Part Three: Why No Outrage?

In this call to Action, the last of three blogs based on Dr. George Yates' lecture, The Political Power of BIG MONEY in America, I am encouraged to remember to whom he was speaking. On April 28, this address was presented to a group of seniors in Western North Carolina who call themselves "Elders United for a Just Society," who "refuse to retire from what matters." I am also mindful of the "emeritus" in Dr. Yates title. Every age group and socio-economic group has a huge stake in the 2012 elections, and I'm glad to hear about seniors who are not about "to retire from what matters." These folks in North Carolina are examples we would do well to follow. Thank you, Dr. Yates!

Why hasn’t the American public risen up in outrage about this tacit agreement between the rich and the TPR?  The answer is that Americans are legendary in terms of their passive unwillingness to take the effort to inform themselves of the facts.  This leaves the public wide open to the influence of propaganda paid for by the rich and implemented by the TPR.  And that is why there has been so little negative public reaction to the Supreme Court’s ‘Citizens United’ decision.  This decision has made unlimited amounts of corporate money, and a comparative trickle of union money, available to finance elections. 

The Role of the Supreme Court

‘Citizens United’ is a 2010 Supreme Court ruling by its 5 member conservative majority that relies on an interpretation of the Constitution’s 1st Amendment ‘free speech’ clause.  The decision invalidated the portion of the 2002 McCain-Feingold campaign law that strictly limited the amount of political contributions corporations could make.  What was the objective of the Supreme Court’s conservative majority? 

Extrapolation from the public record of statements and decisions strongly supports the conclusion that the Supreme Court’s conservative majority objective was based on ideology, and not the constitution.  Those justices knew that since corporations have no brains, all political contribution decisions are made by the senior managers.  Apparently, the objective was to allow the corporations’ senior managers, who are also primarily conservative, to use as much of the corporations’ funds as they wanted to pursue their political agenda – which includes more tax cuts and loopholes for the rich.  And those justices were also well aware that a lot of that additional corporate money would fund the TPR propaganda mill that so effectively influences the voters, thereby enabling the imposition of TPR ideology on the U.S.

Further, the Supreme Court conservative majority did not revoke existing regulations that allowed corporations to make very limited political contributions to ‘front’ entities, such as non-profit groups like the U.S. Chamber of Commerce or 501(c)3 or (c) 4 private ‘committees’, while allowing the contributors to remain anonymous.  Thus, the senior managers can conceal their now unlimited spending of corporate funds to further the TPR’s objective, and also obtain more wealth for the rich.  Certainly precedent wasn’t considered, because over 100 years of diametrically opposed Supreme Court decisions were ignored. 

As a final demonstration that the entire ‘Citizens United” decision was completely ideological, the Supreme Court’s conservative majority specifically stated, without providing any evidence whatsoever, that unlimited campaign contributions by corporations would not cause political corruption.  If that were indeed true, then why would the corporations want their identities concealed?  Because they are well aware that obtaining favorable legislation for the rich through large contributions to politicians can easily be construed as bribery, or at the very least manifestly bad behavior.

What makes these political contributions so effective?  The reality is that vast amounts of money are a political necessity given the strong correlation between how much a politician spends on an election and winning it.  To ensure an uninterrupted flow of ‘big’ money, all politicians have no choice but to compromise their ethics. (Lecturer’s note:  Cecil Bothwell is one of the few exceptions to this statement).  But the TPR politicians’ ethics are particularly limited because they have to vote as they are told to by the ‘front’ entities and the corporations’ senior managers.  Otherwise, they won’t get TPR money and will most probably lose their next election.  Of course, politicians insist their virtue cannot be questioned because this flood of money does not in any way – not even to the slightest degree – influence their legislative decisions. 

Ryan Plan: A Case in Point

Well, here is a very recent example of how ‘Citizens United” has changed America’s politics.  In this year’s Wisconsin State Supreme Court election between a conservative candidate who supported the TPR policies of Gov. Walker and a liberal candidate who did not, the conservatives outspent the liberals by nearly 2 to 1.   In fact, $3.6 million was spent primarily on TV propaganda ads.  Now keep in mind – this was just for one judge in one state.  And who won?  The money contributed by the rich.

