Sunday, August 7, 2011

Twilight of the American Century

It has been a while since I posted a soap-box article, so in the wake of the S&P downgrade of the US credit rating, I thought I'd make a comment on the erosion of the American experiment.

On the evening of July 21st, I watched on television the landing of the Space Shuttle Atlantis.  It was the last flight of the Shuttle program, leaving the American space program without a means of sending humans into orbit.  As budgets are cut and enthusiasm wanes, I began to seriously contemplate that the United States may never send a person into space again without subcontracting the job to Russia, China or a private company.  This was a passing thought, and I consigned it to the recesses of my mind.  However, the goings-on in Washington D.C. and across the rest of the US over the past few months have led me to think that this is not such an unreasonable thought.

And the Shuttle program's demise is a metaphor for what I see across the US.  Government is bad, public spending is evil, and nobody wants to pay for anything through taxes.  The Shuttle program employs over 3000 contractors and government workers.  These people are now losing their jobs.  By October, only 1000 will be left, converting the Shuttles into museum pieces.  Turning the lights out.  And so it is with this deficit reduction farce which was recently completed, with savage cuts in spending and no revenue increases.  Far from creating jobs, this will mean government shedding jobs, as has been happening in States, cities and towns across the US.  No new taxes at any cost.  Never mind that the wealthy and corporations are sitting on their money.

The new euphemism for the rich is that they are "job creators" and taxing them a higher rate would disincentivise hiring.  So last month, Cisco Systems, who is sitting on piles of cash outside the US, taxable at 35%, is lobbying to bring that money back almost tax-free; a so-called "tax holiday"; and in the meantime has announced a cut of over 6000 jobs.  One in ten of their worldwide workforce.  The reason they are laying people off?  People aren't buying.  Why not?  Because they have no jobs, or they have tightened their belts.  The only reason to hire more workers is because there is demand for something you have to sell.  Companies aren't buying.  Consumers aren't buying.  Cutting taxes on Ford won't give them an incentive to hire more people if people aren't buying their cars.  It just serves to increase the company's profit.  So the argument that tax rates must be cut and government spending must be cut to improve the economy defies logic.  And the Republicans are now advocating an amendment to the US Constitution which would mandate a balanced budget.  This is insane.  Sure, debt can be a bad thing.  Is US debt out of control?  Perhaps.  But consider this.  It is not as bad as Greece, and even with a $14 trillion debt, the credit rating was still triple-A.  Why?  Because a big as that debt number is, the government can raise revenue and service that debt.  So in bad times when nobody is buying and nobody is hiring, government is the only entity who can create demand and stimulate the economy.

A perfect example of the dysfunction at the heart of US government had to be the FAA shutdown this past month.  For ideological reasons, Republican Senators blocked the re-authorisation of the FAA budget.  Four thousand workers were furloughed.  Safety inspectors were coming in to work without pay to do their critical jobs.  But, because the FAA was shut down, $30 million a day in taxes were not being collected, reducing revenue.  At the same time, infrastructure projects were put on hold, putting between seventy and ninety thousand construction workers out of a job.  So there you have it.  Lower taxes, people out of work, infrastructure not maintained and safety potentially compromised.  And who benefits?  Well, until they were shamed into refunding the taxes to consumers, the airlines had raised prices, kept the taxes and pocketed the cash.  So in addition to the economic impact of the shutdown, corporations made more profits, and Joe Average gets screwed.

But governments must provide some services and they must be paid for.  So what is happening?  Well, in this example, local government is raising parking fees and fines.  State government is raising tolls and fees on things such as getting a birth certificate.  In some places, parking revenues now are competing with property taxes as the main source of revenue.  Call them fees or fines, but these are taxes.  And they are taxes on the people who can least afford the increases.  Increase corporate taxes or the top marginal rate or progressive property taxation on the value of the property?  Hell no.  But slug the shopper who has no choice but to use the parking meter, the commuter who has to use the bridge?  No problem.

And again, regular people bear the brunt.  Layoff of teachers, police, city workers.  Cities tearing up the tarmac roads because they are expensive to maintain.  Turning out the streetlights to save on electricity.

What is happening to the US?  Well, the tactic must be working for someone, as the same tactics of vitriolic and utterly negative response by business and the opposition to the carbon tax proposal here are just unhinged.  I personally don't know if a carbon tax is the right approach or whether it will work.  But it seems that the disease of believing that any tax increase is an assault on freedom, liberty and who knows what else is spreading.  This is a dangerous road to go down.  Nobody like paying taxes, and nobody likes their taxes to be seen to be misused or mis-spent.  But they are necessary to maintain society and the standard of living people have come to expect.

Welcome to the end of the American Century.  Hastened by the principle that government of the people, by the people and for the people, is a bad thing if you have to pay for it, and the sooner is perishes from the Earth, the better.

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