Capitalism, Socialism, The Constitution And Common Sense
"We the People of the United States, in order to form a more perfect Union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America." - Preamble, Constitution of the United States of America
"The Congress shall have power to lay and collect taxes . . . to pay the debts and provide for the common defense and general welfare of the United States; . . .
To borrow money on the credit of the United States;
To regulate commerce . . . among the several States; . . .
To make all laws which shall be necessary and proper for carrying into execution the foregoing powers. . . ."
- Article II, Section 8, Constitution of the United States of America
"The property of this country is absolutely concentrated in a very few hands. . . . (One) means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise." - Thomas Jefferson, Property and Natural Right, Letter to Rev. James Madison, October 28, 1785.
There's a lot of very confused and mindless commentary coming from the American right these days, including postings on this site, about the benevolent "free market" capitalist system that always works to better the lives of everyone as opposed to the evils of socialism. This all-or-nothing dichotomy is also cast as necessary under the Constitution of the United States by people who know nothing about the Constitution and have very little understanding of economics, if any.
The United States Constitution is the supreme law of the land, and it says nothing about either capitalism or socialism. There is no clause establishing capitalism as the required economic model for the United States, nor is there any clause prohibiting socialism. As Casey Stengel might say, you can look it up.
The Preamble states several ideals as forming the basis of the democratic government of We the People, and they are all emphatically collectivist ideals. Our Constitutional government was ordained and established to form a more perfect union among all of us, not to elevate the wealthy few.
It was ordained and established to secure justice for all of us, insure domestic tranquility to benefit all of us, to provide a common defense, promote the general welfare, not just the welfare enjoyed by corporations and the wealthy few under the Bush tax cuts, and to secure the blessings of liberty for "ourselves" and "our" posterity. Those collectivist ideals are clearly stated in the Preamble as the primary ends of our Constitutional democratic government.
Both capitalism and socialism, by way of contrast, are merely economic theories, or models of how an economy can be organized to best deliver necessary goods and services to society. Neither of those models rises to the level of an ideal, but when either is elevated to such prominence as to be exclusive of the other in principle, they become tyrannical ideologies.
That was true of one-party Communism in the Soviet Union as any Tea Party Republican will not hesitate to tell you. It is no less true, however, of the rigid "free market" capitalism being advanced by today's Republican party here in the U.S., an intolerant, inflexible ideology that seeks to strip the federal government of all economic influence and authority through radical tax cutting, deregulation and privatization of all essential services. Even former GOP standard bearer Bob Dole has spoken out recently against this alarming, anti-democratic trend in today's Republican Party.
Soviet style Communism is correctly condemned as totalitarianism, wholly antithetical to our Constitutional ideals. Today's Republican "free market" capitalist ideology is equally offensive to our Constitutional ideals, as it inexorably leads to the rise of an oligarchy, government by and for the wealthiest individuals and the corporations they hide behind to shield themselves from personal liability. Indeed, that oligarchy is personified by the newly nominate Republican presidential candidate Willard M. Romney.
This anti-democratic purpose of Republican "small government" politics was reinforced by the Supreme Court's 2010 ruling in Citizens United v. F.E.C., holding that corporations are "persons" within the meaning of the First Amendment. That ruling also held that spending money for mass media access is protected "speech" under the First Amendment, and therefore the Federal Elections Commission cannot restrict in any way the time and manner of corporate spending to influence elections. That, in effect, has created a means test for exercising free speech under the First Amendment where if you have the money to buy media access you get heard, and if you don't you might as well be talking to yourself.
Romney, of course, did not hesitate to respond to the Citizens United ruling by saying to a protestor at the Iowa State Fair that "corporations are people my friend." Meanwhile, Thomas Jefferson would be rolling over in his grave if he were aware of Citizens United and the GOP"'s inane "free market" capitalism of deregulation and tax cuts for the wealthy which result in their paying a lower percentage than middle class Americans.
Jefferson was among the primary movers behind the Bill of Rights, the first ten amendments to the Constitution securing individual rights against excessive governmental encroachment. He would surely be appalled today at the gross inequality of wealth, income and availability of other"blessings of liberty" that prevails in today's post-Reagan America. Jefferson would be spinning in his grave if he knew of the obscene wealth and income gap that prevails in post-Reagan America today, and he would surely tell us to start taxing the rich bastards who want to take control of our democratic republic just to enrich themselves even more.
Jefferson wrote to Bishop Madison in October 1785, six years before ratification of the Bill of Rights, about the evils of oligarchic control of our government. He lamented the fact that: "The property of this country is absolutely concentrated in a very few hands." One of Jefferson's solutions to this threat to the general welfare of all Americans was to propose a progressive tax on wealth:
to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise.
