Unplugging to Reality, Part III

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In this period of economic decline, the issues most steadfastly obscured by the media are taxation and the growing inequality of incomes and wealth.  Unplugged, we see the rich continuing to walk away with the fruits of American labor, bleeding the lower economy dry and steadfastly resisting efforts to restrain them.  The overriding socio-economic facts, which are almost entirely overlooked by both sides in the debates, are the demise of anti-trust and business regulation and consequent extracting of excess profits though market control, the continuously rising concentration of wealth and incomes at the top of the American socio-economic ladder, and the financing of this growing inequality through reduced taxes on the wealthy and corporations causing huge deficits and the mushrooming national debt.   These problems have been developing steadily over the thirty years since Ronald Reagan became president, but they did not begin there:

“The decline of American empire began long ago before the current economic meltdown or the wars in Afghanistan and Iraq. It began before the first Gulf War or Ronald Reagan. It began when we shifted, in the words of Harvard historian Charles Maier, from an ’empire of production’ to an ’empire of consumption.’ By the end of the Vietnam War, when the costs of the war ate away at Lyndon Johnson’s Great Society and domestic oil production began its steady, inexorable decline, we saw our country transformed from one that primarily produced to one that primarily consumed. We started borrowing to maintain a level of consumption as well as an empire we could no longer afford. We began to use force, especially in the Middle East, to feed our insatiable thirst for cheap oil. We substituted the illusion of growth and prosperity for real growth and prosperity. The bill is now due.” [1]

Imposing higher taxes on the incomes of the wealthy and corporations is the first step in paying the bill; it would be enough to resolve the immediate debt and budget crises (which reducing their taxes caused in the first place), but that’s something wealthy people are fighting hard to prevent, and won’t even discuss.  As their legislative henchman John Boehner keeps saying: “Tax increases are off the table.”

          The Growing Inequality

Federal Reserve Chairman Ben S. Bernanke certainly won’t go there.  Acknowledging that recent economic growth is lower than expected, “uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers,” he accurately observed (as economists have understood for at least the 75 years since John Maynard Keynes made the observation) that monetary policy – control of interest rates and the money supply – “cannot be a panacea.” [2]

One of Bernanke’s top lieutenants, Federal Reserve Bank of New York president William C. Dudley, a former the chief economist at Goldman Sachs, strikes the same theme:  “These are fundamentally structural issues – not cyclical issues,” he contends.  “They cannot be tackled primarily through monetary policy.” [3]

So, what’s the plan?  All Bernanke suggested to an audience of bankers is that, although “a healthy economic future” requires a plan to shrink the federal deficit, large spending cuts should not be “imposed immediately.”   Is that it?  Wait for a while, hoping against hope for economic growth and investment in a shrinking economy, and then lower the boom?

These men are professional economists, so of course they know all about fiscal policy (i.e., government tax and spending policies designed to stimulate economic activity).  They understand that conventional deficit spending is unavailable to stimulate the economy now, because deficits are already astronomically high and federal debt rages out of control.  But they also know that cutting current spending that provides stimulus is the worst way to cut the deficit when still more stimulus is needed:  Future deficits worsen as the middle- and lower-income classes slide toward depression and their federal tax contributions decline; reducing spending on programs for them and reducing their employment levels, as Republicans plan to do, worsens the economy still more.

And they are fully aware of the current depressed state of the middle and lower classes.  A few days ago the Fed reported that falling home values and increased borrowing have decimated total home equity (the largest component of middle class wealth):

“Falling real estate prices are eating away at home equity.  The percentage of their homes that Americans own is near its lowest point since World War II, the Federal Reserve said Thursday.  The average homeowner now has 38 percent equity, down from 61 percent a decade ago.  The latest bleak snapshot of the housing market came as mortgage rates hit a new low for the year, falling below 4.5% for the 30-year loan.  But even alluring rates have failed to deliver any lift to the depressed housing industry.” [4]

This reflects a severely reduced ability of working Americans to buy homes, due to seriously depressed incomes.  If the goal of economic policy today is economic recovery, the answer is clearly not to continue to drive the bottom 98-99% into the dust.  Just as clearly, increasing tax revenues from extremely wealthy people and corporations (as well as decreasing corporate subsidies, and reducing wasteful military and security spending) would painlessly (no, they would not suffer) reduce deficits while providing badly needed economic stimulus.

Nonetheless, Bernanke sits on the fence, describing basically a “wait and see” approach, as if the lower classes might pull themselves up by their own bootstraps.  Under his plan, non-millionaire income classes are left to struggle like a rapidly dehydrating horse, collapsing in the desert near a water hole, which must either drag itself to water or face a bullet at the water’s edge.

