Capitalism is an irrational political system

Danville Advocate-Messenger

            Yes, it’s irrational. And it’s what the GOP says it wants for our country, to save us from becoming “like Europe.” It’s also what the post-New Deal Democratic Party stands for, only a little less.

            Let’s start with two recent events that highlight the damage American capitalism has done to American political institutions. I’m talking about the appearances of Jamie Dimon before the Senate Banking Committee on June 13 and the House Financial Services Committee on June 19. 

Dimon is chairman and CEO of JPMorgan Chase, the largest bank in the U.S., with assets over $2 trillion. He is a familiar figure on TV, with his elegantly coiffed white hair and serene demeanor. He is widely and lavishly praised (even by President Obama) for his financial wisdom.

Dimon had been summoned to explain his bank’s recent loss of $2-3 billion dollars in risky trades at its London branch. (Current estimates of the loss range from $6-9 billion.) People worried that JPMorgan Chase was once again engaged in the same reckless gambling that caused the global financial crisis of 2008. The FBI, the FED and the SEC are also investigating.

All these investigations should remind us that the weak Dodd-Frank reform law of 2010 has left JPMorgan Chase and other Wall Street giants too big to fail (TBTF). The financial world knows that the U.S. government will bail them out if they go broke just as it did in 2008.

Their TBTF status raises their credit rating and lowers their borrowing costs. In the case of JPMorgan Chase, this amounts to a $14 billion government subsidy according to an article in Bloomberg.com (“Dear Mr. Dimon, Is Your Bank Getting Corporate Welfare?”).

Republican senators on the Banking Committee received Dimon with a fawning frenzy. For instance, Sen. Bob Corker (R-Tenn.) asked Dimon “What would you do to make our system safer?” And Sen. Mike Crapo (R-Ida.) asked “What should the function of regulators be?” Sen. Jim DeMint (R-South Carolina) solicited Dimon’s “ideas on what you think we need to do.” It was like a delegation of hens imploring the fox for his recipe.

JPMorgan Chase, described by President Obama as “one of the best managed banks,” is a habitual criminal. Try googling “JPMorgan Chase crimes.” I stopped counting after finding a total of $6 billion in settlements for various kinds of bid-rigging, bribery and fraud. In a decent, law-abiding country that values accountability, Dimon’s corrupt firm would have been shut down.

The Senate committee was roundly criticized for its obsequious behavior. Perhaps as a result, when Dimon went before before the House Financial Services Committee six days later, several members of both parties asked critical questions.

However, as The Nation’s George Zornick reported, committee chairman Rep. Spencer Bachus (R-Alabama) was watching his back. Bachus, “who has received more money from JPMorgan Chase than any other donor except one over his career … consistently interrupted even members of his own party when they went too hard on Dimon.” In a newspaper interview in 2010 after he was appointed committee chair, Bachus said: "my view is that Washington and the regulators are there to serve the banks."

Lying within Bachus’s 6^th district are parts of Jefferson County that include the suburbs of his native Birmingham. In 1997 JPMorgan Chase sold Jefferson County a financing package for a $300 million sewer project. The package included derivatives that went bad, leaving the county with $3 billion in debt. This led the county in 2010 to declare the largest municipal bankruptcy in U.S. history.

According to Bloomberg, “In 2009, JPMorgan agreed to a $722 million settlement with the Securities and Exchange Commission over payments its bankers allegedly made to people tied to [Jefferson] county politicians to win [the financing contract].”

This sordid crime against his home town did not deflect Rep. Bachus from his mission to “serve” Jamie Dimon’s bank.

There’s nothing very special about this “Mr. Dimon goes to Washington” story. It’s business as usual in the moral swamp that is the government of the United States. And it’s the logical, predictable outcome of a capitalist political system.

            In a capitalist political system, the primary role of a national government is to protect and facilitate a national market in which firms operate with a minimum of government intervention. Competition and economies of scale result in huge corporations as dominant social institutions.

Money is power—it commands not only goods and services in private markets, but also the services of those who govern. Only those who control large corporations can provide the money politicians need to campaign for national office in the world’s largest economy.

