Senate Minority Leader Mitch McConnell (R-KY) is still declaiming the principles of the Big Con as we can tell from this reaction to the GOP flight from the deficit reduction meetings: “Sadly, the Democrats’ response has been a mystifying call for more stimulus spending and huge tax hikes on American job creators. That’s not serious, and it is my hope that the president will take those off the table on Monday so that we can have a serious discussion about our country’s economic future,” McConnell said.” [HoustonChron]
What’s mystifying is that the Republicans persist in believing their own mythology — all economic evidence to the contrary.
Add to this the intransigent repetitions of House Speaker John Boehner (R-OH):
“It’s really pretty straight-forward,” Boehner said. “We need to reduce the regulatory burden and the regulatory uncertainty that’s coming out of Washington.” The Speaker said government has become a barrier for many job creators with its taxing, spending and regulatory actions. He added that means a lot of businesses are hanging onto their money waiting for the uncertainty to go away. Allowing drilling for oil and natural gas on U.S. soil could create one million jobs, according to Boehner, while free trade agreements with Columbia, Panama and South Korea could create another 250,000 positions. However. he added those projects will never be finished as long as the debt and deficit issues remain unsolved. Boehner called the agreement to reduce government spending $79 billion a good first step, but more drastic steps are necessary. “We can’t borrow and spend our way to prosperity,” he said. “We won’t add to the debt without spending cuts.” That could mean reworking entitlement programs for some Americans.” [KY.com]
Translations are in order because while worded very carefully the Republican talking points are still a bit generalized. Let’s explore some specifics.
#1. “We need to reduce the regulatory burden and the regulatory uncertainty that’s coming out of Washington.” Translation — repeal the financial regulation reforms recently enacted to prevent another Wall Street banking meltdown, or prevent the enforcement agencies from having the resources to investigate illegal or unethical Wall Street banking transactions — vitiate any enforcement of the Clean Water and Clean Air Acts on behalf of exploiters and polluters — disallow the EPA from enforcing carbon emissions controls on polluters — prevent the Department of Labor from enforcing workplace safety rules — prevent the MSHA from enforcing mine safety regulations.
Let’s be clear, most of the noise about “burdensome regulations” and “unclear regulations” these days is being made by Big Banking which now having vacuumed up the investment banks’ trading desks in the Credit Meltdown would like very much to continue on a “business as usual” basis.
And, of those businesses which are “hanging on to their money” because of the “uncertainty,” it’s not the least bit difficult to conjecture that those would be hedge funds and private equity managers who are waiting to see rules drafted by the CFTC and the SEC.
#2. “Allowing drilling for oil and natural gas on U.S. soil could create one million jobs, according to Boehner,…” Translation: Drill Now Drill Everywhere! No matter that the product will be going on the international market.
#3. “… while free trade agreements with Columbia, Panama and South Korea could create another 250,000 positions.” Notice that the Speaker doesn’t say WHERE these jobs might be located, we can guess they’d be in — say — Colombia, Panama, and South Korea. One look at the results of NAFTA should be a primer; after all it was Newt Gingrich who told us that NAFTA was a success because it created jobs in Mexico.
#4. “We can’t borrow and spend our way to prosperity,” he said. “We won’t add to the debt without spending cuts.” That could mean reworking entitlement programs for some Americans.” Translation: Uh, we tried that borrow and spend thing and it was called Credit Card Conservatism during the Bush Administration. “Reworking” entitlement programs means privatize Social Security and eliminate Medicare as we know it.
Speaker Boehner sums up his own arguments:
“If we’re serious about creating jobs in America, we can’t raise taxes on the very people who create jobs, and keep spending money that we don’t have. Talk to job creators in Ohio and they’ll tell you that all of the over-taxing, over-regulating, and over-spending that’s going on in Washington is holding them back.” [Boehner]
Really? This summation of the Great Supply Side Economic Hoax of the Century deserves more attention.
Let’s start with the “over-spending part.” When generalized to this extent the impression given is that federal spending is money floated into the atmosphere never to be seen again. However, when we look at actual contract values the picture gets much more clear.
For example, as of June 2011 federal agencies paid $3,537,743,521 for leasing nonresidential buildings. Surely, commercial real estate owners aren’t stashing the money in mattresses? We can probably assume that they spend the lease money on their employees and their businesses. That lease money sustained private sector jobs secured by federal contracts.
As of June 2011 the value of federal contracts for computer system design services was $3,829,984,645. Again, that money went to computer system design firms and to their employees. These are private sector jobs sustained by federal contracts.
As of June 19, 2011 the value of federal contracts for commercial and institutional building construction was $5,296,187,754. The money didn’t float off into the ether — it was spent on goods and services provided by construction companies. [For more federal contract valuation categories click here]
Far from “overspending” holding back employment, the value of private sector contracts with federal agencies helps sustain commercial enterprises in this country, and their employees.