The Bernanke plan is generous, of course, compared to the Paul Ryan Republican budget plan (unanimously supported by Senate Republicans) which fires the fatal bullet much sooner.   Republicans not only won’t increase tax revenues, they plan to reduce taxes of the rich even more.  At a time when federal debt exceeds $14 trillion, Ryan’s plan would add trillions of dollars more to deficits and the debt, destroying what is left of the flagging economy.

Similarly, the draconian plan offered by presidential candidate Tim Pawlenty would cost $7.8 trillion over ten years, tripling the size of the Bush tax cuts:

“As a new analysis from Citizens for Tax Justice shows, in addition to being outrageously expensive, Pawlenty’s tax plan is based on the Republican brand of class warfare — giving millionaires huge additional tax breaks:

– Taxpayers with incomes in excess of $1 million would enjoy an average cut in personal income taxes of $288,822, a 41.4 percent cut;

– Taxpayers with incomes in excess of $10 million would enjoy an average cut in personal income taxes of $2.4 million, a 46.3 percent cut;

The cost of the personal income tax cuts just for taxpayers with incomes in excess of $1 million would be $141.8 billion.

“And that’s just Pawlenty’s income tax plan. He has also proposed eliminating the capital gains and estate taxes entirely, two moves which would overwhelmingly benefit the very richest Americans.”  [5]

Since capital gains (which are derived from corporate dividend distributions of profits) are very wealthy people’s main source of income, this plan would excuse them almost entirely from the responsibility of funding government.  They could not get this ultimate concession from the American people, only from a government they control against the people’s interests.

Ditto for new candidate Michelle Bachman, and the rest of the Republican field. The only issue seems to be how quickly to destroy what’s left of the “middle” class.  Unplugged, we become aware that the prospect of ever repaying (or even reducing) the national debt is completely abandoned from their agenda.  In their opposition to the only available means to fix the economy, and insistence on policies that direct as much wealth as possible to them through ever lower taxes for the rich and corporations (ensuring continued and accelerating growth of inequality), the wealthy corporate elite are actively supporting the demise of America.  The facts cannot realistically be viewed any other way.

Bernanke and Dudley may be presumed to understand these things, and if the Fed runs economic models with honest and accurate inputs, they have the proof.  But these men are not about to publicly reject the Reaganomics “trickle-down” illusion that sits at the core of the Economic Matrix.  Such “couriers,” as Hedges remarked in his “Empire of Illusions” lecture, “see the world from inside the corporate box, and they are loyal to the corporate state.”  [6]

In that loyalty, they betray the American people.  This is class warfare, and unplugged we can see this treachery clearly.  In the fantasy America we are told exists, the image projected by these “experts” takes us wistfully back to the 1960s, to the language of “structural” versus “cyclical” economic issues.   In their neo-classical fantasy there is no hint of impending collapse.  But as Barry Lynn forcefully argues:  “The ‘science’ of economics today is not merely an institutionalized form of neofeudal philosophy … [i]t has become a form of madness, a dream of human imagination we mistake for a pattern of the world.  It is a path not merely to serfdom but to death.  We do have an alternative, though.  We can believe what we see with our own eyes.”  [7]

The consequences for America of allowing the wealthy to continue to drain America’s wealth and lock down their control over the bottom economy’s demise could not be more serious.  As the dark clouds roll in, we can no longer ignore as unduly cynical or paranoid Chris Hedges’ vision of America’s future:

“The tantalizing illusions offered by our consumer culture … are vanishing for most citizens as we head toward collapse. The ability of the corporate state to pacify the country by extending credit and providing cheap manufactured goods to the masses is gone. The jobs we are shedding are not coming back, as the White House economist Lawrence Summers tacitly acknowledges when he talks of a ‘jobless recovery.’ * * * The travails of the poor are rapidly becoming the travails of the middle class, especially as unemployment insurance runs out. And class warfare, once buried under the happy illusion that we were all going to enter an age of prosperity with unfettered capitalism, is returning with a vengeance.

