Tax Cuts: Reagan vs Bush

I’ve been thinking about Republican presidents recently. I had a particular thought comparing Ronald Reagan and George W. Bush.

Reagan is remembered as great by conservatives and remembered as less than perfect by liberals. Either way, the best liberal argument is simply that Reagan would be considered a RINO by today’s Repbulicans. Bush jr is the closest these far right purists have come to their ideal of a ‘real’ Republican. That is a sad state of affairs.

I only want to point out one detail: tax cuts. Both Reagan and Bush campaigned on fiscal responsibility and both implemented tax cuts once in office. The comparison, on this point, ends there. Both Reagan and Bush faced economic problems after having implemented tax cuts, but they responded differently. As everyone knows, Bush kept the tax cuts to the bitter end. Neither 9/11 nor the wars following could stop Bush from implementing and maintaining his tax cuts. It is hardly fiscally responsible to massively increase spending while cutting taxes. I realize Starve the Beast seems like a wonderful policy to wealthy Republicans, but it can’t honestly be called fiscal responsibility.

So, what did Reagan do when it became obvious that tax cuts were failing and the economy was in trouble? He increased taxes. I was just reading that Reagan raised taxes 16 times. These tax increases also included the largest, at least at that time, tax increase during peacetime. Reagan was imperfect in his fiscal responsibility. He made the same mistake of increasing defense spending just because a big military gives rightwingers a hard-on.

Both Reagan and Bush followed the policy of Starve the Beast. The difference is that the latter did so with more enthusiasm. For Bush, reality was less important than ideology. That is what the American public gets when they elect a born-again fundamentalist. Reagan must be given blame for creating the deficit we now have, but his relative moderation kept him from having created an even greater deficit had he refused to increase taxes.

This is centrally important. Republican politicians haven’t shown they’ve learned any lesson from Bush’s failure and Reagan’s willingness to compromise. I was just listening to Boehner speak and he basically said that Republicans don’t plan to change which seemingly implies that there perfectly fine with the Republican policies during the Bush administration. Like Bush and unlike Reagan, they would want to keep all tax cuts (especially tax cuts for the rich) no matter what is going on with the economy and no matter how many wars are going on. They want to push Starve the Beast to its inevitable conclusion of economic crisis and broken budget. The Tea Party’s platform seems to fit perfectly into the vision of Starve the Beast. The Tea Party turned out just to be a maneuver for the GOP to reign back in former Republicans who strayed away because of Bush’s unpopularity.

Sadly, most of the American people and most of the American media won’t see past the GOP rhetoric. The resignation and cynicism right now is overwhelming. Even Obama doesn’t seem to genuinely believe in the hope he campaigned on.

Public Opinion on Tax Cuts for the Rich

I’ve written about tax cuts for the rich in some other posts, but I don’t think I’ve mentioned the aspect of public opinion. I don’t have any commentary. I just wanted to post the data showing a majority Americans want the tax cuts for the rich to end.

http://www.cbsnews.com/8301-503544_162-20016602-503544.html

Fifty-three percent of Americans agree with Mr. Obama that the tax cuts for the wealthy should be allowed to expire, while 38 percent do not, according to the poll, conducted Sept. 10-14.

Two of three Democrats think it is a good idea, and most independents (55 percent) agree. Most Republicans (57 percent) think it is a bad idea.

A small minority of Americans (19 percent) think it is a good idea to let the tax cuts expire for households earning under $250,000 a year – a policy no elected official in Washington is promoting, given the state of the economy.

Meanwhile, one third of Americans believe the Obama administration has raised taxes. Fifty percent think taxes have stayed the same, but only 8 percent think taxes have gone down. In fact, most Americans received a tax break in 2009.

This poll shows the majority of Americans support Obama on the issue of taxes. And yet it also seems to show most Americans are oblivious of the fact that they agree with Obama. They’re unhappy with Obama because they think he has raised taxes, but he hasn’t. This is the product of the right-wing spin machine. Conservatives are good at tellng a narrative so compelling that people either ignore the facts or just assume the facts agree with the narrative.

As for tax cuts for the rich, even the Republican party is closely split with 43% of Republicans wanting them to end. I don’t know of any polling data of Tea Party supporters. They’re more conservative than the average Republican and I’d guess they’re for continuation of tax cuts for the rich because that seems to be the position of Tea Party leaders such as Palin and Beck. However, the Tea Party likes to portray itself as independent. Polling the Tea Party would be a good test of their claim of being independent considering a majority of independents also support the ending of the tax cuts for the rich.