But we have only begun to experience the negative consequences of ‘Citizens United’.  Given the TPR ideology, the U.S. will in the future be besieged by too often irrational and counterproductive policies and legislation. An excellent example of that behavior is the Republicans’ 10 year budget for the U.S. government presented on April 5, 2011.  Known as the ‘Ryan plan’ for the chair of the House of Representatives’ Budget Committee, its fiscal projections are based on the results of a purported ‘analysis’ by the Heritage Foundation, a conservative organization. 

The irrationality of the Ryan plan is established at the outset by the Heritage Foundation’s assertion that $4.2 trillion in tax cuts, inordinately benefiting the rich, would cause a gigantic increase in GDP.   According to its ‘analysis’, which would result in an increase of almost $600 billion in federal tax revenue over the next 10 years.  Meanwhile, the Ryan plan cuts government spending over the next decade by $4.3 trillion.  This includes: 1. Abolishing Medicare and replacing it with fixed value vouchers to buy private health insurance; 2. Replacing Medicaid with fixed amount grants to the states to use as they wish; and 3. Cutting ‘discretionary’ spending by $1.6 trillion. And 2/3rd of those spending cuts come directly out of programs that serve low and middle income Americans.

Of course, the Ryan plan is just trickle down economics, which has already been irrefutably proved to have no redeeming features for our nation.  No wonder the non-partisan CBO’s analysis of the Ryan plan comes up with a significantly different outcome.  It estimates that in 2022 the value of the annual health insurance voucher will be $6,400 to $7,000 less than that required to obtain comparable annual coverage under traditional Medicare.  Overall, the CBO finds that in the next 10 years the Ryan plan will lead to more federal debt than under current law.  And the non-partisan Tax Policy Center estimates the $4.2 trillion in tax cuts, primarily for the rich, will reduce federal revenue by $2.9 trillion over the next decade.  In short, the Ryan plan would be an economic catastrophe – except for the rich and the TPR.

However, the most significant aspect of the Ryan plan is that it demonstrates how smoothly the tacit agreement between the rich and the TPR is working.  Both groups’ objectives would be fully achieved if the Ryan plan were to actually become the road map for the next 10 years of annual budgets.  At this point that does not appear to be possible, yet it would be a horrible mistake to underestimate the power of ideology and greed.

What's To Be Done?

How can rational and concerned Americans combat this tacit agreement between the rich and the TPR?  Well, in a democracy the vote is the supreme weapon.  But the 2010 election demonstrated the voting power a minority party, in this case the TPR, can exercise in a democracy if it is organized, dedicated and well-funded by ‘front’ organizations.  That’s because many Americans just don’t want to be bothered with registering to vote.  And many more who are registered are not motivated to vote. Perhaps most tragically, many of those Americans who are both registered and willing to vote have no knowledge of the pertinent facts, and so they depend upon electoral propaganda – much of which is provided by the TPR using money contributed by the rich.

Ultimately, the responsibility for defeating the TPR at the polls lies with the Democratic Party.  However, to do that the Democratic Party must dramatically change.  It has to: 
1. Promote unity within and between its ranks and its leadership;
2. Propose policies that possess credibility and vision for America;
3. Possess the courage to bluntly explain to Americans why both the greed of the rich and the TPR ideological policies are harmful to them and their nation;
4. Assert an aggressive posture that boldly sets forth the critical political issues instead of meekly allowing the TPR to continue taking the lead, and
5. Be led by compelling leaders who can energize the voters by speaking the truth. 

At this time I don’t know if the Democrats are capable of meeting those requirements, but I remain hopeful.

I’ll conclude my comments with two pertinent TPR insights.  The first is the comedian Lily Tomlin’s description of the difficulty informed Americans have in reacting to the TPR’s ideological statements:

“I try to be sufficiently cynical, but it’s hard to keep up”

The second is Mark Twain’s satirical comment that precisely describes the TPR’s ideological attitude toward the truth.

“Truth is very precious, use it sparingly”.

