Saturday, October 30, 2010

The vote you cast may bite you in the ass

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According to the polls and the pundits, Americans are about to cast a vote that will usher the Republican Party including several of their tea party candidates into power. If this election is about job creation, and according to several polls that's the number one issue on voter's minds, people are about to cast a vote that will throw a wrench into the gears of government and create disfunctional gridlock where little will get done to create jobs, establish the reforms needed to deal with the massive immigration problem or much else. For reactionaries like Glenn Beck, who don't want the government doing anything, this will be a great victory. For voters who actually want effective government, many will be casting a vote against the very goal they are most concerned about, i.e., job creation.

People are angry, and rightfully so. However, within just a few months after taking office the President's policies turned the recession (smaller quarter by quarter GNP) around. Although the recovery has been anemic to this point, the United States has had over four straight quarters of growth in GNP. Angry voters are about to reward President Obama for avoiding another depression and turning the economy around by making Congress Republican. Is so, the vote you cast may bite you in the ass. Any voter anger toward this President and his party for economic (job creation) is misplaced. The economy is growing again.

how will locking up government help?

Gridlock is the condition where government is divided. If the Republicans take the House of Representatives next Tuesday, voters will be rewarding the GOP for two years of saying no to job creation and financial reform that was designed to curb the Wall Street gambling with American's money. Once that irony sinks in, consider how little will get done by the federal government for any reason, including job creation, once the two branches of government are at odds with each other. Gridlock is the situation where Republicans will pass bills that the President rejects and the President submits bills that the Republicans will reject. If job creation is what most voters are anxious about, and polls and pundits claim that to be the case, how will rendering the federal government dysfunctional help? It won't. 

Jobs and taxes

There is a relationship between having a vibrant and growing middle class and the amount that people are taxed. During the last 30 years, since the big tax cuts established by Presidents Reagan and George Bush, the middle class has been stagnating, not growing in accordance to the trickle down theory. That theory argued that if rich people have more surplus (not needed for living expenses) money on hand, they will use that to invest in businesses that will create jobs. If that theory worked, by now we'd have more people living the American dream and a larger middle class; but we do not.

Corporations don't need lower taxes to spur them to create jobs. All together, they are sitting on around $837 billion in their accounts, not being used to hire employees. Tax rates for middle income families are lower now, thanks to this President's middle class tax cut that was part of the stimulus bill, than they have been in 55 years! President Obama and the Democrats seek to keep it this way by extending the Bush tax cuts for everyone earning less that $250,000.

taxes are not high

That leaves for discussion taxes on the most wealthy of Americans. Many of these people are pouring money into the campaigns of Republican/tea Party candidates because, apparently, they are not wealthy enough. This is the subject of what is called the marginal tax rate, or more accurately the tax rates on the richest Americans vs. the tax rates on the middle class. Democrats have indicated that they will let the Bush tax cuts for people earning more that $250,000/year, which are scheduled to expire at the end of the year, to lapse. That would increase the marginal, top tax rates to what they were during the job creation Administration of President Clinton, 40% (see chart below). If lowering top tax rates were the key to job creation, then the middle class would have expanded during the Bush Administration. However, what occurred was the middle class continued its stagnation of the last 30 years until the great recession that Obama's economic team turned around.

History is a guide to voters when deciding on what Party will best serve the interests of job creation and a thriving middle class. During what years was there a robust and growing middle class in the U.S? It was during the years after WWII to the 1970's. The top tax rates for the highest income earners during that time period was from 92% down to 70%. The top tax rate that the Republicans seek to preserve for the wealthiest Americans now is 36%. The following graph shows these rates:

top tax rates for the rich coincided with growth in the middle class

History also shows graphically that increasing the top tax brackets on the highest income earners will not harm job growth and the middle class; just the opposite. Stephan Koepp reported in Time Magazine, "The material rewards that Middle Americans had begun to take for granted -- a house, vacations, college for the children -- have become more difficult to obtain. The heyday of the U.S. middle class, and its high expectations, came in the 1950s and 1960s, when the median U.S. family income -- adjusted to today's price levels -- leaped from $14,832 in 1950 to $27,338 in 1970. But the prosperity spiral was halted by the inflation of the 1970s, which carried prices aloft more rapidly than wages and thus caused real income levels to stagnate for more than a decade. Last year's median [in 2000] was only $27,735, barely an improvement from 1970." 

