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Tax Cuts for the Rich – The Latest Proof We’re Imbeciles

I’m not an economist, but I did ride in an elevator with one last month. I guess that makes me as qualified as the next guy to comment on the absurdity of the continuation of the Bush tax cuts. Republican warlords entrenched in the hills of Washington have continued to snipe at President Obama. In his own words, he has taken a shellacking. Now Obama gives us another word to play with, “capitulation”. For those of you inclined to syllabic minimalization, you may substitute “surrender”. Actually we can cut it to just one syllable; he “quit”. Republicans acting as the hand-puppets of the ultra-rich have strangled the President and with that treasonous act, murdered the hopes of the American middle-class.

How does this serve to prove Americans are imbeciles? Consider this – many Americans are rejoicing in this news especially that enlightened flock of Murdockian sheep known as the Tea Party. They’ve been herded into their pen by the shepherds of idiocy at FOX News and other right wing Kool-Aid pushers and have been told they should be delighted because everyone is getting big tax breaks. As they dance and sing with joy, they don’t have a clue they’ve just walked into their own slaughter house.

At my level of economic expertise, I have the distinction of explaining the problem with extending the tax cuts in a rather simple and straight forward way. Real economists (the ones that wear suits and carry leather briefcases) will cringe at my simplistic description and I’ll admit, by oversimplifying the message, I leave myself open to technical challenges left and right. But if I’m going to communicate with Murdockian sheep, I’m left with no choice. Here goes . . .

Why is our economy in such dire straits? There’s really quite a simple answer. The division between rich and poor has grown far too great. The middle class has dwindled and now millions of Americans are subsisting on minimum wage or unemployment while others are pulling in twenty, thirty, forty million dollars per year. That’s the reality and it presents us with a critical problem.

Why is the increasing division between rich and poor a critical problem? Because with an increasing concentration of wealth in the hands of a few, much of that money is taken out of circulation. Here’s where a real economist would begin to argue that it’s not out of circulation; it’s still there in the M2 money supply, blah, blah, blah. Before you go there, let me settle that point with a technical street term – bullshit! The money is effectively out of circulation. How many flat screen TVs can a guy with eighty million dollars per year buy? The money is sitting in a slip in San Diego or Miami Beach in the form of a hundred million dollar yacht. Other than some bottom cleaners and a couple of deck washers, the money isn’t circulating through the hands of the lower middle class buying cheap beer, pickup trucks and tickets to NASCAR races. It’s sitting in a big pile in some 25,000 square foot mansion in Paradise Valley in the shadow of Camelback mountain.

A common refrain of the sheep herders that has been repeated with great frequency is that the rich are the job creators and that by cutting taxes for them, they will hire more people and thereby create jobs. Oh look at the King’s new clothes. How long are people going to fall for this line of rubbish? Let’s start by looking at a couple of the more obvious pieces of evidence. Shall we compare the state of the nation’s economy at the time the Bush tax cuts were implemented with the state of the economy today? The year 2000 (before the tax cuts to the super-rich), a budget surplus and the lowest unemployment rate in thirty years. The year 2010 (after nearly a decade of tax cuts to the super-rich), a massive budget deficit and the highest unemployment rate in forty years. Even Tea Partiers should be saying, “Whoa, something’s not right here.” The deductively challenged segment of society has to at least have eyebrows raised.

Next question: When did our nation undergo its most vigorous period of growth and prosperity? It was back in the days of Eisenhower and into the early sixties. The middle class was growing by leaps and bounds. The standard of living was rising faster than any time in the nation’s history. Unemployment was low. Interest rates were low. All this while the incremental tax rate on the nation’s richest people was ninety-one percent!

Allow me to repeat for the hard of reading. THE TAX RATE ON THE RICHEST PEOPLE DURING THE MOST PROSPEROUS TIME IN OUR NATION’S HISTORY WAS NINETY-ONE PERCENT!!! Hello! Is anybody home? Tell me again why the rich need the Bush tax cuts (which have already all but destroyed the country) to continue. Why didn’t anyone tell Ike?

Here’s what we’ve witnessed: High taxes on the rich – growth of the middle class and prosperity for everyone. Obscene tax cuts for the rich – the destruction of our economy and the decimation of the middle class. Hey Tea Baggers. Duh.

OK, enough of the “keen sense of the obvious” types of examples. Now for a mini-polemic on a fundamental economic principle. I’ll use a very simple example, so simple that Glenn Beck might grasp it. You are a small country. You are producing and earning one million dollars per year. You are spending two million dollars per year. You’re going in the hole to the tune on one million every year. How is this possible? Simple answer – you borrow money from someone, i.e., “charge it” and/or you sell your assets, your stuff like land, buildings, industry, resources, etc. Can this be done? Sure, it is being done now. Can it be done indefinitely? No. Sooner or later you have no remaining assets to sell and you’re in debt so deep, no one will loan you a nickel. History gives us many examples of what happens in such a situation, but I promised to keep this simple.

There’s an old TV commercial for margarine that says, “It’s not nice to fool Mother Nature.” I’ll take that a step further here and proclaim, “It is impossible to fool Mother Nature particularly when it comes to basic arithmetic.” The simple fact of the matter is that you cannot spend more than you have indefinitely. The bill MUST be paid or there will be hell to pay. The budget MUST balance over the long term. Hopefully, I’ve made this easy enough for the Tea Partiers and I’ll assume they’re in agreement.

Now for the next question. How? How is the budget to be balanced and the bill to be paid? There are only four fundamental ways to do this. 1. Reduce expenses. 2. Increase income. 3. Cheat them out of it. 4. Beat the hell out them with a club and make them afraid to demand payment.