So, in a capitalist political system, the primary role of government is to nurture a private market that will in turn subordinate government to the profits of the wealthy minority who control large corporations.

Why would any society want to do this? Ask our two political parties.

Do American workers have Stockholm Syndrome?

       Danville Advocate-Messenger

              There’s a real possibility that Mitt Romney will be elected President by the votes of slightly more than 50% of American workers. He will have won their votes despite promising to reduce funding for their social safety net (e.g. Medicare, Medicaid and food stamps) while enacting tax cuts that would increase the incomes of very wealthy Americans such as himself.

Why ever would workers support him? They face high unemployment and job insecurity. So they might just need help from the programs Romney would shrink.

            Romney and the GOP would answer: the rich, are “job creators.” You ordinary people tend to use up your income on essentials such as food, shelter and education. Only the wealthy have enough money left over to invest in the businesses that give you jobs. The more income they get, the more jobs they create. Raising their taxes is like starving the goose that lays the golden eggs.

This answer flies in the face of well-known facts. It also makes no sense. That so many people believe it is a symptom of societal Stockholm Syndrome.

There is simply no correlation between the unemployment rate and higher or lower marginal tax rates for the wealthy. [Your marginal tax rate is the rate you pay on the taxable income that falls into the highest bracket you reach: 10%, 15%, 25%, 28%, 33%, or 35%.]

In fact, as Michael Linden of the Center for American Progress points out, “if you ranked each year since 1950 by overall job growth, the top five years would all boast [top] marginal tax rates at 70 percent or higher. The top 10 years would share marginal tax rates at 50 percent or higher. The two worst years, on the other hand, were 2008 and 2009, when the top marginal tax rate was 35 percent.”

Moreover, it just makes no sense to think that throwing more money at the investor class in the form of tax cuts will induce them to create jobs. Corporations today are awash in profits, as JPMorgan’s Tom Lee explains: "It's a record level of cash: $3.60 trillion, $670 billion dollars higher than 2007 when the market was at its prior peak.” But they’re not hiring.

Why? Because people don’t have the money to buy the products and services new employees would create. They’re still reeling from home value losses, unemployment, under-employment and job insecurity.

When investors won’t invest because consumers can’t buy, the government has to do the buying in order to revive the economy. It can restore consumer purchasing power by extending unemployment benefits, subsidizing education, health care and food purchases, and spending on our (rapidly decaying) infrastructure. As billionaire venture capitalist Nick Hanauer said recently:

 “In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich.”

How do Mitt Romney and the GOP get away with making such foolish and dangerous proposals? Why aren’t they greeted with the scorn they deserve?

American workers are behaving like the employees held hostage in a 1973 bank robbery in Stockholm, Sweden. During their six days of captivity, the employees emotionally identified with their captors and even defended them afterward. This kind of traumatic bonding is common enough to have been given a name: the Stockholm Syndrome.

People are afflicted with this syndrome under the following conditions:

1.  Perceived threat to survival and the belief that one's captor is willing to act on that threat
            2.  The captive's perception of small kindnesses from the captor
            3.  Isolation from perspectives other than those of the captor
            4.  Perceived inability to escape

           The severe recession caused by the financial collapse of 2008 has left most workers feeling like their financial survival and their sense of identity is at risk. There is stubbornly high unemployment and under-employment. Those who lose their jobs and are “lucky” enough to find similar work often settle for much lower wages.

They are like captives: forced into a fearful situation by those with power over their workplaces—not just the owners, but also the financiers, those who control the capital and credit their workplaces need. Workers now live with the constant threat of termination. They must be grateful for the kindness of owners who keep them on in these bad times, and should give them what they want.

Workers’ perspective on what has happened and what must be done is shaped by politicians who depend on wealthy investors to finance their campaigns. It is also framed by media giants controlled by the same wealthy investors. Workers are taught there is no escape from the present system.

In a similar situation in the 1930s President Roosevelt told workers they “have nothing to fear but fear itself.” Unfortunately, Barack Obama is no FDR.

Obama v Romney: a choice or an echo?

