Rich Cause the Crisis, Workers Get the Blame July 14, 2009Posted by rogerhollander in Canada, Economic Crisis, Labor.
Tags: canada labor, canada workers, cupe, Economic Crisis, economic meltdown, harper government, labor, linda mcquaig, municipal governement, recessions, roger hollander, steven harper, tax cuts, tim hudak, toronto, toronto city workers, toronto strike, toronto workers, Wall Street, workers rights
add a comment
For a while, the Wall Street meltdown gave the rich a bad name.
Even they seemed embarrassed by their own excess. There were reports of designer shops packaging purchases in plain paper bags.
But as going downscale lost its novelty, the rich have grown weary of their own embarrassment. Gratuitous extravagance is making a comeback. I noticed a Tiffany’s ad in a Toronto newspaper last week for a “diamond solitaire on a platinum band of channel-set diamonds. From $3,550 to $1,000,000.”
Clearly the rich are feeling good in their own skin again. Public wrath, having briefly nipped at the heels of the well-to-do, has moved on to the heels of the less well-heeled – who also carry plain paper bags, but ones you can eat lunch out of.
And so, as the Wall Street-generated economic storm has squeezed public finances, Toronto’s city workers find themselves in the crosshairs.
The striking workers are demonized for wanting to hold onto their benefits, including the right to bank sick days, even though they won this fair and square at the bargaining table. It’s just one of dozens of concessions the city is now demanding from them.
Although the strike is a terrible drag for all of us, the city workers are in some ways doing us a service – holding the line against employers taking advantage of the recession to demand concessions (if unions simply give in, emboldened employers will go for more), and taking a stand against further erosion of public services.
Of course, in the media narrative, the workers are the villains. The role of the financial elite in triggering the economic storm is omitted, as is the elite’s relentless campaign over the past three decades for tax cuts, which set the stage for today’s financial shortfalls.
Responding to this campaign, Ottawa kept cutting taxes (more than $160 billion since 2003), rather than using its massive surpluses for public reinvestment. That meant cuts in transfers to provincial and municipal governments, even as extra responsibilities were downloaded onto them.
By August 2007, crash-strapped Toronto announced an array of cuts that threatened to diminish life in the city: less snow removal, shorter library hours, delayed openings for skating rinks, etc. Further down the food chain, struggling school boards were closing swimming pools.
In fact, the crunch could have easily been alleviated – if the Harper government had been willing to transfer the revenue from a planned one percentage point reduction in the GST, as municipal leaders across the country pleaded. His October 2007 budget gave the answer: no.
Business groups never mention that tax cuts necessitate cuts in public services. For the rich, it’s often a good trade-off; they can buy their own high-end services. But it’s rarely good for the rest of us.
As economists Hugh Mackenzie and Richard Shillington showed in a study last April, Canadian families typically get about $41,000 in public services for their taxes, which amounts to “the best bargain they’ll ever get.”
Meanwhile, provincial Conservative Leader Tim Hudak, sensing the frustrated public might be ready for a Mike Harris revival, has gone after the strikers, suggesting they should “get a grip.”
Hudak wants to direct your anger at the people who pick up garbage, rescue animals, run daycare centres – not at those who’ve spent years pushing for tax cuts that have left our public services underfunded and who now chase the recession blues with million-dollar shopping sprees at Tiffany’s.
© Copyright Toronto Star 1996-2009
Tags: arlen specter, bush apointees, dawn johnsen, democracy, democratic party, glenn greenwald, Iraq war, liberal republican, military commissions, office of legal counsel, olc, patriot act, political parties, political spectrum, Republican Party, right wing republican, roger hollander, tax cuts, telecom immunity, two party system
add a comment
(updated below – Update II)
I just contributed my thoughts on Arlen Specter’s party switch to the New York Times’ “Room for Debate” segment, so I’ll post the link to that once that is available (see Update II), but for the moment — and since this, presumably, is what many people want to discuss — I’ll note a few brief points:
(1) The idea that Specter is a ”liberal” Republican or even a “moderate” reflects how far to the Right both the GOP and our overall political spectrum has shifted.
