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“Job Creators” & “Investors”: The Disconnect Between Republican Policies & Economic Stimulus

by on Monday, March 7, 2011 at 11:03 am EDT in Politics

Rep. Darrell Issa (R-CA)The Republican Party’s latest economic policy proposals are nothing short of pure unadulterated neo-liberalism — the radical merciless ideology foisted upon the world by economist Milton Freedman. Recent events throughout the country have been playing out like a chapter straight out of Naomi Klein’s hugely important bestseller, The Shock Doctrine.

First the tax cuts for the wealthiest 2%, then the calls for deregulation, union-busting, and privatization; followed by — surprise! — severe austerity measures. These policies, if fully enacted, will accomplish little more than transferring trillions of dollars to the wealthiest individuals and corporations, and in doing so crushing the lives of average Americans.

Any ‘trickle down’ effects yielded from extending Bush tax cuts for the wealthy — which added nearly a trillion dollars to our national debt — would have been negligible at best. But they will literally be jack-hammered to oblivion if followed by the Republican-proposed Draconian measures.

Their calls for deep spending cuts in the public sector (both at Federal and State levels) will translate into whittling away all safety nets for America’s elderly and most vulnerable, while issuing pink slips for teachers, cops, firemen, postal employees, librarians, etc.

Instead of paying teachers to educate our children, and cops to fight crime, taxpayers will instead be writing their unemployment checks. That is, until Republicans can finally figure out a way to terminate unemployment insurance as well. Meanwhile, our national infrastructure continues to crumble beneath our feet.

And their proposals do absolutely nothing to stimulate the economy. Unless you believe that sacking public workers will magically reduce unemployment, and somehow stimulate consumer demand (the driver for economic expansion).

Rather than subjecting lower and middle-income Americans to severe austerity measures, our economy would be best served by doing the very opposite. Policies that help to improve the financial bottom-line for struggling Americans guarantees an economic spark, if only because these Americans have little choice, but to spend every last dollar they make on necessities (i.e. they put ALL of it right back into the economy).

Unlike lower and middle-income Americans, the wealthy have the luxury to hoard each and every penny netted from their tax cuts. And few of them will be enticed to invest in a recessionary environment where risks are abnormally high.

How many millionaires are out stimulating the economy right now by purchasing third or fourth homes here in the U.S., when economists are now forecasting a double dip in home prices? How many are considering starting up new businesses, dependent upon consumer spending, when consumer bankruptcies just hit a 5-year high?

For wealthy individuals who do choose to invest, many will wisely target foreign companies, foreign mutual funds, foreign real estate, and multinationals who do business where economies are still growing. In other words, the ‘trickle-down’ part of Republican economic policies will actually occur in China, India, and elsewhere.

The supply-side ideology is based upon a faulty and outdated model that conveniently ignores competition for investment dollars overseas, and is largely dependent upon exaggerating the discretionary spending behavior of the wealthy.

As for corporate tax laws, two-thirds of all U.S. corporations dodged paying a single penny in taxes between 1998 and 2005. And how did these corporations repay the favor? By shifting their labor investments overseas, to countries where the cost of labor is extremely low, and where few if any environmental protection laws exist.

Cisco just released their international salary report showing that the average annual salary of their technical professionals in India ($14,508) is just 1/4 of what their American counterparts make ($62,993). And yet their Indian employees work 56 hours per week, on average — that’s 25% more hours than their American counterparts (45 hrs).

To rub some serious salt into the wounds, the Wall Street Journal recently reported that U.S. corporations (not even including Wall Street Banks) were sitting on close to $2 trillion in cash — the highest corporate cash reserves in over 50 years! — and still refuse to hire in the United States:

Rather than pouring their money into building plants or hiring workers, nonfinancial companies in the U.S. were sitting on $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of June, the Federal Reserve said Thursday. Cash accounted for 7.4% of the companies’ total assets—the largest share since 1959.

The cash buildup shows the deep caution many companies feel about investing in expansion while the economic recovery remains painfully slow and high unemployment and battered household finances continue to limit consumers’ ability to spend.

Yet, Republicans contend we must deregulate our industries further to help corporations cut their costs — at the expense of the environment and consumer protections — and desist from demanding they pay their fair share in taxes — all so that they will have the money they need to “create jobs”.

NO informed American — outside of wealthy individuals and corporate profiteers — could possibly support the Republican Party’s economic policies.

Which begs the question: how does a political party, which serves only the interests of its wealthiest contributors, continue to successfully legislate policies that work against the very interests of the American people?

Since their ideology is unsupported by the facts, they hire “word doctors” who coin misleading phrases to be repeated over and over again. Phrases that are both simplistic and somehow ‘intuitive’ to a non-discerning public.