Danville Advocate-Messenger April 17, 2012
   

            In announcing his campaign for the presidency in January of 1964, Barry Goldwater famously promised that “I will offer a choice, not an echo.” His was to be a campaign in which principles would create a stark difference between him and LBJ.

            Will that be the case between President Obama and the GOP’s nominee, Mitt Romney? Their campaign rhetoric makes it seem so.

            Romney would balance the budget and pay for a sharp increase in military spending and tax cuts for the wealthy by making deep cuts in funding for social programs. Obama would get the revenue to preserve the social safety net by increasing taxes for the wealthy and modestly reducing the rate of growth in military spending.

            As Christopher Preble of the Cato Institute pointed out in a March 6 blog, “Over the next ten years, Romney’s annual spending (in constant dollars) for the Pentagon would average 64 percent higher than annual post-Cold War budgets (1990-2012), and 42 percent more than the average during the Reagan era (1981-1989).” Obama’s plan would cost $5.7 trillion between 2013 and 2022, whereas Romney would spend a $2.58 trillion more, for a total of $8.3 trillion.

            These numbers make it seem that we’re presented with a stark choice here. However, both alternatives are based on an extravagant and outdated conception of America’s role in the international community. The choice is between bad and crazy.  

            Both Romney and Obama are committed to the U.S. military being a global police force. In a speech delivered to The Citadel last October, Romney insisted that the 21st century “must be an American Century” in which “America leads the free world and the free world leads the entire world.”

            When he announced on Jan. 5 that the military budget will increase at a slower rate, Obama added “the world must know the United States is going to maintain our military superiority” in order to preserve “American global leadership.”

            The Cold War ended with the collapse of the Soviet Union in 1991. But the Pentagon still has the planet divided up into military areas of command, and oversees an empire of more than 700 active bases in foreign countries.

Our global presence is more likely to provoke than to prevent terrorist attacks. So why do we maintain this empire at an annual cost of $250 billion (according to Chalmers Johnson, an expert on this subject)?

            Obama’s military budget is level with the maximum reached under George W. Bush, and higher than the peaks reached during the Korean, Vietnam and Gulf Wars. According to Lawrence J. Korb, in an essay (7/6/11) he co-authored for the Center for American Progress,

            “The Obama administration and Congress could cut $150 billion from the budget and still be at Reagan levels. President Obama would need to reduce the budget by about 40 percent, or close to $300 billion, to reach the budget levels established by Presidents Eisenhower, Nixon, and Clinton.”

            We now spend more on our military than we did during the Cold War when Americans believed that a superpower—the Soviet Union—posed an existential threat to the U.S. Those days are over. Yet the U.S. share of global military spending is 43%, while the Chinese share is 7.3% and Russia’s is 3.5%.

            The bloat in our military spending is not just numbers. It’s also as a huge opportunity cost. Every dollar spent on the military is a dollar unavailable for investing in education, health care, transportation and infrastructure.

            In addition to a soaring military budget, Romney wants tax cuts that would overwhelmingly favor the wealthy. In March the Tax Policy Center published updated summary tables of the effects of Romney’s and Obama’s tax proposals on taxpayers at different income levels. The difference is stark.

            For instance, in 2015 Romney would give an average tax cut of $150,000 to the top 1% (whose income averaged $1,500,000 in 2011), and $726,000 to the upper tenth (the .01%) of this blessed cohort. Obama would raise the taxes of the 1% by $105,000 and the .01% by $550,000.

These people don’t need Romney’s help. According to Berkeley economist Emmanuel Saez, the one-percenters captured 93% of the total income gains in 2010, the first year of recovery from the Great Recession of 2007-09.

As the Congressional Budget Office reported last October, the share of national income going to the 1% increased by 275% from 1979-2007. The bottom 80% “saw their shares decline by 2 to 3 percentage points.”

How will Romney pay for a balanced budget while expanding the military-industrial complex and coddling the very wealthy? According to the Center on Budget and Policy Priorities, he would have to cut nondefense programs (incl. social security, Medicare and Medicaid) 25% in 2016 and 38% in 2022. Over ten years, these cuts would amount to $10 trillion.

