Wednesday, August 19, 2009

The Return of Feudalism in America

The attack on this public option is a serious and focused attack on the Middle Class in America.

Thom Hartmann reminds us that the rise of a middle class is not natural in a "free and unfettered" economy. It has happened accidentally, only a couple of other times in the history of the world.

  1. It happened after the plague, the black death because there was a sudden change in population and resources were then freed. The increasing demand for labor drove up the price of labor. Many historians, Thom reminds us, credit this emergence of a middle class with the Renaissance.
  2. 400 years later, when the wealth of America was "discovered" by Europeans, the increasing wealth balanced by a stable population produced a second middle class. This emerging middle class brought about the Enlightenment and the American Revolution.

As the population in America increased, pushing back the Native Americans into small "reservations", the middle class again decreased. At the time of the Republican Great Depression, President Franklin Roosevelt tackled the question for the first time, "How to create a middle class without killing off a third of the population, or discovering gold in a distant land?"

Previously, capitalism had been uncontrolled. He developed the controls that "saved American capitalism from itself."

The Wagner Act of 1935, mandated unions when 51% of the workers voted for them.

The Social Security Act (Act of August 14, 1935) [H. R. 7260]

An act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment compensation laws; to establish a Social Security Board; to raise revenue; and for other purposes.

Fair Labor Standards Act, 1938 - 2009 set a minimum wage and standards regarding overtime and child labor and record keeping.

He also instituted government employment through the WPA, CCC, etc. and invested money in roads, bridges, dams, hospitals and schools. These improvements on infrastructure are investments, and not simply expenses as are bombs and other munitions that disappear when used.

The Weimar-style Hyperinflaton, or The 2nd Great Depression:

Ronald Reagan came into office and set about undoing FDR's New Deal, and we have heard more about this from the right wing pundits. Rush Limbaugh never tires of saying, "Roosevelt is dead!"

Ronald Reagan began to lower income taxes, and he lowered the cost of government as well, but this practice was not followed by either of the Bush's. They continued to lower taxes while increasing costs. Borrowing from Saudi Arabia and China, rather than taxing Americans kept the costs of the wars against Iraq and Afghanistan hidden from the concerns of the American taxpayer.

If we look at this chart we can see that the height of the minimum wage in America was in 1968. Since then, we have had an almost steady decline in real wages due to inflation, and a lack of Congressional support for minimum wage increases. There was a recent increase in 2006 after the longest stagnant period since the first minimum wage.

The government is supposed to provide a stable currency to make markets possible. As the Weimar Government failed to do this, so the recent conservatives have failed. The court system should enforce the contracts that make markets possible. Yet, health insurance companies are allowed to rescind customers who develop any ongoing condition, without access to the courts. Congress was appalled during their testimony, but they refused to change their policies.

An educated workforce, through public education, should be able to travel to work on public roads, or over public bridges or through tunnels or on public railroads or buses. These costs have gone up, and the maintenance has gone down. There has not been a major improvement in the public transit system since, well, the 1950's.

If you Google "bridge collapse", there is the Tacoma collapse in 2006, the Indiana collapse in 2009, and the Minneapolis collapse in August 2007. That year, in April, Bob Herbert wrote for The New York Times that
President Truman had signed the Marshall Plan which rebuilt Europe. He pointed out at that time that a half century later, the US couldn't even rebuild New Orleans. He added that the American Society of Civil Engineers claimed that the US infrastructure was in such bad shape that it would take more than $1.5 trillion over a five year period to bring it back to reasonably adequate condition.
Obama's entire stimulus package was only $787 billion, and still the complaints are unrelenting.

New York City raised its own alarm in the 1970's when the West Side Highway, a raised highway in Manhattan collapsed. Afterwards, studies for the city showed that the entire highway system, the bridges, the drinking water system, and the subway system were all seriously and dangerously deteriorated. In the 1980's, iron workers attending to the Manhattan Bridge were given hazardous duty pay because the iron was so rusted in many areas that they could put a finger through the structural iron.

This has been an ongoing project in New York City, with the city absorbing most of the costs. Mr. Felix Rohatyn explains that
"Since the beginning of the republic," he said, "transportation, infrastructure and education have played a central role in advancing the American economy....Politics and ideology are the main reasons that government has turned away from public investment over the past several years. Zealots marching under the banner of small government have been remarkably effective in thwarting efforts to raise taxes or borrow substantial sums for the kind of public investment that has always been essential to a dynamic economy."
Meanwhile, Herbert points out, China and India are racing to develop the infrastructure and education optimal for competition in the contemporary world. Felix Rohatyn explains:
"It has been shown that the productivity of an economy is related to the quality of its infrastructure. For example, if you don't have enough schools to teach your kids, or your kids are taught in schools that have holes in the ceilings, that are dilapidated, they're not going to be as educated and as competitive in a world economy as they need to be."

