The Panic of 2011
If you’re old or sick and have a lot of money, I suggest taking a trip out of the country, away from your heirs, until January 1, 2011. And don’t tell them where you’re going. On that date, the death tax for rich folks goes from the current 0 percent to 55 percent. So your heirs will get less than half of what they would have if you went to the Great Walmart in the Sky a day earlier.
Deep-sixing the death tax is part of the cancellation of most of President George W. Bush’s 2003 tax cuts. Republicans in the White House and Congress, in their Karl Rovian sneakiness, put a termination date on their otherwise sensible tax cuts. The reason is now clear: The tax increases are being used in campaigns against Democrats who won’t extend the tax cuts.
But wait, there’s more. In 2011, the top income-tax rate will rise from 35 percent to 39.6 percent. The capital-gains tax will jump from 15 percent to 20 percent, an increase of one third, choking off vital capital needed for an economic recovery. And unlike the income tax, the capital-gains tax is not indexed to inflation.
Individuals and businesses are taking profits in 2010 to avoid paying higher 2011 taxes. They will stop doing that on January 1. The tax increases will trigger the Panic of 2011, the second dip of the Great Recession.
Things are going to be worse than they were in the Great Depression. Back then, the country’s moral fiber was stronger. Far fewer people had mortgages. There were no credit cards. Since the 1930’s, the U.S. industrial base, which was still by far the world’s largest, has greatly eroded, and it soon will be surpassed by China’s.
For America’s industrial decline, my Chronicles colleague Tom Piatak blames free trade. I blame the lack of a gold standard, excessive regulations, and high taxes. I especially blame the 1971 “Nixon Shock,” which ended the $35 gold standard, and the ensuing inflation that jammed the middle class into upper-income tax brackets. But both of us want America to have strong producing industries.
By contrast, most politicians, economists, and bankers are happy with an economy based on folks foreclosing on one another’s houses. I’m not joking. One guy I know puts food on a modest table by getting paid one dollar each for pictures he takes of foreclosed houses; 125 pictures per day equals $125, barely enough to survive. Another man I know works for a mortgage company, paying families $1,500 each for not trashing their foreclosed homes before they go and live on the streets.
The economists also tell us that in the summer of 2009 a “recovery” was magically conjured up by President Bush’s $700 billion TARP stimulus, President Obama’s $827 billion stimulus—all of it borrowed money—and Fed boss Ben Bernanke’s doubling of the money supply in 2009.
But the “recovery” money was used to bail out Wall Street at the expense of Main Street. Having a hard time avoiding foreclosure? Tough. Wall Street not only grabbed your money but ran up trillions of credit in your name. Your grandkids will be paying down the debt.
During the “recovery,” the official unemployment rate has remained close to ten percent. That number is bogus. To make the unemployment numbers look better for his 1996 reelection bid, President Clinton removed people who had despaired and quit looking for work. If those numbers are included, as they are on Shadowstats.com, unemployment is really above 20 percent—a depression level by any measure.
Another major weight on the economy is the Iraq war, with a cost of up to five trillion dollars, as calculated by Nobel economist Joseph Stiglitz; he includes not just “defense” spending but the cost of VA benefits for wounded veterans and cumulative interest on the money borrowed from China and Japan to pay for the war. As during the Vietnam War, we’ve learned the hard way Sun Tzu’s warning: “There is no instance of a nation profiting from prolonged warfare.”
Meanwhile, Social Security ran into the red in 2010, seven years earlier than expected, piling higher a national debt that is now rising rapidly above $13 trillion. Obama just socialized medical care, 17 percent of the economy, bringing untold inefficiencies and suffering. For the post-election lame-duck session, Democrats are lusting to pass a “carbon-tax” bill to fight a global-warming threat proved bogus by Climategate. And Republicans are pushing Obama to nuke Iran’s alleged nukes, which could send oil prices up to $300 per barrel.
As we saw on September 15, 2008, when the Lehman Brothers bankruptcy precipitated the Panic of 2008, a recession or depression starts with a triggering event that detonates thousands of pounds of TNT-infused economic rot. The next trigger will be pulled on January 1. Even if the Democrats running Congress pass an extension of the Bush tax cuts to reduce their losses in the November elections, they will mess it up somehow. The trigger will still be pulled.
I hope I’m wrong.
This article first appeared in the September 2010 issue of Chronicles: A Magazine of American Culture.
Entries(RSS)
US expenditure budget for Afghanistan this year is to be $65 billion; I’m not sure how much NATO and other countries add to that. The US budget alone is more than 5 times the Afghan GDP of $12.5B
God only knows the amount we have givine to Iraq. Until republicans and free marketeers discuss why those expenses are far more important to our nations economy than cutting taxes, I am for raising taxes to support these ujust, unnecessary and ill conceived
wars abroad. I would also include the 77 days of bombing Christians under Clinton in the same or similar category.
"Since the 1930’s, the U.S. industrial base, which was still by far the world’s largest, has greatly eroded, and it soon will be surpassed by China’s."
I guess, but it took even a giant country like China a long time to surpass Germany in manufacturing and exports (that happened only two-three years ago, I think), and a long time to surpass Japan. Both of these countries are much smaller than China.
In a sense, the rich world slides slowly from a great height, while China climbs hastily from way way down below.
Sometimes, it appears, God is not merciful with the undeserving.