Bill Moyers put it very well when he suggested that ‘GOP’ stands for “Guardians of Privilege.”

           

U.S. should step back from Iranian precipice

Danville Advocate-Messenger
March 5, 2012        

            The Obama administration is painting itself into a dangerous corner in response to Iran’s nuclear program. Under pressure from the very powerful Israeli lobby and from GOP presidential candidates, Obama proclaimed in his State of the Union address: "Let there be no doubt, America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal."

            He did not say what would count as “preventing,” but it seems to include getting Tehran to agree to a major and verifiable reduction in its nuclear program. Iran rejects this demand, insisting that it is enriching uranium solely for electrical power, which is permissible under the Nuclear Non-Proliferation Treaty.

            There are conflicting assessments about Iran’s intentions. According to the New York Times, “Even as the United Nations’ nuclear watchdog said in a new report Friday [2/24] that Iran had accelerated its uranium enrichment program, American intelligence analysts continue to believe that there is no hard evidence that Iran has decided to build a nuclear bomb.”

            Iran may have decided instead to enhance its prestige and influence by letting the world know that it has the capacity to produce an atomic bomb in a short time span. It may not want the trouble and huge expense of actually building a stockpile of nuclear weapons.

            Obama is saying that the U.S. will “prevent” Iran from developing a nuclear weapon one way (sanctions) or another (military force). The latest sanction under consideration would deny Iran access to The Society for Worldwide Interbank Financial Telecommunication (SWIFT), the financial messaging service for most international money transfers.

            This would make it difficult for international buyers to pay for Iranian oil, thereby sharply reducing Iran’s revenues. Although that would be a blow to the Iranian economy, it also threatens to reduce the supply of oil to the world market, further driving up fuel prices and stalling economic recovery in the U.S. and elsewhere.

The President knows that the military alternative to sanctions could have disastrous consequences. A U.S. attack would take place at the same time as Iran’s neighbor and ally Syria is slipping into a civil war that threatens to destabilize the Middle East.

 Israel is threatening to launch its own attack on Iran, and is saying that it will not warn the U.S. in advance (AP 2/27). If that happens, the U.S. will very likely be drawn into the conflict to protect Israel.

Even the most powerful American or Israeli bombs would be only partially effective against Iran’s widely scattered nuclear facilities, some of which are deep underground or inside mountains. Air strikes would likely result in an even stronger effort by Iran to develop atomic weapons. Its people would put aside their deep political divisions to unite against the “Great Satan.”

            The U.S. would be unwilling and unable to invade and occupy Iran. Therefore, the Iranian regime would survive American or Israeli bombing raids and be able to retaliate both in its own region and abroad. There could be a major interruption of the world’s oil supply if the Persian Gulf becomes a war zone.

            As the International Crisis Group says in a Feb. 23 report, “There is no evidence that Iran’s leadership has succumbed or will succumb to economic hardship.” So Obama’s ultimatum to Iran—that Iran should yield under pressure of his economic sanctions or he will use force—may back him into a disastrous military conflict.  His ultimatum is as much a threat to American national security as it is to Iran’s.

            To better understand Iran’s resistance to American pressure, we need to reflect on the last 60 years of our relationship to Iran. In 1953 the CIA partnered with British intelligence to overthrow the democratically elected Prime Minister of Iran, Mohammed Mossadegh, to stop him from nationalizing the holdings of the Anglo-Iranian Oil Company (AIOC, known today as BP).

            The coup enabled Shah Reza Pahlavi to rule Iran for 26 years as a brutal police state. The Shah’s security service, the SAVAK, tortured and murdered thousands of Iranians. It also worked closely with the CIA.

            The Islamist revolution that overthrew the Shah in 1979 was inspired by Ayatollah Khomeini and driven by hatred not only of the Shah but also of the U.S. for its oppressive manipulation of Iranian politics. The current hostility of the Tehran government is blowback for American abuses of power.

            Even as the U.S. government is threatening Iran for enriching uranium, it accepts Israel’s arsenal of a hundred or more nuclear warheads which it can deliver by intercontinental ballistic missile, aircraft or submarine. It would be suicidal of Iran to build and then use a nuclear weapon against Israel.