Overtaxed? Huh? The total burden of federal taxation is the lowest it has been since Dwight David Eisenhower was the U.S. President. [USAToday]
Over-regulated? There are really only two forms of regulation Republicans truly abhor: environmental and financial. Before Nixon signed the first environmental protection legislation we had the “Silent Spring,” which is not something any ordinary sentient citizen would like to repeat. As for financial regulations — banks are forever complaining about onerous regulations, and then when they get into trouble they’re equally likely to come hat in hand to the federal government for bailouts. Some adult supervision might have prevented the Great Credit Crisis of 2007-2008, but the boys (and a few girls) on the trading desks really don’t want POS.” *(which I’m told means “Parent Over Shoulder”)
The problem for Minority Leader McConnell and Speaker Boehner may be that they have surrounded themselves with those who have already digested the Great Supply Side Hoax, and who echo the thoughts of the GOP leaders until it is hard to discern if the Leader and the Speaker are initiating or receiving the talking points.
We are left with some fundamental questions.
Did an era of low taxation create jobs? There is an amazing amount of misinformation loose in the country on this topic.
“Also, look at history. When JFK, Reagan and Bush cut taxes the economy flourished. It’s what makes America great.” [OCR] Careful there, that’s not quite what the record shows, especially not for the Bush Tax Cuts. Economic expansion between 2001 and 2007 was weaker than any post World War II average, and the only thing that really expanded were corporate profits — not GDP, not investment, not wages and salaries, not consumption, — not net worth, and not employment. [CBPP]
Did low levels of regulation create jobs? No. The only way to say “yes” to this question in terms of the recent U.S. economy, from 2000-2007, is to say that the Housing Bubble created jobs, but as we saw in the previous question even that wasn’t sufficient to create sustainable economic growth. It would be easier to argue that the de-regulation of the financial sector created the Mortgage Meltdown, the Credit Crisis, and the near collapse of the U.S. economy (jobs included) than it is to contend that de-regulation was “good for us.”
If low rates of taxation and de-regulation obviously weren’t the answer to economic doldrums in a consumer based economy what might be?
A reality check, as compared to the following from an OTC reader: “The answer is so obvious and so simple it’s rather embarrassing, but here goes – a superrich businessperson gets to keep more cash when taxes are lower. He/she now has a choice: spend it on stuff, cars, clothes, and booze, whatever, thus helping the economy. Or, more likely, he or she can afford to buy better equipment, or, yes, even hire a maid, or add to the work-force. More money at work, instead of going into the treasury produces more useful things.” The problem herein is one of scale.
When wealth is hyper-concentrated in the hands of about 0.1% of the American population the expenditures so exuberantly set forth by the reader are limited. There are only X number of cars a few people can purchase, certainly not enough to keep Detroit running and the local dealerships filled with customers. There is only so much “stuff” a limited number of people can buy, and that is insufficient to keep the Big Box Retailers in business. If the top 400 families each added one maid to the household staff, then we have traded all the economic benefit that might have been derived from their tax contributions for 400 jobs.
However, accepting the Big Con means rejecting all the economic history on this planet that informs us that the only thing which truly drives economic expansion is an increase in the demand for goods and services. Promoting tax policies which prefer the ultra-rich simply serves to exacerbate the hyper-concentration of wealth at the very top, and does nothing for the larger number of middle and working class Americans who drive the economy.
At some point some discordant notes must insert themselves into the GOP echo chamber music — (1) to ask that the burden of taxation be shifted slightly from the backs of the middle class to the shoulders of the ultra-wealthy is not “socialism, communism…” or even “soak the successful; ” it is done in the interest of promoting the spending capacity of the largest number of people for the benefit of the largest number of businesses. And, (2) to ask that the taxes on the top 2% of the American income earners isn’t “a tax on job creators,” because we’ve noticed that when their taxes were low they have not increased investment, consumption, or employment.
To ask that senior citizens be required to spend another $6,000 annually on medical care while a person earning $1,000,000 annually gets a tax cut is beyond unseemly. To demand that Social Security be “reworked” with lower benefits to protect the income of an individual making over $2,000,000 in Wall Street bonus money is grotesque.
And yet this is what the Republicans are telling us — that it is more important to protect the corporations’ tax havens and loopholes, more important to secure the incomes of the wealthiest among us, more important to cater to the interests of Wall Street than it is to implement a budget strategy that accepts the reality of economics in which Demand is an equally important part of the equation, and which strives to achieve the Aristotelian Mean, the greatest good for the greatest number.
Could it be that the Republicans have noticed that not everyone is listening to their Big Con with quite as much fervor as before? Would that be enough to cause Cantorian Conniption Fits?
Desert Beacon 