Screwed the Undeclared War Against the Middle Class (4 page)

Predator cons are simply greedy. They use politics and/or philosophy as a cover for their theft of our common resources and as a rationalization for their growing wealth in the face of growing societal poverty. They are not conservatives in any true sense—they are not interested in conserving American values or even in keeping American wealth in America. They're the ones who ship jobs overseas, lobby for tax breaks from Congress, fight against the inheritance tax, and reincorporate their companies off shore to avoid paying U.S. corporate taxes.

The predator cons' rationalization for their obscene pileup of wealth is that they're simply playing the game by the existing rules; and that's true to a large extent—except that they're also the ones who bought and paid for the politicians who set up the rules for them. They have conned America into believing that they care about the American economy when all they care about is making money for themselves.

A great example of a predatory con is NAFTA, the North American Free Trade Agreement. These agreements lower wages for American workers—they do not create well-paying jobs in America. They create record trade deficits. Cons don't even try to argue that free-trade agreements are good for America anymore. Agreements like these—such as the Central American Free Trade Agreement (CAFTA)—are passed now (by a single vote in the Senate in 2005) only because corporate America needs them to reap tremendous profits from the low wages they extract in nonunionized,
nondemocratic, and socially disorganized countries; predator cons succeed in passing these agreements by threatening to withhold campaign funds from anyone who dares to oppose them.

It's an old game that the robber barons of the nineteenth century knew well how to play.

The second type of con is perhaps even more dangerous than the predators. They're the true believers.

Just as true believers in communism brought about the death of tens of millions in Russia from the time of the Bolshevik Revolution until the fall of the Berlin Wall, so too the true believers in laissez faire capitalism believe that if only government would go away, everything would be just fine. Employers would become benevolent, employees would be enthusiastic, and bureaucratic inefficiencies would vanish.

These so-called free marketeers aren't bothered by the consolidation of companies or the loss of competition that happens when markets are unregulated. Like Thomas Hobbes, the true believers assume that society will run best when run by the small elite that comes out on top. They believe in
corporatocracy
—the view that an economic aristocracy benefits the working class because wealth will "trickle down" from above to below.

Ronald Reagan was a true believer. He didn't understand economics, and the simple notions of self-sufficiency and a pioneering spirit appealed to him. He asked, in essence: "Why would somebody want to regulate a business? Wouldn't it eventually always do what was best without regulation?"

What Reagan and his followers failed to understand was that business will
not
always do what's best for society. In fact, the fundamental goal of business—to maximize assets and profits while externalizing costs and liabilities—is often
destructive
to the public good. This becomes particularly obvious when business owners do not live or otherwise participate in the same society and culture
as their customers. A small-business owner can't run sewage out his door or pay his workers below a living wage because he has to face his next-door neighbor and his next-door neighbor's kid, who may want to work in his shop.

The same is not true, however, for multinational corporations. Executives of large corporations don't live in the same society as the people who work for them and who live next to their factories. As a result, the legacy of unregulated big business and the concentration of wealth in the hands of the few is pollution, worker exploitation, cuts to worker safety, and the bestowing of profits to the company's elite while cutting benefits to the company's rank and file.

The true believer cons would just be wrong, and not dangerous, if they didn't try to hide their corporatocratic, market-before-people agenda. They have discovered, however, that most people don't agree with them that a government ruled by a small elite is the most stable form of government and that stability and predictability are more important than democracy. Saying this sort of thing out loud loses elections, so these conservatives have learned to con the public by hiding their agenda behind euphemisms and double-speak.

The Bush Jr. administration has perfected the true believer con. Letting a corporate elite control, profit from, and make decisions about our air, water, and sewage systems is called the Clear Skies Initiative and the Clean Water Initiative; or, when they're feeling a bit more open, "privatization." Letting a corporate elite count our votes in secret on their privately owned machines and tell us how we voted is called the Help America Vote Act. Cutting holes in our social safety net programs like Social Security and Medicare is called "strengthening" these programs through increased "consumer-driven choice" and "personal accounts."

Cons suggest that when consumers pool their risk with a private, for-profit corporation to protect personal property, it is called "insurance" and it's a good thing; but when citizens pool
their risk with the government to guarantee health care, retirement, and a social safety net, that is "socialism" and should be "privatized." Translated, the cons' policies mean only one thing: you and I get screwed.

Will we choose a society of, by, and for We the People or a society ruled by the cons' corporatocracy? Will we choose to maintain the middle class that has made America a democracy, or will we let the middle class get screwed?

When cons took over the United States during Reconstruction after the Civil War and held power until the Republican Great Depression, the damage they did was tremendous. Our nation was wracked by the classic scourges of poverty—epidemics of disease, crime, and riots—and the average working person was little more than a serf. The concepts of owning a home, having health or job security, and enjoying old age were unthinkable for all but the mercantile class and the rich. America seemed to be run for the robber barons and not for the thousands who worked for them. Democracy in America was at its lowest ebb; our nation more resembled the Victorian England that Dickens wrote of than the egalitarian and middle-class-driven democracy that Alexis de Tocqueville saw here in 1836.

All that changed in the 1930s, when Franklin D. Roosevelt's New Deal brought back the middle class. His economic stimulus programs put money in people's pockets, and the safety nets he created—like Social Security—ensured that no one would fall out of the middle class once they had gotten there. His programs worked, creating what has been called the Golden Age of the middle class. During these years, from the 1940s until Reagan took power, democracy in America resurged along with the middle class.

