THE PRIVATE SECTOR IS KILLING CAPITALISM & DEMOCRACY

THE PRIVATE SECTOR IS KILLING CAPITALISM & DEMOCRACY

Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except all those other forms that have been tried from time to time.

- PM Winston Churchill

Well, now that we have seen each other, said the unicorn, if you’ll believe in me, I’ll believe in you.  Is that a bargain?

Yes, if you like, said Alice.

- Lewis Carroll, Through the Looking-Glass

By J.M. Hamilton (1-7-2018)

Cue the Prosecco, pour the Vivaldi, and taste the Fire & Fury.

We've just passed through the Looking-Glass, and the GOP has spun so many lies - for so long - that what is down is up, and what is right (wing) is clearly wrong.  A Hatter - given to fabulous story telling & lies - resides in the White House.

Time has a way of revealing old truths and new ones too.

Why it seems like it was yesterday that POTUS Reagan said these famous words, during his first Inaugural Address:

In this present crisis, government is not the solution to our problem; government is the problem. 

And over the span of time, perhaps Mr. Reagan was right.  JMH is not into absolutes or broad generalizations, but look around the globe: Western democracy, as we know it, and mainstream democratic political parties, are in retreat (propped up by deceit, fiction, lies, and vast sums of money).

Yes, the stock market continues to soar, fueled by artificial sweeteners and the Grand Enabler: central bank printing presses.  Other than that, is there much good to say?  

Not really.  National debt spirals out of control.

One thing is for certain, where Western democracies have been co-opted, purchased, and run by, and for, a global oligarchy - or worse still, a kleptocracy - are we really any better than any alternative forms of government?

JMH has taken more than a couple of shots over the years - not at the Chinese people (whom I have the utmost admiration and respect for) - but at China's government.  

Authoritarian & totalitarian governments are so passe, until they are not.  

My freedom loving, and civil-libertarian, heart just hates the thought that a gang of wealthy elites - in a one party state - can run a government and country for their own benefit, while crushing all dissent, smearing all competitors, and censoring news and information flow.

But who - or what political party - am I describing?  China's communist elite or today's Republican Party?

A Republican Party that is hell bent on banning/eliminating words from government reports, ramping up libel laws (to crush dissent), and allowing the consolidation of information & news media, so that The Republican Party narrative can be carefully choreographed, controlled, and trotted out?  

And let's not forget the GOP's revocation of the net neutrality laws, which essentially means a cartel of Internet service providers can, and will, have the means to control Internet news content and information flow. (And the poster boy for Orwell's nightmare - a man presently afraid to show his face in public.  Why that would be the lobbyist - and mouthpiece - for the Internet cartel, and current FCC head, Mr. Ajit Pai)

If Reagan were alive to see what Republicans have become, he'd switch back to the Democratic Party.  By today's standard, Reagan is a Democrat.

Not that Clintonian Dems are so much better, but Mr. Trump and everything the Republican Party has come to stand for (in essence, obtaining obscene wealth at all costs & at the expense of many) is starting to make China's Marxists look almost contained, controlled, and professional.  

At the end of the day both Republicans and the Communist Party serve a ruling kleptocracy; at the end of the day, both parties prove Reagan's maxim that our governments - controlled by ruling & unaccountable cadres - are the problem.

But it doesn't have to be this way.  A few simple reforms - like a popularly elected SCOTUS, removing unseemly sums of money from politics, and a US Senate that is allocated by population - and the US government can be shiny and new again.  

Government doesn't have to be evil or wrong; government can be made to serve the 99%.  

That is to say, government is only as good as the people who serve, and who have the moral courage to speak their minds.  Democracy just happens to be the least worst choice of all alternative forms of government.

But introduce vast sums of money into a Democracy and we become little better than an authoritarian or totalitarian dictatorship, ruled by a moneyed elite.

Much is made of the “rule of law” ... but it's only as good as the laws on the books.  If our government passes laws that condones & enables corruption, and subverts transparency, at every turn, than the rule of law - and the laws of the land - aren't worth the paper they're printed upon.

