Just my opinion
by Thom Hartmann
This weekend, House Republican leader John Boehner played out the role of Jude Wanniski on NBC's "Meet The Press."
Odds are you've never heard of Jude, but without him Reagan never would have become a "successful" president, Republicans never would have taken control of the House or Senate, Bill Clinton never would have been impeached, and neither George Bush would have been president.
When Barry Goldwater went down to ignominious defeat in 1964, most Republicans felt doomed (among them the then-28-year-old Wanniski). Goldwater himself, although uncomfortable with the rising religious right within his own party and the calls for more intrusion in people's bedrooms, was a diehard fan of Herbert Hoover's economic worldview.
In Hoover's world (and virtually all the Republicans since reconstruction with the exception of Teddy Roosevelt), market fundamentalism was a virtual religion. Economists from Ludwig von Mises to Friedrich Hayek to Milton Friedman had preached that government could only make a mess of things economic, and the world of finance should be left to the Big Boys – the Masters of the Universe, as they sometimes called themselves – who ruled Wall Street and international finance.
Hoover enthusiastically followed the advice of his Treasury Secretary, multimillionaire Andrew Mellon, who said in 1931: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down... enterprising people will pick up the wrecks from less competent people."
Thus, the Republican mantra was: "Lower taxes, reduce the size of government, and balance the budget."
The only problem with this ideology from the Hooverite perspective was that the Democrats always seemed like the bestowers of gifts, while the Republicans were seen by the American people as the stingy Scrooges, bent on making the lives of working people harder all the while making richer the very richest. This, Republican strategists since 1930 knew, was no way to win elections.
Which was why the most successful Republican of the 20th century up to that time, Dwight D. Eisenhower, had been quite happy with a top income tax rate on millionaires of 91 percent. As he wrote to his brother Edgar Eisenhower in a personal letter on November 8, 1954:
"Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt
Goldwater, however, rejected the "liberalism" of Eisenhower, Rockefeller, and other "moderates" within his own party. Extremism in defense of liberty was no vice, he famously told the 1964 nominating convention, and moderation was no virtue. And it doomed him and his party.
And so after Goldwater's defeat, the Republicans were again lost in the wilderness just as after Hoover's disastrous presidency. Even four years later when Richard Nixon beat LBJ in 1968, Nixon wasn't willing to embrace the economic conservatism of Goldwater and the economic true believers in the Republican Party. And Jerry Ford wasn't, in their opinions, much better. If Nixon and Ford believed in economic conservatism, they were afraid to practice it for fear of dooming their party to another forty years in the electoral wilderness.
By 1974, Jude Wanniski had had enough. The Democrats got to play Santa Claus when they passed out Social Security and Unemployment checks – both programs of the New Deal – as well as when their "big government" projects like roads, bridges, and highways were built giving a healthy union paycheck to construction workers. They kept raising taxes on businesses and rich people to pay for things, which didn't seem to have much effect at all on working people (wages were steadily going up, in fact), and that made them seem like a party of Robin Hoods, taking from the rich to fund programs for the poor and the working class. Americans loved it. And every time Republicans railed against these programs, they lost elections.
Everybody understood at the time that economies are driven by demand. People with good jobs have money in their pockets, and want to use it to buy things. The job of the business community is to either determine or drive that demand to their particular goods, and when they're successful at meeting the demand then factories get built, more people become employed to make more products, and those newly-employed people have a paycheck that further increases demand.
Wanniski decided to turn the classical world of economics – which had operated on this simple demand-driven equation for seven thousand years – on its head. In 1974 he invented a new phrase – "supply side economics" – and suggested that the reason economies grew wasn't because people had money and wanted to buy things with it but, instead, because things were available for sale, thus tantalizing people to part with their money. The more things there were, the faster the economy would grow.
At the same time, Arthur Laffer was taking that equation a step further. Not only was supply-side a rational concept, Laffer suggested, but as taxes went down, revenue to the government would go up!
Neither concept made any sense – and time has proven both to be colossal idiocies – but together they offered the Republican Party a way out of the wilderness.