Increasing the top tax rate would provide two significant benefits for short and long term job growth. It would help the federal government reduce budget deficits and send a signal to the markets that budgetary discipline is underway. It would also provide the federal government income to invest in the projects that will make the United States an first rate economy again. These necessary investments include education, infrastructure and clean, domestically produced energy. The latter two will boost private employment as the government contracts companies to build new transportation systems (high speed rail) and repair aging systems, from dams to bridges to high speed Internet connections across the country and develop and deploy the technologies that employ alternative energy sources. Dependence upon foreign oil threatens our national security in a manner that only energy independence can resolve. That will require, like all national security initiatives, investment in alternative energy sources. These investments, actions taken by the government, would no more threaten human liberties -- as the extremists of the Glenn Beck endorsed tea party argue -- than government investments in military hardware in the past have threatened liberty.

On the three main issues this election season, jobs, taxes and economic growth, voters are about to punish the Democratic Party for their successes. If voters truly want more job growth, financial discipline and investments needed toward making the 21st Century American economy second to none, establishing gridlock for the federal government  is the last thing they should want to establish politically

The choice

Voters are choosing, on a basic level this November 2nd, between moving forward with investments that will create jobs or moving backward toward waiting for corporations to hire people on their own. If a voter in a given state or Congressional district has a tea party candidate, that option means going backward toward the 19th Century. If a voter does not have a tea party Republican to vote for, then that option means going backward to the policies of the Bush era that helped get this economy in the mess it is in. The choice is progress (moving forward) or regress (moving backward).


   Moving forward                or             moving backward
Reason and science             or              faith and beliefs    
      21st Century economy         or           19th Century economy
        Effective government          or            gridlock and stalemate

People are angry and rightfully so. The tea party, Glenn Beck and the rest of the Obama backlash are angry because a Democrat is in the White House. They made their choice against Democrats decades ago. Other voters, who are not that far to the extreme right, are angry because of the TARP bailouts. These people should reward the President's party for getting almost all of that money back from the banks. After AIG pays what they owe the government, us, we will have actually made money on the bailout that literally prevented the financial sector from dragging the economy into a depression. The Democratic financial reform bill was designed to prevent this from happening again. Some people are angry that the government bailed out General Motors, but that saved a million or so jobs and will not cost the public any money once the publicly held stock is sold back to private investors in the stock market. Why are people angry about successful government actions that saved jobs? People are angry, but their anger is misplaced. Deregulated greed caused this recession, not the government. If the economy is not recovering fast enough now, one reason is the Republican obstruction that has been a roadblock to solutions over the last 19 months. People angry about the deficits and the national debt need to best understand the history of the national debt and put our current debt in its historical perspective. (See especially "We are in danger!...but not from the debt.") Another reason is that the housing bust that initiated the downturn in the economy is still under way. The efforts by the government to stem the tide of foreclosures helped kick off the backlash against President Obama's policies.

People are angry, but the votes they cast may bite us all in the ass. The conservatives and reactionaries misinformed by the FoxPAC Republican/tea Party propaganda will support Republicans, either conservative or tea party reactionary extremists. The liberals and some radicals informed not only by corporate, so-called "lame-stream media" but also but independent sources, will support Democrats, both conservative (blue dogs) and progressive. The people this post is addressed to, moderates, independents and other undecided voters are still making up their minds. Decide carefully, the stakes are high and they transcend the speed of our economic recovery and job creation, even if they are the most important issues. Quoting again Simon Rosenburg, "America faces grave economic and geopolitical challenges. One party is attempting to face these challenges head on, has overcome extraordinary opposition to do big things these past few years, and needs more time to ensure its forward-looking and modern plan for the American economy succeeds. The other party is disappointingly offering nothing more than disproven and discredited political bromides, is retreating further into ideological crazyville, and is simply not ready or capable of doing what is required to ensure our future prosperity."
Know any undecided voters?
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