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.