Ronald Reagan was the first national Republican politician to suggest that he could cut taxes on rich people and businesses, that those tax cuts would cause them to take their surplus money and build factories or import large quantities of cheap stuff from low-labor countries, and that the more stuff there was supplying the economy the faster it would grow. George Herbert Walker Bush – like most Republicans of the time – was horrified. Ronald Reagan was suggesting "Voodoo Economics," said Bush in the primary campaign, and Wanniski's supply-side and Laffer's tax-cut theories would throw the nation into such deep debt that we'd ultimately crash into another Republican Great Depression.
But Wanniski had been doing his homework on how to sell supply-side economics. In 1976, he rolled out to the hard-right insiders in the Republican Party his "Two Santa Clauses" theory, which would enable the Republicans to take power in America for the next thirty years.
Democrats, he said, had been able to be "Santa Clauses" by giving people things from the largesse of the federal government. Republicans could do that, too – spending could actually increase. Plus, Republicans could be double Santa Clauses by cutting people's taxes! For working people it would only be a small token – a few hundred dollars a year on average – but would be heavily marketed. And for the rich it would amount to hundreds of billions of dollars in tax cuts. The rich, in turn, would use that money to import or build more stuff to market, thus increasing supply and stimulating the economy. And that growth in the economy would mean that the people still paying taxes would pay more because they were earning more.
There was no way, Wanniski said, that the Democrats could ever win again. They'd have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections.
When Reagan rolled out Supply Side Economics in the early 80s, dramatically cutting taxes while exploding (mostly military) spending, there was a moment when it seemed to Wanniski and Laffer that all was lost. The budget deficit exploded and the country fell into a deep recession – the worst since the Great Depression – and Republicans nationwide held their collective breath. But David Stockman came up with a great new theory about what was going on – they were "starving the beast" of government by running up such huge deficits that Democrats would never, ever in the future be able to talk again about national health care or improving Social Security – and this so pleased Alan Greenspan, the Fed Chairman, that he opened the spigots of the Fed, dropping interest rates and buying government bonds, producing a nice, healthy goose to the economy. Greenspan further counseled Reagan to dramatically increase taxes on people earning under $37,800 a year by increasing the Social Security (FICA/payroll) tax, and then let the government borrow those newfound hundreds of billions of dollars off-the-books to make the deficit look better than it was.
Reagan, Greenspan, Winniski, and Laffer took the federal budget deficit from under a trillion dollars in 1980 to almost three trillion by 1988, and back then a dollar could buy far more than it buys today. They and George HW Bush ran up more debt in eight years than every president in history, from George Washington to Jimmy Carter, combined. Surely this would both starve the beast and force the Democrats to make the politically suicidal move of becoming deficit hawks.
And that's just how it turned out. Bill Clinton, who had run on an FDR-like platform of a "new covenant" with the American people that would strengthen the institutions of the New Deal, strengthen labor, and institute a national health care system, found himself in a box. A few weeks before his inauguration, Alan Greenspan and Robert Rubin sat him down and told him the facts of life: he was going to have to raise taxes and cut the size of government. Clinton took their advice to heart, raised taxes, balanced the budget, and cut numerous programs, declaring an "end to welfare as we know it" and, in his second inaugural address, an "end to the era of big government." He was the anti-Santa Claus, and the result was an explosion of Republican wins across the country as Republican politicians campaigned on a platform of supply-side tax cuts and pork-rich spending increases.
Looking at the wreckage of the Democratic Party all around Clinton by 1999, Winniski wrote a gloating memo that said, in part: "We of course should be indebted to Art Laffer for all time for his Curve... But as the primary political theoretician of the supply-side camp, I began arguing for the 'Two Santa Claus Theory' in 1974. If the Democrats are going to play Santa Claus by promoting more spending, the Republicans can never beat them by promoting less spending. They have to promise tax cuts..."