            We must hope that President Obama has the wisdom and toughness to resist the efforts of the Israeli government and its allies in Congress to draw us into another military and foreign policy disaster in the Middle East.

           

           

Mitt Romney is the one percent's Captain America

Danville Advocate-Messenger
February 16, 2012

On stage at the Trump International Hotel in Las Vegas on Feb. 2, Mitt Romney and his wife looked humble as they basked in the endorsement of The Donald, orange-haired birther and billionaire capitalist sage.

Trump sounded as if he were presenting the new Mr. and Mrs. America: “This is a great couple. Look at this couple.” If the Romneys had brought along their four totally handsome sons, Trump might have put in a plug for eugenics.

The scene was an ironic reminder of the financial elite’s success in taming the town-hall invaders, founding-father impersonators, tax haters, raucous Obamaphobes and flag-waving birthers that had coalesced as the Tea Party. Here was Trump, once the Tea Party’s presidential favorite, now blessing the establishment candidate.

During the primary season, the Tea Party became infatuated with a succession of unelectables—Michelle Bachmann, Rick Perry and Herman Cain. Happily for the GOP, all three quickly sank under the weight of their manifest incompetence.

That created an opening for another Tea Party darling: the disgraced former speaker of the House, Newt Gingrich, with his venomous mouth and great debating skill. This corrupt Washington insider won over South Carolina conservatives by presenting himself as anti-elitist. In a state that still sports the Confederate flag in front of its Capitol, Gingrich scored points by calling Obama a “food stamp President” as well as scolding blacks for lacking a work ethic.

However, Newt’s victory frightened GOP elders. Bob Dole warned that Gingrich would doom the party’s chances in November. Romney’s super-PAC was able to raise enough money to overwhelm Newt in the Florida primary.

Rick Santorum’s Feb. 7 victories in the low-turnout, non-binding caucuses in Minnesota and Colorado and in Missouri’s straw poll, and his resulting surge in opinion polls, are unlikely to stop Romney. Santorum, Gingrich and Ron Paul will continue to divide (and thereby weaken) the anti-Romney conservatives. Romney’s much greater financial and organizational resources will likely prevail in the big primaries to come, as they did in Florida.

After his decisive win in the Nevada caucuses, Romney tweeted triumphantly: “Our message of restoring America’s greatness continues to resonate through the west & across the country.” What is his vision of our greatness?

And what is his message to the millions enduring the psychological and financial stress of unemployment? To the 48% of Americans who are either poor (49.1 million) or low-income (the 97.3 million who scrape by on less than 200% of poverty-level income).

 In a recent CNN interview, he admitted that he has nothing to say to many of these people: “I'm in this race because I care about Americans. I’m not concerned about the very poor. We have a safety net there. If it needs repair, I’ll fix it.”

Can we believe his promise to care for the safety net? As Tim Dickinson of Rolling Stone points out, Romney has already told us how he would “fix” Medicaid: “Romney has endorsed Rep. Paul Ryan's proposal to "block-grant" the federal contribution to Medicaid – and turn the program over to the states.”

As an April 5 report of the Congressional Budget Office explains, under the Ryan plan “federal spending for Medicaid would be 35 percent lower in 2022 and 49 percent lower in 2030.” Romney told Sean Hannity in an Oct. 24 radio interview that he would cut even more from Medicaid, by reducing the annual growth cap of the block grants from 3% (in Ryan’s plan) to 1 or 2%. As any governor could tell him, this would be a disaster for millions of families.

In the same CNN interview, Romney added “I’m not concerned about the very rich. They’re doing just fine.” Instead, he says he worries about “middle income Americans, they're the folks that are really struggling right now, and they need someone that can help get this economy going for them."

In fact, his tax proposals suggest the exact opposite. According to Howard Gleckman of the Tax Policy Center, “Mitt Romney’s tax plan would cut taxes for millions of households but bestow most of its benefits on those with the highest incomes. At the same time, it would significantly cut corporate taxes and add hundreds of billions of dollars to the deficit.”