The economic conservatives for 26 years have managed to undermine the middle class and to empower the wealthy elite while transferring from investment in infrastructure to expensing for war. Even the little bit that Obama scheduled for the infrastructure in his stimulus bill was attacked.

This is not new. Thomas Jefferson first warned of free market corporatists:
"Those seeking profits,were they given total freedom, would not be the ones to trust to keep government pure and our rights secure. Indeed, it has always been those seeking wealth who were the source of corruption in government....I am not among those who fear the people. They, and not the rich, are our dependence for continued freedom. ... We must make our election between economy and liberty, or profusion and servitude."

And, this is why the attacks on Obama and the "health care reform" are so poisonous.

Changing the Tax Structure:

Progressive taxation, was another part of FDR's stimulus plan -- giving workers more to spend and thus stimulating demand for goods and services. In this case, restoring the tax on the upper class in order to insure payment for the public option part of the health care reform, would give more to the middle class to spend.

It is not uncommon for a small business/entrepreneur to pay as much as $26,000/person/year for health insurance. This is the down payment on a house! What other uses would the middle class put this money to if not on health insurance?

As Jefferson said in a 1785 letter to James Madison, "Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise."

Thom Hartmann adds,
As Jefferson realized, and FDR proved, with no government "interference" by setting the rules of the game of business and fair taxation, there will be no middle class.

And as history around the world proves, when the middle class vanishes, democracy often goes with it.

Thom explains in another article : "The policies of "free and open markets" will naturally produce a small and powerful wealthy class, a small "middle" merchant class, and a huge and terrified worker class, traditionally called "serfs". A free market will create a "Dickens-era" state where the working poor are kept in constant fear and anxiety.

Aren't we approaching this today? In this time of recession, as the unemployment figures continue to climb, those yelling at the Town Hall meetings are afraid and angry. They just don't know why. They are not seeing that their real wages have been shrinking since 1968, but they are feeling the pressure.

Who is the REAL ENEMY?

They don't realize that the middle class is under attack when government began to renege on its function to set the rules of business:
in such a way that working people must receive a living wage, labor has the power to organize into unions just as capital can organize into corporations, and domestic industries are protected from overseas competition

Jefferson realized that a strong central Congress would be needed to help to regulate the commerce of the States. Meanwhile, conservatives then, as now, believed in the trickle down theory and that government was the problem not the solution.

Still, they can't explain why the series of tax cuts by the Hoover administration, preceded the Great Depression, and then raising taxes to provide for government intervention, and the protection of labor rights through the 1930's, 1940's and 1950's, led to a golden age for the American Middle Class.

In the 1930's the top tax rate was 25%, and before Reagan began to dismantle it, it held at 70% for decades. As the top tax rate fell, it caused bubbles (in the stock market and housing) and the middle class fell in proportion. It seems that tax cuts to the upper 10% harm our economy, while tax cuts to the bottom 25%, as Jefferson predicted, are good for the economy.

Between Lincoln's death, and the Great Depression, conservative economics and the Gilded Age brought about a return of feudalism, a disparity between those with great wealth and the growth of the working poor. It took 2 generations before Franklin Roosevelt returned to Lincoln's policy of protecting the rights of labor and the founders' tariffs to protect domestic industries and workers.

We must learn the lessons of the past. To do this, I think we have to listen to each other and stop listening to the corporate megaphone. We had a saying in the 1960's -- "Don't trust anyone over 30 years old." Today, I think we can change it a bit to "Don't trust anyone making over $1 million." These guys are not in the Middle Class, and it's not the Middle Class who are paying them. In other words, they do not share our interests or concerns!

  • Rush Limbaugh -- $400 million (More than Katie Couric, Brian Williams, Charlie Gibson and Diane Sawyer, combined!)
  • Glenn Beck -- $50 million over 5 years.
  • Howard Stern -- $500 million
  • Sean Hannity -- $100 million
  • Bill O'Reilly -- $9 million

We have a congress and a President who have taken on the $6 Trillion health insurance industry and are doing their best to give the American worker the health care we need at an affordable price. This is not a pretty fight.

Our government needs our help if they will be able to protect our interests.

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