“When a culture lives within an illusion it perpetuates a state of permanent infantilism or childishness. As the gap widens between the illusion and reality, as we suddenly grasp that it is our home being foreclosed or our job that is not coming back, we react like children. We scream and yell for a savior, someone who promises us revenge, moral renewal and new glory. It is not a new story. A furious and sustained backlash by a betrayed and angry populace, one unprepared intellectually, emotionally and psychologically for collapse, will sweep aside the Democrats and most of the Republicans and will usher America into a new dark age. It was the economic collapse in Yugoslavia that gave us Slobodan Milosevic. It was the Weimar Republic that vomited up Adolf Hitler. And it was the breakdown in Tsarist Russia that opened the door for Lenin and the Bolsheviks. A cabal of proto-fascist misfits, from Christian demagogues to loudmouth talk show hosts, whom we naïvely dismiss as buffoons, will find a following with promises of revenge and moral renewal. And as in all totalitarian societies, those who do not pay fealty to the illusions imposed by the state become the outcasts, the persecuted. * * *

“As the pressure mounts, as the despair and desperation reach into larger and larger segments of the populace, the mechanisms of corporate and government control are being bolstered to prevent civil unrest and instability. The emergence of the corporate state always means the emergence of the security state. This is why the Bush White House pushed through the Patriot Act (and its renewal), the suspension of habeas corpus, the practice of “extraordinary rendition,” warrantless wiretapping on American citizens and the refusal to ensure free and fair elections with verifiable ballot-counting. The motive behind these measures is not to fight terrorism or to bolster national security. It is to seize and maintain internal control. It is about controlling us.

“And yet, even in the face of catastrophe, mass culture continues to assure us that if we close our eyes, if we visualize what we want, if we have faith in ourselves, if we tell God that we believe in miracles, if we tap into our inner strength, if we grasp that we are truly exceptional, if we focus on happiness, our lives will be harmonious and complete. This cultural retreat into illusion, whether peddled by positive psychologists, by Hollywood or by Christian preachers, is magical thinking. It turns worthless mortgages and debt into wealth. It turns the destruction of our manufacturing base into an opportunity for growth. It turns alienation and anxiety into a cheerful conformity. It turns a nation that wages illegal wars and administers offshore penal colonies where it openly practices torture into the greatest democracy on earth. And it keeps us from fighting back.

*** America’s most dangerous enemies are not Islamic radicals but those who sold us the perverted ideology of free-market capitalism and globalization. They have dynamited the very foundations of our society. In the 17th century these speculators would have been hung. Today they run the government and consume billions in taxpayer subsidies.

“Resistance movements will have to look now at the long night of slavery, the decades of oppression in the Soviet Union and the curse of fascism for models. The goal will no longer be the possibility of reforming the system but of protecting truth, civility and culture from mass contamination. It will require the kind of schizophrenic lifestyle that characterizes all totalitarian societies. Our private and public demeanors will often have to stand in stark contrast. Acts of defiance will often be subtle and nuanced. They will be carried out not for short-term gain but the assertion of our integrity. Rebellion will have an ultimate if not easily definable purpose. The more we retreat from the culture at large the more room we will have to carve out lives of meaning, the more we will be able to wall off the flood of illusions disseminated by mass culture and the more we will retain sanity in an insane world. The goal will become the ability to endure.” [8]

It’s time to unplug.

Trinity: “If you tell me we’ll make it I’ll believe you.”
Neo: “We’ll make it. We have to.” [9]

JMH – 6/27/11


[1] Chris Hedges, “American Psychosis: What happens to a society that cannot distinguish between reality and illusion?” Adbusters , June 17, 2010.  (This posting is digested from Hedges’ a lecture “Empire of Illusion,” recently taped at the New School, and based on his recent book of the same name.)

[2] “Fed Wants Priority Put on Deficit,” by Binyamin Applebaum, The New York Times, June 8, 2001, p. B1.

[3] Ibid. Typically, monetary policy has been thought of as a tool for moderating and controlling business cycles.  Here Dudley acknowledges, if somewhat obliquely, that “structural” issues are now involved.  The prime structural issues, to be blunt, are the continuous rise of wealth and incomes inequality, the trashing of the American middle class (which cannot be entirely written off to globalization) and the “financialization” of industry, marketing and banking to enhance market control and profitability.

[4] “Home equity takes plunge’” by Derek Kravitz and Christopher S. Rugaber,  The Albany Times Union, June 10, 2011, p. 1.

[5] Pat Garofalo, “Pawlenty’s Economic Plan Cuts Taxes for Millionaires by 41 Percent,” Think Progress, June 9, 2011.

[6] Chris Hedges, the “Empire of Illusion” lecture, supra.

[7] Barry C. Lynn, “Cornered: The New Monopoly Capitalism and the Economics of Destruction,” Wiley 2010, p.252.

[8] Chris Hedges, “American Psychosis,” supra (Emphasis added).

[9] Dialogue from “The Matrix.”

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One Response to Unplugging to Reality, Part III

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