And it’s not just one poll showing this majority. Apparently, a majority of polls show this majority.

http://voices.washingtonpost.com/plum-line/2010/09/dear_dems_you_can_win_the_argu.html

* A new National Journal poll finds that 56 percent support ending either all the Bush tax cuts or just the ones for the wealthy, while barely more than a third want to keep them all.

* The new Gallup poll shows that 59 percent of Americans — and a majority of independents — supports either ending all the Bush tax cuts or just the ones for the wealthy.

Indeed, Gallup finds that Obama’s proposal — ending the tax cuts for the wealthy but not for everyone else — has the support of 44 percent, more than any other solution.

* A CNN poll in late August found that a majority, 51 percent, favors ending the tax cuts for the rich, and another 18 percent favor ending them all.

It also found that among independents, 44 percent favor ending the tax cuts for the rich, while another 21 percent favor ending them all. Letting the tax cuts for the rich expire has majority support in all regions of the country except the south.

* A recent CBS poll also found a sizable majority, 56 percent, think the tax cuts for the wealthy should expire.

[…] Here’s another one: A recent Newsweek poll found 52 percent support letting the tax cuts for the rich expire, while only 38 percent support keeping them in place.

The CNN poll found the Republican party was 50/50 split on continuing tax cuts for the rich, but most interestingly Republicans showed the stronger support than even Democrats in ending all tax cuts. So, Republican voters are being true to their fiscal conservative ideology while the Republican leadership is being hypocritical and not representing those who voted them into office.

http://www.huffingtonpost.com/2010/08/20/only-50-of-gop-supports-e_n_689326.html

Only half of all Republicans and self-identified conservatives favor extending the Bush tax cuts for the wealthy, a new public opinion poll shows. Fewer say they favor extending the Bush tax cuts just for those making less than $250,000 a year.

A study released by CNN on Friday suggests that Republicans face a curious public opinion deficit in their efforts to keep tax rates at current levels for income groups across the board. The party’s base isn’t entirely sold on keeping the rates in place. But they also don’t favor raising them on the wealthy and no one else.

Top officials in the GOP have said they will fight the president’s proposal to extend the Bush tax cuts for the lower and middle classes while allowing those for the wealthy to expire. But few voting blocs appear to back that approach.

According to the survey, only 26 percent of self-identified moderates back extending the Bush tax cuts for the wealthy. Only nine percent of liberals said the same thing. Conventional wisdom would hold that Republicans would be the chief proponents of the proposal. But only 50 percent of conservative respondents said they want tax rates for the wealthy kept in place — the same percentage of Republicans support a full extension of the Bush tax cuts.

As for extending the tax cuts for those making under $250,000 a year, 69 percent of liberals support that approach, 53 percent of moderates, and only 36 percent of conservatives.

Meanwhile, every single age group polled by CNN favored extending tax cuts for just the lower brackets over extending them for all groups (including the wealthy). So too did respondents from every single region of the country.

I’m not sure what all of this means. Tax cuts used to be popular. Does this represent a shift? Even Tea Party supporters who are the most right-wing of the American public have grown critical of the Republican leadership and yet the Republicans in Washington keep pushing the unpopular tax cuts for the rich. Will this issue be a turning point in public opinion? Will the GOP be forced to return to the fiscal conservatism last seen during Eisenhower’s administration?

Previous posts with data, commentary or videos related to tax cuts for the rich:

MSNBC w/ Cenk: Reich – Middle Class & Wages

Cenk Uygur on Tax Cuts for the Rich

Reaganomics & Tax Cuts for the Rich

National Debt, Starve the Beast, & Wealth Disparity

Failure of Conservative Morality in Politics

Liberals are the New Fiscal Conservatives

MSNBC w/ Cenk: Reich – Middle Class & Wages

This video reminded me of why it doesn’t help the economy to give tax cuts to the rich and generally increase the wealth of rich while leaving behind everyone who isn’t part of the ruling elite. From just an economic perspective, there are three problems:

1) Increasing the wealth of the wealthy doesn’t necessarily increase investment. At some point, a person becomes so wealthy that further wealth becomes meaningless. This leads the super rich to gamble with their excess wealth which was one of the contributing factors to our recent economic crash. Financial gambling doesn’t make for a stable economy nor does it have any social value. So, if the government genuinely wants an economy that grows with stability rather than constantly crashing, they should create regulation and taxation that helps decrease wealth disparity so that excess wealth isn’t concentrated at the very top.

