12 March 2009

Warning: Long Rant

Listening to NPR this morning on manufacturing in the US, I experienced a moment of insight on just how badly managed our country has been, especially under Republican leadership. Apologies in advance, but I need to vent, which is why blogs exist.

Here are some facts. We basically have the highest corporate tax rates in the world, one of the main things driving corporations and jobs overseas. Other countries use value added taxes (VAT) on goods to pay for things like government services and health care. These costs, then, are borne by consumers. We use corporate payroll taxes, which are almost half of all tax dollars, to pay for government, and then we make employers bear most the cost of worker health care besides. Or not, as companies continue to roll back or drop coverage, or pass costs on to workers.

We have the highest health costs and lowest health care coverage among first world nations, and ranked last in heath care in a recent international study. In healthy life expectancy (HALE), we rank behind 27 other countries, tying with Slovenia. Given that practically everyone over the age of 8 in Slovenia smokes, yet their infant mortality is less than half of ours (very significant to this metric), Americans are by any measure very unhealthy. But get the government involved in our health care? Why, it would ruin it!

Back to taxes. The very "unamerican" VAT of virtually all other countries saddles us with a huge trade disadvantage, because foreign VATs are not levied on trade goods. US manufacturers pay steep taxes on goods they produce, taxes which foreign manufacturers do not pay at all, and must price even their trade goods to cover those taxes. The US government also offers just a bare fraction of the tax incentives other nations offer to manufacturers. These are the major reasons American consumer manufacturing has effectively disappeared.

I challenge you to go to Wal-mart and find anything there made in America, except cans and boxes of processed food, which is of course to Americans what smoking is to Slovenians, a slow death by self-administered poison. Most stimulus money spent on consumer goods will simply leave the US. We only retain a major presence in capital manufacturing (e.g., airplanes and hydroelectric generators) because of our historically superior education and vocational training, which since the '70s has been in steady decline. We now face a serious shortage of skilled workers. Look for these jobs to go next.

Republican economic policies have of course fostered the concentration of wealth into the hands of the few, broadening the income gap. The GOP's paradigm is based on supply-side, trickle-down economics. Basically, keep taxes very low on the wealthy, and their ever-expanding wealth will trickle down and raise up everyone else. Hence, e.g., the GOP has rolled back sharply taxes on capital gains and stock dividends, leading the richest man in the world, Warren Buffett, to marvel that he only pays 17% of his income in taxes while his secretary pays 32%. Yet Republicans are screaming about the unfairness of Obama wanting to roll back the Bush tax cuts for top earners, employing their best "you'll be next" fearmongering as a smokescreen.

In the place of manufacturing jobs for low- and middle-income workers, our economic policies have erected a financial services empire for the wealthy. Kind of like England and Iceland. And now that that industry is devastated, with about ten years of market gains wiped out, $50+ trillion gone and no end in sight, all three of these countries are in deep trouble. And their rich are less rich, though to be sure, still very rich. (The retirees who have lost trillions, however, are mostly not rich.)

On the other hand, middle-class wages have been effectively stagnant since the '80s. The middle class has kept apace with inflation first by become two-earner households, then by becoming deeply leveraged, thanks to cheap credit and inflated home values. Now that joblessness is headed to double-digits (already there in five states), home values have collapsed, and credit is scarce and costly, the middle class is in deep $*&!. Where the poor have always been.

These policies and economic ideology have been insufficiently opposed by most moderates and progressives, due to these ideas' notional popularity and to the power of K Street, advocates of the wealthy. Republicans continue to be masters at reductionism. They have no good ideas right now, but are great at populist spin. How could low taxes not be good? Indeed, low taxes on the middle class and corporations would be good. On the other hand, high taxes on fuel, consumption, and the wealthy would also be very good. Likewise one could deconstruct similar spin on small government, deregulation, etc.

So today I'm in a testy, "we've been sold a pack of lies" kind of mood. Bless Obama, curse Reagan and all his offspring. Obama is not getting everything right, but at least he understands all this. His plans for health care, education, tax reform, etc., may be too ambitious in this dire moment, but I understand the urgency he feels. I feel it too. And if his policies remake America into an European-style socialist republic, color me a socialist.


Brian Davidson said...

Shh! Shh! Don't say that too loud! They'll chase you out of Happy Valley. And you'll just bounce off the Rexburg Bubble.

Every time I think of this current economic crisis, I cn't help but be reminded of a goofy little rhyme from "The Private Eyes," one of my favorite movies. The two bumbling detectives find a caretaker digging a grave, then later find that it was his own grave he was digging. He's been killed by The Shadown, and is sticking out of the grave. The tombstone reads in part: "To dig your own grave is quite a sight, but to bury yourself is not very bright."

carl g said...

Mormons by disposition are very good at respecting authority and very poor at critiquing it. But I think that certainly Republican ideals about the fundamental rightness of gross economic disparity have somehow been accepted in the minds of most Mormons as gospel. How we began with economic communitarianism under Joseph Smith and arrived at this kind of prosperity/disparity theology, I have no idea. Actually, I have a few ideas, but I'll keep them private.