Warm Southern Breeze

"… there is no such thing as nothing."

How did we ever get into the mess we’re now in?

Posted by Warm Southern Breeze on Tuesday, October 29, 2019

Democratic Presidential nominee candidates Senators Bernie Sanders (VT) and Elizabeth Warren (MA) continue to make the case that corporate America has harmed, and continues harming, the very field upon which they sow the seeds of their profit.

They further make the case that such governmentally-approved behavior is not merely injurious, but is unsustainable – if not fatal – to those same corporations, and ultimately, to the American economy upon which it feeds.

Citing examples of such greed and rapacious corporate profiteering by their über-wealthy owners and Wall Street overlords (to whom they are fiscally accountable and must share profits), and in conjunction with misguided Federal tax policy (led almost in whole part by Republicans), Senators Warren and Sanders show how overseas and foreign “outsourcing” – all in the name of increased corporate profits – have damaged average American families, including the cities, towns, and states wherein they reside, whom have all witnessed and suffered from wholesale corporate abandonment to foreign soil.

Slow learners are discovering that America’s narsicisstic wealthy “businessman” president – whom they elected, hoping he would be their knight in shining armor coming to their economic rescue – has also sold them out for his own self interests, exactly like his party’s predecessors. They were merely expendable pawns whom he deceived in his egocentric reality show/chess game. They’re merely the red-capped collateral damage in his monkey-business trade war.

Nowhere are the result of such policies more
plainly and painfully evident than in middle America,
where once-thriving factories have become hollowed-out shells

the veritable rotting skeletal corporate detritus which has
fostered and driven
the Opioid Epidemic in many states.

Once-renown industrial cities like Detroit, where the Big Three of the automobile industry – Ford, Chrysler, and General Motors – reigned since the early 1900’s, and supplied high-paying Labor Union wages with genuine, and significant healthcare and retirement benefits to generations of families. Children attended well-funded public schools, states and cities prospered, thrived and expanded exponentially. Teens who chose to attend college or university did so without incurring debt, and training for technically-skilled jobs and labor was supported by almost all secondary schools.

Then, as if seemingly unnoticed, small things began to change. It was if America’s hard-working men and women, and middle-class families had become the proverbial frogs in a pot of water, never noticing the water temperature was increasing, until they were boiled to death… while yet alive.

Life-saving medications like insulin for diabetics, antibiotics to treat and cure once-deadly infections, blood pressure medications which reduced strokes and many other hypertension-associated health problems, even the plastic bags which contained Normal Saline – typically given as adjunctive intravenous therapy in hospitals – began to be manufactured overseas, and along with it, came precipitous price hikes. So-called “pharma bros” took shockingly unjust and unimaginably avaricious pecuniary advantage of old-line medications – which had for years been off-patent – and jacked up their prices 5000%, or more, which placed them out of reach for many whose very lives depended upon them.

The giant, sloppy, wet kiss given to the Pharmaceutical Industry by Republicans under President George W. Bush in Medicare Part D didn’t help. Pharmaceutical companies were allowed to, and did, raise their prices, and Medicare – the single largest purchaser of medications in the world – was forbidden from negotiating for better, lower prices by that same law, which in turn, passed the price increases along to the insured, most of whom live on nominal, and fixed incomes.

Exorbitant pharmaceuticals hold patients hostage to disease,
as hapless physicians and feckless regulators are
paralyzed to become
Wall Street extortionists’ socioeconomic ransom.

The Supreme Court’s 2010 ruling in “Citizens United v. Federal Election Commission” which solidified corporate personhood, and essentially said that “money is free speech” has neither helped. For if money was free speech, then the poor man would have none (thus violating the Constitution’s Equal Protection clause of the 14th Amendment, and the First Amendment which guarantees Freedom of Speech), and our laws were, and are, written for all equally.

Neither has the subsequent 2014 Alabama case McCutcheon v. Federal Election Commission which “struck down the aggregate limits on the amount an individual may contribute during a two-year period to all federal candidates, parties and political action committees combined.” Essentially, unlimited amounts of money may now be spent on Federal political campaigns. And the ones with the deepest pockets are the wealthy, and their corporations.

But those two [in]famous SCOTUS cases were preceded by “Emily’s List v. Federal Election Commission” in 2009, in which unlimited donations were allowed to be made, thus creating Super PACs (Political Action Committees). The opinion of the three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit was written by a member judge named Brett Kavanaugh, who now sits on the Supreme Court, having been nominated by President Trump to fill the seat vacated by Justice Anthony Kennedy’s retirement – for whom he also clerked, alongside another now-SCOTUS Justice, Neil Gorsuch – who may best be known for his “Frozen Trucker” ruling on the United States Court of Appeals for the Tenth Circuit, in Denver, Colorado.

The uncannily ironic nature of their relationships are almost like getting “Free Swamp Refills at Deep State II with every GOP vote,”
which the President promised to drain.