But after forty years of prosperity, in the 1980s Americans began drinking the cons' Kool-Aid with startling rapidity. Three
"conservative" Republican presidents and one "conservative" Democrat have crushed the middle class and brought our nation to the brink of a second Great Depression.

In 2005 the U.S. trade deficit hit an all-time high at a whop-ping $725.8 billion. Over the past five years, the U.S. economy has experienced the slowest job creation since the 1930s, with fewer private-sector hours worked in 2005 than in 2001. For the first time since the Great Depression, in 2005 American consumers spent more than they earned, and the government budget deficit was larger than all business savings combined.
⁹
We are financing today's consumption with tomorrow's bills, and sooner or later the chits will come in and the middle class will be the big losers—putting democracy itself at risk again.

The way out of this mess isn't difficult to understand—we've done it before. Remember that businesses are run like kingdoms, with CEO kings, executive princes, and worker serfs, so they're essentially anti-democratic. Avoiding the cons' scenario simply requires us to remember that a middle class won't emerge when business has more influence in the halls of government than do We the People. Without democracy there can be no middle class; and without a middle class, democracy will wither and die.

Whether our economy benefits billionaires or the rest of us is determined by how we handle economic policy. It depends especially on a fundamental grasp of two concepts: classical economics and an internal government-spending stimulus.

For more than two hundred years—until Ronald Reagan became president—economics was not hard to understand. Everyone could figure out that when working people have money, they spend most of it. When extremely wealthy people have money, they save most of it. It's the spending of money by working people that creates consumer demand. Consumer demand in turn creates business opportunities, and that creates jobs.

In 1981 Reagan introduced America to
trickle-down economics,
also called (by George H. W. Bush, who understood classical economics even though he later had to placate the con base) "voodoo economics." Reagan's concept, in a nutshell, was that if we reorganized society so that the wealth of the rich grew suddenly and quickly, they'd use that money to build factories and hire more people, thus allowing their wealth to "trickle down" to the workers.

This assertion of Reagan's was new—it had never before happened in the history of the world. Certainly small groups of political and/or economic elites had concentrated wealth at the expense of society generally, but none had ever before said they were doing it because
economics
justified it. Kings throughout history had simply claimed the divine right of kings.

Even though voodoo economics had never been tried, Reagan was able to convince average Americans that it would work, and got it pushed through Congress. (Members of Congress saw it for what it was, but so did their wealthy contributors who would benefit from it, so Republicans and a few sellout "conservative" Democrats in Congress went along.) To institute his voodoo economics, Reagan slashed top marginal income tax rates on millionaires and billionaires from 70 percent to 50 percent in 1981 and all the way down to 28 percent by 1988.
¹⁰

The result wasn't at all what Reagan expected. Rather than create income, the Reagan tax cuts dropped the United States into the greatest debt in the history of the world. Reagan turned to his conservative friend Alan Greenspan, who suggested that Reagan could hide part of the debt by borrowing a few hundred billion dollars a year from the Social Security Trust Fund.
¹¹
Reagan followed Greenspan's advice, which is why we have a Social Security crisis today: the government borrowed all the money in the fund from 1982 to today to help cover the voodoo economics budget deficit; and now, to pay back Social Security, income taxes—which hit millionaires and billionaires (unlike Social Security FICA taxes,
which are taken only on the first $90,000 of income from working people)—rose substantially.

Additionally, as would be expected, the rich got fabulously richer under Reagan. From 1980 to 1990, the income of the wealthiest 5 percent of Americans rose by 25 percent while the income of the bottom 40 percent stayed absolutely flat.
¹²
This is why the most wealthy in America didn't use their money to build factories—after all, there wasn't a significant increase in demand, so why manufacture things that people can't afford? Instead this nation's rich loaned some of their money to the U.S. government so it could pay the bills Reagan was running up, getting it back over the ensuing twenty years with a healthy dose of interest, paid for by future taxpayers.

Although trickle-down economics did produce millions of jobs, they were almost all outside of the United States, while at the same time good U.S. manufacturing jobs vanished. The only accomplishment of trickle-down economics was to produce a nation of peons.

The alternative is to return to classical economics. When working people have money to spend, they create a demand for goods and services, which allows entrepreneurs to start businesses to meet that demand. The entrepreneurs employ more working people, who then have more money to spend. The middle class grows.

Think about it. What would you do if someone gave you an extra $20,000? Maybe you would take a vacation or buy a new car, new clothes, or new appliances. Even if you used the money to pay off old bills, you would then have more to spend in the future because you wouldn't have interest payments. And when you buy more, you create demand, which means more people can be put to work—and the economy grows.

Now think about what Bill Gates would do if someone gave him an extra $20,000—or an extra $20 million or more, as George W. Bush's first tax cuts did. Would he even notice? He'd probably just send it along to his accountant and forget all about it. The only
thing that's going to grow is Bill Gates's bank account. That's the difference between giving money to the rich and giving money to you and me.

This economic truth is just common sense. When people in the lower and middle economic layers of society have increased income, all of society eventually gets richer because working people's spending most of their incomes is the engine that creates economic demand for goods and services.