’t have a budget crisis. We have a jobs and growth crisis.

The GOP has manufactured a budget crisis out of the Republicans’ extortionate demands over raising the debt limit. They have succeeded in hoodwinking the public, including my friend.”


Robert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including “The Work of Nations,” “Locked in the Cabinet,” “Supercapitalism” and his latest book, “AFTERSHOCK: The Next Economy and America’s Future.” His ‘Marketplace’ commentaries can be found on publicradio.com and iTunes.

Emphasis mine

see:http://www.readersupportednews.org/opinion2/277-75/6813-dont-fall-for-the-gop-lie

The 6 Biggest Lies About the U.S. Debt

As Congress nears a vote on the various debt ceiling deals, let’s look at the lies and misinformation that got us into this mess.

From Alternet, by Arun Gupta

“There is one simple truth about the discussion of the looming U.S. debt crisis: it is largely a compendium of half-truths, distortions, myths and outright lies.”

“For example, is it true that the U.S. debt is unsustainable, which is spurring the budget-cutting fever? Far from it. While U.S. debt is at one of its highest levels ever in terms of gross domestic product, the interest payments in 2011 on the  $14.3 trillion public debt will be a mere $386 billion. This is barely more than the $364 billion paid way back in 1998. In real terms, the U.S. economy has grown nearly 30 percent since then. Rock-bottom interest rates on U.S. government debt account for the low payments today, but the practical effect is that servicing the debt as a percentage of GDP is the lowest it’s been in decades.

Or what about hysterical headlines like “U.S. Debt Default Looms” (courtesy of NPR) unless Democrats and Republicans agree to raise the debt ceiling? They are completely untrue. Richard Wolff, professor of economics emeritus at the University of Massachusetts, Amherst, says, if there is no agreement by Aug. 2 to allow the U.S. Treasury to borrow more funds, then “the government instead would choose among cutbacks on various expenditures such as state and local aid, medical aid, for war, for infrastructure. It would extraordinarily unusual for a government in such a situation to attack its creditors.”

If no deal on the debt ceiling is reached this sucks for the rest of us, such as the millions depending on their portion of the $23 billion in Social Security payments scheduled for Aug. 3. A short delay would do no serious harm, but a longer delay, perhaps just a week or two, would be devastating.

For one, removing income support payments would have a major ripple effect in our consumer-based economy. Spending would drop precipitously on items like food, medicine, transportation, clothing and household goods. Peter Bratsis, a professor of Political Theory at the University of Salaford in England and a Greek-American, says his home country is a cautionary tale. Speaking from Greece, Bratsis said since the debt crisis hit last summer many people’s income have dropped up to 25 percent as wages, pensions and social welfare have been sacrificed to please the banks. As a result “Greece is in an economic depression. In Athens, on every block, you have shuttered bakeries, cafes, shoe stores, plumbers and other small businesses that are closed because either people don’t have the money to spend or are afraid to spend.”

Second, says Wolff, “The U.S. Government is one of the largest buyers, if not the largest purchaser of commodities in the world of oil, of computers, of weapons. In an already shaky global economy, the biggest buyer of goods would be making cutbacks. This would be stupefyingly dumb.” He adds that by playing chicken with the national debt, Washington has already irreparably wounded the economy. “The world depends on the U.S. economy running smoothly. A default would lead governments and companies to rethink their relation to the United States, and this has already happened.”

The point is while the dangers are rife in a delay in raising the debt ceiling the doomsday scenario of a government default on debt is not going to occur. The creditors will be kept happy and there will be no default because that is how government works in a capitalist economy. And even if the impasse dragged on, the Fed could dip into its $550 billion in reserves, including more than $400 billion in gold at current prices, to keep making debt payments.

One blatant lie is that Republicans and Democrats, the Congress and the White House are serious about reining in budget deficits to reduce the long-term debt. They are not. The Congressional Budget Office calculates that the deficit from 2011 to 2013 will be $3.5 trillion. Over the decade it will be $8.5 trillion. Now, lots of numbers are being thrown about on spending cuts over a 10-year period, but they keep dropping – the Senate Democrats are proposing $2.2 trillion in cuts and costs savings while the Republicans weigh in at $915 billion.

Cutting one or two hundred billion dollars a year is meaningless. Wolff says, “Even if you cut the debt $300 billion, you are left with an enormous annual deficit that adds hugely to the national debt they all claim to care so much about. It gives lie to the idea that the Republicans and Democrats are interested in trying to cut the national debt.”