Of course, it would also be hard to forget former Massachusetts Governor Mitt Romney who, during his campaign for the Republican presidential nomination, infamously said at the Iowa State Fair, Thursday, August 11, 2001, that “Corporations are people, my friend!” [See video at: 2:40]

But ultimately, it was on January 20th, 1981, when suddenly, seemingly out of nowhere, Americans were told that “government is the problem.”

Logically, however, if government is the problem, then the elimination of government is the solution. But the destruction and absence of government is called anarchy – hardly an idealistic, ivory-towered existence as the “free marketers” and GOP claim.

That marked the beginning of the so-called “Reagan Revolution,” when, led by a B-movie actor and Hollywood has-been who became president, taxes and civil society itself became marked for destruction. Couched in soothing terms, the siren songs he and Republicans like Speaker of the House Newt Gingrich (GA-6), and others, later including Senator Trent Lott (MS), et al., hypnotized America with the harmonious beauty of their message – lower taxes, less government.

According to the (false) assertion, if “government is the problem,” and the logical solution is the destruction of it, then the best way to accomplish that objective is to “starve the monster” – the monster being the United States government. Starvation is the elimination of food, and government feeds on tax revenue. So, the best way to accomplish that objective, is to reduce taxes.

So, in conjunction with tax reductions, it’s also necessary starve the agency that feeds the monster, and that agency is the Internal Revenue Service. It’s a winning combination with almost everyone, because, who enjoys paying taxes, right?

In 2013, Republicans slashed $600M from the IRS’ budget – in addition to two previous years’ cuts. In 2018, the IRS had 9,510 auditors, down 33% from 2010 – despite increased population growth. The last time the IRS has less than 10,000 Revenue Agents was in 1953, when the American economy was only 14% of its present size. And due to continued Republican budget slashing, not only are collections down, so is morale, while retirements are up, and replacements are highly doubtful.

Republicans have not been bashful about their utter hatred of the Internal Revenue Service, and “Abolish the IRS” remains a strong talking point with many GOPers.

Their desire to abolish it was formalized in 1996, when a respected mainstream Republican Senator from Indiana, Richard Lugar, campaigned for President on a platform of abolishing the IRS. In 1997, Republican Speaker of the House, Newt Gingrich, signed onto a petition to abolish the Tax Code. In 1998, another Republican Senator introduced a bill that would repeal the Internal Revenue Code by 2002. And in 2016, Texas’ Republican Senator Ted Cruz ran his presidential campaign upon the slogan “Abolish the IRS.”

And yet, as Supreme Court Justice Oliver Wendell Holmes wrote in part in his 1927 dissenting opinion in Compania General de Tabacos v. Collector, 275 U.S. 87 (1927)) that,

“It is true, as indicated in the last cited case, that every exaction of money for an act is a discouragement to the extent of the payment required, but that which, in its immediacy, is a discouragement may be part of an encouragement when seen in its organic connection with the whole. Taxes are what we pay for civilized society, including the chance to insure. A penalty, on the other hand, is intended altogether to prevent the thing punished. It readily may be seen that a state may tax things that, under the Constitution as interpreted, it cannot prevent.”

The tax cuts passed by the Bush II, Obama (which extended the Bush II tax cuts), and Trump administrations were championed by Republicans, who touted their ability to supercharge the economy. Instead, they have weakened the American Middle Class.

The Institute on Taxation and Economic Policy (ITEP) wrote this about their effect:

“Since 2000, tax cuts have reduced federal revenue by trillions of dollars and disproportionately benefited well-off households. From 2001 through 2018, significant federal tax changes have reduced revenue by $5.1 trillion, with nearly two-thirds of that flowing to the richest fifth of Americans, as illustrated in Figure 1.[1] The cumulative impact on the deficit during this period is $5.9 trillion, including interest payments.”

And, yet again, the progenitor of it all was President Ronald Reagan – who sold us a false bill of goods that, “government is the problem.”

Ronald Reagan signed the Economy Recovery Tax Act of 1981 – the largest tax cut in American history, and written by Republicans Jack Kemp, and William B. Roth – into law on August 13, 1981, which reduced the Personal Income Tax Rates upon the very wealthiest of Americans from 70% to 50% (but only from 14% to 11% for bottom taxpayers), repealed the Estate Tax (aka the “Paris Hilton Tax Cut”), the Trust Income Tax, and was all phased in over three years. Problems with the law were numerous. Interest rates skyrocketed from 12% to 20%, the Dow Jones Industrial Average lost nearly 30% by September 1982, and, the tax cuts didn’t “pay for themselves” (meaning that revenue losses would not be replaced, or offset by increased revenue from other aspects of the economy), which created an ENORMOUS national debt – in fact, it tripled America’s national deficit.

