While the Tea Party crowd is busy called the Obama administration "socialist" for maintaining the status quo, the reality is that America's wealthy are turning on the country like a pack of wolves on an old and weak former pack leader.
We still hear arguments from Republicans and other "conservative" ideologues that "private individuals" can better make use of resources than the government, and thus increased taxation, specifically on the wealthy, and increased government efforts to manage or stimulate the economy are all doomed to fail, etc.
Let's be clear about what's really going on right now.
First of all, huge portions of the wealth accumulated by the wealthiest Americans, especially those in the financial sector, over the past 30 years is effectively stolen wealth that has been redistributed from working class Americans and foreign workers to capital owners.
Secondly, the vast majority of this wealth held by the American wealthy is not being used in ways that are beneficial to the American economy at all, and arguably not even to the world economy. Indeed this wealth is being used in ways that sabotage the American economy, and effectively the world economy as well.
Are "private individuals" better at allocating resources than a government in theory? Depends on the government and depends on the current economic conditions. Right now that answer in America would be a resounding no if we had a government with any will to do anything.
We've had basically two years of very low interest rates now, primarily in America, but also in Europe and Japan. And yet, specifically in America these low interest rates have done little to spur improvements in the economy. Now the theory is that if the American central bank provides "cheap money" to people, then they will borrow now and invest it in businesses and hire more people. Of course there is no reason to do this in America because 90% of the population has no excess money to spend on anything more than what they are currently spending on, so what is the deal with these low interest rates?
Well, what's happening is that large financial institutions and super-rich individuals are borrowing lots of money in America and Japan at near zero interest rates, and they are taking that money to developing countries like Brazil, India, China, Vietnam, Indonesia, Russia, and heck even places like Saudi Arabia, etc. and they are investing it there.
The wealthy are essentially banking on the demise of the US and the rise of these other countries, which makes sense to a degree, but in fact what they are doing is they are accelerating the demise of the US and they are creating new bubbles in these other countries. You see, the low interest rate policies of Greenspan and the entire "free market" gang that has ruled American fiscal and monetary policy for the past 30 years is what created the first big set of bubbles in America, the big bubble that Clinton rode and still tries to pretend today wasn't a bubble but rather a product of his good leadership. In fact, Clinton just oversaw the creation of the problem because he himself bought into the whole "free market" nonsense and much deregulation occurred under his watch.
Right now what has happened is that the imbalance of wealth in America and around thew world has become highly toxic to the entire economic system in and of itself. We have a situation where such a huge portion of wealth is owned and controlled by so few people that they don't really know what to do with it, and the result is an ongoing chain-reaction of bubbles, and each time a bubble bursts the reaction is to implement polices that create new bubbles since that's the only way to try and quickly maintain the status quo; the status quo is a rising tide of bubbly foam.
So we have this relative handful of people with trillions of dollars of wealth at their disposal and of course there is simply no reasonable way for so few people to do anything with this wealth, especially when they are driven by an ideology that whatever wealth isn't be used for personal gratification at the moment needs to be employed in some fashion that will generate more wealth for themselves. So this mass of "capital", which is really just money, goes sloshing around from one thing to the next creating bubble after bubble and leaving wreckage in its wake at every turn.
And as we see revenues going down, but incomes for the super-rich going up, what's happening is that they are trying to grab whatever they can right now as fast as they can. Basically the ship is going down, and they are running around grabbing all the silver and fine china and dumping it in their lifeboats, and filling up additional lifeboats with the treasures on the ship, while they kick the coach passengers in the face to keep them away from the lifeboats so they can load them up with more silver and china. And the Tea Party folks are like complete idiots who are helping to keep everyone else away from the lifeboats so the rich folks and can use them all to take their treasure plus every else's with them, and they're too stupid to understand that in the process they are being robbed and dooming themselves to go down with the ship as well.
What we should be talking about right now is how much wealth we are going to confiscate back from the super-rich, 50% of it or 80% of it, but instead the mainstream media and the politicians are propping up a debate about whether increasing taxes on high end incomes by a couple of percent is justifiable and if it will "just hurt the economy" by reducing the amount of income that the wealthy have to "invest in businesses to grow the economy".
The wealthy aren't investing in the American economy now! There are fewer than 500 people in America right now who could, with their combined wealth, pour trillions of dollars of investment into the economy today, right now, and still have a comfortable cushion left over. They aren't doing it. Allowing them to keep a few percent more of their multi-million to billion plus a year incomes will neither encourage nor discourage them from doing anything different.
These people are taking their money and jumping ship; they are sending their money over seas. They aren't helping America, and they aren't really even helping countries over seas. They are creating bubbles, consolidating property ownership, and buying influence among the next round of banana republic dictators. Even if you take folks like Bill Gate who gives a lot to charity, the rest is still invested in the same manner as I'm describing.
Is it better to reduce taxes and government spending so that individuals can keep that wealth and allocate it themselves? Not necessarily, certainly not when wealth is highly concentrated such that the allocation isn't determined by a majority of the population but rather by a small number of super-powerful individuals, and certainly not in this case right now when the wealthy are essentially scuttling the United States for their own gain.
Updated: Wednesday, October 13, 2010 9:16 PM EDT