Consider Specter’s most significant votes over the last eight years, ones cast in favor of such definitive right-wing measures as: the war on Iraq, the Military Commissions Act, Patriot Act renewal, confirmation of virtually every controversial Bush appointee, retroactive telecom immunity, warrantless eavesdropping expansions, and Bush tax cuts (several times). Time and again during the Bush era, Specter stood with Republicans on the most controversial and consequential issues.
(2) Democrats will understandably celebrate today’s announcement, but beyond the questions of raw political power, it is mystifying why they would want to build their majority by embracing politicians who reject most of their ostensible views.
Reports today suggest that Democratic officials promised Specter that the party establishment would support him, rather than a real Democrat, in a primary. If true, few events more vividly illustrate the complete lack of core beliefs of Democratic leaders, as well as the rapidly diminishing differences between the parties. Why would Democrats want a full-blooded Republican representing them in the blue state of Pennsylvania? Specter is highly likely to reprise the Joe Lieberman role for Democrats: a “Democrat” who leads the way in criticizing and blocking Democratic initiatives, forcing the party still further towards Republican policies.
(3) Arlen Specter is one of the worst, most soul-less, most belief-free individuals in politics. The moment most vividly illustrating what Specter is: prior to the vote on the Military Commissions Act of 2006, he went to the floor of the Senate and said what the bill “seeks to do is set back basic rights by some 900 years” and is “patently unconstitutional on its face.” He then proceeded to vote YES on the bill’s passage.
(4) Today is the best day to watch Fox News since the election — mass grieving flavored by impotent bitterness.
UPDATE: In his Press Conference, Specter just reiterated that he opposes the nomination of one of Obama’s few truly excellent nominees: Dawn Johnsen as OLC Chief. What a great Democrat Specter will be. Specter also just detailed how key Democratic officials promised to support him and raise money for him in the 2010 election if he switched, so now Democrats — Harry Reid and the rest — are committed to keeping him in power for another 8 years, committed to keeping the Pennsylvania Senate seat in the hands of Arlen Specter.
Specter is also complaining incessently about the fact that Lieberman lost his primary and Specter only won his 2004 primary by 1%. This apparently demonstrates all sorts of bad things about our political process. They really do believe that they are divinely entitled to keep their seats forever, and anything which threatens that is intrinsically illegitimate and wrong.
UPDATE II: The New York Times discussion on Specter to which I contributed is now available here.
Canada’s star left-winger February 15, 2009Posted by rogerhollander in Barack Obama, Canada, Economic Crisis, Political Commentary.
Tags: AIG, Alan Greenspan, american left, bailout, banks, banks bankrupt, banks nationalized, Barack Obama, Bill Clinton, Bush, Canada, cheney, clinton foreign policy, deregulation, disaster capitalism, Economic Crisis, economic recovery, fannie may, franklin roosevelt, Freddie Mac, haroon siddiqui, Iraq, iraq economic sanctions, Larry Summers, left wing politics, milton friedman, naomi klein, neo-conservative, New Deal, no logo, privatization, roger hollander, ronald reagan, shock doctrine, tax cuts, university of chicago, Wall Street
add a comment
Toronto Star, Feb 15, 2009
She fits the cliché of the Canadian who is a celebrity abroad but is mostly ignored at home.
Naomi Klein shot to international fame eight years ago with her book No Logo, which has since sold 1 million copies.
The Shock Doctrine: The Rise of Disaster Capitalism, published 15 months ago, has already sold 800,000 copies and been translated into 26 languages. Last week, a documentary based on the book was released at the Berlin Film Festival.
Her speaking engagements and political activism keep her on the road, around the world. Her newsletter goes to 30,000 subscribers.
No Logo charted the corporate commodification of youth pop culture and the casualization of labour (what’s sold in the West are expensive brands, not products, which can be manufactured cheaply in the East).
The Shock Doctrine is about the globalization of the neo-conservative ideas pioneered by Chicago economist Milton Friedman and popularized by Ronald Reagan. There was the massive privatization – not only of public services at home but wars abroad (private security forces and contractors galore in Iraq and Afghanistan) and even disaster relief (post-tsunami and Katrina). There was the deregulation of the markets, which led, inevitably, to the current economic meltdown.