If you really believe shrinking the debt is an imperative, then there are easier ways to do it then stealing grandma’s meds. The Bush wars and tax cuts – which are still going – cost $3.3 trillion from 2002 to 2009. Cutting the trillion-dollar war budget in half, ending the Bush tax cuts (which Obama could have done with no sweat when he was bursting with political capital in early 2009 or by calling the GOP bluff before or after the 2010 midterm elections) and raising tax rates on corporations would pretty much wipe out the deficit over the next decade. In the case of corporate taxes, during the last decade it averaged only 10.7 percent of federal revenues – and since 2008 it’s shrunk to barely 5 percent – versus 29.8 percent in the 1950s.

Of course, the stand-off is based on another lie: that Congress and Obama administration can enforce cuts over a 10-year period. The budget process is an annual exercise. There is no provision whatsoever to make cuts permanent because they can always be undone by Congress, and taxes can always be lowered or costly new wars started, both of which always seem to happen, widening the deficit once more.

There is no end to the falsehoods and fantasies from the chattering classes. “We are in recovery.” So says Ben Bernanke – since 2009 no less. Obama has been saying the same since 2010, while hedging that it is “painfully slow.” Really? Tell that to the 25 million Americans who are unemployed, underemployed or have dropped out of the labor force. This amounts to an unemployment rate of16.2 percent, but the real rate is probably closer to 20 percent after factoring in youth unable to enter the workforce or those who have taken early retirement. Or try telling the 100 million Americans who are effectively caught in poverty (using far more realistic measures than the government does) or the 6.5 million households with mortgages that are delinquent or in foreclosure that we are in recovery.

The notion we are in recovery is based on believing the downturn was “the Great Recession,” a distortion the New York Times helped spread. Paul Krugman is one of the few mainstream commentators saying that not only is there no end in sight to the four-year-long slump, let’s give it a more accurate label such as, “the Lesser Depression.” Suppose the corporate media had been saying “Depression” for the last few years. It would have bolstered support for extraordinary measures to dig out of an extraordinary crisis, such as policies that did work during the last depression: jobs programs, infrastructure, social welfare, stronger labor rights and aid to local governments. But this would mean redistribution of wealth downwards instead of upwards. Therefore, saying recession makes it sound part of the normal boom-and-bust cycle, one we will overcome through the magic of the market as we have so many times before.

We can then move on to the recovery phase, which means getting our economic house in order by reducing the debt, a lie told by Serious People whether pundits, politicians or experts. We are being led to think the wisest course is repeating the major mistake of the Great Depression – enforcing austerity in a deep economic funk. When the New York Times backs huge cuts to social spending, you can be sure the rest of the media assumes squeezing the poor and middle class harder is the tonic for economic health. Sure, the Times may sniffle that Obama’s stunning offer to hack $650 billion from Medicare, Medicaid and Social Security was “overly generous” to Republicans but that is just code for “we in the liberal penthouse support it with mild reservations.” On the other side of the media aisle, the Wall Street Journal endorsed the Republican sadism, saying that none of the critics on the right offer “anything nearly as fiscally or politically beneficial as Mr. Boehner’s plan.”

This is what passes for the range of opinion in the two most esteemed newspapers in the country. That’s because we are still in thrall of the biggest lie of all – market fundamentalism. An eternity ago, in 2009, Newsweek declared, “We Are All Socialists Now.” They were right, but only in the way America has always been socialists: we socialize the rich when they lose money, and then we socialize their ability to profit. (The esteemed economic historian Karl Polanyi argued “laissez-faire was planned.” By that, he meant profit-making depends on government regulation of land, labor, finance and the environment. On top of that, there are outright transfers of wealth that occur during wars, infrastructure building and as part of social reforms, such as the railways, the Cold War, Medicare, the internet, and the bank bailouts.)

Thus, the debate is about differing Democratic and Republican visions on which parts of the welfare state should be sent to the glue factory. “We all must sacrifice,” is the mantra. Never mind that the effect on the national debt will be laughably small. Slashing $650 billion from entitlements – Obama’s burnt offering – will nick a miniscule 3 percent off the national debt by 2020, while the suffering will be enormous. But we must do it to appease the markets.

