PAUL BUCHHEIT FOR BUZZFLASH AT TRUTHOUT
A cynic might argue that business leaders and their friends in Congress
weren't expecting different results.
In either case, we've become a bipolar nation, 1% manic and 99%
depressive. Our affliction is caused by a 30-year experiment in the dismal
economics of delusion. Deregulation for corporations and tax cuts for the
wealthy have defined conservative policy since the 1970s, when University
of Chicago economist Arthur Laffer convinced Dick Cheney and other
Republican officials that lowering taxes on the rich would generate more
Ronald Reagan complied in the 1980s by dramatically reducing the top
marginal tax rate. And while declaring government "the problem" he eased a
half-century of protective regulations on mortgage lending.
In the Clinton years, Larry Summers and Alan Greenspan and Phil Gramm and
others lobbied against regulations on the derivatives that evolved into
toxic assets a decade later. A lonely voice of opposition, Commodities
Trading Commission head Brooksley Born, was denounced by the powerful
Treasury men, who were shocked by her affront to the nation's "financial
The repeal of the Glass-Steagall Act in 1999 removed long-held protections
for commercial bank deposits, as the newly liberated financial
institutions now coveted the unprecedented profits in high-risk
investments. Soon after, the 2000s brought us the Bush tax cuts, which
have cost the nation over two trillion dollars, and a further assault on
the Securities and Exchange Commission by Goldman Sachs and other
financial institutions committed to "self-regulation."
So what's the result of all this? The financial collapse of 2008, of
course. But it goes way beyond that. Tax cuts and deregulation led to the
worst inequality since the Great Depression, with the top 1% nearly
tripling their income while wages leveled off. The richest 10% own 80% of
the "unearned income" that gets taxed at rates lower than those for
teachers or health care workers. Corporate profits are at a record high,
having accounted for 88% of the recovery after the 2008-9 recession.
Yet taxes on corporate income have been shrinking dramatically. The total
tax revenue derived from corporate taxes has dropped from about 20% in the
1960s to under 9% in 2010. From 2008 to 2010, the top 100 U.S.
corporations paid only 12.2% of their income in taxes, and thirty of them
paid nothing at all.
The lack of SEC regulation has also allowed corporate America to seek tax
dodges beyond our borders. Citizens for Tax Justice reports that the 280
most profitable U.S. corporations sheltered half their profits from taxes
between 2008 and 2010. The "Ugland House," a single building in the Cayman
Islands, is now the 'home' of 18,857 corporations. While the worldwide
average corporate profit per employee is $40,000, in Bermuda in 2007 it
was $5.4 million per employee.
But corporate heads, especially in the financial sector, keep lobbying for
more deregulation, often infiltrating the regulatory agencies with former
employees to get their point across. The Washington Post reported on the
clamor by business leaders to link regulations to job losses. Congress
listens. "Dodd-Frank obviously is a disaster," proclaimed Ron Paul. "But
Sarbanes-Oxley costs a trillion dollars, too. Let's repeal that, too!"
Ironically, even earnest attempts at regulation can be foiled by big
business. The Daily notes that "Stringent regulations tend to protect
incumbent firms from...innovative start-ups that could drive them out of
business...Google, Apple and other technology giants, for example, have
spent billions of dollars on software patents to defend themselves against
pointless litigation. Shoestring entrepreneurs can't even begin to do the
same, so many new tech firms are never established."
We don't have the political will to regulate greed in a reasonable and
effective manner. Instead, wealthy Americans continue to insist that more
for them is better for everyone, and that the system will work if we just
leave it alone. As Rachel Marsden said, "If capitalism is perceived to not
be working in America...it's because the system isn't capitalist enough."
After 30 years of economic devastation for most Americans, it's sad to
watch our rapid fall from sanity.
Paul Buchheit teaches Economic Inequality at DePaul University. He is the
founder and developer of social justice and educational websites
(UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and
main author of "American Wars: Illusions and Realities" (Clarity Press).