Our Impossible Republic

October 16, 2011 | By | 2 Replies More

I’m Tim Hogan. I am a husband, a father of two, a small businessman and I am one of the 99%.

The day will come when our Republic will become an impossibility because wealth will be concentrated in the hands of a few. When that day comes, we must rely upon the wisdom of the best elements in the country to readjust the laws of the nation.
– James Madison

Our Republic is at such an impossible time because the fewest have the wealth of our nation. The gap between the richest and poorest in America is at its greatest ever. The income of the top 1% of Americans has increased by nearly 300% since 1979 while wages and salaries of average Americans have barely, if at all, kept up with inflation over the same period. Americans suffer poverty at the highest rate ever. 46.3 million Americans have household incomes below the federal poverty line, with one in six children in America living in poverty, right now.

The percentage of wages as a percentage of our nation’s Gross Domestic Product (GDP) is at its lowest since 1947 when the government began keeping such statistics while corporate profits are at an all time high. Corporations have more than $2 trillion in cash reserves while unemployment is endemic and worker productivity is at all time highs.

The financial crisis of 2008 spawned efforts to stop the excesses of the banking and investment communities but, those valiant efforts have been to no avail as the laws and regulations which would prevent a re-occurrence of the financial crisis have been stymied and blocked by the financial industry’s stranglehold on the US House and Senate and threats of lawsuits.

Meanwhile the four largest financial institutions which took over $100 billion in bailout money from US tax payers have doubled and redoubled down on the risky derivatives which caused the financial collapse. Bank of America, Citicorp, JP Morgan Chase and Goldman Sachs as insured commercial banks now hold some 95% of risky derivatives as investments after they collectively received over $135 billion in federal bailout monies. Yes, the bailout monies were repaid with interest but, right now banks continue the very same risky activities which caused the 2008 financial meltdown in the first place.  And see here and here.

The US economy continues to sputter, unemployment remains high and average Americans continue to lose ground; to inflated prices for food; and, to inflated prices for energy, foisted upon us by speculators; and, to the wealthiest of Americans with the highest incomes.

There are two completely divergent views of solutions to our nation’s economic woes. US House Republicans took time off from their early efforts to be sworn in properly and to restrict abortions to pass their version of the budgetary and economic future of America.  The US House plan, endorsed by the GOP Caucus in the US Senate, would cut spending by $4 trillion, eliminate some government departments and much of the safety net for the poor and replace Medicare with a voucher system which caps payments to insurers with no guarantees of any level of coverage.

Under the US House plan retirement ages would rise for Social Security, the Cost of Living Adjustments (COLAs) would be further restricted for federal retirees and Social Security beneficiaries as they were under Presidents Reagan and G.H.W. Bush and people under 55 would have their benefits replaced by private accounts administered by the same Wall Street banks and folks now buying up 95% of the derivatives that caused the 2008 financial meltdown and who got over $135 billion in US Taxpayer bailouts.

The US House Republican budget and economic plan also incorporates the reduction or elimination of corporate taxes and more and bigger tax breaks for millionaires and billionaires.  All but six Republican US House members and almost all of the GOP US Senators have signed onto a “No Tax Pledge” to oppose any tax increase as defined by lobbyist Grover Norquist.  And see here.

Republicans oppose any tax increase for jobs and oppose any deficit spending for jobs. On Wednesday of this week, every Republican member in the US Senate voted against even allowing debate on solutions for our nation’s economic problems. The Republican members in the US House of Representatives won’t even allow a vote on solutions to our nation’s economic problems and are instead voting on another, already passed, anti-abortion bill.

President Obama put forward a Jobs Act which independent economists estimate will put some 1.9 million Americans back to work, and many of those right now. President Obama proposed that the cost of the Jobs Act be paid for by restricting some tax breaks for corporations and the wealthy and the elimination of subsidies to Big Oil.  And see here and here.

Now, President Obama has endorsed the concept of a tax surcharge on the incomes of millionaires and billionaires to finance the Jobs Act.  Super-majorities of Americans the elimination or reduction of tax breaks for corporations and the wealthy (70%) and support tax increases on the wealthy (66%) to pay for jobs, according to a September 20, 2011 Gallup poll. Thank you Mr. President but, your plan doesn’t go far enough at increasing taxes and giving proper incentives to prevent the kinds of problems which brought us the financial meltdown of 2008.

-Former Clinton Labor Secretary Robert Reich has it right:

Democrats should propose eliminating payroll taxes on the first $20,000 of income, and making up the revenue loss by applying payroll taxes to incomes above $250,000. This would give the economy an immediate boost by adding to the paychecks of just about every working American. 80 percent of Americans pay more in payroll taxes than they do in income taxes. And because lower-income people would get most of the benefit, it’s likely to be spent.

It would also give employers an extra incentive to hire because they’d save on their share of the payroll tax. And most of the incentive would be directed toward hiring lower-income workers – who have taken the biggest hit on jobs and pay during the recession.

It wouldn’t add to the deficit. Lost revenues would be made up by applying payroll taxes to income exceeding $250,000. This is certainly fair. As it is now, the Social Security payroll tax doesn’t apply to any income over $106,000. Having the tax kick in again at $250,000 would draw on the top 3 percent of earners, who (as noted) now rake in a larger portion of total income than they have in more than 80 years. Call it the People’s Tax Cut, and let Republicans explain why they’re against it.”

-Congress should impose a graduated and progressive derivatives or financial transactions tax to both raise money to finance government and regulate the financial industry. The European Union is about to impose such a tax which would raise income, provide incentives for financial institutions to limit risky investments and allow greater transparency for regulators. The Dodd- Frank bill could be used to limit the percentages of derivatives holdings by any single institution with the data provided by the levying such a tax.

