The Reason Our Tax Structure Could Lead to the Next Crash

Warning bells just keep getting louder and louder as the countdown to the Next Crash keeps ticking. Wall Street’s in denial—or possibly simply trying to make as much money as possible to stash offshore before the shit hits the fan–but the Washington Post warns: “U.S. economic growth slows to 0.2 percent, grinding nearly to a halt.” Earlier the Wall Street Journal warned, “Declining population could reduce global economic growth by 40%,” and of course there’s always the scapegoat of last resort, the “slow-growth Fed” was blamed.recession

Wrong. History, as well as REAL economists have argued for a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive. But for years the Fed has been pretty much the only game in town as far as economic policy goes….and monetary policy, which is decidedly less effective than fiscal policy, has done all it can.

Fiscal policy? Not a chance. While Europe and Asia blast ahead of the U.S. in education, infrastructure, broadband internet, etc., The GOP controls fiscal policy now that they have the Congressional majority, and even when they didn’t actually control it, they blocked every single attempt at meaningful growth-oriented policies with fear-mongering over the public debt. 

Stimulus measures that re-industrialize the country are shunted aside for more and more defense spending that we don’t use or don’t even work (i.e. F-35 Joint Striker Jet…$1.4 Trillion and it’s “functionally unoperational”…that’s almost as much spent on a piece of crap as spent on GWB’s Iraqi Occupation). I guess war and fear mongers figure spending more on new toys than the next eleven highest-spending countries wasn’t quite enough overkill. Hell, in for a penny in for a pound…bring back the draft! If you wanna be an American, prove it and serve instead of running your mouth about being a Patriot.

Social issues aside, to me, a strong economy where people have a decent shot at making a living income should be the priority. Ninety percent of Americans simply cannot comprehend that another Great Depression will devestate each and every one of them. 

“But Harvey”, people ask, “how do you explain unemployment being down and Wall Street being up if everything is so bad”?

It’s really pretty simple. The cost of borrowing money has been so low for so long, that investors have been able to do the one thing that heretofore has been reserved for the gambling-addicted…they have been gambling with almost free borrowed money. It’s turned the U.S. into a de-industrialized nation that consumes 65% of all dress shirts, televisions, phones, computers, etc. but no longer makes any of them within it massive borders. But be sure and run out and get that Apple Watch…how did you live without that shit?

We have made tax rates so low on gambling income (“capital investments” @ 15%) that people with real money have no reason to pump money into productive activities, because productive income is taxed at double the rate of passive income. That’s why tax cuts to the wealthy does not translate into stimulating job-growth…the wealthy simply take the gift of low taxes and gamble with it on the next big thing, or just stash it overseas (where it at least earns interest income) for when it all comes crashing down….and it will. Just like the crash came from an out-of-whack housing market…and the average citizen pays higher taxes resulting in no discretionary income to spend on things they want as opposed to things they need.

And the GOP will never give “growth-promoting fiscal policy” victories to President Obama and Hillary Clinton before the presidential election of 2016. Never. In spite of obviously rational solutions to the core problems of the American economy, solutions that would help the American people And economic stability, the GOP will never, ever agree to fiscal stimulus programs that give the Democrats bragging rights and make Obama and Clinton look good before the elections.

The GOP is hungry for power, very hungry. They lost the presidency twice to Obama and by gawd they want it back, no matter who gets hurt in the process, no matter what damage they do to democracy, no matter how many Americans go to sleep hungry.

Now, with the $889 million backing from the Koch Empire—via the activist Supreme Court’s unbelievably anti-democracy Citizen’s United ruling, they can beat Hillary and take absolute control of the American democracy: win the presidency, hold Congress, gain the power to issue executive orders, veto productive legislation, and appoint more than 6,000 insiders including cabinet officers, regulatory heads, federal judges, ambassadors, and staff bureaucrats. The GOP has been stacking the deck with voter suppression, gerrymandering, ALEC-sponsored legislation and they know all to well that all that power is on the line in 2016.

2016 looks and sounds more and more like McCain/Palin’s 2008 loss when the GOP was also deep in denial about the coming market crash. Money manager Jeremy Grantham’s predictions see beyond the Big Oil-funded GOP’s gross denial, he sees that “around the presidential election or soon after, the market bubble will burst, as bubbles always do, and will revert to its trend value, around half of its peak or worse.”

Yes, a crash of 20%–much worse than 2008 and 2000–with the Dow dropping below 10,000. No wonder our brains tune out. With the GOP in full deflection mode from FOX and the mainstream media talk intended to sell ads more and more of the shrinking middle class are sinking back into their couches and hanging on like grim death to what little they can.

Just as before the 2008 crash when George Bush’s Treasury Secretary Hank Paulson was telling Fortune, “this is far and away the strongest global economy I’ve seen in my business lifetime.” They don’t even know what’s coming but they can feel it down in their gut.

Later, after the crash, after running America’s monetary system 18 years, even former Fed Chairman Alan Greenspan finally admitted to Congress, “I really didn’t get it until very late.” Today, it’s even worse. With even fewer, yet bigger “Too Big to Fail” banks, it’s déjà vu all over again. With the GOP, Big Oil, the Kochs; as with Paulson, Greenspan, and to a lesser extent Bernanke earlier, none of them will “get it” intil it’s too late again. For power, they have sold their souls, and millions of American’s savings, dreams, and yes, lives.

Our only real hope is that people start listening more to their gut and less to FOX Noise. Optimistically, money from the Kochs, Sheldon Adelsons, Big Oil, can’t stop the coming archetypical shift in the global collective conscience — from the deranged pseudo-ideology of Ayn Rand, the pendulum is swinging to the Pope Francis’ “moral imperative.”

They’ve been subliminally attacking Pope Francis, worried about his historic papal declarations on “The Moral Imperatives of Global Climate Change Action” to be released next month, with its talking points on the sin of climate-science denialism.

Why so threatening? Because Pope Francis will deliver this historic message to a global audience in several historic speeches this fall: to the United Nations General Assembly, to a joint session of the U.S. Congress and to the World Meeting on Families in Philadelphia. All translated, reprinted and broadcast for billions.

Unfortunately for the GOP, the fossil-fuel industry recently exposed their overwhelming fear and resolve to combat Pope Francis, when the Koch-financed Heartland Institute went to Rome during the recent Papal Summit on Climate Change and taunted the pope for backing the United Nations “climate-communist science,” comparing the pope’s fight against global warming with the church’s charges of heresy against Galileo.

It’s pretty clear that if the GOP wins the presidential election in 2016, allowing even more stacking of the Supreme Court, our children, who have already witnessed the collapse of capitalism to corporatocracy, the collapse of democracy via Citizens United, and the collapse of investigative journalism, will also bear the brunt of the next economic crash…and it will be a doozy.

 

Harvey A. Gold