Letter to Rev. James Madison, October 28, 1785.
That kind of truly democratic tax fairness, precisely, is what today's post-Reagan GOP opposes most vehemently in its monolithic opposition to letting the Bush tax cuts expire, and almost all Republicans in Congress, including Massachusetts Senator Scott Brown, have signed the mindless Grover Norquist pledge never to raise taxes. That pledge is in violation of their Constitutional duty to use the power of taxation to pay the national debt, as well as their duty to promote the general welfare under Article II, Sect. 8.
Republicans like Romney, Ryan and Brown like to give lip service to the general welfare by claiming, against all evidence, all historical fact and all logic, that their theory of "free market" capitalism is the only means to achieve that essential Constitutional ideal. They andtheir corporate funded PACs rely on spending billions for media access to induce mass amnesia among the electorate as to how poorly their ideology of unregulated capitalism has in worked in fact.
"Free market" capitalism, unfettered by "big government" regulation, has never worked in actual practice. When it has been allowed to operate here in America, it has always led swiftly and directly to economic disaster. That was true in the Panics of 1837, 1873 and 1893, the total economic collapse of 1229 and, most recently in the crash of 2008 when George W. Bush, with the aid of a Republican Congress, deregulated and tax-cut is into the worst economic disaster since the Great Depression.
In the meantime, well regulated capitalism combined with socialized, tax funded government services has proven to be the optimum mix for our pluralistic democratic society to meet the noble, collectivist ideals on which our Constitution is founded. Here's where today's Tea Party Republicans display their critical, end-stage amnesia as to the facts of our recent history, beginning with Reagan's "trickle down" version of "free market" capitalist theory.
The Gipper talked a good ideological game, but when push came to shove and the theory wasn't working, he raised taxes to get us out of trouble. Over eight years, his policies brought unemployment down to 5.5 percent from the 7.1 percent he inherited from Jimmy Carter. Yet, in his first two years, after cutting the highest tax bracket from 69 percent to 50 percent, unemployment soared to 9.6 and 9.7 percent.
It wasn't until Reagan's sixth year, with the top tax bracket at 50 percent, that unemployment dropped below the 7.1 percent he inherited from Carter, and that was only down to 7.0 percent. It took him eight years to reach the 5.5 percent level, yet we've never heard the likes of Romney, Ryan and Brown whining about how slow the recovery was under Reagan as they are doing now about Obama after only four years.
Reagan's overall economic legacy was middling at best. When he left office in 1988, he had just cut the top tax rate to 28 percent. having worked with a 50 percent top tax rate for most of his administration. Still, he left a $155 billion deficit, having increased the national debt from $997 billion to $2.85 trillion. He left with a 3.4 percent increase in GDP after eight years, just slightly better than Carter's 3.25 percent, and he left with a pretty good 9.9 percent growth in adjusted median household income.
That was the economy inherited in 1989 by George H. W. Bush who retained Reagan's 28 percent top tax rate for the first two years, while unemployment steadly increased to 5.6 percent by 1990. Poppy raised taxes in 1991 to 31 percent, and unemployment kept going up reaching 7.5 percent, higher than Carter's 7.1 percent, by the time he left office in 1992. Poppy was just continuing Reaganomic principles while making adjustments when necessary as did Reagan himself.
Overall, G.H.W. Bush's legacy, with a top tax rate of 31 percent, is rather poor. The deficit grew during his administration to $290 billion in 1992, with only marginal growth in GDP at +2.1 percent over four years, well short of Carter's +3.25 percent. Bush left office with negative growth in adjusted median household income over four years, down to -4.9 percent, again significantly short of Carter's very modest +0.3 increase.
That was the economy built on Reaganomic principles that Bill Clinton inherited in 1993, and the first thing Slick Willie did was to raise the top marginal tax rate to 39.6 percent. That rate held through the full eight years of Clinton's Presidency, and those years saw the greatest improvement in our economy since the post-war boom under Eisenhower when the top marginal tax rate was up around 90 percent. This actual historical fact is something today's Republicans like Romney, Ryan and Brown want you to forget, because it clearly proves just how phony they are when they whine about "job killing taxes" and regulations.
Rejecting Reagan's "trickle down" economics, Clinton's policies brought unemployment down to 3.9 percent after eight years, the lowest in modern history. Those policies brought about an astounding +14.5 percent growth in adjusted median household income, which naturally dovetailed with the steady decline in unemployment over eight years.