Critics attack her for seeing corporate conspiracies. They particularly sneer at her hypothesis, announced in the book’s subtitle, that right-wing economic policies have faced such popular resistance that they can only be introduced in the jet stream of shock-and-awe wars and natural disasters (laying off tens of thousands of Iraqis in order to sell state enterprises; building tourist beach hotels in Southeast Asian fishing villages washed away by the tsunami).
Her admirers see the economic crisis as proof of her prescience.
The New Yorker magazine recently ran a 12-page profile: “She has become the most visible and influential figure on the American left – what Howard Zinn and Noam Chomsky were 30 years ago.”
She has campaigned against the University of Chicago’s plan to build a $200 million Milton Friedman Institute to honour its former professor, who died in 2006. “The crash on Wall St. should be for Friedmanism what the fall of the Berlin Wall was for authoritarian communism, an indictment of an ideology,” she has said.
In a twist of fate, the economic crisis has dried up funding for the institute, and it has been put on hold – much to her delight.
In an interview Tuesday, Klein, 38, said she welcomes the election of Barack Obama. But she has two problems: his refusal to insist on accountability for recent American misdemeanours abroad and at home; and his “narrative that everything went wrong only eight years ago” with the election of George W. Bush.
It was Bill Clinton who periodically bombed Iraq and tightened the economic sanctions that killed 1 million Iraqis, including 500,000 children, according to UNICEF. It was he who axed the Depression-era restrictions that had prevented investment banks from also being commercial banks. He and Alan Greenspan resisted the regulation of the huge derivatives industry.
If you develop amnesia about all that, “then you do exactly what Obama is doing. You resurrect the Clinton economic and foreign policy apparatus, and you appoint Larry Summers, the key architect of the economic policy that has imploded at this moment.”
Obama’s economic recovery plan, especially the bank bailout, is a disaster.
It is “layering complexity over complexity. What got us into this mess in the first place were these complex financial instruments that nobody understood. Now they have a bailout that nobody understands.
“The facts are easy to understand, namely, that these banks are bankrupt and they should be allowed to go under or be nationalized because there also needs to be a workable financial sector.
“The amount of money that’s at stake in the bailout – if you include everything, the deposit guarantees, the loans, Fannie May and Freddie Mac and AIG – is now up to $9 trillion. The American GDP is only $14 trillion. So they’ve put more than half the American economy on the line to try to fix a mess that actually cannot be fixed in this way. Just look at what happened to Iceland. The debt that their three top banks held was 10 times their GDP. You can bankrupt the country this way.”
Obama’s stimulus package is not big enough. Almost 40 per cent goes to tax cuts. “And to pay for the cuts, they had to drastically scale back much more important and stimulative spending, on such things as public transit.”
Among the many parallels to the 1930s, the one Klein finds most useful is that president Franklin Roosevelt was under constant public pressure to improve the New Deal. That “history of resistance, struggle and community organizing” needs to be replicated to keep Obama honest.
“Obama is an important change from Bush, and the reason why he is important is that he is susceptible to pressure from everyone. He is susceptible to pressure from Wall Street, to pressure from the weapons companies, from the Washington establishment. But unlike Bush and (Dick) Cheney, I don’t think he’d ignore mass protest.
“The irony is that just at the very moment when that kind of grassroots organizing and mobilization could have an impact, we are demobilizing and waiting for the good acts to be handed down from on high, whether it is the withdrawal from Iraq or the perfect economic stimulus package.”
It is equally important that America come to terms with its recent past.
“So much of this moment for me comes down to whether there’s going to be any accountability for what happened – whether it’s the illegal occupation of Iraq or torture or the economic crimes that led to this disaster.
“The FBI believes that there’s a huge criminality at the heart of the economic meltdown but they’ve made a decision not to prosecute because they were afraid that might send panic through the market.
“All this argument for impunity, amnesia is really corrosive.”
Haroon Siddiqui’s column appears Thursday and Sunday. email@example.com
Allen Barra on the Myth of Ronald Reagan February 14, 2009Posted by rogerhollander in Art, Literature and Culture, Political Commentary.
