The Great Reagan Pyramid Scheme Comes Crashing Down
The Republican Party that Nixon invented melded the moneyed classes of the Northeast with the white evangelicals of the South. This odd couple went on to simultaneously steal from and oppress the rest of us. The moneyed classes were happy to let the New Puritans impose their stringent morality, since they could always just buy any licentiousness they wanted, regardless of the law. And the New Puritans were so consumed with cultural issues such as homosexuality, abortion, school prayer and (yes) fighting school desegregation that they were happy to let the northeastern Money Men waltz off with a lion's share of the country's resources, consigning most Americans to stagnant wages and increasing debt. The Reagan revolution consolidated this alliance and brought some conservative Catholic workers into it.
These domestic policies at home were complemented by wars and belligerence abroad, which further took the eye of the public off the epochal bank robbery being conducted by the American neo-Medicis, and which were a useful way of throwing billions in government tax revenue to the military-industrial complex, which in turn funded the think tanks and reelection campaigns of the right wing politicians. The Reagan fascination with private armies and funding anti-communist death squads contributed mightily to the creation of al-Qaeda, blowback from which fuelled even bigger Pentagon budgets, spiralling upward and feeding on itself. Terrorism is much better than Communism as a bogey man, since you can just intimate that there are a handful of dangerous people out there somewhere, and force the public to pay over $1 trillion to combat them. In fact, of course, less US interventionism abroad would create less blowback, and genuine threats are better addressed through good police work by multilingual FBI agents than by a $700 billion Pentagon budget.
As a result of the Second Gilded Age and its serf-like subservience to big capital, most corporations in the US don't pay any income taxes, despite doing $2.5 trillion annually in business.
The Reagan Revolution included the stupid idea that you can cut taxes, starve government, abolish regulation of securities, banks, & etc., and still grow the economy. The irony is that capitalist markets need to be regulated to avoid periodically becoming chaotic (as in 'chaos theory,') but the people who most benefit from regulation are most zealous in attempting to abolish or blunt it.
What those policies did was create the preconditions for a long-term bubble or set of bubbles that benefited (for a while) the wealthiest 3 million Americans and harmed everyone else.
The average wage of the average worker is lower now than in 1973 and has been lower or flat for the past 35 years. That's the condition of the 300 million or so Americans.
In the meantime, the top 1 percent has multiplied its wealth many times over and now takes home 20% of the national income, owning some 45 percent of the privately held wealth in the US.
The Right keeps promising us growth, but it turns out that "growth" is mainly for them, i.e. for the 3 million (and indeed mainly for about 100,000 within the 3 million).
Those 3 million are a new aristocracy, lords of the economy, who reward each other with tens of millions in bonuses for ceremonial reasons that have nothing to do with the jobs they actually perform. Bush has been trying to make them a hereditary aristocracy by getting rid of the estate tax.
That is why banks are refusing the government bailout if it restricts the salaries of the top officers-- you don't mess with the feudal lord's prerogatives.
The enormous wealth of a thin sliver of people at the top of US society allows them to buy members of congress and to write the legislation that regulates their industries.
Congress capitulates to this 'regulatory capture' because its members have to buy hugely expensive television ads to remain competitive in elections. So they fundraise from the rich, and the rich have expectations (as Keating did of McCain).
These problems could be fixed with a graduated income tax and a closing of tax loopholes ( after we get out of the recession or crash or whatever this is); by legislation criminalizing regulatory capture; by requiring mass media to run political ads for free as a public service (the public owns the airwaves); and by much shortening the election season (please).
A lot of America's fiscal and educational problems were caused by congressionally mandated fixed sentences imposed on judges with regard to marijuana possession, as a sop to the New Puritans that make up 1/3 of the Republican Party. You have a lot of people serving 5 years in jail for having small amounts of pot. The states had to build new prisons to hold them all. They took the money out of the budget for higher education, abolishing the whole idea of state universities and causing tuitions to rise.