2) Most new jobs are created by small businesses, but the tax cuts for the rich mostly only help big businesses. Also, the bailouts help Wall Street while leaving Main Street to suffer. Why help the rich who helped break the economy while sacrificing the working and middle classes which are simply trying to get by? A lot of the working and middle class was in debt for the reason that wages were stagnating even as the rich were getting richer. So, if the government genuinely wants to stimulate job growth, they should ensure that wages grow as the economy grows and they should give bailouts to small businesses while breaking up corporations that are too big to fail.

3) Even ignoring all that, giving more wealth to the wealthy doesn’t stimulate the economy for some simple reasons. Assuming they don’t gamble it, the other choice the rich could do with excess wealth is simply to put it into savings. The middle and working classes, however, will spend any extra money they have which invests back into the economy. For good or ill, the US economy is based on consumerism and consumerism is based on working and middle classes that have money to spend. Let me explain why. A rich person spends several hundred or even several thousand on a pair of shoes. For the same amount of money, hundreds of working and middle class people could buy shoes. The purchase of hundreds of shoes stimulates the economy more than buying one pair of shoes even if it’s the same amount of money. So, if government genuinely wants to stimulate the economy, they should give tax cuts to the working and middle classes.

All of this assumes that those in power actually care about the economy as a whole and actually care about the average American. I suspect that this is a false assumption. It’s hard for me to believe that after all these decades intelligent people (including Democrats like Obama apparently) think that trickle down economics actually works. I think these people know that it just makes the rich richer. That is why they do what they do. Politicians are of the rich and have campaigns funded by the rich. Why would they help the lower classes? So, what if the economy collapses? The rich will always maintain their wealth. If the country gets bad enough, they’ll just move to a pleasant tropical island and take their wealth with them.

Here is another video that relates, but it’s from more of a libertarian perspective:

The author interviewed, Thomas E. Woods Jr, is criticizing the US military-industrial complex. Besides the moral argument, he mentions that military is not a very good investment. When we invest in military that is less that can be invested in other things such as education or infrastructure. Also, funding goes to defense research which uses up public tax money and wastes the most brilliant minds on discovering more efficient ways to kill people. Those same dollars and those same brilliant minds could be used for research to cure cancer or research into alternative energy.

Once again, the only people who benefit from the military-industrial complex are the defense contractors and the wealthy investors in these companies. Certainly, the average American who pays for these wars and dies in these wars aren’t benefiting. The only reason we have any interest in the Middle East in the first place is because of the oil that is there and those most interested in that oil is of course the big oil companies seeking profit from a dwindling resurce.

There were some comments below that last video which gave me some hope. Here is one from a user going by the name capitalist4life:

“I am a recovering neocon. I was converted through Dr. Paul’s gentle suggestion that our foreign entanglements may cause some foreigners to want to kill us. I found that reasonable and I became more anti-war as I saw Hannity and Limbaugh vicously attack that reasonable idea. The one thing that didn’t convince me was strong anti-war rhetoric. I had to be eased into it. Just keep that in mind. Don’t be aggressive and extreme. Gently ease our “conservative” friends into the anti-war way of thinking.”

But let me end with a different quote. One of the last truly moral Republican leaders was Dwight D. Eisenhower who, of course, is famous for warning about the military-industrial complex. He was far from being a pacifist liberal and for that reason his words are all that more important. He seemed to genuinely believe that politicians should serve all Americans and not just the wealthy. Here is what he said in a 1953 speech:

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.”

National Debt, Starve the Beast, & Wealth Disparity

See the actual cartoon at this link.

http://www.lafn.org/gvdc/Natl_Debt_Chart.html

Bill Clinton steadily reduced the debt increase while he was in office, thanks largely to the 1993 Debt Reduction Act* that was OPPOSED BY EVERY SINGLE REPUBLICAN IN CONGRESS, led by Newt Gingrich! The Republicans claimed that the Debt Reduction Act would result in HIGHER deficits and also result in an economic recession during President Clinton’s term. Obviously, with hindsight they were completely wrong. Republicans don’t seem to be very good at math, or economics.

Now, after 20 years of huge Republican deficits and Republican recessions, the National Debt has increased from $937 Billion — LESS than $1 Trillion — the day Ronald Reagan took office to ALMOST $10 TRILLION!!! The Debt has increased more than TEN TIMES what it was when Ronald Reagan promised to reduce the National Debt by 1983! We and our children and their children will be paying off the debt added by Ronald Reagan, George H.W. Bush and George W. Bush for the next 100 years and more! For what !?!? Services have been cut across America. Police and Fire Departments haven’t grown nearly as fast as our population. Even the number of troops in the military has been cut while military spending has skyrocketed!