Raising the top tax rate from 31 percent to 39.6 percent clearly was a boon for the middle class and working class, as shown by the record low unemployment and record high increase in household income. It was fully consistent with Jefferson's idea about progressively taxing the wealthiest Americans in order to level the playing field for all of us, but it did not adversely affect the overall economy. To the contrary, Clinton left office with a 3.88 percent increase in GDP over eight years, higher than Reagan's 3.4 percent, and he left us with a $236 billion surplus.
After raising the top tax rate by nine points, i.e. the rate paid by the wealthiest Americans, Clinton turned the economy around big time. George W. Bush inherited that thriving economy, cut taxes down to 35 percent, and then oversaw the most massive economic debacle since the crash of 1929. It wasn't all due to lower taxes though, because deregulation of the financial industry played a major role.
Clinton signed the GOP's Gramm-Leach-Bliley in 1999, just before leaving office, repealing the Depression Era Glass-Steagall Act that had stabilized the financial industry for over 65 years, but that had no retroactive effect on the economic success of his policies over the prior eight years, achieved while Glass-Steagall was in effect. Handing that singular item of deregulation over to an ideological anti-regulator cum tax cutter like G.W. Bush, however, was like handing matches and a can of gasoline to a pyromaniac.
This is all just factual stuff, you know, the hard reality that always gets in the way of right wing "small government" tax-hating ideology. Bush was blessed with the events of 9/11, giving him and Cheney the pretext they needed to distract America from their economic boondoggles by lying us into a military boondoggle in Iraq, their fialed attempt to secure Iraqi petroleum reserves for their corporate pals in Big Oil.
Today's GOP doesn't want you to remember any of this of course. Still, try to remember how it actually went down. Right after 9/11, while telling scary stories about non-existent weapons of mass destruction in Iraq, Bush reassigned 1,500 agents from the FBI's financial crimes unit to Homeland Security, and he never replaced them. It was during this period that his pals on Wall Street began packaging the fraudulent mortgage-based CDO's that brought the economy crashing down in 2008, and they could get away with it only because nobody in the Bush administration's small government was minding the store.
So now we see the Republicans blaming Barack Obama for the sins of George W. Bush, as enabled by GOP majorities in both houses of Congress between 2001 and 2006. They're screaming about how slow the recovery from 2008 has been, despite the fact that they have stonewalled, filibustered and obstructed every attempt he has made to reach a consensus on a recovery plan and despite the fact that Reagan's recovery from the far more modest economic troubles inherited from Carter was just as slow if not slower.
And what do GOP hacks like Romney and Ryan propose we do to speed up the recovery? Why let's just go back to the same policies of tax cutting and deregulation implemented by George W. Bush. Forget how well that actually worked out then, because that's just irrelevant factual stuff, while the Republicans base their plans on ideology.
It's not just any old ideology, either, based on theories from truly deep thinkers like Adam Smith, Karl Marx, Edmund Burke, John Maynard Keynes, or even David Stockman who has recanted the Reaganomic nonsense that so many Republicans still hold so dear. No, indeed, it's the maunderings of a third-rate Russian emigre' novelist named Ayn Rand to whose ideas Paul Ryan has frequently attributed his economic principles. He's been hilariously attempting to distance himself only recently after Rand's atheism became widely known to folks on the Religious Right, flatly contradicting his numerous prior statements about his deep belief in Rand's Objectivist economic principles.
Contrary to such right-wing "small government" nonsense, the Constitution and common sense both tell us that there is no magic bullet. Neither pure "free market" capitalism nor totalitarian state socialism can alone attain our stated Constitutional ideals. What those ideals require is the flexibility to deploy whichever approach will in fact work better in any given economic context.
That optimal balance requires a mixed economy, with capitalism for the distribution of discretionary consumer goods and services, combined with socialism providing for essential needs, public water supply, highway systems, free public education, police and fire protection, important public services paid for with our tax dollars. You know, all those infrastructure essentials which business owner Willard M. Romney unquestionably did not build as President Obama has so clearly reminded him.
We also need a strong centralized federal government peopled by non-ideologues who understand and take seriously the need to exercise the tax power, not just for the national defense but to pay the national debt and promote the general welfare of all Americans. We need a President and a Congress that understands, as the founders did and today's Republicans do not, the need for a strong federal government to regulate all commerce that crosses state lines, both as to material goods and to services.
This is especially critical in the financial sector which has assumed a major portion of our national GDP over the thirty-plus years since Reagan took office, as those corporate "persons" so dear to Willard Romney have steadily "offshored" manufacturing jobs to enhance their own bottom line, and the general welfare of We the People be damned.