The Great American Fiscal Rape (aka The Looting of the U.S. credit line)

The Great American Fiscal Rape (aka The Looting of the U.S. credit line)

When people find that they can vote themselves money that will herald the end of the republic.

- Unknown

Come then, tell me, dear friend, how tyranny arises. That it is an outgrowth of democracy is fairly plain.

    Yes, plain.

Is it, then, in a sense, in the same way in which democracy arises out of oligarchy that tyranny arises from democracy?

    How is that?

The good that they proposed to themselves and that was the cause of the establishment of oligarchy - it was wealth, was it not?

    Yes.

Well, then, the insatiate lust for wealth and the neglect of everything else for the sake of money-making were the cause of its undoing.

    True, he said.

- Plato on Democracy, Part II, And How Democracy Leads to Tyranny (Republic Book VIII)

By J.M. Hamilton (12-25-2017)

Holiday Greetings & Salutations from San Antonio, Texas.

As a student of economics, history, and politics - one of the great concerns expressed about democracies and republics - that I have encountered -  is that they are prone to collapse, when the public learns that they can vote themselves government money.  That is to say, the 99% learn they can reach into the government till and take out far more than the government receives in tax revenue.

Republicans have often proclaimed themselves to be the guardians of fiscal virtue, and advocates of fiscal sanity. It is Republicans who often claim that that it was FDR's New Deal policies, and the Great Society policies of the 60s and 70s, that would bankrupt this nation. 

How ironic then that it is not the Dems and liberals who threaten the nation's fiscal health, nor the 99%, but the Republican Party - and the Oligarchy that owns the Republican Party - that threatens: the nation; our Republic; and United States' national security.  

How is the United States threatened?  

The Republican Party has done this by trashing the fiscal health of the nation, via tax cuts for the exceptionally wealthy; launching wars w/out end; and by providing unpaid for welfare for U.S. multinationals.  In other words, it is not the 99% that we have to worry about looting the nation, but the Republican Party and their owners, the Oligarchy.

The most recent example is Trump's tax cuts, which he signed into law last week.

These tax cuts are unpaid for - and mostly accrue to an elite few (more than 82% of the GOP tax cuts will be directed to the top 1% by 2027, once middle class cuts are phased out) - and are expected to add anywhere between a trillion to two trillion to the annual deficit. In short, the Republican Party is borrowing from the nation's credit line - and against this nation's exorbitant privilege, our global fiat currency - to pay for tax cuts that will disproportionately accrue to multinationals and the wealthy.  

Note: Dems used to get a bad rap, per Republicans, for being tax and spend liberals; but far more insidious than tax and spend liberals are borrow and spend Republicans.

(And Republican tax policy is little more than Keynesian policy in reverse.  Lord Keynes, during a recession, would advocate government expenditure to spur the economy and close the economic gap, so as to make up for the temporary deficiency in private sector spending.  

What the Republicans have done is reverse engineer fiscal stimulus by looting the nation's credit line, and handing out fiscal stimulus - in the form of unsustainable tax cuts - for: heirs & heiresses; multinationals; and the exceptionally wealthy.  The result is a highly ineffective form of government stimulus - it is a bastardized form of Keynesian stimulus called trickle down economics. Instead of tapping into the government credit line and providing jobs for the 99% and spurring aggregate demand; the GOP has tapped into the government credit line to provide tax cuts for the billionaires, in the hopes that a few crumbs will trickle down to the 99% and spur demand.)

How do we know that Republican tax stimulus will break the bank, that is rape the nation's credit line (and it's not entitlements that are causing the fiscal problem)?

Consider the following:

The period of massive tax reductions, particularly for the wealthy, started w/ President Reagan in the 80s to the present day;

During the last 37 years, from Reagan forward, every single year has produced a fiscal deficit, but for three to four years, late in the Clinton presidency;

During the last 37 years, the national debt has exploded, so that the debt to GDP ratio has climbed from under 50% to over 100%, in the present day;

To further emphasize the point, when POTUS Clinton handed POTUS Bush a legacy of unheard of fiscal surpluses, it wasn't so-called welfare spending or entitlements that caused the deficits to reappear, but Bush's (W) tax cuts for the rich and the initiation of two wars, post 9-11.

President Donald Trump reportedly told friends at his swanky Mar-a-Lago resort "You all just got a lot richer," hours after signing the GOP's massive tax bill.  – Business Insider

Republican like to say high taxes are a threat to the economy, but the GOP also likes to cite the Eisenhower years as the halcyon days of GOP achievement, and the great American economy.  It was under Eisenhower, however, that the top tax rate was approximately 90%, and the capital gains rate was higher than it is today.  And yet the economy produced annual GDP growth that often exceeded 3 to 4% annually. Today's GDP is bogged down and constrained by an unsustainable national debt (caused, in no small amount, by GOP fiscal mismanagement).

In short, higher tax rates in the 50s were not deleterious to the U.S. economy; nor is entitlement spending a threat to the U.S economy today (albeit it certainly would have been helpful had FICA revenue been allowed to accrue in a trust fund and collect interest income or investment revenue, instead of being spent by politicians to meet current Federal expenditures and pork-barrel projects).

To quote POTUS Reagan: "Social Security has nothing to do with the deficit."

But rather, it is borrow and spend Republicans that threaten the fiscal heath of the nation, the nation's credit line, and our national security.  Their irresponsible borrow and spend tax policies line an elite few's pockets, while threatening the nation's fiat currency, the dollar.

For how long will nation states want to hold dollars, or purchase the nation's debt, when they figure out America will never have the means of repaying its national debt, except by printing money in a glorified Ponzi scheme?

After 37 years, one would think the GOP would know better, and they probably do.  One would either have to be fatuous or nescient, or insane, to believe that tax cuts for the rich will spur the economy in the face of ever mounting hard evidence and facts.

Today's GOP doesn't even attempt to use logic anymore.  Instead, they rely upon the apathy and nescience of their aging voter base, and have stated this latest round of unsustainable tax cuts is direct payback to their plutocratic donors/owners.  Which is obvious, because not only are the GOP tax cuts unsustainable, they are unfair.  Multinationals see more than a dozen points shaved off there corporate tax rates, permanently, while most Americans will be lucky to see a couple of points removed from their bracket, temporarily.  

Moreover, what little relief the middle class did receive is likely to evaporate before a wall of GOP imposed: austerity; entitlement cuts; and higher health insurance premiums (as a result of Republican efforts to gut the ACA).

Today's GOP is no longer the party of Lincoln; but rather, Republicans more closely resemble organized crime, & private equity, who bust out victims and corporations by maxing out their credit lines and liquidating businesses for personal gain.

Except instead of busting out individuals, sole proprietors, and corporations - like organized crime & private equity - the GOP is raping the nation, by maxing out the U.S.' credit line.  

Did I call the ruling class an Oligarchy?  Kleptocracy is more like it.

Copyright JM Hamilton Publishing 2017

P.S. One way for future voters, and generations, to right the wrongs of this latest GOP instigated theft is to close a vast directory of loopholes available to the idle rich, multinationals, and the billionaire class. And institute a corporate minimum tax based upon EBITA, so as to cut out the gaming of tax payments that often takes place, via financial engineering.  And finally, eliminate hedge fund's & private equity's carried interest loophole. 

Remember: A fool and their credit line are often parted.