The first alternative is a favorite of the populists and the Tea Party. Within reason, this is indeed a judicious and oft necessary choice. Here’s the problem, especially with the Tea Party crowd and the Republicans. They pay lip-service to the concept, but in truth refuse to do it. They’re all for cutting, but only on those things they don’t care about, e.g., the arts, culture, health care, protection of the environment, programs for the poor, mass transit, education and the like. They refuse to cut excessive military spending, prisons, etc. The cry of cut, cut, cut is hollow and never seems to come to fruition.

The third alternative, cheat them out of it, is good up to a point and is in fact being done now. Printing money, oh excuse me, I mean quantitative easing, debases the currency and makes the face value of our debts lower. But as Germany discovered in the early 1920s, it has its limitations. I also promised to keep this discourse simple and I’m certain the concept of currency manipulation is way over the head of the typical Glenn Beck follower.

The fourth alternative amounts to thugery and war. I’ll dismiss this approach by reiterating a famous old adage about there are no winners in war. Economically, it’s hard to justify the intense consumption of resources necessary to wage war and destroy the resources of the vanquished. Not to mention the fact that it tends to be messy. We’ll put war aside for the time being.

That leaves the second alternative, increase income. If we assume that expenses either can’t or won’t be cut enough to square the ledger, it suggest there is absolutely no realistic alternative other than increasing income. Taxes must be increased. At this point in time, we have no alternatives. Our choices were already made when Bush implemented these destructive tax cuts nearly ten years ago. It’s water under the bridge. To some of us, it looked stupid at the time, but gloating over our ability to perceive the obvious does little to solve the problem at hand. Taxes MUST increase.

Finally, the question that begs to be answered is, “Whose taxes must increase?”

Again, keeping it simple, let’s break society into three fundamental groups, (1) the poor and unemployed, (2) the middle class and (3) the rich. In today’s world, let’s consider someone rich only if the income is over a million dollars per year. Although I wouldn’t put it past some of the Tea Baggers to suggest taxing unemployment benefits or welfare payments, I suspect most rational people would view that as a rather nonsensical idea. That leaves us with the middle class and the super-rich. Even Republicans prone to inane statements in the economic realm (like Jon Kyl) strut about singing the refrain that the middle class is the source of nearly all jobs, business start-ups and is the heart and soul of America. With the economy in trouble, the middle class has been brutalized. Not even the Republicans have the audacity to suggest increasing taxes on the middle class while the rich continue dancing. Who does that leave? The super-rich. That’s right, the people whose 1960 marginal tax rate was 91% and whose current marginal tax rate is 35%.

The obvious, logical, moral and sensible solution is to remove the “temporary” tax breaks for the obscenely wealthy segment of society. It makes sense. It appears to be the only alternative, but instead the tax cuts appear to be destined to remain in place and the country is to be put on a collision course with an ugly end point. Remember, Mother Nature guarantees the ledger WILL ultimately balance. By perpetuating these insane tax cuts, the ultimate burden will be placed on the people that currently inhabit the vanishing middle class. Chances are that’s you and me. Again looking at Germany of the 1920s, it was the middle class that was decimated only to return years later compliments of Adolf Hitler and the Nazi party. During the lead up to that dark era of history, Germany was populated by a virulent right wing not unlike our Tea Party and by government officials whose fiscal shenanigans took the nation into ruin. The more I learn of the period, the more I feel like I’m looking into a mirror in history.

Finally, why does it appear the rich are going to continue to ride the gravy train at the expense of the middle class? Even with this simplistic description of the situation, how can it be anything but obvious that we can’t afford to continue down this disastrous fiscal path? We’re going over the cliff because the Republican Party has collectively decided to hold the nation hostage to retain the tax cuts for the super-rich. Despite the fact that jobs are not available for countless Americans, the Republicans say they can starve to death and rot in hell if the rich aren’t given their tax heaven. They won’t agree to the extension in the unemployment benefits unless there’s a way to pay for them. Incredibly, they say this with straight faces. Hey Kyl, here’s a way to pay for them. Eliminate the sinful tax break someone with an income of eighty million dollars per year has been given. Any self respecting roof rat could figure that one out. I guess that can’t be said for Washington sewer rats. How can members of the Republican Party look themselves in the mirror? And how can President Barack Obama sell out the future of America by bowing down to the Republican extortion demands?

Oh! One more question keeps nagging at me. Why are the Republicans so insistent on continuing down a fiscal path that is so clearly detrimental to the nation’s wellbeing? Is it because all Republicans are blithering idiots? No, some are, but not all of them. Some are actually quite brilliant. If they are capable of rational thought, why do we see this nonsensical behavior? In my mind, it’s another simple answer, greed and ego. I can see absolutely no logical explanation other than the likes of Jon Kyl and the rest of his band of merry gentlemen are fundamentally evil people. They are owned and operated by the super-rich they are protecting at the expense of the middle class. When giant corporations are treated as individuals in our electoral system under the guise free speech, we’re getting the best political system money can buy. And that is a sad testimonial to America and its grim future. The wealthy are being protected not because it’s best for the nation, rather because they are the masters of political arena. I guess I should be grateful we’ve still got seats in the bleacher section, but sadly we’re too far from the field for anyone to hear our cheers. Even the Murdockian sheep have better seats. Too bad they’ll be the first ones slaughtered after the game.

If we sit idly by, we no doubt get what we deserve. Someone has to educate the sheep. And now you see why I quit writing this column for a while. Have you ever tried to educate sheep?

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