Pleasing the markets means pleasing the credit rating agencies – Standard & Poor’s, Moody’s and Fitch – an example of cult-like devotion in which the elite command us to drink the Kool-Aid. Like a death watch, the media turn anxiously to the rating agencies to ask the condition of U.S. government debt. Are they going to downgrade it, which would mean higher interest rates and an even bigger debt problem? This is one more big lie as Japan’s huge debt – more than twice the size of U.S. debt as a percentage of GDP – was downgraded in January and “there was no negative impact at all,” according to one analyst.

But first let’s go to the tape and review how the big three credit rating agencies inflated the mortgage bubble. The bubble was driven by the banking industry’s insatiable appetite for debt, the repackaging of dicey mortgages into profitable securities. The agencies, especially Moody’s and S&P, gave investment-grade ratings to almost any sack of residential mortgage backed securities (RMBS) and collateralized debt obligations (CDO) that passed across their desks. By law, banks, pension funds, insurance companies and other institutional investors need investment-grade ratings on these securities to hold them. Since the rating agencies were paid by the issuers, they were raking in the cash by gold-plating shit. Moody’s revenue on these securities quadrupled from over $61 million in 2002 to over $260 million by 2006. For S&P, it went from $64 million to $265 million for CDOs in the same four years and from $184 million in 2002 to $561 million in 2007 for RMBSs.

Don’t think they didn’t know exactly what they were doing. At S&P, one manager emailed a co-worker in December 2006, “Let’s hope we are all retired and wealthy before this house of cards falters.” Then, according to a U.S. Senate report, the ratings firm triggered the financial collapse by downgrading huge amounts of these securities from AAA to junk. In one day, on Jan. 30, 2008, S&P downgraded an astonishing 6,300 ratings. In 18 months the two firms downgraded more securities than they had done in their entire 90-year histories. Once the securities turned to junk, the big players could no longer hold them, which burst the bubble as they were sold in a panic and losses began mounting on the bank’s balance sheets.

We know the rest of the story – the financial collapse, the trillions in bailouts and credit lines, the lack of punishment for executives at any of these firms, the return to obscene profits a year later, the de-fanging of any credible reform. But now, we are being told, the rating agencies word on debt is the word of God.

This time, S&P is not so much looking for a fast buck as nakedly pushing an agenda. In a blatant lie, S&P President Deven Sharma, who was summoned to testify before a House subcommittee on financial oversight on July 27, said his firm was “misquoted” in demanding $4 trillion in cuts and unctuously preached that ratings should be free of politics.

What happened is two weeks earlier, on July 14, S&P issued a detailed statement, explaining that it was placing both long-term and short-term U.S. debt “on CreditWatch with negative implications.” It explained that “there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling.”

It did offer a safe passage. S&P said that if “an agreement would be enacted and maintained throughout the decade” to realize “budget savings of $4 trillion,” then “other things unchanged” it could affirm the stellar ratings on both short- and long-term U.S. debt. But, it warned, any “credible” agreement “would require support from leaders of both political parties.”

S&P knew exactly what it was saying. The only budget number it mentioned (three times) was $4 trillion. By saying both parties needed to sign on to an agreement to be credible, it knew the Republican agenda of strangling the last of social welfare would triumph. And by issuing the statement in the heat of negotiations, it threw its lot in with the Tea Party mob.

S&P was telling Capitol Hill to drive a stake through the heart of the welfare state. To let us peasants know we must till the corporate fields until the day we die. Otherwise, the credit rating deities will rain downgrades upon our heads, blighting the land for future generations.

We must pay now and forever. That is the truth, a truth so crude and cartoonish it seems comical. Which is why we need so many lies.

Arun Gupta is a founding editor of The Indypendent newspaper. He is writing a book on the decline of American Empire for Haymarket Books.

Emphasis Mine

see:http://www.alternet.org/story/151827/the_6_biggest_lies_about_the_u.s._debt?akid=7335.123424.kt7uO7&rd=1&t=2

Taxes are Way Too Low!

If you count payroll taxes, the richest 400 Americans, pocketing over $354 million a year, are paying a lower tax rate than a hospital orderly working for $29,000 a year.

Robert Borosage, Our Future

“.. Washington doesn’t have a revenue problem, it has a spending problem,” says House Majority Leader Eric Cantor (R-Va.). All Republican legislators have been taught to chant this tired Republican “talking point” as if it were the Hare Krishna mantra.