As scary as our crony government is, our crony economy is equally frightening - for it is the monopoly economy that provides that explosive wealth used to subvert our republic.

The global kleptocracy not only likes a rigged government, but they like a rigged economy.

This mean - as JMH has oft written - that cartels and monopolies are the order of the day.

You see, it's no longer enough for large-scale enterprise to make a profit, but those profits have to be turbo charged, via consolidation, financial engineering, and M&A.  Consolidation and M&A are known killers of: customer service; innovation; jobs; and its practitioners are connoisseurs of predatory behavior.

In fact, while were comparing China's government to America's, why not compare China's state run enterprises to U.S. cartels and monopolies?

US monopolies - often propped up by government sanction & bailouts, and all too often are too big to fail (see Wall Street banks) - most resemble.... you guessed it, here comes the punch line, China's state run enterprises (which are also propped up by China's government, receive bailouts, and are often too big to fail).

Somewhere along the way Republicans - and alleged, free market enthusiasts - took a U-Turn, and instead of appreciating Adam Smith (who defined “capitalism” as competitive markets, with many competing entrants, operating w/in the guardrails and the regulatory rules of the road - established by government), came to fall in love - to the point of idolatry - w/ Ayn Rand's golden calf.

The problem with Ayn Rand's individualist dogma - and the libertarian economic ethos - is (taken to the extreme): it always metastasizes into cartel, monopoly, and the crony economy.  Of course, the U.S. kleptocracy has no overriding ethos, other than: the ends always justify the means.  And their religion boils down to several things: their personal enrichment, at your expense; the almighty dollar rules; and only suckers pay taxes.  Like China's kleptocrats, the U.S. kleptocracy believes in privatizing profits, while socializing losses (see again, the Wall Street bank bailouts).

The very things Adam Smith warned us about.

It doesn't matter how gifted the genius is, or how nifty the product is, no man or woman should have the ability to establish a government sanctioned cartel - or monopoly - in any country that respects democracy, freedom, and economic & human rights.  

Monopoly and monopolistic profits are antithetical to capitalism, democracy, and human rights; and if the private sector fails to compete, in a given market w/in the economy (to better insure monopolistic returns), the government has an obligation to compete against the private sector within that market.

The outcome of nearly all monopolies (unless strictly controlled & regulated)  - in the long run - is not only pernicious, but highly destabilizing.

Alice and The Hatta, by Lewis Carroll

Destabilizing?  But to what degree?   

Take a look at the rise of M&A and monopolies - throughout the West over the last 37 years - and the rise of populism throughout the West today.  

Look at relatively prosperous Germany (the crown jewel of the EU), which today, cannot even form a coalition government.  

Take a look at Egypt and Iran (where both countries have little economic opportunity, high rates of unemployment, and whereby, their economies are controlled by - you guessed correctly - crony cartels and monopolies), and what do you see?  

Answer: military coup and revolution.

Cartels and monopolies, and unchecked wealth & power, are breeding grounds for political instability and revolution. 

It's been that way for centuries.

JMH - perhaps naively - believes in a mixed economy: all the best that capitalism has to offer (in a carefully regulated environment), combined w/ a social net necessary to contain capitalism's inevitable fallout.

But a mixed economy – w/ strong democratic institutions -  means we need a government controlled regulatory regime, that will: expand and enforce antitrust laws; and establish commercial rules of the road, that protects consumers, labor, and society (and moreover, insures the inevitable social costs of doing business are picked up by the industry and biz that produces those costs, both foreseen and unforeseen).

As it stands today, the greatest threat to the US economy - and capitalism -  is a government controlled by a ruling kleptocracy.  

A kleptocracy that is funded - when they are not pigging out at the government trough - by an economy that is dominated by untrammeled cartels and utilities.

No other threat to our nation exceeds this one.  

For the survival of our freedoms and our democratic institutions, it is a threat that must be contained.  It's time to wipe the sleep from our eyes, and rejoin Alice on the other side of the Looking-Glass.

Copyright JM Hamilton Publishing 2018

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.