So many of the economic pundits are of the opinion that this is a "normal" economic downturn. They are wrong. Because of the systematic transfer of wealth from former middle class to the top tier the old economic models are no longer valid. The working people cannot deter the coming recession because they are tapped out, and for the first time they know it. Only a massive working class tax cut can restore balance.

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“DUH”, THIS TIME IT IS DIFFERENT!

By Ronald Orf

During the 1920’s Henry Ford decreed that nobody who worked in his automobile plants should receive less than $5 a day for their labor. Conservatives labeled him “a traitor to his class” and despaired that rewarding labor at that level would bring about the destruction of the American economic system. Ford’s response:

“DUH” MOMENT NUMBER ONE:

“People need to make $5 a day to afford to buy my cars”.

When I was a child my mother used to reminisce about her childhood during the depression. She recalled the government slaughtering hogs and burying them in pits to try to raise the price of pork by decreasing supply. My mother knew this “supply side intervention” could not succeed because:

“DUH” MOMENT NUMBER TWO:

The problem was not that people did not WANT to buy pork, but that they COULD NOT AFFORD to buy it.

During the 1980’s the Reagan administration instituted a tax policy of rewarding the capital side of the economic equation. “Supply side” economics put into place large tax cuts for business and the wealthy. The misnamed “Department of Labor” became the “stick it to labor” department throwing roadblocks at unionization and minimum wage increases while encouraging the outsourcing of industrial jobs to places where labor would be far less demanding. Many American workers bought in to the scheme on the hint that their reward would come through higher productivity and corporate profits. They were so enamored at being part of “the team” they overlooked that the gains in profits and productivity were systematically transferred to management and the top 5% of the population through incentives and a capital gains tax rate far lower than the working class was paying on their stagnant salaries.  Surprisingly, it all seemed to work! The American economy prospered, and whenever or wherever Republicans got a chance, they extended the “Reagan Revolution” to all aspects of the economy.

“DUH” MOMENT NUMBER 3:

Supply side economics never actually worked, and in fact brought about the disaster that is now engulfing the U.S. financial markets.

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Most of the economic “recovery” that was brought about during the Reagan era was the responsibility of demand, and had nothing to do with the supply side cuts, which were really just the recycled “trickle down economics” of the pre-Great Depression era. Not coincidentally, the last time this percentage of American assets was held by such a small portion of the population was 1929. The Reagan-Bush-Bush economic policy has been nothing more than a method for a massive redistribution of wealth that has taken 30 years to complete.The current situation is not part of the “normal economic cycle”, but the cumulative effect of a deliberate process. The working class, who were encouraged to eat their seed corn, actually financed the “Reagan Expansion”, and while the top tier (capital) prospered, the rest of us (workers) never received that promised payoff and lost spending power every decade, a process that has been grossly accelerated during the last seven years. We have financed our phantom middle class lifestyles by gutting the equity from our homes, making the double income family the norm, working longer hours more productively than any other industrial nation, maxing out their credit cards, and borrowing from our retirements. Despite the noble stopgap efforts most American families are belatedly realizing that they are in a financial death spiral. Even if they cut back drastically on their lifestyles they still cannot meet their essential payments for fuel, food, health care, and college costs.

Now this administration, instead of proposing payroll tax cuts that should have been instituted three decades ago, belatedly pushed a Rube Goldberg rebate scheme in the hope of creating demand, and god willing, more borrowing to stave off an economic debacle. Instead of a revamping of the tax code they are going to foreign markets to borrow 1% of GNP to finance the scheme with even more debt. This is accompanied by pouring good money after bad into the financial markets in the hope that the consequences of their greed and insanity can be forestalled until after the next election.

“DUH” MOMENT NUMBER 4:

They will fail, because this time things are different!

Come this fall the Mexican or Sri Lankan who is making your automobile or washing machine will not be buying the results of his handiwork. The average Joe no longer has the resources or the inclination to pull the economic elite out of their folly, and he will suffer disproportionately because of his inability to do so. The people who have only peripherally participated in the “greed is good” economy are tapped out, and for the first time, they realize it. They now perceive themselves as participating in a rigged game of Monopoly where the obvious winner is awarding them $600 for passing GO only to prolong their participation. Those who were dealt Park Place and Boardwalk before the game began are praying that they can once again convince us that it is still an honest game and that no major adjustments are required, but the former suckers have finally embraced the cynicism that is necessary to bring about real change. They want the card reshuffled. They want a new game to begin.

Authors Website: none

Authors Bio:
I am a retired educator who had to go back to work because my daughter is an actress. I live in a small town in Iowa, and have no desire to live anywhere else. Going back to work was the best thing that I ever did, not just because of the monetary gain, but because I felt rather useless in the lifestyle I was getting used to. I am a Democrat with libertarian tendencies, an though active in the Obama campaign, I have met John McCain on a few occasions and like him as a person very much. I am more cynical about politics now then I have ever been, and honestly feel that this country is doomed to second tier nation status if reality is not infused in to both our social and economic thinking.

I am not a doctrinate thinker, although the articles that I have had published in the Cedar Rapids Gazette, The Des Moines Register, and the Waterloo Courier may lead people to believe that I fall in to that category. I truly believe that solving this country's problem may need a radical approach that would have been unthinkable seven years ago.