This post is partly in response to a request(I actually have at least one reader) and partly because in reviewing my previous posts on the economy I felt they were too dispassionate, not forceful enough and did not reflect my views strongly enough. One of the things I have noted in the past15 years or so is how much conservatives have captured and manipulated the debate about the economy. Here is one good example. Conservatives will enact policies that benefit the wealthy at the expense of the rest of us and if someone complains about those policies, then the complainer is guilty of "class warfare." While viewing CNN's coverage of the election results I enjoyed a comment made by David Gergen. For those who don't know, Gergen was originally a reporter (I believe with U.S. News and World Report) and then worked in the Reagan, senior Bush, and Clinton administrations. I have never heard him described as a liberal. When someone during a discussion election night (I think it was a Republican consultant) raised the issue of class warfare and linked it to Obama, Gergen said the following (and this is almost an exact quote) "Class War? That war is over and the rich won."
Here are some basic facts which I have cited before. From the start of the Reagan administration until 2009, the richest 1% in the U.S. had its share of the wealth of the economy increase from 8% to 20%. The United States now has the greatest inequality of wealth of any industrialized country. Our wealth inequality is the greatest in U.S. history since 1929 before the Depression. The tax rate for the richest Americans is the lowest it has been since Roosevelt raised the rates in the 30's. Twenty-five years ago the average CEO made 40 times the wages of the average worker. The average CEO now makes between 360 to 380 times that of the average worker (I have seen both figures). When adjusted for inflation, the average worker makes around 11% less than he or she did in 1973. Since Reagan took office we have seen a massive shift in wealth from the middle class to the super rich and it accelerated under Bush 43. When Reagan took office the U.S. was the world's largest creditor nation. We are now the world's largest debtor nation. These facts are widely available--see works by Phillips and Johnson cited before. It should be obvious that conservative economic policies are impoverishing our country. Add to the above so-called free trade, which is anything but. When we engage in so-called free trade with countries like China we are promoting worker exploitation and environmental degradation so that large multi-nationals can replace U.S. workers with cheap labor in order to maximize profits. In the future I'll go into "free trade" in greater depth.
It is time to fight back and reverse these destructive and disastrous policies and return to the policies of the past that worked so well for us before (returning to the past, does this make me a conservative?). This is not class warfare, this is self-defense. In addition to regulating derivatives and credit default swaps, we need to regulate commodity futures. Do we really need a futures market in gasoline? The market worked well without it and its rise has led to much more extreme and rapid fluctuations in the price of gasoline than in the past. In addition to removing tax benefits for moving jobs off shore, our tax system should be reformulated to benefit medium and small business, not large corporations. Emphasis should be on companies that produce products or create new products instead of financial manipulation. There should be steep tax rates on money made through non-productive means (financial manipulation) and lesser rates on money made by productive means. We should selectively use tariffs and tax policies to promote manufacturing in the U.S. Universal healthcare should be enacted and funded by tax surcharges heavily tilted toward the rich, removing the burden from employer financing that we have now (health care costs add up to more per each auto produced by GM than the cost of the steel to make the car). Alternative energy should be pushed so that we significantly reduce the transfer of wealth from the U.S. to foreign countries and we can use new developments in modern energy to become a profit point for this country. As Kevin Phillips has pointed out in several of his books, the shift in energy production from wind to coal and steam meant a shift in power from the Netherlands to Britain. Similarly, a shift in energy from coal/steam to oil led to a shift in world power from Britain to the U.S. We need to shift to new forms of energy and become a world leader in these forms if we want to maintain our economic power and standing in the world. The U.S. government needs to take the lead in promoting these policies and providing seed money for R&D through government grants because the free market focuses on short term gains and not long term strategic development. Also, the free market does not reflect social costs, especially long term social costs. We need a whole new paradigm and a radical shift from the conservative policies that guided us from 1981 to 2008. We need to restore political power from the rich to the rest of us. This can only be done with public financing of political campaigns. Also, as a price of using the airwaves, broadcasters should be required to provide a certain amount of free time for candidates running for office. Unless we remove the pernicious effects of campaign money, mostly from large contributors, the rich will continue to control a lot of elections and legislators. Finally, unless and until we can shift our economy from a financial economy favoring a narrow group of the rich and super rich to a productive economy favoring the mass of the people, we will continue to struggle economically. I think that at least in the short term we will probably have to face a reduction in living standards because so much of our recent wealth was based on a bubble financed by debt and speculation.
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