[ . . . ]

Back in the 1980s Senator Daniel Patrick Moynihan repeatedly complained that Ronald Reagan was running up the national debt in order to bankrupt the USA so that the Federal government could no longer afford any of its social programs, from Aid to Families with Dependent Children to Social Security to Medicare to veterans’ benefits. He was right, but hardly anyone listened.

The Republicans are still trying to bankrupt the Federal government and they’re still trying to eliminate every Federal social program, not only the remnants of FDR’s New Deal but even going back to Teddy Roosevelt’s conservationist programs.

[ . . . ]

The last non-conservative Republican President, Dwight D. Eisenhower, actually DECREASED the National Debt three of his years in office. Eisenhower’s predecessor, Democratic President Harry Truman ALSO DECREASED the National Debt three times, but by far more than President Eisenhower did, in the years following the Second World War.

[ . . . ]

* (1996) A number of Republicans have sent e-mails complaining that the Congress was Democratic while Ronald Reagan was President. Unfortunately, only half the Congress was Democratic during President Reagan’s first 6 years in office, when the entire National Debt more than DOUBLED. The upper house of Congress, the U.S. Senate, had a Republican majority during those six years, which comprised most of President Reagan’s time in office. That’s why Bob Dole was the Senate Majority Leader while Reagan was President. Those Republicans also don’t seem to know that any Bill passing out of Congress had to be approved by BOTH Houses of Congress, even by the Republican Senate! Furthermore, to go into Law a Bill must be signed by the President — none other than Ronald Reagan during those critical years! President Reagan almost TRIPLED the National Debt during his eight years in office!

(1996) Other Republicans have written that the above chart couldn’t possibly be correct, because the “National Debt Clock” clicks UP all the time! Well, whoever programmed that “Clock” set its algorithm to INCREASE every second. But whoever maintains the Web site surreptitiously “adjusts” the numbers every evening after the Bureau of Public Debt publishes its new, up-to-the-minute, National Debt figures. For instance, in October 1996 the National Debt actually went DOWN over several weeks, but the “National Debt Clock” ticked UP every second of those weeks. Yet, from one day to the next the National Debt Clock’s level was often LOWER than the day before, without the “Clock” ticking backwards once!!! Must be post modern math! Perhaps that’s why the CBS finally stopped showing that “Clock” on its Evening News! Also, based on the records of recent Presidents, the “National Debt Clock” should tick upwards at a much faster rate for Republican Presidents, which it doesn’t. If you want to see the true level of the National Debt, just visit the Bureau of Public Debt website. (That text was written for the 1996 version of this chart; it is even more apt after eight years of “President” George W. Bush.)

http://counterpunch.org/pollin02222006.html

This decline in real wages, beginning in the late 1970s and accelerating sharply in the 1980s under Reagan, is also a crucial link in understanding why inflation did not rise up as unemployment fell in the 1990s, contrary to expectations of virtually every single economics textbook. The standard theory held that when unemployment gets too low, workers gain in bargaining strength. They then push up wages, and businesses pass along these additional costs in the prices they charge consumers. This means rising inflation. But beginning in the 1990s under Clinton, unemployment fell, to as low as 4.0 per cent in 2000, but inflation stayed low. What happened?Former Federal Reserve Chair Alan Greenspan’s own answer to this question (as reported by Bob Woodward in Maestro, his book-length hagiography of Greenspan) was that U.S. workers had become increasingly “traumatized” in the 1990s, and as such did not feel sufficiently secure to attempt to bargain up wages even at low unemployment. …if one would have to pick the single most important turning point over the past 30 years in the treatment of U.S. workers, I would choose Ronald Reagan’s decision to summarily fire more than 11,000 air traffic controllers who, as members of PATCO, the air traffic controllers’ union, went on strike eight months into Reagan’s presidency, in August 1982. This early attack by Reagan was followed by eight years of relentless hostility to the organized working class.

But Reagan did not attack the organized working class only. More broadly, Reaganomics entailed a dramatic new framework for fiscal policy, the area in which Mr. Roberts was likely to have primarily involved as a Treasury official. Reagan’s fiscal program was fundamentally about tax cuts for the rich, a massive expansion in military spending, sharp reductions in social expenditures, and an acceptance-or better still, an embrace-of large-scale federal government fiscal deficits on these terms. All of this should have a familiar ring to those who have followed the course of economic policy under George W. Bush.

