Last month some highly illuminating research was published among the Tulane University Economics Working Papers[*1]. The authors, James Alm and Janet Rogers, are respected experts in the neglected (by the public and legislators) field of tax policy outcomes. They undertook to systematically study the 48 contiguous U.S. States between 1947 and 1997, employing 130 explanatory variables, to find correlations between State tax and expenditures and long-term economic performance.
I was not surprised by the results. Those states that pursue Conservative fiscal policies, with overwhelming consistency, have the poorest economic performance. States with long-term Republican administrations consistently stagnate or under-perform economically. States that are not committed to Conservative orthodoxy are generally more successful in overall economic performance. Successful states, for example, have relatively high corporate taxes and higher taxes on upper brackets, while using that tax money to finance improvements in education, health care and public transportation. These investments repay handsomely in general economic health, just as a well-run shopping mall with good facilities, fixtures, security and ambiance will attract tenants at high rents. However, states that invest primarily in highways to the neglect of “social” investment do not share that kind of success. The greater their commitment to social equity, the more economically successful states are. Such policies do not, it has been demonstrated, generate any out-migration of entrepreneurial talent or wealthy taxpayers. The states with the least commitment to Conservative orthodoxy are in fact net generators of new millionaires [*2]. Equity was, after all, the key to America’s original success: rejecting aristocracy as the principle of social organization, it became the first land in which ordinary citizens prospered. After WWII, its prosperity “ran deep”, a fact that was not lost on the underclasses of the world, no matter how much their aristocratic intellectuals ranted against it. The United States manufactured the best products and dominated world industry precisely because it evolved an egalitarian ethos and a serious concern for the public interest, not because it gave tax breaks to billionaires. Every third-rate backward hell-hole in the world is very nice for its rich people.
But that aspect of the American spirit has been rejected and abandoned by the current generation. On the national level, the United States has been dominated by Conservative economic ideology since the “Reagan Revolution” of 1980. The result ― and in my view the Conservative agenda ― has been the destruction of the United States economy and the transfer of much of America’s wealth to the Communist Party, which now holds much of America’s bloated debt. Spectacular waste, spending and debt are the hallmarks of Conservative ascendency. The spending spree ― virtually all of it on non-productive activities ― began the second Reagan came into office and continued to accelerate in the Bush Sr. years. The Clinton hiatus saw some clawing back and greater fiscal restraint, but Clinton and his entourage were essentially converts to Conservative fiscal ideology (if not Conservative social ideology), and left most of the Reagan-Bush policies in place. Government spending was restrained, but Wall Street was left to itself to devise new frauds. Conservative icon Alan Greenspan — whose recent remarks reveal that he never bothered to read Adam Smith — remained in charge of the Federal Reserve. When Bush, Jr. came into power, the Commissars in the White House announced that “deficits don’t matter” and pursued destructive economic policies with a cavalier fanaticism surpassed only by the Soviets in the Brezhnev era. The results were, to put it simply, similar to the Soviet experience. The United States is now spiraling towards self-annihilation, and there is not much the current administration can do about it, even if it has any coherent economic doctrines to work with (which it doesn’t). Most of America’s manufacturing capacity has been destroyed. During the 1950’s and 1960’s, manufacturing accounted for roughly fifty percent of corporate profits, and roughly a quarter to a third of gross domestic product. Financial services accounted for less than ten percent of corporate profits and little more than ten percent of gross domestic product. By the end of Bush, Jr.’s regime, after 28 years of policies driven by Conservative ideology, the proportions were reversed. Manufacturing now accounts for less than five percent of American corporate profits, and American products are notoriously shoddy and hard to find outside of the U.S.
