We have heard about trickle-down or so-called supply-side economics for decades, if not centuries now. The theory goes that if the wealthy are provided with lucrative tax breaks and major corporations are freed from the shackles of regulation, the economy will grow at a much faster clip, and the crumbs of that growth will rain down upon the starving masses. The masses of course would then rejoice and shower the brilliant policymakers with praise in the form of re-election. What we now know is that by any measure, the theory has been an abysmal failure. In fact, the economic plight of the poor and middle class worsens when the results of trickle-down policies are measured. What a PhD researcher might call an inverse hypothesis.
What we do know however, is what engulfs, rather than trickles, upon the poor and middle class when massive deregulation and changes in the tax code which encourage risky behavior are implemented. With the end of Glass-Steagal, and the deregulation of derivatives at the behest of Citibank, under Bill Clinton, the lowering of marginal income tax rates and capital gains tax rates on the wealthy, as well as significant loosening of the capital requirements on large banks under George W. Bush, the economy should have been downright hailing in bowling ball sized droplets wrapped in $100 bills on our heads, but it did not. Instead massive deregulation and tax breaks caused the wealthy to “innovate,” creating complicated derivatives and bundled investment products. MIT graduates, who formerly went on to discover galaxies, went to work for Goldman Sachs instead. When the bubble finally burst in 2007, the poor and middle class had no idea how much of the burden for cleaning up the mess would fall to us.
Obviously, the Department of Justice would jail many of the perpetrators, for there was certainly fraud committed. Surely even Tim Geithner could not prevent a straw man or two from being sent to the big house. At the very least, the public would be able to yell vociferously at our television screens as real investigations were opened, and Congress questioned the executives of the large banks and insurance houses under penalty of perjury. If Roger Clemens found himself on the receiving end of perjury charges as a result of congressional testimony, we could expect nothing less for the billionaire bankers. Alas none of this occurred. Instead, the executives were called to Capitol Hill to perform in a dog and pony show. Congressmen and women would bark at the likes of Jamie Dimon in an effort to demonstrate to their constituents the feigned anger deep within them, while all the while almost no one ever intended to punish anyone, for anything, at anytime.
So, the poor and middle class are left to clean up the mess left by those so brilliantly trained at Harvard Business School and Wharton. It would be devastating if what we heard of most on the major news networks were the extent of the disaster – foreclosures and massive underwater equity in residential real estate mortgages. Millions of Americans owe more on their homes than its fair market value, nearly every cent of which is a direct result of the fraud perpetrated by the large banks and their mortgage originator bagmen. Millions face foreclosure due to unemployment or the failure of the banks to refinance their mortgages and reduce principal due. Because of new, albeit still paltry, capital requirements implemented by Dodd-Frank, the banks are reticent to write down the value of their mortgage portfolio, making even more foreclosures likely. If Ford and GM cooked up a scheme to overcharge us for each car or truck by fixing prices, each company would be held to account for the amount we overpaid. However, if some bright bankers do the same and force up housing prices, it is ascribed to the ever mystical “market forces.” All the while, the major media does nothing to halt the filthy narrative that most Americans spent the years between 2002 and 2006 eating caviar on their HELOCs, knowing precisely what we were doing.
But that’s not all . . .
The giant bubble created by the magnificent morons of money has left behind an even larger crater in the budgets of the federal government, as well as the states and municipalities. The American people have been paying the tab run up by bankers and the Federal Reserve with high unemployment and underemployment. This high unemployment in turn has drastically shrunk local and state revenues — the very tax revenues that fund the programs that those on the very edge economically depend upon for basic survival. We have paid in the form of higher state university and community college tuitions for our children. We have paid through school closures and increased class size. We have paid with overcrowded and unsafe prisons and jails. Our neighborhoods have become less pleasant and far less picturesque as more and more of us lose homes and become increasingly desperate in the means by which the money needed ensure survival is acquired. Our parks remain on the verge of being shuttered. City budgets have been slashed. Roads are falling into disrepair. Public services have been cut. This list is endless.
There are no great projects on the horizon for the American people to rally around. No coast to coast high-speed rail project. No massive subsidized solar or wind farms to bring energy independence. No plans to bring our energy grid into the 21st century. Even NASA, who once brought us the space shuttle, has had to table plans for several Mars visits, and no manned flights to anywhere or anything are on the horizon. Instead, rather than fund these projects and other employment and morale creating projects, the two parties in power have decided to let the bankers off free and clear while fighting over the crumbs to be left for the rest of us. Proven failed economic policies and bald faced lies remain the very backbone of the Republican Party, while the Democratic Party has done only marginally better in its rhetoric, speaking only of the poor in passing.
The trickle-down and supply-side economic policies of the recent past have devastated the poor and middle class in the United States and the world. We are left standing as the bricks that held this once strong building crumble around us, yet the penthouse remains intact. In fact, it has private security in Washington D.C. guarding the door.