Ed Crane, president of the Libertarian CATO Institute, noted in a memo that year: "When Jack Kemp, Newt Gingich, Vin Weber, Connie Mack and the rest discovered Jude Wanniski and Art Laffer, they thought they'd died and gone to heaven. In supply-side economics they found a philosophy that gave them a free pass out of the debate over the proper role of government. Just cut taxes and grow the economy: government will shrink as a percentage of GDP, even if you don't cut spending. That's why you rarely, if ever, heard Kemp or Gingrich call for spending cuts, much less the elimination of programs and departments."
George W. Bush embraced the Two Santa Claus Theory with gusto, ramming through huge tax cuts – particularly a cut to a maximum 15 percent income tax rate on people like himself who made their principle income from sitting around the pool waiting for their dividend or capital gains checks to arrive in the mail – and blowing out federal spending. Bush even out-spent Reagan, which nobody had ever thought would again be possible.
And it all seemed to be going so well, just as it did in the early 1920s when a series of three consecutive Republican presidents cut income taxes on the uber-rich from over 70 percent to under 30 percent. In 1929, pretty much everybody realized that instead of building factories with all that extra money, the rich had been pouring it into the stock market, inflating a bubble that – like an inexorable law of nature – would have to burst. But the people who remembered that lesson were mostly all dead by 2005, when Jude Wanniski died and George Gilder celebrated the Reagan/Bush supply-side-created bubble economies in a Wall Street Journal eulogy:
"...Jude's charismatic focus on the tax on capital gains redeemed the fiscal policies of four administrations. ...
In reality, his tax cuts did what they have always done over the past 100 years – they initiated a bubble economy that would let the very rich skim the cream off the top just before the ceiling crashed in on working people.
The Republicans got what they wanted from Wanniski's work. They held power for thirty years, made themselves trillions of dollars, cut organized labor's representation in the workplace from around 25 percent when Reagan came into office to around 8 of the non-governmental workforce today, and left such a massive deficit that some misguided "conservative" Democrats are again clamoring to shoot Santa with working-class tax hikes and entitlement program cuts.
And now Boehner, McCain, Brooks, and the whole crowd are again clamoring to be recognized as the ones who will out-Santa Claus the Democrats. You'd think after all the damage they've done that David Gregory would have simply laughed Boehner off the program – much as the American people did to the Republicans in the last election – although Gregory is far too much a gentleman for that. Instead, he merely looked incredulous; it was enough.
The Two Santa Claus theory isn't dead, as we can see from today's Republican rhetoric. Hopefully, though, reality will continue to sink in with the American people and the massive fraud perpetrated by Wanniski, Reagan, Laffer, Graham, Bush(s), and all their "conservative" enablers will be seen for what it was and is. And the Obama administration can get about the business of repairing the damage and recovering the stolen assets of these cheap hustlers.
I post this in the wake of Citigroup purchasing a 50,000,000 corporate jet with our bailout money.
To what do I owe the pleasure of this company? What is owed to me and to what account do I owe by the nature of my birth? Solemn allegiance and my blood poured out on foreign fields for the honor and glory of brass buttons and medal-resplendent generals?
A promise? A dream? A promise is a note for some other time, and a dream was never real in the first place. So open up the envelope and find what you’ve won: nothing. To think, you’ve worked your whole life in a marriage with the country of your birth only to find yourself no more than a concubine, thrown over for another, younger and cheaper.
If I were a German autoworker my wage would be $33.44 per hour with four weeks vacation a year. If I were a Japanese autoworker I’d earn $25.60 an hour plus an annual bonus, a bonus that last year ranged between $17,000 to $22,000. If I were so unfortunate as to be an American autoworker I’d start out at $14.00 an hour and top out at $28.00 per hour. I say unfortunate because Americans hate UAW members, those fat, lazy Americans trying to feed their families and pay their taxes.
The chairman of Goldman Sachs gave himself a $70 million bonus last year, or about what that fat, lazy American autoworker would earn in 1,200 years. The whole board of directors gave themselves between $60 to $65 million each as bonuses, not including their regular salaries. They didn’t work nights or second shifts, never listened to the foundry's hammer pound. This year they have been praised by Treasury Secretary Paulson for forgoing their bonus for"this year." Paulson called them "wise and prudent" while keeping their jobs in a company that has lost $4.00 to $5.00 dollars per share.