The public debt that started to soar with the Conservative Revolution has now reached levels that only a miraculous revival of industrial production could possibly start to pay down, and nobody is interested or willing to increase production. The country is still enraptured by the infantile notion that there is a viable “post-industrial” economy in which people miraculously support themselves by exchanging e‑mails and buying things that other people make. This may be as ludicrously absurd as any drivel thought up by Karl Marx, but it is the dominant world-view among the nation’s policy makers[*3]. Along with the miraculous powers of “deregulation” (i.e. refusing to protect the public from racketeering, fraud and ponzi schemes), and the premise that the rich must never pay for anything or suffer any consequences for failure, this fantasy remains a central tenet of Conservative ideology. The U.S. now produces nothing and consumes with the blithe irresponsibility of a twelve-year old accidentally given a platinum credit card. Since the Reagan Revolution, money has rocketed out of the pockets of Americans into the pockets of sleazy dictators, global cartels, kings, princes, ayatollahs and other criminals. The standard of living of ordinary Americans has been steadily declining. Perhaps more damaging, family financial instability has dramatically increased. The chances that any given American family will suddenly and unexpectedly see its income halved are now one in five, a historic high[*4]. The notion that the Communist Party is a legitimate component of the “free market,” another Alice-in-Wonderland Conservative concept, has ensured that America’s assets are now in the hands of the world’s most ruthless and brutal genocidal monsters.
But the public debt is only a shadow cast by the general level of indebtedness. From the end of World War II to the Reagan Revolution, the U.S.’s total market debt as a share of gross domestic product remained relatively static at %145, what would be expected in a functioning, industrially productive economy. With Conservative ascendency, it began a steep upward climb, reaching an almost inconceivable level of %335 under Bush, Jr.
The damage done by crackpot Conservative economics is as profound as the damage done by Marxism was for the countries that embraced that bullshit. For the last twenty-five years, I’ve been trying to explain to people that Conservative ideology and Communist ideology are closely related, driven by the same motives and employing the same techniques. They differ only on the level of slogans. But that has been a hopeless, thankless task.
Now, Canada is stuck with an administration for whom the disastrous Communist/Conservative ideology is unquestionable gospel. Because the previous Liberal administration had balanced the books, created a healthy surplus, and encouraged responsible policing of the banking system, Canada did not suffer much from the global Conservative-created recession. The current government sleazily claims credit for the safety margin created by the previous government, by policies which it hated and opposed. But Comrade Harper has already, within a few short years, taken us from a positive balance sheet to the greatest level of federal debt we have ever experienced, worse even than the nightmarish fiscal irresponsibility of the old Mulroney Conservatives. The ordinary citizen does not feel the pinch of this yet, but will when the bills come due. That’s the damage he managed to do with a minority in parliament. Now he has a majority. Hang on to you hats. You ain’t seen nothin’ yet.
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*1. — James Alm & Janet Rogers. Do State Fiscal Policies A
ffect State Economic Growth?. Tulane Economics Working Paper #1107, April 2011. jalm@tulane.edu; jrogers@budget.state.nv.us
*2. — Cristobal Young and Charles Varner. Millionaire Migration and State Taxation of Top Incomes: Evidence from a Natural Experiment. National Tax Journal, June 2011, 64 (2, Part 1), 255–284.
*3.- It would be difficult for me to exaggerate the depth of this attitude in American power circles. Witness an article in Foreign Policy (“Securities: The New World Wealth Machine”, Autumn 1996) that was widely influential in both Republican Party and Wall Street circles. Enraptured by the lack of regulatory constraints on issuing repacked “high quality” bonds against clusters and pools of existing loans and assets (making vast and instantaneous profits in the financial market, based on no actual productive activity), it argued that “an economic policy that aims to achieve growth by wealth creation therefore does not attempt to increase the production of goods and services, except as a secondary objective.” It is wise to keep in mind, when hearing Conservative ideologues use the words “wealth creation,” that their private definition of the term is as fantastical and dishonest as when Communists use the word “democracy.”
*4.- Jacob S. Hacker. The Great Risk Shift. Oxford University Press, 2006. p.31
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