No doubt Mr. Roberts recalls President Reagan’s frequently recounted stories about “welfare queens” driving to pick up government checks in their Cadillacs. It was through repeating stories like this that Reagan was able to build support for an assault on even the minimal welfare state programs that had been operating prior to his taking office. It is no surprise that the individual poverty rate rose from 11.9 per cent under Carter to 14.1 per cent under Reagan. ..large-scale fiscal deficits create persistent pressure for a permanent contraction in social spending by the federal government… Remember the Reaganites, as with the Bush group, apparently experienced few qualms about throwing more money to the military while cutting taxes for the already overprivileged

http://www.forbes.com/2010/05/06/tax-cuts-republicans-starve-the-beast-columnists-bruce-bartlett.html

I believe that to a large extent our current budgetary problems stem from the widespread adoption of an idea by Republicans in the 1970s called “starve the beast.” It says that the best, perhaps only, way of reducing government spending is by reducing taxes. While a plausible strategy at the time it was formulated, STB became a substitute for serious budget control efforts, reduced the political cost of deficits, encouraged fiscally irresponsible tax cutting and ultimately made both spending and deficits larger.

http://www.post-gazette.com/pg/10054/1037783-109.stm

Ever since Ronald Reagan, the GOP has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government “down to the size where we can drown it in the bathtub.”

But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?

The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait-and-switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.

So the beast is starving, as planned. It should be time, then, for conservatives to explain which parts of the beast they want to cut. And President Barack Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission. [ . . . ]

Why are Republicans reluctant to sit down and talk? Because they would then be forced to put up or shut up. Since they’re adamantly opposed to reducing the deficit with tax increases, they would have to explain what spending they want to cut. And guess what? After three decades of preparing the ground for this moment, they’re still not willing to do that.

In fact, conservatives have backed away from spending cuts they themselves proposed in the past. [ . . . ]

At this point, then, Republicans insist that the deficit must be eliminated but they’re not willing either to raise taxes or to support cuts in any major government programs. And they’re not willing to participate in serious bipartisan discussions, either, because that might force them to explain their plan — and there isn’t any plan, except to regain power.

But there is a kind of logic to the current Republican position: In effect, the party is doubling down on starve-the-beast. Depriving the government of revenue, it turns out, wasn’t enough to push politicians into dismantling the welfare state. So now the de facto strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe.

http://www.thefiscaltimes.com/Blogs/2010/07/14/Bartletts-Notations-Do-Tax-Cuts-Starve-the-Beast.aspx

In another Fall 2009 article, University of Mississippi economist Andrew T. Young found, contrary to starve the beast theory, that “tax increases-even temporary-may serve to decrease expenditures by forcing the public to reckon with the cost of government spending.”

In the Spring 2009 issue of the Brookings Papers on Economic Activity, University of California, Berkeley, economists Christina Romer and David Romer published an article examining the history of tax changes, which found “no support for the hypothesis that tax cuts restrain government spending; indeed, they suggest that tax cuts may actually increase spending.”In a Summer 2007 article, I thoroughly reviewed the history and development of starve the beast theory. I identify Alan Greenspan’s July 14, 1978, testimony before the Senate Finance Committee, shortly after passage of Proposition 13 in California, as the point at which starve the beast theory started to become Republican orthodoxy. Said Greenspan on that occasion, “Let us remember that the basic purpose of any tax cut program in today’s environment is to reduce the momentum of expenditure growth by restraining the amount of revenues available and trust that there is a political limit to deficit spending.”

In a Fall 2006 article, Cato Institute economist Bill Niskanen found three major problems with starve the beast theory: “(1) it is not a plausible economic theory; (2) it is inconsistent with the facts; and (3) it has diverted attention away from the political reforms needed to limit government growth.” He concluded that it is a “fantasy” to think that tax cuts would even restrain spending growth.

In a November 15, 2004, article, Brookings Institution economists William Gale and Peter Orszag looked at whether the tax cuts of the George W. Bush administration were restraining spending and found no evidence; on the contrary, they found that the abandonment of fiscal discipline on the tax side of the budget encouraged a reduction in fiscal discipline on the spending side as well.

http://www.salon.com/technology/how_the_world_works/2010/07/14/starving_the_beast_works/index.html

But decrying Republican “invincible ignorance” on the connection between tax cuts and deficits misses the point about what’s going on here. We just haven’t reached the endgame that determines whether starving the beast really works. But if California’s experience is any guide, that day will come.

