Dear Rep. Brat:
Here are some observations I sent to a friend recently that sum up my strong views about the current and chronic WORLD economic crisis. You promote yourself as the only economist in the Congress. Everything that has been tried so far, including the Fed's utter foolishness with short-term interest rates (now near zero) has not worked for the vast majority of Americans, many of whom remain unemployed or in substandard employment. It is important to remember that MOST American workers have been employed by small, usually local businesses, not the big industrial firms.
With the aging and dying of us Baby Boomers, the huge DEMAND engine that was present for over 60 years has radically dwindled, and we have been suffering a DEMAND-side crisis, not a SUPPLY-side crisis, for at least 9 years.
I know you are a Republican and may be wedded to the dominant but thoroughly discredited economic theories, but I also think you are smart enough to consider a radically different view of the situation, thus:
Greed and selfishness ARE universal. However, they are not synonymous with "self-interest." The INCOME-tax cuts of 2001 and made permanent for most people (UP TO $700K TAXABLE joint incomes) by Barack Obama and Congress about 2 years ago were absolutely the WRONG thing to have done, because capital investment was already quite healthy and did not need "stimulation," which was the primary justification. (We are awash in cash now! Where are all those "investments" and jobs?) Most businesses, even the large ones, are self-interested in their reliance on paying customers, and if the majority of people in this country and around the world are deprived of spending money, then sooner or later the businesses will have to lay off employees (as they have done) who will then have NO spending money, thus triggering more layoffs! When those INCOME-tax cuts were made permanent, the FICA PAYROLL tax was increased back to a combined 12.4% on workers and lower-salaried people and their employers. The really wealthy (and their employers) do NOT pay FICA on their larger salaries, nor on PASSIVE incomes like dividends, interest and capital gains. It is levied only on lower EARNED incomes. FICA is also levied on GROSS wages and salaries and allows for no deductions and no exemptions, nor is it deductible from taxable income. Thus, it is paid by lower-income folks with PRE-TAX dollars.
Now the wizards are trying to cut Social Security benefits and/or raise FICA PAYROLL taxes to fix a Chicken-Little "crisis" in Social Security, so that FICA revenues may thereafter be surreptitiously diverted to alleviate the horrible deficits caused by inadequate INCOME-tax revenues, NOT Baby-Boomer SS claims. Collected FICA revenues are reportedly down as well, indicating shrinking payrolls despite the falsely inflated "jobs reports." (Also, SS benefits derive from revenues already taxed, yet they are being doubly taxed again for higher-income recipients!)
Note the significant difference between TAXABLE incomes and GROSS incomes, the former reflecting exclusions, exemptions and deductions. Many of those in the lower half of the American income structure cannot afford to buy a home, so they most likely are forced to use the measly Standard Deduction instead of larger itemized deductions. Most of them also spend 100% of their net incomes (no savings) into their local economies, which wealthier folks don't do.
In 2014, the GROSS household median (midpoint) was under $53K. 80% of all US households were under $113K annual gross. At least 63% of American households were under $75K gross annually. The top 5% of households earned more than $262K gross annually. The true "middle class" has no spending money! Relatively flat recent retail sales is proof!
So, economic self-interest more likely relies on getting paying customers, not cutting taxes for investors. The cut taxes and resultant deficits have eroded the real purchasing power of the masses, shifting net wealth from the masses to the relatively few and under-taxed wealthy who could easily AFFORD to pay more taxes to reduce those deficits.
The Bureau of Labor Statistics finally admitted that their numbers do not reflect the recently enlarged group of former workers who have simply quit looking for work in desperation. Those folks are no longer counted as "unemployed." The BLS "jobs reports" do not report NET jobs added but only GROSS jobs added, meaning they don't reflect the substantial layoffs that have also occurred. They also cannot accurately account for "under-employment," which is rampant. Retail sales is a much more accurate measure of true economic health than is the "jobs report," and retail sales are still suffering.
The fact of the high numbers in the Dow Jones averages do not matter to at least 60% of American households. I think the true "middle class" has no dog in the Dow fight.
Contrary to the blather of Milton Friedman and most others, there is NO SUCH THING as a "free market." If so, then monopoly and price-fixing would be legal. It is a massive delusion believed in the repetition of it. The American and world economies function much more as a manifestation of "fair-market mercantilism" (buying and selling) than "free-market capitalism." "Capitalism" is merely a very useful tool for accomplishing the capital funding of businesses. It cannot be a legitimate end unto itself, because no business, no matter how well-capitalized, will survive w/o paying customers. GM and Chrysler are obviously well-capitalized (no small thanks to the American taxpayer), but their cars still SUCK!
I think Bernie is wrong about some things, but his thinking is much closer to the reality for most people than is Milton Friedman's. Speaking of "wrong," we've had about 34 years of Friedman's brand of "free-market capitalism" and the true world economy is in the toilet. It is going to stay there until the masses get some jobs and some spending money.
PS--The Fed has cut short-term interest rates practically to zero, yet no widespread prosperity is manifest. That "supply-side" claptrap is meaningless for the majority of households routinely deprived of borrowed money, and most consumers are no longer going to borrow and spend. Those days are so over. Our economic problems are FISCAL, not MONETARY, so Congress needs to get busy!