- Dr. George C. Yates

Part Two: The Super Rich and TPRs United

In the introduction to his lecture, The Political Power of BIG MONEY in America, which we posted as the first in a three-part series, Dr. Yates described our current economic reality:

1. 5% of the U.S. citizens own 65% of the nation’s wealth.

2. Middle and low income citizens have not profited (and most have lost) from the increases in the GDP.

3. The U.S. has one of the most inequitable distributions of wealth among the 27 largest industrial nations.

4. The U.S. has the most limited upward income mobility from one generation to the next of all those 27 nations.

After fact-checking Dr. Yates' data and finding it confirmed by credible sources, I believe his description is accurate and comprises a reality that would be stunning to most citizens. Dr. Yates is not alone in painting this picture, but it is a reality rarely seen and heard in our mass media.

In the second of the series from the lecture, Dr. Yates lays bare the myth of “trickle-down economics” and explains the politics of it as well.

What has enabled the rich to enjoy such an immense increase in their wealth over the last 30 years? A primary contributor is a strategy called ‘trickle down’ economics, which provides large tax cuts and an array of tax loopholes that disproportionately benefit the rich. Trickle-down economics was first instituted by Reagan and then used by Bush I and Bush II. This strategy has given the rich a form of the Midas touch – but rather than turn things into gold, they turn high nominal tax rates into low effective tax rates.

In fact, during the last 10 years the wealthiest 5% of individuals received tax savings of $1 trillion from Bush II’s trickle-down economics, enabling that wealthiest 5% to acquire more than 65% of America’s total family assets. How much do you think the bottom 50% of Americans own? Just 2%. Clearly, the TPR has devised an incredible strategy to reward the rich, and has thereby successfully fulfilled its half of their tacit agreement.

And how does the TPR justify this blatant strategy of greed? It’s not a problem, as long as you are comfortable with ignoring the facts. This is the TPR’s justification. “The tax cuts provided primarily to the rich are actually only the 1st phase of a 4 phase process. In the 2nd phase, the rich invest most of the additional cash provided by the large tax cuts in productive business assets. Then those investments ‘trickle down’ during the 3rd phase, causing robust growth of GDP, and thereby also reducing federal debt. The ‘payoff’ is in the 4th phase, when the other 95% of Americans receive higher incomes due to the more robust economy.”

Well, during the 20 years that trickle-down economics has been used, only the 1st phase – where the top 5% have had their taxes greatly reduced and their loopholes greatly enlarged – has ever been realized. So trickle down works just fine – if you are one of the rich. Otherwise, federal government data conclusively demonstrate the only economic result of the first phase tax cuts has been to cause a very, very large increase in U.S debt.

The TPR has used obfuscation to conceal that inconvenient fact. Here is an example. Last December a TPR U.S. Senator proudly justified the 2 year extension of tax cuts and loopholes for the rich by stating: “You should never have to offset the cost of a deliberate decision to reduce tax rates on Americans”. I think the following observation by Winston Churchill regarding the behavior of ideological politicians best enables you to appreciate the irrationality of that statement:

“(The ideologists) run the risk of being most humorous when they wish to be most serious”.

However, the TPR’s political hypocrisy has recently caused the rich to become concerned. Every objective economic study has determined that to eliminate annual deficits, one necessary action is to require the ‘rich’, and the middle class, to contribute their fair shares to government revenues by paying more income taxes.

Well, the foregoing describes how the rich have used the TPR to greatly magnify their wealth, and to concurrently gain greater control of America over the last 30 years. But as I earlier noted, the objective of the TPR is also to gain national control. Aren’t the two groups’ objectives in direct conflict? Not at all! The rich want economic control to obtain more wealth, while the TPR wants political control to impose its ideological principles.

What is an ideology? It is a belief system that exists within its own specifically defined reality that often differs from real world reality. The belief system typically relies on dogmatic principles, including an ethical system whose truth cannot be questioned. Thus, followers of an ideology are ‘true believers’ because they are convinced their dogmatic principles are infallibly correct. That’s why they tend to be intolerant of people or ideas that deviate from those principles. That is also why compromise is unacceptable – it requires deviation from those principles. Thomas Jefferson described a major deficiency common to all ideologists, including the TPR’s:

“He who knows best demonstrates how little he knows”.