If you judge the point of “starving the beast” as a strategy not to cut spending, but to break government, it all starts to make sense. By making it essentially impossible to raise taxes in California on those most able to pay, conservatives ensured that when the state hit hard times, it would have no tools to deal with a severe downturn in state revenues. California is headed for another big budget shortfall this year, and there will inevitably be more cuts in state services — particularly those aimed at the most vulnerable sectors of society, but also at the guts and sinew of basic government infrastructure — schools, police, firefighters.

For the GOP, that’s not a bug in the program, it’s a feature! We haven’t yet reached that point with the federal government, due to the fact that the U.S. can run a deficit, and California can’t, in combination with the low cost at which the U.S. can currently borrow money. But if Republicans hold the line on no new taxes, and at the same time continue their pattern of decades of failure at making politically unpopular cuts in entitlement spending, the U.S. will someday reach a point at which it is no longer so simple to operate in the red. Borrowing costs will rise, threatening either severe inflation, or the requirement of real spending cuts.

And then the U.S. government will break, just like California has. In that scenario, “starve the beast” succeeds.

http://www.informationclearinghouse.info/article15455.htm

If government can create conditions that cause a middle class to emerge, by implementing fair rules for business, progressive taxation, and free public education, the opposite is also true: government can create a corporatocracy by deregulating business, by cutting taxes on extreme wealth, and by privatizing as much of the commons as possible. Cons call this “starving the beast.”

Here’s how you starve the beast: you put through tax cuts for the rich, which cuts back the revenues of the federal government to the point that, if you got rid of all the social programs, you’d have a balanced budget. No more Social Security, no more spending for education, no more spending for Medicare and Medicaid; have the government simply keep the armies, prisons, and police. Let’s shrink government– that’s their philosophy.

When you cut all those social programs, you lose the middle class and in its place create a very small, very wealthy elite and a large underclass of starvation-wage workers. You lose democracy and instead create corporatocracy. You change the rules of the game; We the People lose, and the feudal lords win.

Cons have been winning this particular game of “starve the beast” since Reagan first started seriously playing it in 1981. They’ve done it in large part by lying to the American people; and they’ve had to do that because if they told the truth the majority of Americans would throw them out of office.

This is, after all, still a democracy. If the majority of us agree to get rid of Social Security so that only the wealthy can have retirement benefits and the old are left to fend for themselves, so be it. If a guy breaks his back and can’t work and the majority of us decide not to help people who are disabled, and as a result he has to beg on the street, well, we can democratically decide to screw him and ourselves.

But the cons are not having this debate in an open and honest fashion. They are not asking We the People if we want to get rid of, for example, the Head Start program. They could ask, “Do we want to invest in our youth now or not?” We know that if we invest in educating the very young, fewer of them will become criminals. It will save us money over the long term. But if the majority of us say, “No, we would rather pay $50,000 to imprison them later than pay $300 to put them in Head Start now,” then fine, it’s a democracy.

But that’s not the way the cons are doing it.

Instead of explaining why it would be better for Americans to give all their money to a corporate elite, they’re giving huge tax cuts to the rich while pretending that the tax cuts benefit all Americans.

Instead of arguing that Americans should not expect the right to health care or security in their old age, they are prompting a government crisis by handing to the rich money they’re borrowing from China, Japan, and Korea in the name of our grandkids. We are borrowing so much money from these countries that if they so much as blink, our currency could crash.

And that’s just what the most ideological of the con elite want. They want an economic crisis because they figure that’s the only way they can force a cut in spending on social programs.

In 2004 they thought they had starved the beast enough and sent Bush out on the campaign trail to advocate getting rid of Social Security– privatizing it, putting it in the hands of Wall Street. But it didn’t work. Turns out We the People apparently like Social Security. So the cons went back to starving the beast. Bush instead passed a new series of tax cuts, with more to follow.

The cons are trying to play the game so that the rich benefit while the rest of us lose out. They get tax cuts, and we get program cuts. That’s not the “free” market. That’s a market that’s being created for the benefit of the rich at the expense of the middle class.

George Lakoff, Moral Politics, pp 194-6:

The conservative political agenda, for example, is not merely to cut the cost of government. The conservative agenda, as we shall see, is a moral agenda, just as the liberal agenda is.

Consider, for example, the issue of the deficit. How did it get so large?

