Dissolving the Union

For those who think the U.S. is broke, think again. It’s far more serious than that.

To renew Bush-era tax cuts for our most well-to-do 2% would reduce U.S. government revenues by $700 billion over the decade. That shortfall will need to be borrowed.

Or we could provide college scholarships to 14 million U.S. high school students. Or tuition, room and board for about half of today’s college students.

$700 billion is also the interest expense on the $3 trillion that the U.S. is projected to borrow to fund the long-term costs of wars in Iraq and Afghanistan. Of that interest paid to individuals, care to guess what portion finds its way to the topmost 2%?

$700 billion is also the amount authorized in October 2008 to stabilize the financial sector as part of the Troubled Assets Relief Program.

To boost liquidity, the Federal Reserve just announced $600 billion in “quantitative easing” over the next six months. That sum could be increased by another $300 billion.

A December 1st report brought news that, from March 2008 to May 2009, the Fed extended nearly $9 trillion in short-term loans to 18 financial institutions.

That’s our full faith and credit at work making the world safe for financial markets. And for the elite of Wall Street. To show their gratitude to the American public, the financial sector just paid themselves $144 billion in year-end bonuses.

Meanwhile long-term unemployment is the worst since the Great Depression and fiscal disorder is now commonplace at the federal, state and local level.

States and municipalities have around $2.8 trillion of outstanding bonds. That debt is dwarfed by debts that are off the books, including as much as $3.5 trillion in pension shortfalls. The situation resembles the run-up to the subprime mortgage meltdown

Meanwhile, the first of 78 million Baby Boomers born between 1946 and 1964 reach age 65 in 2011. This demographic bubble ensures fiscal strains unlike anything the U.S. has ever experienced.

Breaking the Habit

The topmost few have fared well over the past three decades. Then there’s everyone else.

In 1981, a $872 billion tax cut and investment stimulus helped expand national net worth by $5 trillion from 1983 to 1989. 54% was claimed by the half million families who make up the top one-half of one percent of the U.S. population.
That works out to an average $5.4 million gain per already-wealthy household. That’s a $65,000 increase in wealth per month or $90 per hour, 24 hours a day.

As with our wars, that surge in personal wealth was financed with debt. While the public got the debt, the well-to-do got ownership of the assets financed with that debt, along with the bulk of the interest.

That boost to personal wealth dates to when the stock market was a fraction of what it is today. Now the top 1% have a combined net worth greater than the bottom 90 percent.
The top 1% own 34% of all private net worth; the bottom 90% own 29%.

From 2002-2006, the topmost one percent received two-thirds of the gains in national income. That trend has remained steady over three decades.

During the 1977-1989 period, the top 1% claimed 70% of the increase in household income. The U.S. is now witnessing its widest ever disparities in wealth and income.

Reagan-era “supply-side” economics was marketed with campaign rhetoric remarkably similar to what we hear again today.

Reagan policies doubled the national debt in just one year.

Financial Reality

Over the past several decades, financial freedom has emerged as a proxy for personal freedom and the pursuit of financial returns as a proxy for the pursuit of happiness.

The economic environment changed such that those values not calculable in money are, by design, displaced. While that may not be what we want, that’s what we were schooled to do.

The trends confirm steadily increasing disparities in both wealth and income. Much as concentrated wealth undermines democracies, concentrated income undermines markets.
Americans do not yet grasp how this money-myopic mindset worked its way into education and embedded itself in law. Yet our shared embrace of a “consensus” mindset induces us to freely embrace the very forces that now jeopardize our freedom.

There are no winners in this model, only creditors and debtors. The trends are not even good for the financially well-to-do. Lawmakers are right to worry that civil disorder is emerging as a possibility in reaction to growing social discontent.

Lacking the political will to address this steady dissolution of civil society, the U.S. faces increasing instability. How Americans respond will define what America becomes.
Should the union dissolve, the seeds of its destruction will be traceable to this shared mindset.