So you've got more ignorant people (because people can't afford even "state" college), and fewer high-tech firms are founded; and you're feeding and housing large numbers of harmless potheads with your tax dollars instead. The US maintains a vast gulag of nearly 2 million prisoners, putting us in the same league as Putin's Russia. No country in Western Europe incarcerates a similar proportion of its population.
Mexico's president wants to decriminalize the possession of small amounts of drugs such as marijuana, cocaine and heroin for personal use, though an arrest on possession charges would require entry into a program to kick addiction.
Decriminalizing possession of small amounts of drugs; decriminalizing marijuana altogether (and taxing the resulting industry); removing mandatory federal sentencing requirements; and letting states go back to educating their children instead of putting millions in jail; would solve another big batch of America's problems.
So there you have it. Abolish puritanism in government policy; go back to using the government to regulate industries and finance and provide services; and fight terrorism with better public diplomacy and better police work instead of with militarization-- and you might get out of this thing intact.
posted by Juan Cole @ 10/15/2008 01:23:00 AM
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36 Comments:
I completely agree with you that most corporations in the US don't pay any income taxes. I have read the same thing at lots of places. But I don’t understand that when this is so clear then why someone does not take a serious step against it?
This is about as good and succinct a description of the American political-economic predicament -- and how to get out of it -- as I have seen.
Thank you for putting it all together so succinctly. I knew all of this but had not formed the whole picture this way.
Very good suggestions, Juan. This plutocracy and their dreams of American hegemony are literally killing us.
I can attest to the gulag state of America. In my city, a new multimillion dollar jail was approved and erected in record time, while the most crowded school district in the state was left to rot, with plans for a much needed new school thrown in the trash due to budget considerations.
And the Pentagon want ANOTHER half trillion dollar increase to their unchecked budget!
I think the government is going to have to do more than just provide regulation and other services for a while.
We are going to need significant government spending to turn the economy around and replace infrastructure.
Of course, the Republicans are already trying to frame the debate in terms of an out of control Democratic Congress and President and the "loss" of the Middle East, hoping for a comeback in 2010 or 2012.
Mr. Cole,
This is just a fan's comment. I've been reading your column daily since shortly after the Iraq War (the 2nd) and you have been a steady source of information and insight.
Thanks for today's fine recap of the situation in America. We need more of this kind of perspective.
I appreciate your patriotism, sir.
If this really is the end of Reaganism, and right now it really seems to be, then good riddance, and it couldn't have happened too soon for me for this nasty, damaging, vile political movement.
Well said, Professor Cole. Do you think President Obama will have the will, the grit and the power to start the process of unraveling this mess?
Abolish puritanism in government policy; go back to using the government to regulate industries and finance and provide services; and fight terrorism with better public diplomacy and better police work instead of with militarization-- and you might get out of this thing intact.
Unfortunately the MOB is unanimously opposed to your suggestions. McCain-Obama-Bush are pledged to delivering for Wall Street and the Military. The Duopoly is The Right. The Demoblicans have morphed into the Republicrats over the past three decades.
To implement your suggestions we will all have to vote Nader/Gonzalez.
Or McKinney/Clemente.
I have mo problems there, but I'm afraid most folks are following the pied piper. And he's leading the poor children of Hamlin around in circles, following the rats.
Thanks for that, Juan! A great blast, and it's probably all true.
As a seventy+ yo long time recreational user of marijuana, I would like to endorse this article by Prof. Cole.
While not an American, I have felt the wrath of America's illegalise marijuana policy, even 10,000 miles across the sea, it seeks out and persecutes people for possesing a home grown weed.
Sleepers awake, I say.
r
So when is a credible candidate and party going to run on this platform in the US?
That's fine Juan. Everything you say is true. I saw the fallacy of Reagans (666) "Vacuum Up" economics when he was President. When I told people what was going
on they thought I was nuts.
