Talking Point: US Government Debt and Jobs

Job, Jobs, Where are the Jobs?

The talking point is simple. Average Americans are not spending money, and the economy is stalled, because they don't have much money. It's no use giving tax breaks and low interest rates to product manufacturers, because the people who would normally buy their products don't have money. People need jobs.

It is debatable whether the American public is responsible for 70% of domestic spending on goods and services, but by sheer number their spending potential is huge. They might make up 70% of domestic spending if they had money to spend, but they don't have good jobs.

Why not? Government policies over the past several decades, supply-side (trickle-down) tax policies and corporate globalization policies, have created a record wealth gap. A study by three Citigroup analysts indicates that the top 1% of Americans earn as much annual income as the bottom 60% and the top 1% possess as much wealth as the bottom 90% of Americans. The analysts concluded “economic growth [in the US] is powered by and largely consumed by the wealthy few.” [1] This is borne out by recent statistics showing that growth in domestic product sales have declined at discount stores and have grown in high-end stores and luxury products.

The Solution:

The government needs to set policies to put money in the pockets of average Americans, and I'm not talking about a $600 check; it needs to be tens of thousands per year, which simply put means temporarily creating jobs. The money for these jobs needs to come from the places that it is being hoarded: The richest 1% of Americans and transnational corporations who have benefited greatly from government policies over the past few decades.

After people have had government-sponsored jobs for several years, they will have the money to buy more products and services they need. This will create a market for private sector products and, in turn, support more jobs in the private sector. Eventually, the government can get out of business of job creation.

And yes, these jobs will require more government revenue in the near-term, but will also generate new revenues. In the long run, we'll be more likely able to pay down the US Government debt.

Agree? Let policy makers know:

• Contact the Broadcast Media
• Contact the US Senate
• Contact the House of Representatives

Sources:

1. Can the Middle Class be Saved? Atlantic Monthly, September, 2011.

Sometimes it's Worth Saying the Obvious

It took a while, but now it is generally accepted that the United States of America is a world Empire. There are references to "US Empire" on mainstream magazine covers, numerous books lay out the history in detail and now we even hear references to the US Empire in decline.

What isn't as widely acknowledged, but should be generally accepted is that the United States, and the World for that matter, is in the midst of a class war. Sadly, some of the inertia in the class war resides in common people who perpetuate the notions that 1) government is inherently bad and 2) that if we are going to have taxes at all, then the taxes on the wealthy class should be very low so they can invest and create jobs.

A government of the common people can be a very beneficial thing. Ask someone with Veterans medical care, someone who benefited from the GI Bill who wouldn't have been able to go to college without it, someone with a monthly social security check or someone with medicare. I could go on with the highway system, which some smart people would deride that saying the car corporations pushed the US government to fund the highways and that we should have invested in mass transit instead, but you get the idea; if we the people have a shared vision, we can efficiently and effectively use our government to pool the resources to do it. That great American "can-do" thing. So, future visions of a Utopian anarchism aside, a government of the people, as opposed to "of the corporations", is a good thing.

"But if the government spends the money it will displace it from being spent in private sector and distort the free market." Frankly, the private sector does a fine job of distorting the free market with speculations that have no connection to the real economy and do not provide jobs. The tax cuts for the rich don't just go to buying McMansions and Hummers, that money chases the next speculative bubble and distorts commodity prices in ways that make it impossible for dairy farmers to buy the grains they need. The private sector isn't investing to avoid and manage the next environmental disaster or rehabilitate our crumbling sewers, bridges and other infrastructure. Lots of money chasing the next bubble, but not investing in world class broadband digital infrastructure. Why? Investments in tangible things that affect the real economy are difficult, and many "rich people" want to get richer quicker "in the market", not get their hands dirty with long term investments difficult and risky things like developing new innovations. The magic of the "invisible hand" of wealthy people is more a myth than a reality.

So, it is becoming passe' to say that the Wall Street class caused the problem, were bailed out by middle-class tax payers, are continuing to get tax cuts and the cost is falling on middle class tax payers. We see it in "austerity" plans and "debt control" plans that are taking the form of cuts to programs that help the lower and middle class people, cuts that forestalled investment in infrastructure maintenance, environmental restoration and much more. And we're told that we cannot raise taxes on the wealthy 1% of the people who now hoard 40% of the nation's wealth.

There is a phrase that describes the struggle surrounding this situation and it's "class war."

Wealth Gap and Revolution

Lately I've been dwelling on the social strains caused by the wealth gap in the US. Everyone should know the difference between "income gap" and "wealth gap;" income being the annual revenues and wealth being the accumulated revenues or savings. The wealth gap is actually more pronounced than the income gap, but both have been growing for several decades. A recent statistic on wealth gap:

The top 1% of Americans own 40% of the wealth.

The word hoarding comes to mind as does a famous quote:

There is, inherent in the capitalist system, a tendency to self-destruct. - Schumpeter, 1942.