But while Reagan is praised by some for reducing taxes, few recall his tax increases, such the 1982 Tax Equity and Fiscal Responsibility Act, the 1983 Social Security Amendments, and the 1984 Deficit Reduction Act – all which were enacted to increase Federal revenue after it bottomed out because of his cuts. Yet even before his tax cuts were implemented, the Treasury Department had warned that a 9% revenue reduction would occur. Criticized for his “trickle down” “supply-side” theory of economics which later earned the moniker “Voodoo Economics,” Reagan’s budget cuts were a kick-the-can-down-the road promise, which only reduced projected spending, and were not not absolute cuts in current spending.

See Historical Tables page 22 of the Office of Management and Budget’s report from 1789 to 2024 (estimate) for Summary of Receipts, Outlays, and Surpluses of Deficits: https://www.whitehouse.gov/wp-content/uploads/2019/03/hist-fy2020.pdf

But, to be certain, it’s not just Democrats who see the inequity of the tax reduction problem clearly, and for what it is. Berkshire Hathaway CEO and billionaire Warren Buffett addressed the very problem in his 2003 Report to Shareholders (published in 2004). In part, he wrote that, ”

“I can understand why the Treasury is now frustrated with Corporate America and prone to outbursts. But it should look to Congress and the Administration for redress, not to Berkshire.

“Corporate income taxes in fiscal 2003 accounted for 7.4% of all federal tax receipts, down from a post-war peak of 32% in 1952. With one exception (1983), last year’s percentage is the lowest recorded since data was first published in 1934.

“Even so, tax breaks for corporations (and their investors, particularly large ones) were a major part of the Administration’s 2002 and 2003 initiatives. If class warfare is being waged in America, my class is clearly winning. [emphasis added, ed.] Today, many large corporations – run by CEOs whose fiddle-playing talents make your Chairman look like he is all thumbs – pay nothing close to the stated federal tax rate of 35%.

“In 1985, Berkshire paid $132 million in federal income taxes, and all corporations paid $61 billion. The comparable amounts in 1995 were $286 million and $157 billion respectively. And, as mentioned, we will pay about $3.3 billion for 2003, a year when all corporations paid $132 billion. We hope our taxes continue to rise in the future – it will mean we are prospering – but we also hope that the rest of Corporate America antes up along with us. This might be a project for Ms. Olson to work on.”

The report to shareholders is available here, in its entirety (which is very much worth reading), from the Berkshire Hathaway website.

Some criticize Senators Sanders and Warren, and castigate their observations and statements as either anti-American, or Socialist. Socialism, however, is when government controls the means -and- the method of production, and in America, there is no “government factory” – nor has there ever been. Even the currency and coinage in your pocket – which is printed and stamped by the United States Bureau of Engraving and Printing (a subsidiary division of the U.S. Department of the Treasury) – is not an example of the dreaded socialism.

Why not?

The presses which stamp the coinage, and print the currency, while owned by the United States government, are purchased from the Private Sector. The metals, inks, and paper used in the production of the same, are also publicly bid and obtained from the Private Sector.

Nothing which our United States government uses is made by the government. Not even the inkpens, reams of paper, copying machines, paperclips, military service members’ uniforms (nor any DoD item), nor the highly technical equipment used by NOAA, NASA, DARPA, ORNL, nor any other governmental department, agency, or bureau are made by the government. Every single, solitary item is ALL purchased from the Private Sector by publicly bid contract.

In this article by published in The Atlantic by Dr. , Ph.D., Professor of Finance at New York University, he makes the case that oligopolic trends (oligopoly exists when a few large businesses control a market or industry) in American business have harmed American consumers, and constrained the economy.

In essence, greed killed American enterprise.

“In my research on monopolization in the American economy, I estimate that the basket of goods and services consumed by a typical household in 2018 cost 5 to 10 percent more than it would have had competition remained as healthy as it was in 2000. Competitive prices would directly save at least $300 a month per household, translating to a nationwide annual household savings of about $600 billion.

“And this figure captures only half of the benefits that increased competition would bring. Competition boosts production, employment, and wages. When firms face competition in the marketplace, they also invest more, which drives up productivity and further increases wages. Indeed, my research indicates that private investment—broadly defined to include plants and equipment, as well as software, research and development, and intellectual property—has been surprisingly weak in recent years, despite low interest rates and record profits and stock prices. Monopoly profits do not translate into increased investment. Instead, just as economic theory predicts, they flow into dividends and share buybacks.

“Taking into account these indirect effects, I estimate that the gross domestic product of the United States would increase by almost $1 trillion and labor income by about $1.25 trillion if we could return to the levels of competition that prevailed circa 2000. Profits, on the other hand, would decrease by about $250 billion. Crucially, these figures combine large efficiency gains shared by all citizens with significant redistribution toward wage earners. The median household would earn a lot more in labor income and a bit less in dividends.”

See: https://www.theatlantic.com/ideas/archive/2019/10/europe-not-america-home-free-market/600859/

See also: https://www.hup.harvard.edu/catalog.php?isbn=9780674237544

One Response to “How did we ever get into the mess we’re now in?”

  1. […] https://warmsouthernbreeze.wordpress.com/2019/10/29/how-did-we-ever-get-into-the-mess-were-now-in/ […]


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