This has remained their tried and true method for selling destructive economic policies to the American people. Take Frank Luntz, probably the most famous of all conservative “word doctors”. He coined the phrase “government takeover of healthcare”, which became the talking point for the Republican Party during the health care reform debate. It helped spur the Tea Party into storming Democratic town hall meetings during that period — terrified that “Marxists” were coming after their Medicare.

Their current economic play-script is inundated with two phrases: “job creators” and “investors” — to be used in place of “corporations” and “wealthy individuals”. These phrases — more or less the equivalents of “fair and balanced” being used to describe Fox News ‘reporting’ — are now the cornerstone of the entire Republican economic policy narrative.

Take Rep. Darrell Issa (R-CA), the Chairman of the House Committee on Oversight and Government Reform. Virtually every sentence that comes out of his mouth includes the phrase “job creators”. Check out his Twitter account and count the tweets where he reiterates the phrase “job creators”. In fact, he created a website called AmericanJobCreators.com where he asks “job creators” to tell him what kinds of consumer protection regulations he should dismantle on their behalf.

The guy is a corporate lobbyist’s wet dream.

And our obsequious President — instead of showing leadership on this issue and dismantling this fictitious narrative — first capitulated on extending Bush tax cuts for the wealthiest 2%, then capitulated to Issa back in January on the argument that deregulation helps create jobs. In doing so, he legitimized what he knows to be untrue, making it next to impossible for his party to now push for MORE regulation and RAISE taxes on wealthy corporations and individuals without immediately being branded as hostile to “job creators”.

The Conservative Party in Canada, having noticed the success their Republican counterparts across the border were having with this “job creators” phrase, quickly employed it as their own anti-tax slogan.

But make no mistake about it. Our current economic plight was created by:

  • Bush’s deregulatory policies leading to a financial meltdown, and the ensuing AIG and TARP bailouts.
  • Bush’s misleading us into unnecessary & expensive wars.
  • Bush’s granting the wealthiest 2% nearly $3 trillion in tax cuts over the last decade.
  • Two-thirds of all corporations having evaded paying a single penny in taxes from their trillions in profits over the last decade.
  • Corporations having moved our higher paying jobs overseas to low-cost labor countries.

It is not due to a lack of investing capital by cash-hoarding, tax-evading corporations and the wealthiest 2% (the so called “job creators”) — which remains the Republican rationale for cutting taxes and deregulation.

Yet, somehow the lives of the rich and powerful keep getting easier — more comfortable — while the burden for the reckless calamity they unleashed on this country slowly, but surely — thanks to a combination of an emboldened right-wing and a compliant, timid President — gets shifted onto the backs of the American people in the form of harsh austerity measures.

Milton Friedman’s legacy continues to haunt us.

Karl Rove On Obama Extending Bush Tax Cuts: We’re All Supply-Siders Now!

by on Sunday, December 19, 2010 at 4:47 pm EDT in Politics, Tax Policies

The new tax cut bill, signed into law Friday by President Barack Obama, will surely come back to haunt him in his 2012 reelection campaign.  His quick capitulation to the Republicans, and aggressive advocacy for this fiscally irresponsible bill helps to further erode his credibility to one-time supporters.

First came his health care ‘reform’ bill — a backroom giveaway to BigPharma and the health insurance industry.  Then came his watered-down financial reform plan, his escalation in Afghanistan, his refusal to close Guantanamo Bay, his green-lighting the assassinations of American citizens abroad without trial, his complicity in shielding Bush war crimes, etc. etc.

Extending George W. Bush’s destructive ‘supply side’ tax policies only solidifies this President’s reputation as one who has no core principles to speak of.

Candidate Obama promised his supporters repeatedly that he would end, once and for all, the deep tax cuts for the wealthiest 2% of Americans.  To extend these tax cuts at a time when we are engaged in two wars, and with deficits skyrocketing, poses a serious threat to our country’s fiscal health.

Moody’s recently threatened to downgrade the United State’s AAA credit rating if this tax bill was signed into law.  The effects of a credit downgrade during a deep recession could be quite significant:

For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasuries, which currently rank as among the world’s safest investments.

“From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth,” Moody’s analyst Steven Hess said in a report sent late on Sunday.

After Obama announced his plan, Treasury prices fell sharply in volatile trade last week and yields have hit a six-month high, in part due to concerns over the effect the package will have on government debt levels.

If the bill becomes law, it will “adversely affect the federal government budget deficit and debt level,” Moody’s said.

Moody’s believes this tax bill will add an additional $700 to $900 billion in new national debt.  A downgrade in the US credit rating could push interest rates upwards, thereby prolonging this deepest of all recessions.

