Lately in America and elsewhere around the world we have been besieged with pundits and politicians weeping, clawing, and gnashing their teeth as they run around with their hair on fire attacking the social safety nets of various countries as they shriek about the “need” for austerity. At a time when 18-25% of America’s working people—40% of our youth—are un- or under-employed, they call for sacrifice and talk about the need to make “hard choices” to help the nation and the world recover from the devastation they themselves have wrought upon our economy with their own dishonest, irresponsible, and profligate mismanagement.
Any attempt to make them share the sacrifice, to make the 1% pay their fair share of the burden, is referred to as “class warfare”. This, mind you, from the very thieves who have destroyed the tremendous gains for the general welfare of the People achieved by the programs which lifted the U.S.A. and the world out of the Great Depression.
With the Republic of France’s President Nicolas Sarkozy at her side, Reich Chancellor Angela Merkel and her plutocratic allies have jammed down the throats of the overwhelming majority of European Union nations a pledge of balanced budgets, consequences be damned. They are visiting upon their own people the same cruelty which the victors in the First World War inflicted upon the Central Powers, Germany in particular, over reparations for a war all parties had equal culpability in, and by creditors over wartime debts.
Screw the people; in money we trust. The financial oligarchy must never be without its daily bread, even if the people are relatively starving. Let them eat cake.
The New Deal and the Golden Age of Capitalism
The period from the end of the Second World War in 1945 through the abandonment of the Bretton Woods system of monetary management (established by the “Allies” at the United Nations Monetary and Financial Conference in 1944) is known to economists and historians alike as the Golden Age of Capitalism. They gave it that moniker because of the nearly unparalleled expansion of the economies of the nations of the West, and certain other countries, and the uplifting of the general welfare of their citizens as a whole.
Here’s what those political and pundit figures who advocate going back to this Golden Age don’t tell you: during the majority of this period, 1946-1964, the income tax rate for the wealthiest Americans was 91%, with the threshold for that rate being $200,000. The rate for the lowest bracket was 20%. President Johnson’s Revenue Act of 1964 changed those highest and lowest rates to 70% and 14% respectively, and raised the threshold for the top rate to $400,000. As for the estate tax which Republicans fondly refer to as the “death tax”, during this period of prosperity, once an estate surpassed the $60,000 a tax rate of 77% kicked in.
Union membership in America during this Golden Age was the highest it has ever been, with over one-third of all non-farm workers organized. The farm workers themselves began to organize in 1962 and joined in a nationwide federation in 1966. Executive salaries were a mere 12-20 times higher than that of the average worker.
The foundation of all this wealth and prosperity was the New Deal.
Prior to 1913, the American government’s chief source of income was booze. Not its manufacture and sale, but excise taxes upon those activities. By the late 19th century, the yearly average intake of alcoholic beverages (beer, wine, liquor) for Americans had grown to 86 bottles per person. By contrast, the current alcohol intake rate (2011) is a 14 bottles per person. Due in large part to America’s saloon culture, alcohol was America’s fifth largest industry.
To provide a larger and more reliable source of revenue for the federal government, Congress and the states passed the 16th Amendment to the Constitution and subsequently to the U.S. Code allowing the taxing of income. The initial rates were 1% for the lowest bracket ($1000 and above), with an additional 6% (total 7%) after a threshold of $500,000. By the end of the Great War (First World War), however, these rates had risen to 16% and 77% respectively, though with the upper threshold rising to $1,000,000.
At the end of that war came the First Red Scare, which strengthened the counterattack of the right wing advocates of plutocracy, fueled the growing “hooded Americanism”, and secured the demise of the remnants of the Progressive Era of Theodore Roosevelt, William Howard Taft, and Woodrow Wilson.
The 18th Amendment to the Constitution took effect in January 1920 and Prohibition began the Roaring Twenties in which many of the Lost Generation fled to Europe. Politically, so-called progressivism died before the onslaught of William G. Harding, Calvin Coolidge, and Herbert Hoover, along with Andrew Mellon.
Hoover, Secretary of Commerce to both Harding and Coolidge before he became President, dominated the decade more than any other person and is chiefly responsible for all of its excesses and failures, including the Great Depression. Hoover was a strong advocate of what he called trickle-down economics, the idea that enriching the rich even more richly would create an abundance that would inevitably “trickle down” to the lower social classes.