Tags: allen barra, common people, conservatism, deregulatin, free market, garry wills, globalization, main street america, mergers, privatization, reagan myth, reagan presidency, reaganism, roger hollander, ronald reagan, tax cuts, wiliam kleinknecht, will bunch
add a comment
Feb 13, 2009, www.truthdig.com
By Allen Barra
“The aftermath of Reagan’s presidency,” Garry Wills wrote in a famous introduction to his 1987 book “Reagan’s America,” “has proved, over and over, that Reaganism without Reagan is unsustainable.” In the two decades since Wills’ book was published, a significant portion of the press and public seems to have forgotten that. William Kleinknecht is on a mission: In “The Man Who Sold the World: Ronald Reagan and the Betrayal of Main Street America,” he is out to demonstrate that Reaganism with Reagan never worked.
Kleinknecht, a veteran crime correspondent for the Newark Star-Ledger and the New York Daily News and an American Society of Professional Journalists award winner, is angry. But unlike many writers who have taken scatter shots at the Reagan legacy, Kleinknecht hasn’t lost his temper—in Henry James’ words, he has found it.
In a fiery and lucid introduction he writes, “This book is born of annoyance: a great bewilderment over the myth that continues to surround the presidency of Ronald Reagan. It gives voice to a vast swath of psychically disenfranchised Americans, millions of them, lumped most thickly in the urban areas on either coast, who never understood Reagan’s appeal.” Kleinknecht’s thesis is nothing less than that Reagan was the “obvious enemy of the common people he claimed to represent, this empty suit who believed in flying saucers and allowed an astrologer to guide his presidential scheduling. …” The great conundrum “is this: none of [the] unmistakable harbingers of American decline is being laid where it belongs—at the door of Ronald Reagan” [emphasis Kleinknecht’s].
In the tradition of most previous Reagan critics, Kleinknecht doesn’t try to draw a bead on Reagan from an ivory tower. He goes after Reagan from the blue collar on up: “He enacted policies that helped wipe out the high-paying jobs for the working class that were the real backbone of the country. … His legacy—mergers, deregulation, tax cuts for the wealthy, privatization, globalization—helped weaken the family and eradicate small-town life and sense of community.”
Reaganomics did create fortunes, but mostly for those at the top of the economic ladder; it also brought “a reversal in the slow gains that the working class and the poor had made in the previous two decades.”
During a month when Republicans dug in against Barack Obama’s stimulus plan, Kleinknecht’s words, written last year before the economic crash, ring clear. “Reaganism replaced Enlightenment thinking with the corrupted Romanticism that portrays free-market purism as an article of religious faith that is the real meaning of America. The answer to any of the economic challenges of the twenty-first century is to do nothing. Cut taxes, eviscerate all regulation of private enterprise, and trust the market to guide our fates.” If this sounds like hyperbole, then you weren’t listening to the Republican response to President Obama’s bailout proposal.
To see long excerpts from “The Man Who Sold the World,” click here.
“The Man Who Sold America” has much in common with another recent scathing indictment of the Reagan administration, Will Bunch’s “Tear Down This Myth: How the Reagan Legacy Has Distorted Our Politics and Haunts Our Future.” Both books cover much of the same territory: Contrary to the nearly two decades of idolatry from the right, Reagan was no more popular than numerous other modern presidents (as Kleinknecht notes, just 27 percent of eligible voters elected him in 1980, a year which saw a record-low turnout at the polls), the legacy of the famous 1980 tax cut was an era of deregulation that spawned CEO and Wall Street greed, and, most important, the Reagan revolution did not do what it set out to do, namely to reduce the size of government (“Big government,” writes Kleinknecht, “was not stripped away in the Reagan years; it was just redirected to the needs of private enterprise”).
However, Bunch sees Reagan primarily as a pragmatist whose image has been hijacked by a neoconservative cabal while Kleinknecht sees Reagan himself as the betrayer of what once was regarded as genuine conservatism. Reagan’s early backers “were not Burkean conservatives or acolytes of the John Birch Society. They had little interest in social issues. … Most were not even particularly passionate in their anticommunism. They viewed Reagan quite simply as a potential liberator for the entrepreneurial class.” They were men who simply “wanted deep cuts in their taxes and government regulators out of the way.”