The President never even attempted to make a compelling case to the American people for Keynesian economic principles — the ones he ran on; the ones he was elected on — but instead cowardly embraced the failed trickle down policies that helped to create much of our country’s problems: including runaway debt, and redistribution of wealth from the middle class to the highest earners over the last 30 years.  His Democratic party still controls the Presidency and both Houses of Congress, and yet he is too timid to use the bully pulpit to promote any progressive policies.

The irony is, he will personally wear the new debt this bill creates around his neck like a noose.  And the blame for it will be leveled by the very Republicans to whom he capitulated.  After all, they were blaming him for Bush’s debt just ONE MONTH after he was sworn in as President.

The Republicans will shamelessly pick up where they left off a month ago: screaming that Obama has created runway deficits, and pointing out the urgency for government spending cuts.

Having caved in on extending Bush’s tax cuts for the richest 2%, he will be forced to offset the new debt by cutting important programs like Social Security, Medicare, and Medicaid.  In addition, new government spending cuts will ‘trickle down’ to impact state budgets, in the form of more layoffs for school teachers and police officers.

Instead of writing the epitaph on Bush’s failed ‘trickle down’ economic policies, Obama has instead resurrected them from the grave.

So we as a country — governed by a Democratic President — will continue to endure a deepening divide between the rich and the poor, and will continue to watch our national debt escalate in a way that won’t create a single job, but will only threaten our country’s most cherished social programs.

Karl Rove is jumping for joy over this turn of events.  After the signing of the bill, he jubilantly Tweeted:

Judging by remarks from Geithner, Hoyer & others celebrating Bush tax cut extension; we’re all supply-siders now!

Perhaps Obama should tap Rove to run his 2012 Presidential Campaign.  They appear to be on the same page on just about every issue.

NY Times’ Paul Krugman: Supply Side Economics Creates Deficits

by on Thursday, July 15, 2010 at 10:43 am EDT in Politics

Nobel Prize winning economist, Paul Krugman, attempts to educate a largely ignorant Republican/Tea Party constituency on the documented failures of Supply Side economics.  He focuses on the Carter and Reagan years (since Republican politicians tend to cite Reaganomics as their model for economic success), and he demonstrates that revenues actually dropped decisively with Reagan’s tax cuts:

… the revenue track under Reagan looks a lot like the track under Bush: a drop in revenues, then a resumption of growth, but no return to the previous trend:

Matt Yglesias contends that “the conservative movement in America doesn’t [actually] care about the budget deficit,” and the proof is in the policies for which they advocate:

1) There have been two presidents who were members of the modern conservative movement, Ronald Reagan and George W Bush, and they both presided over massive increases in both present and projected deficits.

2) The major deficit reduction packages of the modern era, in 1990 and 1993, were both uniformly opposed by the conservative movement.

3) When the deficit was temporarily eliminated in the late-1990s, the mainstream conservative view was that this showed that the deficit was too low and needed to be increased via large tax cuts.

4) Senator Mitch McConnell says it’s a uniform view in his caucus that tax cuts needn’t be offset by other changes in spending.

5) The deficit reduction commission is having trouble because they think conservative politicians won’t vote for any form of tax increase.

In sum, there are zero historical examples of conservatives mobilizing to make the deficit smaller.

Senate Republican Leader Mitch McConnell recently made the following assertion about George W. Bush’s tax cuts for the wealthy:

“There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”

Here Ezra Klein of the Washington Post resoundingly slams McConnell’s fictitious allegations:

There’s an ontological question here about what, exactly, McConnell considers to be “evidence.” But how about the Congressional Budget Office’s estimations? “The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year. Tax cuts account for almost half — 48 percent — of this $539 billion in increased costs.” How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018. How about George W. Bush’s CEA chair, Greg Mankiw, who used the term “charlatans and cranks” for people who believed that “broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue.” He continued: “I did not find such a claim credible, based on the available evidence. I never have, and I still don’t.”

Of course, the Right rarely if ever lets factual evidence get in the way of their deep-seated, largely debunked, ideologies.

Still, it is good to see the Left finally doing a better job of educating the public about the real track record between the differing economic policies — something necessary if we are serious about promoting positive change in this country.

War Of Words: Why Failed Theories, Like Reaganomics, Continue To Linger

by on Tuesday, December 1, 2009 at 2:55 pm EDT in Politics

The Republicans have long engaged in historic revisionism as a means of covering up a long record of failed policies and blunders.  Some of their most disastrous ideological experiments over the years, like Reaganomics, have been successfully re-framed into mythological successes.  Democrats have no one to blame for this, but themselves.  They’ve done next to […]