America Is Not Broke

This evening I decided to take a break from the economic history of the last thirty years to comment on the speech Michael Moore gave yesterday in Madison, Wisconsin.  Here is the part of his speech I’d like to talk about:

“America is not broke.  Contrary to what those in power would like you to believe so that you’ll give up your pension, cut your wages, and settle for the life your great-grandparents had, America is not broke. Not by a long shot. The country is awash in wealth and cash. It’s just that it’s not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.

“Today just 400 Americans have the same wealth as half of all Americans combined.  Let me say that again: 400 obscenely rich people, most of whom benefited in some way from the multi-trillion dollar taxpayer ‘bailout’ of 2008, now have as much loot, stock and property as the assets of 155 million Americans combined. * * *

“For us to admit that we have let a small group of men abscond with and hoard the bulk of the wealth that runs our economy, would mean that we’d have to accept the humiliating acknowledgment that we have indeed surrendered our precious Democracy to the moneyed elite. Wall Street, the banks and the Fortune 500 now run this Republic — and, until this past month, the rest of us have felt completely helpless, unable to find a way to do anything about it.

“I have nothing more than a high school degree. But back when I was in school, every student had to take one semester of economics in order to graduate. And here’s what I learned: Money doesn’t grow on trees. It grows when we make things. It grows when we have good jobs with good wages that we use to buy the things we need and thus create more jobs. It grows when we provide an outstanding educational system that then grows a new generation of inventors, entrepreneurs, artists, scientists and thinkers who come up with the next great idea for the planet. And that new idea creates new jobs and that creates revenue for the state. But if those who have the most money don’t pay their fair share of taxes, the state can’t function. The schools can’t produce the best and the brightest who will go on to create those jobs. If the wealthy get to keep most of their money, we have seen what they will do with it: recklessly gamble it on crazy Wall Street schemes and crash our economy. The crash they created cost us millions of jobs.  That too caused a reduction in tax revenue. Everyone ended up suffering because of what the rich did.” (Emphasis added.)

Commentator E.D. Cain reported: “Moore is his typical over-the-top self, but he does a good job explaining the effort to ‘level-down’ the middle class in this country.  * * *  Instead of taking on the public sector workers and public school teachers, we should be demanding a better middle class for all Americans. We are wealthy enough as a nation to make that happen.”

I’m not sure I would agree that Moore, who showed some humor and restraint, was “over-the-top” this time, certainly no more than the bizarre situation in Wisconsin he was addressing.  But E.D. Cain and I agree that he makes a valid point.

Indeed, I think it’s the crucial point: The recession and state and federal budget problems bear a close relationship to the vast expansion of wealth and income inequality in America, and to the actions taken by the wealthy elite.  The Wall Street recklessness Moore points to is only part of a bigger, 30-year problem.

It was interesting to watch John Boehner and other Republican lawmakers tonight on MSNBC news argue that drastic federal spending cuts are essential because America is broke, and raise their traditional refrain about “big-spending Democrats” bringing the nation to the brink of economic disaster.

As to the latter point, when you’re in a recession, government domestic spending tends to boost economic activity, stimulate growth and jobs, and lift the country out of the recession.  No, the potential disaster lies with the budget cuts they are proposing,  which will eliminate jobs (an estimated 700,000 – 1,000,000), reduce economic activity, and dampen growth.  That will reduce federal tax revenues, and thus potentially increase deficits and debt.

Wholly apart from the social and educational disruptions they will cause, and their ineffectiveness for reducing the deficit, there is a dangerous possibility that the Republican budget proposals will reduce government spending too much, leading the economy into deeper depression.

And it is simply wrong to claim that Democratic domestic spending has caused the high level of federal debt, and to imply that it should be up to the middle class to sacrifice more to balance the budget.  Almost all ($12.1 trillion) of the outstanding debt (over $14 trillion) is debt from Republican administrations, not caused by “big-spending Democrats” or programs for the middle class and the poor. [1]

Further, their alleged concern about deficit reduction does not square with their insistence, just two months ago, on renewing the Bush tax cuts for the wealthiest Americans.  That measure reduces tax revenues by over $60 billion this year, and would reduce tax revenues by an estimated $800 billion over ten years. [2]

The Republicans’ alleged concern about the debt is a sham.  Their very wealthy clients aren’t worried about the debt — they created it and they profited from it over the years.  Today, there is so much debt interest in the budget, and so much of that interest is paid to domestic investors (mostly the wealthy elite), that it’s especially egregious to gut social programs while the wealth at the top continues to grow.

Economic recovery and cutting back on federal borrowing requires that the rich pay a fairer share of taxes.  Spending cuts that further diminish the well-being of everyone else won’t work, and are palpably unfair.  Michael Moore is right: America is not broke.  There is plenty of money, but too much of it is in the wrong hands.

JMH – 3/7/11

[1] Social Security has been independently funded and has a surplus.

[2] Of course, apologists for tax cuts for the wealthy argue that the wealthy in turn create investments and jobs (i.e., Reaganomics).  As explained elsewhere on this site that’s not true, as the Bush Administration’s fiscal record proves, or even logical.

This entry was posted in Decline in America, Economics, Wealth and Income Inequality. Bookmark the permalink.

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