Suffocate the Middle Class

If there is anything that conservatives are good at, its taking away the punch bowl half way through the party. Naturally, they would prefer that there was no punch bowl, and no punch. In fact, they would prefer that nobody be allowed to attend parties, or host them.

If conservatives were in charge, parties would be outlawed, except for the obscenely wealthy, and the extremely powerful, who would be encouraged to have parties in Cancun, Monte Carlo, or at the summit of Mount Kilimanjaro. The Proletarians, the common people, in the words of one sage conservative, Mitt Romney, “believe that they are entitled to health care, to food, to housing, to you name it”.

Conservatives in the United States, but also in Britain, Spain, Portugal, Italy and elsewhere love nothing more than to find ways to screw the poor every way that they can. Then, they love to vilify those people to prove how inept, how worthless, how vulgar, how lazy they are.

After the plunge in international markets after the collapse of Lehman Brothers in 2008, and the  housing market debacle, European nations introduced austerity measures as the solution for a contracting economy. This is a standard conservative solution for an economic meltdown. Aggregate demand in the economy is driven down by collapsing asset prices.

People, fearful for their jobs and their savings, which are devastated by the plunge in the value of their assets, stop buying goods and try to save more, pay down debts, or walk away from those debts. Since business sees lower profits, they lay people off, reduce expenses, cut benefits and expect people to work longer hours.

The net result of this is that economies contract, national debt grows, the treasury receives less revenue, which makes the problem worse. If left untreated, it can become an economic death spiral, which ultimately leads to recession, or depression.

The solution, as conservatives see it, is to cut government, which they see as the problem. It is always too much government spending. In order to do this, they start to cut back on government.

First, they slash funding for government departments. Those departments no longer have the ability to pay their employees, and they start to lay people off. This adds a burden to the state, because they now have to pay those people unemployment, for which those people have paid. There is the inevitable squabble in Congress about how long to pay unemployment benefits.

These unemployed people are now added to the unemployment rolls and need to find work, along with the millions of people already looking for work. This puts added pressure on the Treasury to pay unemployment benefits. This also adds to emergency medical, intended for the very poor, Medicaid.

Conservatives complain about how little revenue is getting to the Treasury and demand dramatic cuts in Government spending. Those firms that are reliant on government for business have to cut back on staff, making the unemployment situation worse.

To make matters worse, conservatives want to cut taxes for the very wealthy, making the treasury situation deteriorate.

This scenario is what happens when conservatives introduce Austrian economics. They claim that lowering taxes on the wealthy will increase economic activity, and employment, and the economy will improve. It never works that way.

Countries like Greece, have a very poor revenue collection administration, which means that far too many people, mostly the wealthy pay little or no tax. In the United States, the wealthy find a multitude of ways not to pay taxes due.

The wealthy, instead of spending more, squirrel their funds away, typically in tax-resistant trusts, or spend money in places that do not pay taxes to their government, or on goods that do not create jobs.

The solution is quite simple, as demonstrated by John Maynard Keynes, who introduced Keynesian economics. The idea is quite simple. When private and consumer demand dries up, especially during asset crises, government must step in to stimulate the economy.

In the United States, which prints its own currency, money can theoretically be printed indefinitely, especially during a deflationary recession or depression. In 2008, Obama introduced a stimulus program, which prevented the world economy from diving into Depression, and created a boom for the stock market.

Companies made record profits from the stimulus package as corporate profits exploded upwards. The rewards for this did not accrue to the people who were forced to do more work, longer hours for less pay. It went to the executives in the form of enormous remuneration packages and bonuses while ordinary people either lost their jobs or worked longer and harder for less.

Conservatives pushed for more austerity, more government cutbacks and more people lost their jobs. What this results in are fewer consumers, which means lower profits for companies. We are seeing that in the latest figures. The U.S. GDP has turned down once more, as have corporate profits. The boost that the stimulus gave to the economy is wearing off and we may well see recession looming once more.

Conservatives love this, because it allows them to demand ever more austerity. As it is, the end of the payroll tax holiday has arrived for consumers, taking $1000 per year from a family earning $50k/yr.

Republicans are ecstatic that they will be able to implement even greater austerity measures. In Louisiana, Gov. Bobby Jindal is cutting Medicaid, the medical for the very poor. He wants to raise Sales Tax, putting a greater burden on the poor in one of the poorest states in the Union, while doing away with state tax for the wealthy.

The sequester, or automatic spending cuts across the board, will arrive soon, allowing them to hold the nation to ransom once more. This will affect military and domestic spending programs universally. That will be followed by the threatened fight over raising the national debt ceiling. Conservatives will threaten to shut government down, and with it the world economy, unless they get their way.

The programs that they want to cut, or destroy, are all programs that people have paid into their entire lives, Social Security, Medicare and Medicaid. These are programs that keep the Middle Class and poor from desperate, grinding poverty, and allow them some dignity in their old age. It is programs like this can guarantee a strong Middle Class.

If Republicans succeed in allowing the sequester to take place as scheduled, millions of people could be laid off, or furloughed for an indefinite period. Since these cuts are indiscriminate, across the board buts, both essential and non-essential services will be affected, putting the security of the nation at risk because of the irresponsible actions of conservatives in Congress.

Even Democrats have been affected, agreeing with some spending cuts, without understanding the harmful effect that it will have on the work force, on unemployment, and the drain that it will create on the social safety net, what there is of it. The human tragedy that is unfolding is unthinkable in the wealthiest nation on earth.

Keynesian economics recommends government spending to spur economic growth. That means more spending, not less. Businesses are not going to hire until they see customers come through the doors. If government keeps cutting spending, there will be fewer customers, and business will see a downturn.

It is already happening in the net profit and margin figures for the market. Without government intervention, the economy can slip down the slope towards recession. Yet Conservatives continue to hold the economy to ransom, threaten the elderly with losing benefits, the poor with losing unemployment subsidies and essential medical.

We need to tackle the nations problems by providing work for millions of unemployed people, which would pressure businesses to raise wages, increase economic activity, improve the national infrastructure and invest in the future. The conservative way leads only to disaster.

Having conservatives in charge of the economy reminds me of the movie Gremlins, in which a race of unpleasant creatures destroys a small town. Eventually they are destroyed in the town swimming pool, but not before terrifying a rather attractive Phoebe Cates. Conservatives have become the Gremlins in the American economic system.

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