A primary characteristic of an ideology’s defined reality is its reliance on irrationality. For example, a year ago TPR Representative Bachmann publicly stated that:

“We’re on to Obama’s gangster government. We need to take out some of these guys.”

Her office hurriedly issued a hilarious, but totally irrational, explanation that her words actually referred to a small business bill. But the joke in Woody Allen’s movie Annie Hall says it best:

“This guy goes to a psychiatrist and says, “My brother’s crazy, he thinks he’s a chicken”. The doctor replies, “You should put your brother in an institution.” And the guy says, “I would, but I need the eggs”.

So say good bye to rationality when discussing TPR principles.

The influence of the Tea Party ideology on American politics is far larger than the percentage of Americans who are actually dedicated TPR activists, for 3 reasons. First, the Tea Party’s successful co-optation of the Republican Party converted it into the TPR. Second, the TPR is intensely focused on enacting its ideological principles. This dedication explains its preference for irrational but simplistic and emotionally satisfying beliefs over objective facts. Third, the TPR’s ideological influence on American politics has been immensely increased by the flood of money from the rich. Thus, the rich have also totally fulfilled their half of the tacit agreement.

Ironically, the TPR advocacy of greater tax cuts for the rich is another perfect example of total irrationality. Why? Because most all TPR’s are in the middle income class! They don’t seem to realize that while the rich have prospered from trickle-down economics, their financial condition, like that of all other Americans, has diminished. Apparently, they don’t know that since 2002, the wealthiest 1% of Americans have received 2/3rd of all the growth in national income. Thus, the TPR’s have had to wrestle with the other 99% of Americans to try to get their share of the remaining 1/3rd of national income growth.

Nor do the TPR’s comprehend that at yearend 2010 the top 1% of Americans held about 36% of all national assets while the bottom 80%, which includes most all of the TPR’s, held just 16%. Further, the median household income in 2000 was about $52,000. This year, 2011, the median household income is estimated to be $49,300, adjusted for inflation. That is a decrease in spendable income over the last 12 years of 5%. So the TPR’s have seen their living standards diminish just like the rest of Americans. In short, they are happily cutting their own financial throats to satisfy the rich. But that’s fine with them, because they are receiving the rich’s money to facilitate the imposition of TPR ideology on our nation.

- Dr. George C. Yates

The Political Power of BIG MONEY in America - Part One

This blog has a loyal following, but I doubt that few would be among the top 5% of the wealthy in this country. I would hazard a guess that while this country’s GDP has increased 2 to 3 percent a year since 2002, most of you have seen no increase in your family’s income and maybe have watched it decline. You may even be wondering why recovery of employment from the Great Recession of 2008 is so slow and tentative.

An address by Dr. George C. Yates a few weeks ago offered such clarity to what has happened that I want to share it with you.

Dr. Yates is Associate Professor Emeritus in the Management and Accountancy Department at U.N.C. Asheville. George Yates' particular scholarly interest is Strategic and International Management, and he has extensive business experience across the globe.

He has kindly given me permission to post his lecture. Although separated into a series of three posts, I have kept his lecture in the order in which he delivered it. By dividing it this way, I hope you will be able to focus on it in manageable “chunks”. If any of you are impatient with having it presented over a three day period, send me a note and I’ll send you the lecture all in one piece.

One of Dr. Yates’ themes is the persistence of irrationality in U.S. political discussion. That’s why when a friend in North Carolina sent me the speech the subject line said, “Please Read (I don’t ask that too often).” And now I ask you to do the same. And if what Dr. Yates says makes sense to you, please send links to whoever you think will read it.

I begin with these words:

“Our country is divided into 2 nations, between whom there is no contact and no sympathy, which are as ignorant of each other’s habits, thoughts and feelings as if they were inhabitants of different worlds”.

