Class Warfare Blog

April 27, 2011

Princes of Principle

Filed under: Economics,Politics — Steve Ruis @ 1:40 pm
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Recently Republican lawmakers have pounded podiums stating that they would not forsake their “conservative principles” to get along in Washington. Having principles to live by is considered a good thing by most folks, including me, but just what are these principles they are pointing to? Are these principles correct or are they simply smoke screens to hide the real motives of the politicians? There doesn’t seem to be a published list so I did my best to identify these things so I could examine them. I do not believe the list is complete.

Some of the So-Called “Conservative Principles”
1. We need to “get back” to the original intent of the founding fathers (for the federal government).
As in so many cases, the history of conservatives is scary bad. As radical as the Constitution was, it allowed for future flexibility (through amendment and the “necessary and proper” clause amongst other features) and it admitted defeat when it came to resolving the issue of slavery. Amongst other compromises, the Constitution set the value of five (black) slaves to be equal to three (white) Americans for the purposes of apportionment and then put a limit on how long slavery could exist. This one compromise/limit resulted in the Civil War and 50,000 American deaths and larger numbers of causalities. The “Founding Fathers” (the term wasn’t used while they were alive) were just doing the best they could and didn’t claim any special hold on the future. This is probably why women and blacks weren’t allowed to vote or hold property or….

2. The Founding Fathers intended there to be limited government.
Again, there seems to be a complete disjunct between actual history, as flawed as it can be, and the jumped up history being espoused here. Consider, for example, the charge to the Constitutional Convention. This august body (Franklin, Washington, Hamilton, Madison, etc.) was convened without a mandate from all of the colonies (Rhode Island boycotted the process, including ratification until very, very late) and was convened solely to address ways to improve the Articles of Confederation, created by the Second Continental Congress.

Not only did the “Founding Fathers” dump the Articles of Confederation they were supposed to amend and create a whole new constitution but they invented the ratification process out of whole cloth, too. In writing the Constitution, they gave unprecedented power to the federal government including clauses that allowed for future amendments (James Madison’s notes indicated that they were very aware of the fact that they couldn’t predict what the future would bring, so they shouldn’t tie the hands of future generations.) and powers to the Congress to act in any way they deemed “necessary and proper” to define those powers (“To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.”). Obviously the Founding Fathers didn’t consider the document perfect as it was amended ten times (the Bill of Rights) immediately after ratification!

Of course, any powers not vested in the federal government were given to the states, so they saw no limit to government at all.

3. Cutting taxes doesn’t affect the deficit/cutting taxes raises government revenues/cutting taxes creates jobs.
Since the term “voodoo economics” has already been claimed, I really should come up with some new snazzy term to describe this notion. Failing at that, let’s just see whether this idea passes the “common sense test.” If you were having trouble making ends meet, what would you do? You, like most everybody else, would cut back on your spending. If doing that didn’t fix things then another job (either by a non-working family member or a second job for you) would be in order. That is, you would reduce your spending until the problem was solved and/or you would raise your income by working more. For the government, a tax cut (for businesses or individuals) is the equivalent to a cut in pay. When taxes are cut, revenue goes down. This makes the problem worse, not better.

But, wait, the conservatives claim, the tax cuts then stimulate the economy, create jobs and then the government’s revenues increase. This sounds nice and it would be acceptable if there were a shred of evidence to back it up . . . but there is not. The Bush tax cuts of 2003 triggered an immediate loss of revenue for the federal government and thrust us into deficit spending (about which there was no hue and cry from conservatives or Republicans). The number of new jobs (with military spending increasing in leaps and bounds, mind you) was paltry compared to the previous decade. This is typical of the effect of tax cuts. When taxes are cut, government revenue goes down (duh) and, if spending is not curtailed, deficits occur, just like in your household or personal budget (probably by running up your credit cards).

4. Tax cuts for the rich are warranted because small businesses create jobs.
This is just plain loopy. First, most people think small business are labeled “small” because they have few employees and do only a little business, like a neighborhood coffee shop or a shoe repair shop. The formal definition of small businesses has to do with how many owners there are. If there is but a single owner, or just a few, and the business does billions and billions of dollars worth of business, it is still a small business.

Now it is true that small businesses create most of the jobs, but because of the loopy definition, almost all businesses are “small” businesses, so this doesn’t tell us much. The small businesses that actually create almost all of the new jobs are start-ups, that is “new” small businesses. The simple fact that four out of five small businesses fail during the first five years because they lack the funds necessary to make a go of it, tells you that most new small businesses are not created by rich people. Consequently tax cuts for the rich not only have no empirical justification for creating jobs, they also have no theoretical justification.

5. Government needs to get off of the backs of the people and stop interfering in their lives.
Except in the case of abortion, women’s health issues, gay marriage, sexual relations between unmarried people, personal health decisions, and myriad other social issues. Small government doesn’t exclude even the finest details of your life. This, like so many other “principles” seems to be code words for “it is okay for us, but not for them.”

6. The free market will take care of most of our economic problems, if we can just remove all of this government regulation.
I am sure conservatives have had this belief in the free market, but it hasn’t been in the last 100 years or so. They are the first to espouse protectionism, the first to seek to provide subsidies for businesses, and tax breaks, etc. There are no free markets in the U.S. and that is a good thing. Corporations and markets exist for very limited reasons and none of them involve morality or “doing the right thing” for people. If a buck can be made, well just make it. Only government can supply the checks and balances needed to make sure that businesses don’t run amok. Take, for instance, the recent Wall Street binge. They took a government effort to expand home ownership to more citizens to create a system that created very iffy mortgages (rated C- risks individually), rebundled them into securities and then corrupted rating agencies into ranking them A level securities. This is a little like taking a great many wilting flowers and making bouquets of them and selling them as new. The brokers made money when these things were sold and made more money when the federal government bailed out their companies that should have gone bankrupt when the whole house of cards collapsed. The conservatives don’t believe in socialism unless it is having the government cover all of the business risks they are taking. Republicans are all for privatizing profits and socializing losses.

7. Cutting defense spending jeopardizes our national security.
This is flat out irrational. How much we spend should be based on our obligations and what role we intend to play in the world. A principle that military spend can go up but not down is mind bogglingly simplistic.

According to the Stockholm International Peace Research Institute (SIPRI) database which calculated military expenditures in 2009 (in constant 2008 US$) the total military expenditures around the world came to $1,200,000,000,000 while the part of that attributed to the U.S. was $687,000,000,000 (57%). In other worlds we outspend all of the other countries in the world combined (57 to 43)!

If we were to cut $300 billion dollars from the defense budget, we would still account for 43% of all military spending around the world and would still be outspending the next six most profligate countries (China, France, United Kingdom, Russia, Japan, and Germany) on military affairs. And none of those countries are considered enemies of the U.S. (nor are the next 40 on the list). (If we were to cut $300 billion from defense, we would be back to where spending was when George W. Bush began his presidency.)

Does no one remember Osama bin Laden’s claim that his war would cause the U.S. to bankrupt itself fighting an elusive enemy it can’t engage? Do you feel more safe now? How about economically?

So, what do you think of these “principles?” Do they hold water or are they all wet?

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