Friday, 1 October 2010


On the surface W. Falk’s analysis (see Richard Hancock’s post of 30 September) seems to make sense, largely because it seems from his statistics that the US is a country spending money for an anachronistic welfare state that keeps borrowing from China to keep itself afloat. Let us take each point separately and see if this article is hollow populist rhetoric (rather typical of a mass publication) intended to distract the public that US fiscal imbalances (the same ones most countries in the world are also confronting) are the fault of labor and the middle class.
First, 45% of adults pay no income taxes. If we consider that one in seven Americans lives below the poverty line (14.3% or 43.6 million) and that ten percent (officially, or 14 million) are unemployed and the average weekly paycheck adjusted for inflation has fallen by 13% since 1973, we can see how government revenue should be lower owing to structural economic problems for which the system and not workers and the middle class are to blame. About 20% of income tax revenue dropped in 2009 owing to a sharp rise in unemployment and that entailed higher costs for benefits.
Second, the 45% of Americans not paying federal income taxes are paying sales taxes, Social Security tax (assuming they have jobs to pay into the system), state, and local taxes. In 2009, US collected a mere 7% from corporate taxes (a drop of 50%, the largest in half a century), while social security contributed 42% and individual income tax 43%, a drop of 20% owing to the recession. Defense absorbs 23% of the budget, and categories designated “other mandatory and other discretionary” absorb 29% for a total of 52%, while 19% is for Medicare and Medicaid and 20% for Social Security for a total of 39%. Interest on debt currently absorbs 5% of the budget and total debt to GDP ratio is 80% and will be at or above 100% by 2015, or 15% of the budget. The political question is who pays and where to cut to reduce the deficit. The answer is that both political parties have always have been financed by business and both represent business interests because the national interest has always been identified with business. Therefore, Republicans and Democrats will continue to trim the welfare state that has been downsized since Reagan, they will raise indirect taxes paid by workers and middle class, they will not raise corporate taxes that are a mere 7% of revenue, in spite of the fact that corporate profits have been going up well above the inflation rate in 2010, or income taxes on the top 20% of the wealthiest Americans who own 85% of the wealth. The top 1% own about 35% of the wealth, and the next 19% own 50% of the wealth in a country whose GDP amounts to an estimated $14.5 trillion, and world GDP of about $58 trillion! The question of fairness in tax policy is addressed by both political parties, invariably with the intent to distract so they can squeeze more from the bottom income earners in order to maintain a regime of high defense spending while strengthening the corporate welfare structure.
Ultimately, the issue before the American people is what kind of society do they want? Do they want a two-tiered society that resembles a Third World country? Do they want a society that continues to permit a small minority to own most of the wealth, a process of manipulative accumulation (recall how banks and financial institutions sunk the world economy in the crisis of 2008-2010) responsible for the extreme volatility in the economy, or a society where social justice prevails, at least to some degree that the average citizen can be proud of America’s Jeffersonian democracy roots–”of the people, by the people, for the people”? I have complete confidence in Republicans and Democrats alike:
a) to continue to erode the social welfare state;
b) to continue to weaken the middle class and labor that has been weakening since the end of the Vietnam War (US economists predict that as many as 40 million jobs may be lost in the next 10-20 years to low-wage countries);
c) to continue to strengthen finance capital through bailout plans, subsidies, tax breaks, tariffs, and to strengthen the top 20% at the expense of the 80% of the citizens.
d) to continue to pour more resources into defense;
e) to continue to blame lack of productivity (meaning it is the fault of workers) as the key reason for the economic problems;
f) to continue to use government as the “alleged enemy” that is failing people (implying that business is the solution and on the side of the common man);
g) to continue to blame China and its currency and trade manipulation for lack of American competitiveness; and
h) to continue to demand greater conformity to a system that is not working for the welfare of its people.

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