Many seminal thinkers of 20th century American conservatism—Kleinknecht cites Russell Kirk, Richard Weaver and German-born émigré Friedrich A. Hayek, to whose names I would add G.K.Chesterton—regarded large corporations as “a threat to folkways and small-scale private property. It was, after all, not government but big corporations that did so much to wipe out agrarian culture. The former machinist or farmer now bagging groceries at Wal-Mart is not exactly a conservative icon.”
This is interesting because Kleinknecht’s case against Reagan isn’t based on the former actor’s adherence to traditional conservative values but on his disregard of them. There are two enemies of a real conservative society, thought Chesterton; one of them “is State Socialism and the other is Big Business.” In other words, the enemy is bigness, no matter on which side of the political spectrum it originates. Hayek, quoted by Kleinknecht, wrote something similar in his highly influential book “The Road to Serfdom” (1944): “… [T]he movement toward totalitarianism comes from two great vested interests: organized capital and organized labor. Probably the greatest menace of all is that the politics of these two most powerful groups point in the same direction.” Such sentiments, Kleinknecht writes, “were swept out of Washington in the 1980s. Relief from government regulation was one of a handful of core beliefs that really mattered to Reagan and his business supporters, and anything that stood in the way of the natural consolidation of the nation’s productive forces was a barrier to be removed.” Or as Reagan’s good friend whom he appointed attorney general, William French Smith, put it, “Bigness doesn’t necessarily mean badness.”
“The Man Who Sold the World” is the most concise and well-thought-out argument against Reagan. Kleinknecht is no poet; he too often writes at the top of his voice. Nonetheless, if he is guilty of occasional pamphleteering, there’s never any doubt as to his meaning, and many of his phrases linger after one has closed the book. “By discrediting government as a legitimate and meaningful presence in the lives of Americans,” he writes in his final chapter, “The Second-Rate Society,” “Reagan repudiated the very concept of national leadership. By exhorting Americans to place self-interest above all, he undermined the spirit of sacrifice and the possibility of a common effort to solve our most pressing national problems.”
Kleinknecht isn’t just writing to be heard by liberal Democrats: His challenge to conservatives is nothing less than to once again be conservative.
Allen Barra writes for numerous publications, including The Wall Street Journal and The New York Times.
Barack Obama: More ” Plus ça change… You Can Believe In” January 18, 2009Posted by rogerhollander in About Barack Obama, Barack Obama.
Tags: afghnistan, ahmadinejad, alioto, Barack Obama, Bill Clinton, castro, charles colson, clearance thomas, Cuba, democrats, Free Trade, gaza, George W. Bush, george will, Guantanamo, harvard law review, hillary clinton, Iran, Iraq, israel, jewish orthodox union, lawrence summers, rahm, Ralph Nader, reagan, republicans, rick warren, roberts, roger hollander, stem-cell research, supreme court, tax cuts, toronto star, torture, welfare reform
add a comment
Several weeks ago I coined the phrase “plus ça change… you can believe in.” (http://rogerhollander.wordpress.com/2008/12/14/plus-ca-change-we-can-believe-in/?) It is an obvious take-off on the Obama slogan that twists the meaning 180 degrees via the classic French dictum, which translates to English more or less as “the more things change the more they stay the same.” (plus ça change, plus c’est la même chose)
Today’s Toronto Star (http://www.thestar.com/news/uselection/article/572960) has published an article it had run nineteen years ago in 1990 on the occasion of Barack Obama’s election as the first ever elected president of the Harvard Law Review. The article is eerily prescient; and it provides grounds both for those who believe he will bring meaningful change as well as for those, like me, who based upon both his words and actions, have lost most of what hope we may have had.
(Full disclosure: I voted for Obama but my heart was with Ralph Nader)
The article confirms that as early as nineteen years ago, Barack Obama had already clearly demonstrated his brilliant mind, a social conscience, formidable personal drive, and magnificent diplomatic skills. In an uncanny way we see in this article almost a carbon copy of the Barack Obama that we have watched as a presidential candidate and now President-elect.Those of you pragmatists out there will thrill by the account of how he was able to relate positively to conservatives along with those of his more natural constituency to achieve his historic election as the Law Review president. From your adulatory postings on the article’s Comment section, however, you must have either missed or ignored that paragraph that jumped out at me.