Jeff Gates is author of Guilt By Association, Democracy at Risk, and The Ownership Solution. Read other articles by Jeff, or visit Jeff's website.

3 comments on this article so far ...

Comments RSS feed

  1. bozh said on December 7th, 2010 at 12:06pm #

    uncle sam letting go any part of his beloved america??? not ever! he won’t ever let go of chunks of iraq and afgh’n let alone, say, giorigia. tnx

  2. Don Swift said on December 7th, 2010 at 5:43pm #

    Jeff Gates is exactly right that America’s problem is that most of its people embrace a fake conventional wisdom that is responsible for most of its problems. Our difficulty is that there is no alternative vision that can compete with what corporate America and the Republican information machine has sold us.

    People need emotional security even more than physical well-being. Americans have been facing multiple crises: terrorism, knowledge that our government tortures people, decline of the middle class, the great recession and near break-down of the financial system, and the prospect that minorities will play larger roles in American life. For most people, it was too much to bear, and they reverted to intense belief in the conventional wisdom of unregulated capitalism, American exceptionalism, and Social Darwinism. Investigators tell us that people defend their beliefs most when they are seriously challenged. This explains the massive outbreak of political fundamentalism, with all of its strange incongruities and inconsistencies.

    We see all sorts ot wild political manifestations. Major party candidates talking about taking up arms against the government and calling for nullification of federal laws. The next majority leader of the House, Eric Cantor, supports an amendment that will permit two thirds of the states to repeal federal laws. He wants to undo the work of James Madison, the Founder whose seat he occupies. All of this is allegedly undertaken in defense of the Constitution, which few of these folks understand.

    Here is one small example of how people respond when a conventional belief is challenged. In 2004-2005, one could not find many Americans who approved of torture. Confronted with indisputable facts, most Americans now accept it so long as it is defined some other way. Recently, even Dick Cheney’s stock has risen.

    The election was about political fundamentalism, and the people restored to power the people who nearly destroyed our financial system and economy.

    At some level, most Americans may not want to see the GOP give the rich an extended tax break, but at a deeper level they understand and partly buy the logic that these people should be rewarded because they are
    successful competitors in the competition for status and prosperity.

    The Democrats have constructed no compelling counter master narrative and are, thus, unable to offer people a worldview that gives them comfort and hope. Doing so would be very difficult because the media reinforces the established consensus every day, around the clock. Moreover, the right wing think tanks have mastered cognitive science and communications.

    Even if unemployment remains high, there is no danger that the union will fall apart or that there will be violence in the streets. What is much more likely to happen is that the same people now desperately clinging to the conventi0nal wisdom will continue to do so and will vent their rage against progressives, organized labor, minorities, and the poor.

    My comments conclude with reflections on conventional wisdom and how it emerged in the United States.
    Long before there were great advances in advertising and cognitive science, George Orwell wrote that in Great Britain there was a “general tacit agreement that ‘it wouldn’t do’ to mention “ certain embarrassing facts. That is also true in America. Most Americans suffer from self-induced blindness when it comes to some political basics. They do not want to think there is an American empire, one paid for by society but working for the economic benefit of a the few at the top and their banks and corporations. People prefer to think we have soldiers all over the world and engage in wars to extend the benefits of democracy to others.

    The great economic interests have usually dominated state policy in the modern era. Adam Smith pointed out that the merchants and manufacturers were “the principal architects” of British policy and that they made certain their own interests “were properly attended to.” He noted that Great Britain brought economic desolation to what is now Bangladesh destroying its textile industry and agriculture, forcing people to grow poppies so the Brits could peddle drugs in India. Of course, we Americans do not think about this side of Adam Smith. Of course, we Americans do not think about that side of Adam Smith. We revere him because he seemed to oppose government regulating the economy, a notion deeply embedded in American conventional wisdom.

  3. Don Hawkins said on December 7th, 2010 at 6:29pm #

    Madison Avenue is there really such a place. What does it look like asphalt and concrete way up high do they speak in tongues?