In the year 2015, Romney’s tax plan would raise taxes by an average of $157 for the bottom 20% of taxpayers, and $82 for the second quintile. The third (middle) quintile (“the folks that are really struggling”) would receive a whopping $138 tax cut! (Tax Policy Center, “The Romney Plan”)

And what about the “very rich” that Romney says he’s “not concerned about”? The tax cut for those with incomes over $1 million would average $145,568.

In short, Romney’s vision of a restored America comes straight from George W. Bush’s coloring book: prosperity trickling down on the rest of us from super-wealthy “job creators” such as himself.

Does America still respect labor?

Advocate-Messenger, September 8, 2011

            As another Labor Day came and went, I found myself wondering whether this important national holiday has lost some of its original meaning. The U.S. Department of Labor explains on its website, that Labor Day is “a creation of the labor movement . . . and a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.”

            Yet today the “labor movement” is struggling for its life. Since 1945, union membership has declined from a historic high of 35% of workers to only11.9% in 2010.

           The Republican Party has been very effective in its decades-long campaign against the labor movement. For instance, in 1947 a Republican congress passed the Taft-Hartley Act over the veto of President Truman.

          One of its most important provisions allowed states to pass so-called right-to-work laws that prohibit union shops. (Union shops are workplaces in which, by collective agreement, all employees must be either union members or pay their fair share of the union’s costs in representing them.)

           There are twenty-two right-to-work states, predominantly in the South and upper Midwest. Right-to-work laws invite new hires to be free riders, benefitting from union contracts without paying dues. And of course they weaken unions by depriving them of funds.

          Another major provision of the Taft-Hartley Act allows management to mount a vigorous campaign against a union’s effort to organize its workers. Interpretations of this provision by the National Labor Relations Board and the courts have given a green light for management to make union organizing of a workplace very difficult and hazardous.

         Most companies facing a union organizing effort hire union-busting “consulting” firms to give them tactical and legal advice. On its website, one of these firms (Labor Relations Institute, Inc.) boasts of “more than 25 years of experience in thousands of elections—and a management win rate of over 90 percent.”

        The UN’s Declaration of Human Rights says that “Everyone has the right to form and to join trade unions for the protection of his interests.” In 2000 Human Rights Watch issued a very critical report on the precarious state of this right in the United States.

        It found that “Firing a worker for organizing is illegal but commonplace in the United States.” The fired worker faces years of hearings and appeals in order to get reinstatement.

       The report noted that in the weeks before a vote on unionizing, management forces employees to attend group meetings in which the union is described in the worst possible terms. It also forces workers to attend threat-filled, one-on-one meetings with their supervisors.

       Thanks to such tactics under the coaching of professional union-busters, the union participation rate for private-sector workers is down to 6.9%. The overall rate of union membership is higher (11.9%) only because 36.2% of public-sector workers are unionized.

        Federal law does not give public-sector workers the right to unionize. However, beginning in 1959 most states granted their workers this right.

       Unions have been more successful in the public than in the private sector because state and local officials sit across the bargaining table from their fellow citizens. So these officials haven’t adopted the intensely adversarial role of private-sector corporations concerned only with profits.

       Until recently, that is. Fresh from electoral victories in the 2010 elections, Republican governors and state legislators began a nation-wide campaign against public-sector unions. As the L.A. Times reported on April 2, “Nearly half of the states are considering legislation to limit public employees' collective bargaining rights.”

      The growing weakness of the labor movement has resulted in three decades of stagnant wages for workers, even as worker productivity has steadily risen. The added wealth American workers created in the last thirty years has been gone mostly to rich CEOs and shareholders.

      According to the Economic Policy Institute, between 1980 and 2008 the richest 10% of Americans got 98% of all income growth, while the bottom 90% shared the 2% remainder. The GOP and its mouthpiece, Fox News, want Americans to ignore these facts. They say it is unions who are selfish and greedy.

      In fact, unions have played a large role in creating a workers’ middle class by pushing for Social Security, civil rights, Medicare, aid to education, health insurance and retirement plans. Without union power, this middle class is headed toward destruction.

