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The Republican plan to wreck the economy and then blame the Dems. Will it work?

By   Follow Me on Twitter     Message Richard Clark     Permalink
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The Republican Party and its powerful allies in the right-wing news media made it clear from the moment Barack Obama took office that they would demonize everything he tried to do, especially with respect to the economy.

Knowing that progressives had no comparable media infrastructure with which 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 Consortium News article, a synopsis of which follows here.

Republicans in Congress have decided that sabotaging economic recovery and employment growth is their best tactic for electoral gains in November as long as they can pin the blame for all the joblessness and the bad economy on the Democrats. And this it seems fairly likely they will succeed in doing, given that most Dem voters are essentially asleep at the wheel when it comes to really understanding how our political economic system works. Signs of this Republican plan have been cropping up since the Democratic victories in 2008.

Here are the things you need to understand, to clearly see how this Republican plan will work:

1. Economic recessions and depressions almost always result from insufficient "effective" consumer demand for goods and services produced domestically. In economic terms, merely wanting something does not constitute "effective demand." For a want to become an "effective" demand for goods or services, it must be accompanied by the monetary ability to actually make the purchase.

2. Jobs are not created by just having large pools of investment money available, as most big corporations and banks now do. There must also be the opportunity to invest in a business that will have customers who have the money to buy the goods and services. Then and only then will investment money flow into business opportunities and job creation.

3. Over the last 30 years, the Republican-Right economic theory that economic prosperity and employment automatically "trickle-down from the wealthy" has been proven again and again to be fallacious. Tax cuts for the wealthy create huge investment money pools -- but not jobs.

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4. Republicans are seeking to extend the tax cuts for the wealthy by falsely stating that increases in taxes for the upper 2% of income earners would hurt demand and prolong the economic downturn. Experience and history prove otherwise. The large majority of buying is done by the remaining 98% of the population. The top 2% invest much of their income, rather than spend it on consumer goods. Besides, compared to the rest of us, there are not that many of them.

Implications for the larger economy

Tax cuts at the highest marginal income brackets simply serve to concentrate wealth and political power in the hands of the economic elite. This power of the economic elite then pushes government policy in directions that dramatically cut the percentage of the nation's wealth and income that goes to the large majority of Americans. And this has been happening for at least the last 30 years. Hence the decimation of America's middle class.

The ever reduced incomes and wealth holdings of the middle class cuts into the ability of most Americans to buy goods and services. As a result, the economy falters because most customers do not have enough disposable income to keep the flow of goods and services at a level that is sufficient to generate the number of jobs and the kind of incomes that a vibrant economy and a healthy middle class requires.

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That part of the national income that previously (prior to 1975) would have ended up in the hands of America's great middle class, as disposable income, has for more than 30 years been increasingly diverted into the pockets of our economic elite who, because they already had more money than they could possibly spend on goods and services, have used most of this recent "windfall money" to invest in things that turned out to be "bubbles." As a result, sound business enterprises lacked the numbers of middle class customers they had always depended upon. As a result, many such businesses faltered and had to start laying off employees and/or moving their factories or other operations to low-wage countries.


Why middle-class tax cuts are important for the economy

Middle-class tax cuts 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 either creating some kind of investment bubble here or being invested in a foreign country like China or Brazil). This is the great multiplier effect that people learn about when they take a course in, or read a basic text on, economics. Extending unemployment benefits has a huge multiplier effect as well. This is because unemployment benefits are so very badly needed by the recipients that virtually every penny of it gets spent on goods and services, immediately.

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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