There are other ways that we could improve the economy are simple, may be targeted and could lead to long term employment by many of the some 15 million Americans currently out of work. I also recommend the following proposals:

-All the federally owned mortgages for any borrower through any federal program who is current could have their mortgage rate dropped by unilateral federal action to just 4%. According to one expert, such a loan rate reduction could have a stimulus effect of over $100 billion and not cost the taxpayers a dime. The idea was originally proposed by Republicans

I propose that the all the federal agencies involved in backing home mortgages do an emergency rulemaking and individually declare that existing and future loan rates are reduced to 4% so as to stimulate the economy and home purchases. Reducing home loan rates to 4% for borrowers who are current is less risky than other options which might put money directly into the hands of average Americans.

Consumers “upside down” on loans who are current could possibly find relief and perhaps spared foreclosure. The extra money could be spent, giving the economy a boost or saved, giving lenders more capital for loans.
Lenders and mortgage brokers will still have opportunities to finance or refinance the loans downward to lower rates for “well qualified” and “decently qualified” borrowers to even lower rates than 4% which would further stimulate home purchases or savings. The competition among lenders could result in additional savings to consumers and more economic stimulus, apart from any political vagaries of rating agencies and the prices for T-bills.

If the federal agencies involved cannot unilaterally reduce rates to 4% by law then, the “super committee” authorized by the debt ceiling agreement which has to report back to Congress by the end of November, 2011 could report out such language or proposal in legislation which would immediately authorize such action with its report and must be voted upon in December 2011. If the economy improves, employment improves and so will tax collection ands the federal debt imbalance the committee is charged to address.

Expansion of the bi-partisan federal HIRE Program which has led to many new job hires by a cross-section of businesses in America. The HIRE program targets persons with criminal records and reduces the financial and associated risks of the employment of person with criminal histories. Increase employment in this most “at risk” group will pay for itself with increased revenue from the taxes paid by the newly employed and reduced recidivism which reduces costs of confinements.

-Expansion of the credit amounts and easing of the terms and conditions of loans guaranteed by the Small Business Administration. Recent efforts to expand supports of community bank lending to small businesses have been stalled because of claimed “bailout” issues.

Fine, take the private sector and the “bailouts” out of the program by making the SBA the direct lender instead of paying billions in fees to banks. Obama administration changes in student loan programs which eliminated banks as the “middlemen” already saved the government some $68 billion over the next 10 years, why not the same for small businesses right now?

-Put some $60 billion into a new revolving loan fund for small business to expand capacity and employment while continuing the small business employment and health insurance tax credit programs of the stimulus plan and healthcare reform.

-Have the Congress make a new commission or charge an existing agency to study and report back on the impact of non-tariff trade barriers to the export of US goods.

Countries bar import of US goods for consumer safety, environmental or other reasons. Some manipulate their currencies to reduce the price of their exports and increase the cost of US goods. When US manufacturers became aware of safety barriers, they improved their goods and exported. If the non-tariff trade barriers are of such significance to bar the export of some US manufactured goods, the government can make specific grants, loans or loan guarantees to spur specific development of products or product improvements to allow more exports.

Such programs would boost US export of manufactured goods and provide a resource for innovation for manufacturers on the bubble about changes in or production of products so as to increase exports. Obviously, such would boost employment in the distressed manufacturing sector of the US economy and possibly slow the export of US manufacturing jobs. Some have described such “outsourcing” as a “good thing.”

The President’s plan to put people back to work immediately is a merely a good start. It is time that those which have had the lion’s share of the growth of wealth in America for the past 30 years pay their fair share for the support of the nation which gives them both the opportunity and safety to accumulate or maintain great wealth. For too long the Middle Class and the working poor have borne the burden of supporting the corporations, millionaires and billionaires of America.

If the opponents of Madison’s “adjustment” who have had their way for the last 30 years were right, America would never have recently suffered through the “Great Recession” and would have had the largest period of Post-WWII economic growth rather than one of the worst. If the opponents of Madison’s “adjustment” who have had their way for the last 30 years were right, the “Lost Decade” of the GW Bush years never would have occurred.

If the opponents of Madison’s “adjustment” who have had their way for the last 30 years were right, 46.3 million Americans and one sixth of all American children would not right now be in poverty. We are poised upon the brink of the impossibility of our Republic where the wealth of our nation is concentrated in the hands of so few. Corporations are “people,” real Americans are being rendered powerless, and all good flows to the few who already have too much. It is, as President Franklin Delano Roosevelt said:

The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism – ownership of government by an individual, by a group or by any other controlling private power.

America was founded as a republic; it is up to us to keep it that way.

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Category: Corporatocracy, Economy, Politics

About the Author ()

imothy E. Hogan is a trial attorney, a husband, a father of two awesome children and a practicing Roman Catholic in St. Louis, Missouri. Mr. Hogan has done legal and political work in Jefferson City, Missouri for partisan and non-partisan social change, environmental and consumer protection groups. Mr. Hogan has also worked for consumer advocate Ralph Nader in Washington, DC and the members of the trial bar in the State of New York. Mr. Hogan’s current interests involve remaining a full time solo practitioner pioneer on the frontiers of justice in America, a good husband and a good father to his awesome children.

Comments (2)

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  1. L. Myzo says:

    Do you have a cite for the Madison quote? Have seen it elsewhere but have heard its genuineness being questioned. Thanks.

  2. Tim Hogan says:

    Nobel Prize winning economist and NYT columnist Paul Krugman agrees with me about more taxes on the rich and taxing financial transactions.

    http://www.stltoday.com/news/opinion/columns/paul-krugman/paul-krugman-what-s-next-after-the-superdud-supercommittee/article_b9a4cd5b-b7a3-5545-967b-3a7fab3a4022.html?mode=comments

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