      In a healthy capitalist democracy, there needs to be a countervailing power to prevent the capture of government by entrenched wealth. As Thomas Donahue, a prominent official of the AFL-CIO, succinctly put it: "The only effective answer to organized greed is organized labor."

      In 1954 President Eisenhower said: “Today in America, unions have a secure place in our industrial life. Only a handful of reactionaries harbor the ugly thought of breaking unions and depriving working men and women of the right to join the union of their choice.” What would he think of his party today?

A budget engineered for a dysfunctional national family

Danville Advocate-Messenger

            Last week’s debt ceiling agreement was a striking victory for Republicans, although they almost threw it away under pressure from the Tea Party fringe. They got nearly $3 trillion in spending cuts with no tax increase.

How did they extract this from a Democratic president and a Democratic majority in the Senate? They did it by cloaking an act of extortion with the language of fiscal responsibility and family budgets.

            Their message went something like this: the American people are like a self-indulgent family. Through their government they are spending more money than they actually have. The only responsible, adult thing to do is cut their spending.

            Even President Obama has used this simple-minded argument, and the mainstream media repeat it constantly. It makes people afraid that scary things will happen to the national family unless they mend their ways.

            This message of fear builds on the stress and anxiety most Americans have about their own household budgets. Average household incomes are stagnant. Over 10 million households owe more on their home than it's worth. Jobs and income are insecure, even as health care and educational expenses rise.

             Republicans got Americans to transfer this anxiety to the national budget. Then they presented themselves to a frightened public as rescuers: tea-partiers, “young guns” and Ayn Rand devotees became a patriotic posse galloping in to save us from government fiscal abuse.

This clever rhetorical trick allowed Republicans to get away with political terrorism. They took the American people hostage by threatening to inflict a great harm (sovereign default) on our society unless they got what they wanted.

By agreeing to the debt deal, Obama and the Democrats have rewarded the GOP hostage takers. The GOP will come back for more.

            Republicans took the nation hostage in order to save the wealthiest Americans from paying a cent more in taxes. This is the most important and morally indecent feature of the debt deal.

            For a second time Obama has broken his campaign promise to end the Bush tax cuts for the wealthiest 2% of taxpayers. According to the Center on Budget and Policy Priorities, ending them would raise $826 billion in ten years. That would be a big help in reducing the deficit.

            The simplest way to reduce federal deficits is for the economy to grow, thereby increasing the amount of tax revenue. As economists across the political spectrum have warned, major cuts in federal spending will further weaken the economy, thereby shrinking government revenue and worsening the deficit.

            The Congressional Budget Office (CBO) in January 2010 issued a report examining various options for achieving economic and job growth. Its conclusions were similar to those of Mark Zandi, chief economist of Moody’s Analytics: you get the most economic growth per dollar from spending on extending unemployment insurance, fiscal relief for state governments and infrastructure spending.

Cutting taxes for the wealthy is the least effective option. It’s not hard to see why.

Consumer spending accounts for 70% of economic activity in the U.S. As the CBO report explains, wealthy families are more likely to save than to spend the money they get from tax cuts. Programs to relieve poverty and unemployment or to help states pay the salaries of teachers and construction workers immediately increase consumer demand.

The Republican threat to send the United States into default unless they got huge spending cuts was in effect an attempt to harm the nation in one way or another. The GOP forced us to choose between harming our country by going into default and harming it by reducing consumer demand in an already fragile economy.

Let’s go back to the comparison between a family budget and the national budget. It’s a sad truth that the average American household is less able to buy into the “American dream.”

But the nation as a whole (the national family) is quite rich. The national income is the GDP (Gross Domestic Product—the dollar value of the sum of goods and services produced by our economy). The U.S. has one of the highest GDPs or incomes per capita in the world.

But our national income is very unequally distributed, to a degree that is common in third world countries. In the economic expansion of 2002-2006 under Bush, the top 1% captured almost three quarters of national income growth. During that same period, the Bush tax cuts fattened their after-tax income.

            Our national household has quite enough income to pay for social security, universal health care and other valuable social programs. The problem is that a minority in the national family are hogging so much of the household income that the rest of the family is suffering.