I also told people about the rise of the "Moral Majority" twenty years ago. They thought I was nuts.
I also told people about the Right Wing Conservatives gaining control of the Main Stream Media. They thought I was nuts.
You see Juan, the problem is not that I am nuts (or you are nuts) the problem is the American people are just plain STUPID!
And there isn't a damn thing you or I or anyone else can do about that.
I should add that when I tell people that the American people are STUPID they think I'm nuts. When you tell stupid people the truth they think you're nuts.
A nice high altitude overview correctly (in my view) setting the origins of our present situation into the lap of Mr. Reagan, his cronies, and their simple greed. The first seismic rumblings of our current dilemma were the savings & loan scandals of the mid to late 1980s.
Fodder for another article might be the deregulation of the credit card industry the consequences of which are yet another shoe to be dropped.
p.
Perfessor, that's just crazy talk. Decriminalizing pot would destroy our billion dollar liquor industry. Liquor is about the only thing we still make in America and export, along with cigarettes and weapons.
But I suppose you could argue that all the prison guards you'd put out of work could go back to farming, only they'd be farming cannibis and hemp, and with all the hemp they could farm, that would cut down on our oil imports, which would harm the oil industry and we can't have that!!!!
Another brilliant post, Professor Cole. It blows my mind the extent to which both federal and state governments invest in drug prohibition policies, many of which are inherently discriminatory (whether by race or by socio-economic status is debatable). Possession of pot is a victimless crime yet the government spends endless amounts of taxpayer dollars to incarcerate people when there really is no positive net social benefit to doing so.
We are a country in recession that desperately needs new sources of cash flow and new industries to funnel that cash through. Many lawmakers would be hard pressed to come up with many viable industries to open when in fact, staring them right in the face, is the black market marijuana industry, which by all accounts continues to thrive even through tough times. The country would be well served by a regulated pot industry where revenues are taxed, and the product itself is much safer as it is regulated and much less likely to be laced with other drugs.
Thanks for all the great work you do here.
It's hard to summarize the vast milleu the US has acquired in the last 60 years, but you grasp that task well.
I don't think there will be some way to cushion the collapse of the American Empire though. I wholeheartedly agree with your drug/education proposals, and certainly the US public needs to mature out of the Puritanical values of the past into accepting that we are a unique melting pot nation unlike any other. We can't use the same governmental structure that's developed in the 20th Century to impose regulation of commerce and deliver services. We have to base our work with each other on the sharing of resources, sharing knowledge, sharing with equality and modesty. We must turn our governmental effort around to eliminate the bias to the individual (as that is embedded in our Constitution), aim effort to the good of the group, and pour our resources into a green economy.
A bottom line for me is saving the planet's ecosystem from the destruction of global warming and pollution. We can squabble forever about cushioning the fall of capitalism, but immediately, not eventually, we must deal with our toxic and overheating environment, else there will be a cataclysmic change on the surface of the planet which will kill us off. I don't want to believe that's our destiny. No "god" will save us from ourselves; we must make the effort ourselves, and take responsibility for ourselves.
You are absolutely correct and if you want to read one of the very best and most intelligent commentators on the background to our current economic mess read Robert Kuttner's "The Squandering of America: How the Failure of Our Politics undermines Our Prosperity" (2007).
Well said.
Did you know (Krugman posted this on his blog) that Henry Paulson was an assistant to John Erlichman during the Nixon Administration?
It comes full circle.
This is very good.
You surprise me Juan. You are covering more ground and becomming a social commentator and I like it.
We have just lost a progressive state govt here in West Australia. Our local paper and even the local state radio are run by conservatives and the new premier though a liberal by conservative standars is threatening to undo much of the good work of the past decade. It is such a shame. Our last premier was a man of the people. He would catch the train to the footy and sit amongst the riff raff and even rejected the overly generous superanuation package. He oposed uranium, helped introduce decent drug and prostitution and other social laws etc and had a more reasonable attitude to the plight of the Aboriginal people. Maybe he was too much of a threat! Money talks loudly.
