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First, Reagan raised Social Security taxes to fill the Social Security fund with tons of cash. Then they cut taxes for the rich people and "borrowed" an equivalent amount from the fund to make up the difference and replaced the cash that they looted with government IOU's.
Then they went on a military spending spree: B1 bombers, B2 bombers, SDI ("Star Wars") to give huge amounts of our tax dollars to their friends over at the military/industrial complex.
They now had produced huge Federal deficits so the government borrowed money from the banks, insurance companies, etc., at relatively large interest rates, payable by the U.S taxpayer. However, they had already lowered the taxes for the wealthy so the interest and dividend income that the rich received by loaning the government the money was hardly taxed at all. The corporations and the wealthy made out like bandits. They not only got paid big bucks for boondoggles, but they loaned the money at large interest rates to the government to pay for the boondoggles and were allowed to keep it by not having to pay taxes on it. I know it is complex, but think about it to understand how it works.
Any excuses that they give to rationalize spending programs or tax cuts are just a smokescreen for looting America.
The use of ethanol in the gasoline is another scam that is costing Americans dearly. Ethanol does NOT save oil or reduce emissions of greenhouse gases since your vehicles mileage drops significantly when they put ethanol in it. (I have proved this to myself by comparing my car's gas mileage (with two different cars) when using ethanol gas and gasoline without ethanol.)
Another way that the rich rob Americans (transfer money from the middle class to the wealthy) was also promoted by Mr. Fed - Greenspan. As head of the Fed, Greenspan lowered the prime interest rate to exceedingly low values, way below what the economic conditions called for. The excuse given was to encourage the economy. That was not the real reason.
The real reason for lowering the interest rates was twofold. First, this allowed the banks to get away with paying very little interest on savings accounts, CD's, and bank-issued money market accounts. At the same time, the banks were charging significantly larger rates to customers on their charge cards and even mortgages. The "spread" gave enormous profits to the banks.
Second, The low interest rates on savings accounts, CD's, etc. gave stock brokers a key selling point to get middle class people to transfer their savings from federally-insured instruments into the stock market. "The stock market is booming and you middle class people are losing out", went the sales pitch. The middle class took the bait and started buying stock. The big pile of cash thrown at the stock market boosted the market value way beyond sustainable profit levels, and made possible and encouraged the fraud perpetrated by Enron and hundreds of other companies. The extra beauty of this scam is that their is no liability for the corporate insiders who bailed out with billions of dollars in profit before the stock market "collapsed".
At the same time as the stock market scam was proceeding, the wealthy were promoting "privatization" of Social Security which would have pumped more middle class (suckers) money into an already inflated stock market. Now the rich are telling us how wonderful the economy is doing because stock prices haven't collapsed. The stock prices are being artificially maintained ("price inflation"). There is no "real" economic activity maintaining the stock price level. As long as the rich keep trading huge amounts of stock, they will keep the prices up.
With large amounts of real unemployment (the government employment/unemployment numbers that they publish are a huge hoax), with food prices rising rapidly thanks to the turning of food (corn) into ethanol, with the value of the dollar dropping regularly thanks to the huge corporate-sponsored trade and Federal deficits, with the housing market tanking because of irresponsible mortgage lending -- what have I left out? -- the U.S. economy is hanging by a thread.
Of course, the wealthy ring their hands and ask for reduced taxes on the rich to jump-start the economy. Anyone who entertains such an idea is an idiot or totally insane.
Their is a solution. It requires the government to take several steps.
First, rewrite all the trade agreements to take the power away from the corporations to set trade policy. Rewrite or scrap NAFTA, WTO, IMF, the World Bank, etc. Put quotas and tariffs on imports to make it unprofitable to offshore manufacturing and white collar jobs that can be performed just as well here in America. By leveling the playing field so that smaller businesses can compete with the multinationals, prices to consumers will NOT increase appreciably. The corporations merely pocket labor cost savings as profit. They do NOT pass along their savings to you the consumer.
Second, make health insurance coverage available to all Americans so that it is NOT tied to one's job. This will enable smaller businesses to compete with the larger corporations by eliminating a cost that the smaller companies cannot sustain and still maintain a competitive price structure. Also, it would enable individuals to start their own small businesses to better their situation. The need for affordable health insurance stifles entrepreneurs, which benefits the big multinational corporations.
Third, recognize that the economy is DEMAND driven, NOT supply driven. Give rich people tax breaks to spur the economy, and they will do exactly what the rich have done for the past 25 years -- they will build factories in China to tap into developing markets there. To build the American economy, provide jobs here so that Americans will have money to buy goods and services and more jobs will be created in the U.S. Moreover, these working Americans will pay taxes and reduce the deficit since the government will no longer have to borrow money to pay its way. "Supply side economics" is a giant fraud.
When, not if, the recession hits, there is only one way to get out of it. The government has to create jobs (that is correct, spend money) by putting people to work providing services for people. NO no-bid contracts to Halliburton. In fact, all those fraudulant contracts have to be rescinded. Americans have to be hired to rebuild infrastructure and provide services to Americans. NO contracts to companies who hire aliens at starvation wages instead of Americans. And put stringent penalties in any contracts for those companies who violate the rules.
Fourth, to reduce our dependence on oil, no more ethanol from corn in the gasoline. Mandate strict mileage and emissions standards for ALL vehicles: cars, trucks, SUV's, and buses and impose and enforce strict penalties for noncompliance. The technology exists today to improve all vehicles within the next five years. And, forget waiting for hydrogen fueled cars. That is another fraud designed to keep all transportation options in the grasp of the oil companies. Hybrid-electric and plug-in electric is the answer to reducing oil consumption and reducing pollution. The technology is available today, and its implementation can reduce the REAL costs now.
The multinational corporations have been looting America long enough. The middle class has been gutted and is hanging on by a thread. Conservative economist Kevin Phillips, who was Richard Nixon's economics advisor, explained in his book "Wealth and Democracy" how the wealthy elite in every empire destroyed their societies by destroying their middle classes. The Roman, Spanish, Portuguese, and Dutch empires arose because of the efforts of a "middle class", and then were destroyed by the greed of a wealthy elite who preferred colonialism (cheap foreign labor and resources) and pursued disastrous wars to hold on to that empire. The wealthy elite taxed their middle class into poverty to support an extravagant life style and maintain huge armies and navies to hold on to their colonies.
You don't need a crystal ball to see into the future. I have described the scenario and what needs to be done to prevent it from destroying our country. The "safety net" put into place by president Franklin D. Roosevelt has already been removed by the wealthy. It no longer exists. The "crash" of 1929 and the recession of the 1930's that followed it could happen here. The Fed won't help us. It fueled the trouble we are in to enable the rich to get richer. Lowering the interest rates won't help. If people have no money to spend because they lost it all to the rich, how will lending them money at low interest rates solve anything if they have no way to pay it back.
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