Liberals like to think of Ronald Reagan as stupid. Whether he was or not, those around him certainly were not. While constantly attacking liberals as big spenders, the Reagan and Bush administrations added three trillion dollars to the national debt by drastically increasing military spending while cutting taxes for the rich. They could count; they saw the deficit increasing. They blamed the increases on liberal spending, but Reagan did not veto every spending bill. Moreover, Reagan’s own actions acounted for much of the deficit increase. Had financial responsibility and the lessening of spending been Reagan’s top priorities, he would not have allowed such an increase in the defiicit, simply by not cutting taxes and not pushing for a military buildup far beyond the Pentagon’s requests.

While the deficit was increasing, there was a vast shift of wealth away from the lower and middle classes toward the rich. Liberals, cyncally, saw this shift as Reagan and Bush making their friends and their political suporters rich. Certainly that was the effect. It is hardly new for the friends of supporters of politicians in power to get rich. This is usually seen as immorality and corruption, and with good reason. Many liberals saw Reagan that way.

But Ronald Reagan did not consider himself as immoral. Certainly he and his staff could tell that their policies were producing vast increases in the deficit, when they had come into office promising a balanced budget. Reagan was not forced to pursue deficit-increasing policies. Why did he do so?

I would like to suggest that he pursued deficit-increasing policies in the service of what he saw as overriding Moral goals: (1) Building up the military to protect America from the evil empire of Soviet communism. (2) Lowering Taxes for the rich, so that enterprise was rewarded not punished. Interestingly, for President Reagan as for any good conservative, these policies, however different on the surface, were instances of the same underlying principle: the Morality of Reward and Punishment.

What was evil in Soviet communism, for Reagan as for other conservatives, was not just totalitarianism. Certainly Soviet totalitarianism was evil, but the U.S. had supported capitalist totalitarian dictatorships willingly while overthrowing a democratically elected communist government in Chile. The main evil of communism for Reagan, as for most conservatives, was that it stifled free enterprise. Since communism did not allow for free markets (open to Western companies) or for financially rewarding entrepreneurship, it violated the basis of the Strict Father moral system: the Morality of Punishment and Reward.

Adding three trillion dollars to the deficit actually served a moral purpose for Ronald Reagan. It meant that, sooner or later, the deficit would force an elimination of social programs. He knew perfectly well that the military budget would never be seriously cut, and that a major increase in tax revenues to eliminate the deficit would never be agreed upon. In the long run, the staggering deficit would actually serve Strict Father morality – conservative morality – by forcing Congress to cut social programs. From the perspective of Strict Father morality, Ronald Reagan looks moral and smart, not immoral and dumb as many liberals believe.

http://en.wikipedia.org/wiki/Income_inequality_metrics

File:Share top 1%.jpg

Share of pre-tax household income received by the top 1%, top 0.1% and top 0.01%, between 1917 and 2005.[9][10]

http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4#the-gap-between-the-top-1-and-everyone-else-hasnt-been-this-bad-since-the-roaring-twenties-1

half-of-america-has-25-of-the-wealth_0b13c_0.jpg

http://www.huffingtonpost.com/2011/05/20/bush-tax-cuts-debt_n_864812.html

http://www.cato.org/pubs/journal/cj26n3/cj26n3-8.pdf

http://www.huffingtonpost.com/lawrence-jacobs/deficits-social-security_b_630215.html

http://www.commondreams.org/view/2009/01/26-0

http://www.thomhartmann.com/blog/2009/01/transcript-obamas-economic-speech-and-two-santa-claus-theory-rant-08-january-2009

http://blogs.alternet.org/theparagraph/tag/two-santa-claus-theory/

http://www.capitalgainsandgames.com/blog/bruce-bartlett/1701/jude-wanniski-taxes-and-two-santa-theory

http://www.capitalgainsandgames.com/blog/bruce-bartlett/1705/all-time-fiscal-fallacy-tax-cuts-starve-beast

http://tibu2.blogspot.com/2009/02/republicans-iraq-and-santa-claus.html

http://d-day.blogspot.com/2009/04/two-santa-claus-theory.html

http://www.calitics.com/diary/8718/the-two-santa-claus-theory

 

Cenk Uygur on Tax Cuts for the Rich

Cenk Uygur has been slowly breaking into the mainstream for a while. He now has his own segment on Ratigan’s show.

It’s interesting that Cenk Uygur used to be a Republican. This makes obvious why he left the Republican party.

The question I wonder about is: What is the motivation for Republicans being for and Democrats being against tax cuts for the rich? Many like to argue that both parties are in the pocket of the wealthy elite. But if that were the case, Democrat politicians should support tax cuts for the rich as much as Republicans do.