Keep up the good work.
JC!
I think this is one of your best pieces of work!
Excellent
Thanks for all you do
Don't compare the U.S. to Russia. Russia doesn't deserve it.
http://www.correctionalnews.com/ME2/Audiences/dirmod.asp?sid=0315B589110D4028BBED4AD769F24FF6&nm=News&type=news&mod=News&mid=9A02E3B96F2A415ABC72CB5F516B4C10&tier=3&nid=B14DDB4C169F46B99E0DAAFF3CA47AEA
WASHINGTON — For the first time in history more than 1 percent of adults in the United States are locked away in jail or prison, according to a Pew Charitable Trusts report.
By the close of 2007, one in every 99.1 adults — more than 2.3 million people — were held in federal and state detention facilities, according to the report produced by the Pew Center on the States’ Public Safety Performance Project.
During 2007, the U.S. prison population increased by more than 25,000 inmates to almost 1.6 million inmates, marking a 1.6 percent increase over the 2006 level, according to the report. The prison population experienced a 3.1 percent increase during 2006.
Local jails throughout the United States held 723,131 inmates at the end of 2007, according to the report. The United States leads the world in incarceration ahead of the more populous China, which has 1.5 million people incarcerated, and Russia, which holds 890,000 people behind bars.
The United States also leads the world in the number of inmates per capita, with 750 inmates per 100,000 residents, according to the report. Second-placed Russia is the leading European country in inmates per capita with 628 per 100,000 residents. In Germany, 93 people per 100,000 residents are incarcerated.
Umm, didn't "using the government to regulate industries and finance and provide services" lead to this problem in the first place? I thought the government was already supposed to regulate the financial industry. The plain truth is that the government failed. In fact, it will fail again, and again, and again until you realize that the government (I will include the Fed because they are too intertwined in the government) has no idea what they're doing.
This recession is the result of speculative buying (rising housing prices) which arose from excess capital and the government-banking complex (this is my term to refer to the system we have) lowering interest rates too low in 2001-2003 while targeting housing.
If you want to fix this problem then get rid of the monopoly privilege that the Federal Reserve has over money. Its obviously clear no one in our government knows what they're doing so let the free market give it a go and see if they can come up with something better.
Yes! Righteous Anger. The amount of anger and alienation present in the populace is rising. John Francis Lee's and others's critiques of Obama's right-of-centerness is well founded, but I think it a mistake to condemn those who see him as a changemaker.
The changes you prescribe, and I endorse, are cultural. And such shifts in such a deeply normative society like the USA will be as slow as molasses unless something radical occurs. Myself and others see the movement for change as a separate phenomenon that currently supports Obama, but is not in any way owned by him. Equally important as at least some measure of change in the executive is the change in Congress's chemistry as more progressives replace incumbent reactionaries. Historically, economic depressions have fueled cultural and political change in the USA as the class war impacts a much larger percentage of people than usual. But we must understand that the current and future struggle will be a marathon against well entrenched institutions that still wield considerable power and will fight any change in the status quo with all their might.
And as much as it hurts, the financial unraveling must be welcomed as it has the potential to become the radical event that will increase the speed of cultural change. What it has provided is one of the rare openings for a populist-participatory democracy moment, which must be fully and rapidly exploited. We must be openly honest with our anger and widely share it, as many will share that anger but not know that others feel similarly. But beyond our anger we must have a ready list of proposals invoking systemic change that provides a solution, or, as with Global warming and Peak Oil, a path toward mitigation. And whatever November's outcome, we must not relent. Indeed, the holiday season should find us planning with our friends and families the escalation in political pressure that will facilitate the pace of cultural change, and begin to apply that pressure as forcefully as possible starting January 20, 2009.