To borrow one of Cantor’s favorite sneers,How could anyone believe that? Here’s a graph showing federal revenues as a percentage of GDP. Clearly Washington has a revenue problem.

In fact, Americans are paying the lowest percentage of their income in taxes since 1958. Corporate taxes which brought in over 6% of GDP in 1950 are nownear historic lows of barely 1%. Senator Carl Levin has just introduced the Stop Tax Haven Abuse Act of 2011 targeting the $100 billion in taxes lost annually to offshore tax havens. (Needless to say, House Republicans vow to go to the mat to protect the corporate tax dodges since loopholes are deemed tax hikes in their Fox world)

It gets worse. Hedge Fund billionaires now pay a lower tax rate than their chauffeurs, or the teachers of their children, or the cops that patrol their streets. The IRS reports that the richest 400 Americans – who made an average of $354 million a year in 2007 – paid an effective tax rate of 16.6%, down from 30% in 1995 and 23% in 2002. Even as their incomes doubled from 2001 to 2007, their effective tax rates were virtually halved from 1995.

If you count payroll taxes, the richest 400 Americans, pocketing over $354 million a year, are paying a lower tax rate than a hospital orderly working for $29,000 a year.

Clearly we have a “revenue problem” – and a major league indecency problem.”

emphasis mine

see:http://www.ourfuture.org/blog-entry/2011072814/ignorance-index-iii-revenue-problem

Bush Tax Cuts, a Decade Later: How They Helped Break the Economy

It seems hard to believe but, just a decade ago, the deficit didn’t exist and there were surpluses as far as the eye could see. The United States was on track to eliminate the national debt altogether by 2010, making the country debt free for the first time in nearly two centuries.

From Alternet. By Steve Benen | Sourced from Washington Monthly

It seems hard to believe but, just a decade ago, the deficit didn’t exist and there were surpluses as far as the eye could see. The United States was on track to eliminate the national debt altogether by 2010, making the country debt free for the first time in nearly two centuries.

Then 2001 happened. In fact, a year ago this week, George W. Bush’s tax policy became law, and to honor the occasion, Slate’s Annie Lowrey tried to “find something redeeming” to say about them. Alas ,she came up empty, concluding that they’ve “been a failure in every conceivable way.”

Ten years ago this week, the policy’s conservative champions made bold predictions about what the tax cuts would do — massive job growth, vast new wealth, higher incomes, smaller government, and balanced budgets. None of these predictions proved to be even remotely true.

The fine folks at the Center on Budget and Policy Priorities put togetherseveral worthwhile charts this week to mark the 10th anniversary of this tragic mistake, but this one’s my favorite.

But the spectacular failure of the policy is really only part of the story. Indeed, to a certain extent, looking back at recent history only helps provide a salient foundation for the more important problem: the fact that we haven’t learned anything from the mistake.

Well, perhaps “we” is the wrong word. Some of us have learned quite a bit. But in the Republican Party, we have lawmakers who continue to insist that their votes in support of this monstrosity were fully justified. They won’t apologize, they have no regrets, and they’d rather cause a deliberate recession than any allow a single penny of tax increases to be imposed on anyone.

And on the presidential campaign trail, it’s arguably even worse. Tim Pawlenty is pushing a tax-cut plan that’s triple the size of Bush’s tax-cut package, convinced that it will — you guessed it — generate massive job growth, vast new wealth, higher incomes, smaller government, and balanced budgets.

Worse, in the process, Pawlenty is setting a bar and challenging his presidential rivals to follow him. He wants $11.6 trillion in tax cuts — will other candidates match that? Surpass it? The race is on to see which Republican presidential candidate can be the most ridiculously irresponsible, and the competition will no doubt be fierce.

We are, in other words, talking about a party that tried an ambitious and radical experiment, saw it fail, and decided what’s needed now is significantly more failure.

 I mind that Republicans got this wrong and we’ll be dealing with the consequences for many years to come, but I really mind that Republicans think they were right. As Ezra noted the other day, the party not only “hasn’t learned anything from the failure of the Bush tax cuts,” it’s actually managed to “unlearn some things, too.”

Emphasis Mine.

see:http://www.alternet.org/newsandviews/article/612959/bush_tax_cuts%2C_a_decade_later%3A_how_they_helped_break_the_economy/#paragraph2