Editor’s Note: The Republican Party and its powerful allies in the right-wing news media made it clear from the moment that Barack Obama took office that they would demonize everything he tried to do, especially on the economy.

Knowing that progressives had no comparable media infrastructure to respond – and that many Democrats would cower when attacked – the Republicans now appear to have convinced many Americans to hand congressional power back to the GOP, a situation that Stephen Crockett addresses in this guest essay:

Indications of this plan have been around since the Democratic victories in 2008. It seems that all doubt about facilitating the economic downturn as a path to political power for Republicans have been removed by recent legislative votes.

Economic recessions and depressions almost always result from insufficient “effective” consumer demand for goods and services produced domestically.
In economic terms, wanting something is not “effective demand.” For a want to become a demand for goods or services, it must accompany the desire to buy with the ability to actually purchase. Money is required.

Jobs are not created by just having large pools of investment money available. There must be the opportunity to invest in a business that will have customers who can buy the goods and services before the investment money flows into job creation activities.

The Republican Right economic theory that economic prosperity and employment “trickle-down from the wealthy” has proven to be unsound by historical experience.

Tax cuts for the wealthy create huge investment money pools but not jobs. The United States has plenty of money sitting idle in corporate and personal coffers. Corporations have almost a trillion dollars sitting essentially idle in corporate accounts at this time.

Republicans are seeking to extend the tax cuts for the wealthy by falsely stating that increases in taxes for the upper 2 percent of income earners would hurt demand and prolong the economic downturn. Experience and history prove otherwise.

Tax cuts at the highest marginal incomes brackets do concentrate wealth and political power in the hands of the economic elite. The resulting political power by the economic elite pushes government policy in directions that dramatically cut the percentage of the nation’s wealth and income held by the vast majority of Americans.

This reduces the ability of most Americans to buy goods and services. As a result, the economy unwinds because customers do not have enough disposable income to keep the flow of goods and services at a healthy economic level.

The former middle class disposable income now controlled by the economic elite funds speculation and unsound “bubbles” in the economy instead of a healthy economy because sound businesses now lack paying customers.
Deregulation helps corporations charge excessive prices. Not enforcing anti-monopoly laws permits price gouging. Not capping interest rates concentrates wealth and reduces consumer spending.

Outsourcing jobs to foreign nations reduces incomes available to buy goods and services. Union-busting keeps wages and benefits down which undermines the purchasing power of workers.

Privatizing government services costs consumers more in out of pocket expenses once provided by government. This reduces disposable income for these consumers.

When employers reduce benefits and increase co-pays, it increases the cost-of-living for workers. As a result, these workers have less disposable income to spend on goods and services.

Middle-class tax cuts do help the economy because they increase the disposable income of those members of society who spend the vast majority of their incomes and have little left over to save. The money changes hands over and over again instead of sitting idle. This is the multiplier effect in economics.

Extending unemployment benefits has a huge multiplier effect. This is because unemployment benefits are so low that essentially all of it gets spent on goods and services immediately.

Excessive concentration of wealth and income unwinds our economy. All the Republican policies for the past 100 years have been designed to concentrate wealth and income in the hands of the very few.

Every time they reach the economic concentration levels that currently exist, we have a serious depression. This is a direct result of increasingly “Republicanized” governmental policies over the previous 30 years.

Economic concentration of wealth and income are currently at levels very similar to those just before the Great Depression in 1929.

The only reason our current situation has not quite deteriorated to that of the last Great Depression is that the Republicans have not been completely successful in undoing the reforms put in place as a result of the New Deal.

Despite repeated attacks by Republicans the social safety net remains only damaged but not destroyed. It is not from lack of trying by Republican politicians.

Republican attempts to gut Social Security continue. Privatization keeps coming back to threaten the stability and viability of Social Security. Cutting Social Security benefits instead of increasing revenue seems to be the most effective avenue for the current attack.

This approach is being pushed by most Republicans and some corporatist Democrats. A wiser economic approach would be to remove the income ceiling over which Social Security tax is not paid.

Why should almost all workers be taxed at over 13% while those making a million a year are paying closer to 1% and those making 10 million dollars a year are taxed at around 1/10th of 1% on their income?

Social Security taxes are the most regressive tax system I know of in our current system. The poor and middle classes pay much, much more in percentage terms than the wealthy.

For decades, working people have been paying in far more than the current needs for each respective year of Social Security payments.

These surpluses were “borrowed” by the federal government so they could fund annual deficits created by cutting taxes for the wealthiest Americans, cutting taxes on corporations by huge margins and nearly eliminating taxes on imports.

It is only fair that corporations, wealthy Americans and foreign exporters selling in the American market pay higher taxes to fund these previous decades of “borrowing” since they reaped the benefits of that “borrowing”.

Republicans only want to look at cutting benefits instead of making Social Security taxes fairer by equalizing the Social Security tax rate for all income levels.

These Republicans do not want to pay back the Social Security tax money borrowed by the federal government to fund tax cuts for the wealthy, fight two wars on credit and allow the near elimination of taxes on imports.

Sound economics says government should run surpluses in good economic times and deficits during economic downturns. Following this advice helps reduce the severity of economic cycles.

Under the Republican Presidencies of Reagan and both George Bushes, we did exactly the opposite and created both the current downturn and the debt crisis. The vast majority of our total national debt developed under these three conservative Republican Presidents.

Currently, the Republicans in Congress have fought every measure to increase employment and help small businesses. They have fought all kinds of economic reforms that would curb corporate abuses of consumers, shareholders or workers.

They have fought all attempts to curb excessive corporate political or economic power. They have been against any measures that would increase demand for goods and services or levels of employment.

By their actions, it is hard not to conclude that the Republicans want to worsen the economic downturn until it reaches Great Depression levels.

The economic downturn was created by “Republicanizing” our economy and the Republicans want to blame the Democrats instead. With tons of corporate money behind them and a corporate dominated media helping them, it might just work.

Written by Stephen Crockett (host of Democratic Talk Radio http://www.DemocraticTalkRadio.com and Editor of Mid-Atlantic Labor.com http://www.midatlanticlabor.com). Mail: 698 Old Baltimore Pike, Newark, Delaware 19702. Email: demlabor@aol.com.

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