Reagonomics & Tax Cuts for the Rich

Rich and defenders of the rich (who have an unfounded belief that one day they will be rich) love to argue for tax cuts for the rich. Afterall, they earned it. The people working in the factories didn’t earn it. The indigenous who were living on natural resources the rich took away didn’t earn it. The taxpayers (which excludes some of the wealthies US companies that pay no taxes at all) who bail out the rich didn’t earn it.

Who owns most of the wealth? The best way to determine this is to add all wealth and invested wealth. The only factor that should be excluded is the wealth invested in the houses people live in because it can’t easily be translated into tangible wealth and in this market many people lose their homes after investing lots of money into them. So, going by all wealth accept for homes, the top 1% own more wealth than the bottom 95%.

How do wealthy people get their wealth? Most wealthy people are born into and grow up with wealth. Most wealthy business owners received larged start-up money, inherited a business, or inherited other forms of wealth.

Another way of thinking about wealth is wealth disparity. Ever since Reagonomics, the wealth disparity has increased to the highest in the developed world.

http://counterpunch.org/pollin02222006.html

“At the simplest factual level, it is not accurate that Reagan’s tax policies were responsible for bringing inflation down, from an average rate of 8.2 per cent under Nixon, Ford and Carter, to 4.6 per cent under Reagan. The main force here was the stringent monetary policies imposed by then Federal Reserve Chair Paul Volcker. Volcker was appointed not by Reagan but by Jimmy Carter in 1979… Volcker did indeed break the back of persistent and rising inflation brought on primarily by the four-fold oil price increases in 1973-4 and again in 1979. But he achieved this at a very high cost… real wagesi.e — . the buying power of your dollars of wages — peaked in 1973, the period of high inflation. Average real wages fell sharply throughout the Reagan presidency. The average figure for those eight years, at $15.72 per hour (in 2005 dollars), was 7.6 per cent below the average hourly wage under Carter of $16.95, and 9.6 below the Nixon/Ford peak of $17.39.

…This decline in real wages, beginning in the late 1970s and accelerating sharply in the 1980s under Reagan, is also a crucial link in understanding why inflation did not rise up as unemployment fell in the 1990s, contrary to expectations of virtually every single economics textbook. The standard theory held that when unemployment gets too low, workers gain in bargaining strength. They then push up wages, and businesses pass along these additional costs in the prices they charge consumers. This means rising inflation. But beginning in the 1990s under Clinton, unemployment fell, to as low as 4.0 per cent in 2000, but inflation stayed low. What happened?

Former Federal Reserve Chair Alan Greenspan’s own answer to this question (as reported by Bob Woodward in Maestro, his book-length hagiography of Greenspan) was that U.S. workers had become increasingly “traumatized” in the 1990s, and as such did not feel sufficiently secure to attempt to bargain up wages even at low unemployment. …if one would have to pick the single most important turning point over the past 30 years in the treatment of U.S. workers, I would choose Ronald Reagan’s decision to summarily fire more than 11,000 air traffic controllers who, as members of PATCO, the air traffic controllers’ union, went on strike eight months into Reagan’s presidency, in August 1982. This early attack by Reagan was followed by eight years of relentless hostility to the organized working class.

But Reagan did not attack the organized working class only. More broadly, Reaganomics entailed a dramatic new framework for fiscal policy, the area in which Mr. Roberts was likely to have primarily involved as a Treasury official. Reagan’s fiscal program was fundamentally about tax cuts for the rich, a massive expansion in military spending, sharp reductions in social expenditures, and an acceptance-or better still, an embrace-of large-scale federal government fiscal deficits on these terms. All of this should have a familiar ring to those who have followed the course of economic policy under George W. Bush.

No doubt Mr. Roberts recalls President Reagan’s frequently recounted stories about “welfare queens” driving to pick up government checks in their Cadillacs. It was through repeating stories like this that Reagan was able to build support for an assault on even the minimal welfare state programs that had been operating prior to his taking office. It is no surprise that the individual poverty rate rose from 11.9 per cent under Carter to 14.1 per cent under Reagan. ..large-scale fiscal deficits create persistent pressure for a permanent contraction in social spending by the federal government… Remember the Reaganites, as with the Bush group, apparently experienced few qualms about throwing more money to the military while cutting taxes for the already overprivileged.”

Thom Hartmann: Government & Taxation

Thom Hartmann did these two interviews on the same day. They make for a perfect comparison of worldviews. Which person interviewed actually represents values of the average American? Which is speaking for the benefit of the struggling working class?