“‘He’s willing to talk to them (the conservatives) and he has a grasp of where they are coming from, which is something a lot of blacks don’t have and don’t care to have,’ said Christine Lee, a second-year law student who is black. ‘His election was significant at the time, but now it’s meaningless because he’s becoming just like all the others (in the Establishment).’” (my emphasis)
If this isn’t prescient, I don’t know what is.
In a recent article in politico.com (http://www.politico.com/news/stories/0109/17532.html) entitled “Obama Tries to Seduce Republicans” we read about not only Obama’s selection of the notorious Rick Warren for the inauguration invocation prayer, but also of his dinner with right-of-center writers at George F. Will’s home and the transition team’s reaching out “to other prominent figures atop the Southern Baptist Church, Charles Colson’s Prison Fellowship Ministry and the Jewish Orthodox Union.” We read of his cozying up to McCain and others in the Republican leadership, and he has been eulogized by everyone from Condoleezza Rice to Pat Robertson (from Robertson’s CNN interview with Larry King: “I must say, this is the most amazing campaign that I think we’ve seen in our life time or maybe in this century. Obama is absolutely brilliant. I would like to make a prediction. He can one of the great presidents of the United States if he doesn’t get pulled too far off of center and gets over into some of the things the American people don’t want. If he governs the way he said he is going to do, as I say, he has the smarts and the charisma to pull this nation together and be an outstanding president.” (http://transcripts.cnn.com/TRANSCRIPTS/0811/05/lkl.01.html)
I have no problem “reaching out” to the neo-Fascists who control the Republican Party, but what had set him apart from the others in the campaign was his initial indication that he would “reach out” to the likes of Cuba’s Castro, Chávez in Venezuela and Iran’s Ahmadinejad. That would take courage and show leadership, but unfortunately he has backpedalled on this commitment since he won the election.
It is interesting yet most disturbing to note that right wing Republican presidents like Reagan and W. tend to be aggressive in promoting their agenda and thereby achieve results (which unfortunately are disastrous for most Americans), while Democrat compromisers like Clinton and Obama tend to be diplomatic and achieve little of their own agenda while advancing that of their opposition (in Clinton’s case, for example, welfare “reform,” free trade, reduced social spending, etc.).
I am still more than pleased that Obama won over McCain, that the United States elected its first Afro-American President, and I have confidence that the Obama presidency and the Democratic controlled Congress will undo some of the most horrendous crimes of the Bush Administration. I believe that Obama will outlaw torture, eventually close Guantanamo, and make some necessary changes with respect to women’s health care, domestic spying, stem cell research and other important areas. And it cannot be too soon for some of our existing Supreme Court Justices to move on to that even higher court up in the sky so that Obama will have the opportunity to make appointments to that will serve to detoxify the Court, which has become contaminated with the likes of Thomas, Alioto and Roberts.
But by his policy statements (slower troop reduction in Iraq; troop build-up in Afghanistan; at least tacit support of the Israeli massacre in Gaza; no immediate doing away with the tax cuts to the rich, etc.) and his appointments (Gates of Iran-Contra fame, Rahm the unabashed Israel apologist, Clinton the cheerleader for the Iraq Invasion; Lawrence Summers the wolf to guard the economic chicken coop), Obama has shown us what we can expect in the most critical areas: change that is pretty much the same thing.
Tags: Barack Obama, budget, david patterson, democratic party, democrats, Economic Crisis, economic growth, economy, james ridgeway, michael bloomberg, new jersey taxes, new york, recession, repeal tax cuts, roger hollander, tax cuts, tax the rich
1 comment so far
Posted by James Ridgeway on 12/24/08
All of us who have been taught the Biblical story of Christmas (since my grandfather was a Methodist minister, that certainly includes me) will remember that Jesus is supposed to have been born in a stable because there was “no room at the inn.” Less often repeated is the reason why his parents had hit the road in the first place, despite the fact that Mary was nine months gone at the time. According to the Book of Luke, “it came to pass in those days, that there went out a decree from Caesar Augustus that all the world should be taxed.” The Romans ordered all people to go to their home towns to register for a census, which was needed in order to institute the new tax system. That’s why the holy family was schlepping the 90 miles from Nazareth to Bethlehem when Mary went into labor.