That’s certainly an accurate description of the effects of America’s political polarization today. Yet these are the words the famous early 19th century British Prime Minister, Benjamin Disraeli, used to describe British society’s polarization between the small, rich upper class and everyone else. I cite this quote to put into perspective America’s current situation. While our nation is suffering from an unusually intense polarized society, the condition has been experienced before.

However, the unique aspect of America’s current version of polarization is that it features a very effective and mutually beneficial, “you scratch my back and I’ll scratch yours” type of tacit agreement between the rich and the Tea Party co-opted Republicans – hereafter I’ll refer to that political grouping by its acronym ‘TPR’. The rich give the TPR unlimited amounts of money, thereby assisting the TPR’s objective of controlling the political system so it can impose its ideology on America. In return, the TPR enacts laws enabling the rich to become far richer. This tacit agreement hangs over our democracy like the sword of Damocles, and the hair holding that sword up is fraying badly.

How did America get itself into this democracy-endangering polarization? Well, a certain amount of the blame is attributable to the Democratic Party. In a 1936 speech to Parliament, Winston Churchill excoriated his own party’s failure to take a firm position against Nazi Germany. However, his words accurately describe the Democratic Party’s recent behavior: “We are decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, and all-powerful to be impotent.”

And the Democrat’s typical reaction to TPR policies can be aptly described in terms of its being a baseball team at bat. Most of the Democratic batters go to the plate, bat on shoulder, and then with open-mouthed amazement watch 3 TPR policy fast balls whiz past them. That’s called striking out. Do Democrats want to lose this crucial ballgame? Well, to win they must hit those pitches so hard the balls unravel; they must realize they are a team that has to work together or else be demoted to the minor leagues; and they must bluntly tell the American public everybody has to pay for a ticket to once again enjoy a winning economy.

Now I’ll define who America’s ‘rich’ are. They consist of corporations with equity of $200 million or more combined with the wealthiest 5% of individuals. Actually, corporations and wealthy individuals are one and the same. Why? Because corporations can’t do anything – they are just legal fictions. The senior managers determine all of a corporation’s policies and make all of its critical decisions, including how to allocate its profits – generally to themselves and their fellow rich. Since the wealthiest 5% own over 65% of the nation’s common stock, it’s understandable that they receive over 60% of annual corporate dividends and capital gains paid in the U.S. So when large corporations do well, the rich do even better.

Here is an example of that symbiotic relationship. Over the last 9 years America’s productivity has annually increased on average by 2% to 3%. Yet American workers have received no increased benefits from their increased productivity. Why not? Because most all of the income attributable to that growth in productivity has been retained by the corporations’ senior managers and paid to its shareholders. That is why the earnings of middle and lower class workers today make up the smallest percentage of GDP since such data were first recorded in 1929!

Meanwhile, the TPR constantly endeavors to further cut taxes and increase tax loopholes for the rich, asserting they now pay unfairly high taxes. This is false. The World Bank reported that for the 20 most industrialized nations, the 2008 total effective income tax rate for U.S. corporations was lower than 2/3rd of those 20 nations. Clearly, corporations are being treated very fairly. And for the year 2007, the latest data available, the nation’s 400 highest gross income taxpayers paid an effective average income tax rate of about 17%. In comparison, in 1995 their effective average income tax rate was about 30%. The wealthiest 5% of Americans have enjoyed comparable reductions in actual taxes paid, so they are also being treated very nicely. And that is why the U.S. now has the most inequitable distribution of wealth of the 27 largest industrialized nations.

Here is one result of that inequitable distribution. Which would you say is the best predictor of the future wealth a child will possess – diligence, intelligence, knowledge, or creativity? Well, those are all wrong choices, because the best predictor is the current wealth of that child’s parents. As a result, economic mobility in the U.S. has in recent years been significantly declining. In 2008, the median American worker 30 to 39 years old had an inflation-adjusted income that was 20% less than what a comparable worker made just 11 years ago. As a result, of the 27 largest industrialized nations, the U.S. now has the most limited upward income mobility from one generation to the next.

- Dr. George C. Yates

Look for Part Two on Monday: The Super Rich and Tea Party Republicans United