Conservatives and Wall Street experts say that we should just let GM go into bankruptcy so that the company can escape its labor contracts. To throw the cost of GM pensioners onto the back of the Pension Guarantee Trust Corporation. You see, big government was the answer after all… when it suits them. The company wins, Wall Street wins, then the company can void all the contracts of the less profitable dealers nationwide, at will, and bring unemployment to thousands whose fault it was to choose the wrong place to work.
It's only America bleeding, but pay them no mind, it’s just another self-inflicted wound. Just another girl cutting herself because she hates what she sees in the mirror. Just another family with the utilities turned off. Just another family trying to feed themselves on our national minimum wage, a wage that has remained frozen for nine years. Now Goldman Sachs, they’re wise and prudent, but talk to me about it in eight more years. Meanwhile, the poor French with their socialism must eke out a living on a minimum wage of $10.71 with the cost their healthcare paid for by the government.
Give me liberty or give me death; in America you’ll get both. Wall Street eyes the Korean model where autoworkers earn $7.50 per hour and 20% are contracted workers who earn $3.60 per hour. Since 1987, unions have been legal in Korea, but when push comes to shove during labor negotiations, the police round up the labor leaders, pushing and shoving and them into jail cells for protective custody.
Citibank, in an effort to remain profitable, is eliminating 53,000 jobs. Thanks a lot for all your years of service, now get lost. Citi stands in line for their share of the bailout money and has come up with another great idea. Let’s raise credit card interest rates on our customers. We have to, you know, to cover our losses. The customers must pay for the company's mistakes; the taxpayers must bail them out to cover the company's mistakes. But let's blame the auto workers union, their decent wages and retirement packages are destroying an industry with their insistent demands for living wages.
Now Japanese auto manufactures, operating in non-union states, have a more enlightened relationship with their employees. The have an open door management policy; any employee with a grievance can go straight to company management and complain. If, for example, an American employee at one of Toyota’s manufacturing plants were to ask why Toyota’s Japanese employees were given $20,000 bonuses but not its American employees, management would hear them out before showing them that ever-open door.
Because we can, they would answer. Because we can shut down this whole factory if we choose to. We would still have to pay for the millions of dollars worth of equipment we’ve invested in. But you? You, we would just show to the door and be done with you. If one of our million dollar machines were to break down, we would spend tens of thousands of dollars to have it fixed. But you? You must pay for most of your own healthcare and invest in your own retirement. Those machines are valuable, but you… there’s the door.
A mother that hates her own children, a mother that sleeps with foreign men and introduces them as uncles. A mother that cares more about the gold coins left on the nightstand, yet tells her children that they should love their mother. A mother that praises bank presidents and despises autoworkers and all workers and anyone that can’t buy her a drink or show her a good time.
The German autoworkers are asking for an 8% raise this year, and the Japanese autoworkers a 5% raise. And their American counterparts? Yeah, right, they’re destroying the whole fabric of the economy with their high wages, or so we are told. In Korea, labor leaders are in hiding.
What do we owe a country that claims so vociferously that it owes us nothing in return? That builds billion-dollar aircraft to protect us from men in mud huts but doesn’t want to lift a finger to defend our jobs. Billion-dollar missile defense shields to defend people who can’t afford to keep their heat on. Eight children have died in the last two weeks in house fires where the utilities were turned off. Meanwhile, bank presidents are praised and workers are reviled and thrown out by the thousands with the trash. God bless America.
This can be found here: http://open.salon.com/content.php?cid=4579... and is a response to Americans in hopes they will find their nationalism and support the autoworkers to keep their jobs. I love my country..what does that mean? It means I support all Americans nationalized or native born by supporting their ability to have the American Dream. I don't think that's too much to ask. If we don't do this we might as well just join the EU and be done with sovereignty. We have made other countries wealthy at the neglect of our own.
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