Mr Cole,
I have very deep respect for your opinions and for your expertise, and I want to start my (first!) comment by thanking you for blogging about otherwise ignored issues and lending your expert analysis to the unwashed masses.
I want to take issue with the claim that most corperation in the US do not pay an income tax. It is important to remember that you only pay an income tax on income, and for a corperation that means profits. Because we are so used to seeing only the big successful corperations, the Wal-Marts and the Targets and so on, we forget about the hundreds of thousands of smaller corperations that are not yet in the black, and even the one-mighty corperate giants like GM, and Ford who haven't posted a profit in years. None of these people pay an income tax, because none of them make an income! There is a reason the GAO study, "did not name names".
As a published acedemic, you should have red flags going up like crazy about any methodology that does not clearly specify the sample groups.
The Government tells us weed is the gateway drug to heroin though even its true path is to increased Doritos consumption.
Do not forget the financial that Hemp production could bring to our economy as well, especially in poor rural Appalachia.
On our penal system: we have for-profit prisons that are traded on the stock market . . .
«The Republican Party that Nixon invented melded the moneyed classes of the Northeast with the white evangelicals of the South.»
I would add (like the book "The Right Nation" does) the moneyed classes of the West, whose interests are not always those of the Northeast ones, but they can do deals.
Ari Fleischer on The Daily Show last night rolled out the latest GOP meme by calling Obama's tax plan a massive redistribution of wealth. Stewart did not press him on the growing divide between rich and poor over the last 8 years. I guess socialism is redistribution of wealth from the rich to the poor, while capitalism is redistribution of wealth from the poor and middle class to the rich.
Professor, your succinct analysis is so good .... I'm actually going to print it on vellum, in script, of course, and frame it. If you don't mind though, a few details about the current mess could be added.
There are a few changes we need right now, and I mean starting this week.
The credit crisis has made housing unaffordable. This must be fixed. We must find a way to return to realistically valued houses and to make it possible for people to stay in their own home, James Kunstler not withstanding, which means that peak oil is one of two root causes, the other being loss of manufacturing capability.
We need to begin to restore our manufacturing capability. Obama's plan for education is a good start, and necessary, but it will take a while. More needs to be done now.
Education must be taken away from the 'no child left behind' scheme to privatize some schools, and returned to a profession.
We badly need infrastructure improvements, but only in places where there is hope for future communities. (Peak oil, global warming.)
Good luck Senator Obama on your quest for the presidency, and good luck Senator McCain on your quest to return from a failed campaign.
1) Reagan did not cut taxes. Please study the history of the Alternative Minimum Tax and tell me he cut taxes. See Tax Reform Act of 1986 for a shocker. BTW, under Carter the system of loop holes resulted in rather obscene negative tax rates on the rich.
2) The welfare state does not help rural as people much as they have fewer social problems. The only programs that get them money are farm programs, and military spending. I would prefer just sending them a check, in exchange I could buy gas without ethanol in it, but I know the stars will never align.
That is the problem with your welfare state ideas, too many rural people. You need to get them some cash or they will not vote for you.
Excellent-you have summed up exactly what has happened over the last 30 to 35 years.
Ha ha ha ha! I like what Jeff says. Thanks.
Booze is a drug. Probably the oldest narcotic humanity has used. Certainly the most prevalent over the centuries. The Republicans and religious moralists don't make alcohol illegal because it's their drug of choice.
I know they unsuccessfully tried to make alcohol consumption illegal during the prohibition but that doesn't make it any less of a drug.
I loved the neo-Medicis part. It's just genius...
Prof. Cole speaks truth to power persuasively. I hate to quibble with such an accurate and hard-hitting argument, but I must raise two points. First, I see in this piece no mention of the Clinton administration, which, in the name of "triangulation," pretty much accepted and carried forward the pro-business, anti-egalitarian trends begun during the Reagan era. Second, I am glad the current election season has run as long as it has, for it has served a remarkably positive purpose: preparing white Americans for the possibility of leadership by a black man.
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