As a minor footnote, prof. Stiglitz should not be praised in any way as he supported even higher bailouts than the ones instituted as well as the carbon tax and Obamacare.
Prof. Stiglitz is wrong in many areas. But the analysis he assembled on the true costs of the Iraq War is sound. For example, he included the costs of taking care of wounded veterans, something our chickenhawk leaders don't even want to think about. A 20-year-old whose spinal cord is snapped by an IED will spend the rest of his life being taken care of by the VA, and will not produce anything economically himself.
I agree with Mr. Seiler about the untold costs...
Here is Lt. Col. Bacevich on the costs:
When we're talking soldiers, we're talking kids who are the PFCs that are 19 or 20, and the lieutenants and the captains are 23 and 25. These young people, they are remarkable. I mean, we have young soldiers going back for a third and a fourth and a fifth combat tour.
By this time in the Vietnam War, the American Army basically had disintegrated. Today's Army hasn't disintegrated. And so the durability of the force has proven to be quite remarkable.
I guess the piece that bothers me is, as a people, having accepted the proposition of open-ended war. I mean, the so-called long war, now eight years old, has become the longest war in our history, and there's no end in sight.
So as a people who have accepted the proposition of open-ended war, we've also accepted the proposition that the burden of waging this open-ended war should fall on the backs of roughly one-half of 1 percent of the population. And the other 99.5 percent of the population carries on as if there were no war.
Not only do the soldiers, this very small cohort, bear the burden of the sacrifice of waging war in the field, we don't even bear the burden of paying for the war. There's no change in our domestic priorities. There's no sacrifice. There's no increase in taxes.
And I think that there's something fundamentally wrong with a democracy that subscribes to that sort of division of labor. I think it's deeply, deeply immoral that so few should have to pay so much while the vast majority of us basically pay nothing. ...
what we have found is that we, the people, have so distanced ourselves from the professional army that unless you have a family member serving in uniform—and most people don’t—you don’t know where this military is, you don’t know what it’s like, and you really don’t have much say in the way it’s used.
President Bush exploits that after 9/11. He decides he knows how it wants to be used. And, of course, for the first time in our history, when we go to war, instead of a president turning to the Congress and turning to the country and say, “We’re going to have to change the way we do business, because we’re at war,” President Bush actually says, “Go to Disney World. Go shopping. Go back to doing what you have been doing for the last ten years, and I’ll take care of everything.” And I have to say, the great majority of the American people basically did what Bush said and tuned the war out and allowed the burden to fall on a very small percentage of the population, which I find, frankly, morally objectionable."
The least the remnant of traditionalists and conservatives in America can do is tell the truth. I thank both Mr. Seiler and Bacevich for doing their fair share of the truth telling.
Of course, you must realise that most of the cost for war, as is the case for foreign aid, goes to domestic capitalists. That is where the problem lies.
Dr.Wilson,
Yes, I understand this and these Militare/Warfare Recepients have their legs and arms wrapped around the money bag as tightly as any of the little old ladies in Florida receiving medicare. I just posted my thoughts on this duplicity from a desire for a level playing field (the Republicans and their party must be leveled) All the current duopoly wants is a fair advantage, it is all they have ever wanted, and I don't want to give it to them.
Someone once said that a deceived man didn't know he was deceived. Such is the case for most working Americans. The federal income tax is a benign tax on activities covered by federal privilege and , therefore, does not reach to earnings derived from activities of common occupations in the private sector (pls, don't give me the 16th amendment story). Only if our grand parents and their parents were total morons would the folks have voted to let federal bureaucrats seize their earnings, which, of course, they did not. See http://www.losthorizons.com for the details and the facts; you will be amazed, upset, bewildered, and intrigued. But mostly, you will be informed and become free of the deception.
"War is a racket," said Gen. Smedley Butler, most-decorated Marine of the time. Part of a speech of his from 1933:
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War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.
I believe in adequate defense at the coastline and nothing else. If a nation comes over here to fight, then we'll fight. The trouble with America is that when the dollar only earns 6 percent over here, then it gets restless and goes overseas to get 100 percent. Then the flag follows the dollar and the soldiers follow the flag.
I wouldn't go to war again as I have done to protect some lousy investment of the bankers. There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket.
There isn't a trick in the racketeering bag that the military gang is blind to. It has its "finger men" to point out enemies, its "muscle men" to destroy enemies, its "brain men" to plan war preparations, and a "Big Boss" Super-Nationalistic-Capitalism.
It may seem odd for me, a military man to adopt such a comparison.
Truthfulness compels me to. I spent thirty- three years and four months in active military service as a member of this country's most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle- man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism.
I suspected I was just part of a racket at the time. Now I am sure of it. Like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical with everyone in the military service.
I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.
During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.
Speaking of Stiglitz, during the Bush administration (I have missed Stiglitz’s criticism of American military spending since Obama has been president) he said that the wars in Iraq and Afghanistan are financed entirely by borrowing which will have to be repaid by future generations, and that 40% of this borrowing is from foreign countries. According to Stiglitz, the current wars are the first since the American Revolution in which the United States is dependent on foreign countries for economic support. If this is correct, it seems to me to mean that the United States is in such dire financial condition that it cannot independently engage in military action that the American government officially says is necessary for defense of our vital interests, but it is probably just another benign benefit of globalization that I am too naïve to appreciate.