The Bible never tells us how much Joseph—an impoverished carpenter with two dependents, one of them a kid who wasn’t even his—ended up having to pay in taxes. But it’s safe to assume that the local Romans, and the wealthy Sadducees who supported them, got off easy in comparison to working stiffs like Joseph. Maybe they even got off as easy as rich Americans have, under the tax cuts passed by the Bush Administration in 2001 and 2003.
During the Democratic primary campaign, Barack Obama, along with all of his Democratic contenders, promised a swift repeal of these tax cuts. A rollback of tax cuts benefitting only corporations and the wealthiest individuals was supposed to provide the financing for Obama’s policy proposals, from education and health care to infrastructure and green energy. But by September, the Democratic nominee was already backpedaling on his pledge, and within three weeks of his election, Obama’s economic advisors confirmed that, after all, the new president might just let the Bush tax cuts expire on schedule in 2011, rather than eliminating them two years earlier. The decision is based on the premise that it is unwise—in economic as well as political terms—to raise taxes during a recession, since lower taxes stimulate the economy.
At the same time, New York’s Democratic governor David Patterson has refused to consider instituting a temporary “millionaire’s tax” to address his state’s desperate financial needs, choosing instead to slash vital social programs. Patterson claims that such a tax will drive businesses and wealthy individuals out of New York and further depress the economy. (This despite billionaire Mayor Michael Bloomberg’s declaration that among his rich friends, he’d “never heard one person say ‘I’m going to move out of the city because of taxes.’”)
But an analysis by the Center for Budget and Policy Priorities, released earlier this year, debunks the myth that tax cuts for the rich more than “pay for themselves” by fueling economic growth.
There is no evidence that the tax cuts caused any increase in economic growth, let alone growth sufficient to offset their cost. In fact, the 2001-2007 economic expansion was among the weakest since World War II with regard to overall economic growth. Moreover, revenue growth was very poor during 2001-2007. Real per-capita revenues fell deeply in 2001, 2002, and 2003 and have since risen to barely 2 percent above their 2001 level. Over the course of other postwar economic expansions, they grew by an average of 12 percent.
Capital gains taxes, CBPP found, have the effect of lowering revenue in the long run. And tax cuts financed by deficit spending—as they were under Bush, and undoubtedly will continue to be under Obama—are especially harmful.
Brookings Institution economist William Gale and now-CBO director Peter Orszag concluded that the 2001 and 2003 tax cuts are “likely to reduce, not increase, national income in the long term” because of their effect in swelling the deficit. [The Congressional Budget Office’s] recent study of a deficit-financed extension of the 2001 and 2003 income-tax cuts found that “real [Gross National Product] per person would decline by 13 percent in 2050” relative to an extension that was financed through a balanced mix of revenue and spending changes effective immediately.
Even the Bush Treasury Department’s analysis of the cost of the 2001 and 2003 tax cuts “estimated that they would generate only enough economic growth to cover less than 10 percent of their long-term cost. Furthermore, that estimate was based on a best-case scenario; it depended on the assumption that the cost of the tax cuts would be fully offset by spending cuts.”
Likewise, on the state level, a recent study looked at a much stiffer “half-millionaire’s” tax that went into effect in New Jersey. While the study found a tiny increase in the “out migration” rate among wealthy residents, it detected no damage to the economy. In fact, it found that overall, the state’s tax revenue increased by $26 for every $1 lost.
Especially during a recession, if we put more money in the pockets of the rich, it is likely to stay right there—in their pockets. On the other hand, if we put more money in the hands of low- and middle-income workers through tax cuts, and in the hands of the poor and unemployed through increases in government programs (food stamps, TANF, unemployment benefits), that money is virtually guaranteed to go directly into the economy, since its recipients have no choice but to spend it on their basic needs—food, clothing, gasoline, doctor’s bills. A few of them might even be able to afford a room at the inn.
This post also appears on James Ridgeway’s new blog, UNSILENT GENERATION: “Information and commentary for pissed-off progressive old folk (and future old folk)… because we’re not dead yet.”