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TRICKLEDOWN AND OVER-REGULATION

September 29, 2017

TRICKLEDOWN AND OVER-REGULATION

Trickledown (also known as tax cuts, among other things) and failure to regulate the activities of big banks and corporations have never worked, contrary to incessant propaganda offered by the rich and corporate class to the contrary. They have not only not worked for ordinary Americans; they have not even worked in the long run for the rich and corporate class. Yet since the Great Depression of the Thirties the argument that reducing taxes on corporate America will result in unleashing investment, employment, wage increases, entrepreneurship etc. that will result in economic growth persists even though study after study shows that raising taxes on the rich and corporate class has little effect on the economy other than to increase government revenues needed to help fund important public initiatives.

In modern times, it was Reagan who came into office and furthered this myth, and things have not been the same since. His giant tax cuts on the rich and reduced regulations on the rich and corporate America instead gave us a recession along with Iran-Contra and a wife guided by astrology. Contrary to business page chatter, he was a disaster for working class Americans (though a boon to the superrich).

George Bush the Younger later gave us a first in history, a giant tax cut for the rich during war, and an SEC which looked the other way on the regulation of the big Wall Street banks who themselves, unleashed by Clinton’s ill-advised signature on a bill in 1999 repealing the New Deal Glass-Steagall Act which had theretofore prevented banks from mixing investment and commercial banking, soon gave us Bush’s Great Recession with their reckless and criminal investments. I need not recount their mortgage fraud, our hundreds of billions in bailouts, the Fed’s purchase of their subpar paper at par etc. etc. etc., all of which is well known, none of which had to happen but for the twin myths of trickledown and over-regulation.

My followers have read most of my above diatribes before, but have had little extraneous proof of my denunciation of policies calling for reduction of taxes and regulations on the rich and corporate class. I here propose to lay out a few of such proofs and their results. Let’s start with regulations.

Regulations must be based on statutes, thus there must be laws in place in order for there to be rules and regulations construing such laws. With the repeal of Glass-Steagall in 1999, we also rid ourselves of rules and regulations which did not allow the big banks to mix investment with commercial banking, thus also allowing the big banks rather than the SEC to measure risk assessment, which is the equivalent to inviting a fox into the henhouse and asking him or her which chicken he or she wants to eat first. The fox chose credit derivatives, securitized shaky mortgages for sale to unsuspecting customers such as retirement funds for nurses, policemen and firemen, and traipsed around the globe making investments that were not regulated or overseen by Bush’s SEC. Result? See above (Bush’s Great Recession).

The fundamental problem with the anti-regulation crowd of Reagan-Bush and now Trump is that they have failed to understand that regulation of practices by big banks and corporations is not a damper on economic growth but rather applies to the bad practices such regulations were designed in the interests of all of us to prohibit or otherwise control. Proof?

Bush’s enormous reduction in taxes for the rich and corporate class in wartime, a first, when added to abandonment of regulation of such a class in their both domestic and international activities, was an open invitation for disaster to our economy, and unsurprisingly, the economy tanked. How badly did it tank in terms of aggregate lost wealth to our economy (yet to be recovered)? Try, per the Government Accounting Office, 22 trillion dollars! The GAO breaks it down into 13 trillion dollars in lost economic output and 9.1 trillion dollars in home equity losses. To give you some perspective, this lost 22 trillion dollars is currently a bit more than our gross national debt, which I understand is hovering around 21 trillion dollars, and that is a lot of money either to owe or lose or give away because of “malfeasance, incompetency and complacency,” as described by Rana Foroohar in a Time article of October 13, 2016, entitled “The Financial World’s Rotten Culture Is Still a Threat – to All of Us.”

Like a rock thrown in the middle of a fish pond with its concentric circles hitting all shores, there are other both human and economic tragedies resulting from Bush’s trickledown and anti-regulatory policies (and as again advocated by Trump). Thus, for instance, Joseph E. Stiglitz, noted economist and Nobel Prize winner, writes that lost economic production can never be recovered and that its effects are still with us to this day. Seven million people lost their homes to foreclosure as a result of Bush’s Great Recession. Thousands of suicides in Europe and America were attributable to Bush’s Great Recession, as noted in an article in the British Journal of Psychiatry of June, 2014. Credit froze. Retailers closed up shop. Thousands of small banks who received no bailouts either closed or were forced to merge by the Fed. Unemployment soared. Bankruptcies soared. The only possible good news from this continuing economic tragedy is that it provided a history for us to see and never again repeat.

So what is Trump proposing?  A repeat – more of the same old same old trickledown and anti-regulation. Are we so profit-driven and greedy that we refuse to comprehend history, even our history of just a few years ago? As I often write, how many more hits can our economy take before it collapses and takes all of us with it, both rich and poor? Must we, as Elizabeth Warren suggests in her book This Fight Is Our Fight, succumb to Trump and his band of billionaires, bankers and bigots? NO!

When Roosevelt was insulted and threatened by the rich and corporate class, he responded with his classic statement on the Saturday before Election Day in 1932 with reference to the moneyed class: “They are unanimous in their hate for me – and I welcome their hatred,” which tells me that we need not succumb to the ruinous trickledown and under-regulatory policies Trump is proposing as a puppet for Wall Street and to line his own pockets as well. Like FDR, we can and should and I for one will loudly protest tax cuts for those who don’t need them along with demands for what they do need – regulation. FDR also stated in a lesser-known quote that the war against “privileged princes” and “economic royalty” running corporate America was not just “war against want and destitution and economic demoralization but a war for the survival of democracy.” Amen! He was right then and his insight is prescient now as words we should heed lest both we and our democracy fall from within.     GERALD       E

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