We see it happening before our very eyes playing out in the Washington budget debate. The notion, that giving the wealthy class, or owner class, tax cuts to spur growth is a widely held belief in our society. But this simplistic rule only makes sense when money is tight and production capacity at factories is tight and in need of investment to expand, neither of which hold today; we don't need any more production capacity and even if the owner class were to produce more, the commoners don't have the money to buy the stuff.

What we face is a market that is saturated with production capacity, but no money among we the little people, because the money is being hoarded and used for non-productive speculation. Buying commodities, like grains, industrial metals, oil & gas, have become disconnected from the real economy and turned into a gambling playground for the wealthy (not just Americans).

The tendency is for this kind of hoarding to create social instability (dare I say "revolution"?).
People are catching on to this, and the big questions are 1) will we get to the point where enough people become so destitute that they don't have anything, and thus don't have anything to loose if they rise up? 2) will the honest, wise wealthy people change policies before this happens, if only to save themselves?

Stay Tuned.

Sources:

Show Me the Money, Zine, Autumn, 2001, Tony Honeycut.

US Economy in the Pocket of 1/100th of 1 Percent

This graphic is jaw-dropping. The yellow ball, representing the wealth of one one-hundredth of one percent (0.01%), doesn't even fit into the graphic. Whereas the bottom 90% of Americans is the tiny blue ball.

How Rich are the Superrich?

The top 400 of America's richest aristocrats hoard as much wealth as the bottom 155,000,000 people. - Michael Moore at a Madison, WI rally, March 5, 2011.

Sources:

Mother Jones, It's the Inequality Stupid, March/April, 2011.

Island of Properity in a Sea of Poverty

The following is a transcript from a segment on GDAE Podcast Episode 23 from late November 2009.

We've all heard that about 1% of Americans own about 38% of the nation's wealth.... and the bottom 40% own less than 1% of the nation's wealth. These are 2001 statistics and the disparity has certainly grown since then, during the Bush years.

On another scale, the relatively few developed Nations have accumulated a similarly disproportionate share of global wealth, in part at the expense of exploiting the natural resources of the lesser developed nations.

We've commented in the past on GDAE Podcast that this analogy between individuals and nations translates to the financial melt down. A small minority of wealthy elites in the US benefited from the financial bubble at the expense of a super majority of Americans, yet it was the majority of tax payers who bailed out the tiny financial elite when the crash was upon us a year ago.

By analogy, on a global scale, it was a small minority of countries, the Group of 7, or G-7, that created and benefited from the bubble economy; yet it is the other countries being hammered both during the go-go bubble expansion days of wealth accumulation and on the down-side of the global financial crash.

Now, with global climate change, we see the devastating legacy of this wealth disparity that has persisted over the generations: The minority of industrialized countries have accumulated their wealth, in part, by pushing a cost off onto the environment in the form of greenhouse gas emissions. Like the use of slavery, a small minority have gotten rich on the backs of others.

These are illegitimate riches. But where do we find ourselves today? These illegitimate profits have been invested to create even more riches, which have often been passed between generations (can you say "Paris Hilton?"). The wealth has been used to buy influence in all three branches of government, such as removing the Glass-Steagall Act designed to prevent speculative financial crashes from contaminating commercial financial institutions that fund small businesses, home and car loans, student loans, home improvement loans and the like. But now these super rich speculative financial institutions, and the US Government itself, are insolvent, although they won't admit it. [Now the US CAN'T pay global climate pollution reparations ... unless the US takes a loan from China to do so.]

This scenario of wealth accumulation among a tiny elite reminds me of something I recently read in an old National Geographic magazine. I came across a statement by a wise 39-year old Kuwaiti made back in 1975. When oil wealth in the Middle East was accumulating, the Kuwait fund for Economic Development pledged $16 billion to developing countries. According to National Geographic, The fund's director general, Abdlatif Al-Hamad, 39, explained the philosophy behind such generosity. He said:

"We cannot close our doors and say to hell with everyone else. Nothing is clearer than the danger of having an island of prosperity in a sea of poverty."

Financial Elite in a Sea of Poverty

Back in 1975, when oil wealth in the Middle East was accumulating, the Kuwait fund for Economic Development pledged $16 billion to developing countries. According to National Geographic,

The fund's director general, Abdlatif Al-Hamad, 39, explained the philosophy behind such generosity: "We cannot close our doors and say to hell with everyone else. Nothing is clearer than the danger of having an island of prosperity in a sea of poverty."

We've all heard that about the 1% of Americans who own 38% of the wealth. The bottom 40% owned less than 1% of the nation's wealth. These are 2001 statistics and the disparity has grown since then.

Sounds like an island of prosperity in a sea of poverty.

Where is Abdlatif Al-Hamad today?

Source:

National Geographic, "Arabs," October, 1975.