Ronald Reagan and his budget director David Stockman rechristened Hoover’s ideas as “supply side economics”, but pinned down in an interview Stockman admitted the two were identical. During the 1980 Republican presidential primary campaign, later Vice President George H.W. Bush correctly characterized the doctrines as “voodoo economics”.
Critics of Hoover and Co. during the Roaring Twenties called their ideas and policies nothing more than a retread of the Gay Nineties horse-and-sparrow theory then in vogue among the robber barons and their supporters, which, in fact, it was. Even more unkindly than by Marie Antoinette Bourbon, this theory stated that, “if you feed the horse enough oats, some will pass through to the road for the sparrows,” (John Kenneth Galbraith). In other words, the non-superwealthy can damn well eat shit and smile about it.
William Jennings Bryan, three-time Democratic presidential candidate and Wilson’s Secretary of State, to this soulless excuse for an ideology of avarice with such abyssmal lack of conscience was: “There are those who believe that if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests up on them.”
Hoover’s other major ideal was “associationalism”, the idea that, in spite of a mountain range of evidence to the contrary, voluntary organizations are best for citizens taking care of each other and for caring for the less fortunate members of society. Reagan rehashed this as “volunteerism”, while the PR (propaganda) of Bill Clinton, John Major, and Tony Blair spun this as “public-private partnership”.
As Secretary of Commerce, Hoover was master of all things economic and had his hands in every federal department and nearly every sector of the American economy. Before he accepted appointment from either, Hoover demanded this authority from both Harding and from Coolidge. His right hand, a power in his own right with ideas that paralleled Hoover’s, was Andrew Mellon, a banker and industrialist who served as Secretary of the Treasury for Harding, Coolidge, and Hoover himself.
Mellon’s chief goal was to slash taxes, which he did for both those in the wealthiest bracket and those in the lowest. He reduced the top rate from 73% to 58% in 1922, to 50% in 1923, to 46% in 1924, 25% in 1925, and finally to 24% in 1929. Meanwhile, the rate for the lowest bracket fell from 4% to 0.5%; however, other changes led to the tax burden on the wealthy not only decreasing but trickling, or rather flooding, down to the less well-off.
After the stock market crashed in October 1929, Hoover continued to spout his theories of low taxes, trickle-down economics, and a laissez-faire market-place up to the day he was replaced by Franklin Delano Roosevelt. Secretary of the Treasury Mellon was about to be impeached in 1932 and only escaped by accepting his patron’s offer of the ambassadorship to the Court of St. James. The same Congressmen later sought to impeach Hoover, but saw no need when he was defeated at the polls so ignomiously.
Just to show how the more things change the more they stay the same, among Hoover’s responses to the Great Depression, by the way, was the forced expulsion of some half a million (500,000) Mexican and Mexican-Americans to the Republic of Mexico.
Before Roosevelt had even been elected, Congress passed the Revenue Act of 1932, which raised the bottom rate from 0.5% to 4% and the top rate to 63%. Before the beginning of the Second World War, the top rate had risen to 79%.
The New Deal of FDR (in office 1933-1945) saved not only the American economy but that of the world, and very probably the Republic itself. With his leadership, the nation’s of the world began the systems of both temporary relief programs and permanent social welfare agencies along with regulatory agencies that helped bring about the Golden Age of Capitalism.
Some of the temporary relief was provided by programs such as:
National Recovery Administration (coordinator for the whole system)
Federal Emergency Resettlement Agency
Works Progress Administration (infrastructure jobs)
Civilian Conservation Corps (parks and rural areas)
Public Works Administration (infrastructure)
Farm Service Agency (for tenant farmers)
National Youth Administration
These were phased out soon after America’s entry into the Second World War if not before.
The more long-standing New Deal agencies and programs include:
Federal Deposit Insurance Corporation (FDIC)
Federal Savings and Loan Corporation (FSLIC; wiped out by S&L crisis in the 1980’s)
Federal Crop Insurance Corporation
Tennessee Valley Authority (TVA)
Federal Housing Administration (FHA)
Social Security Administration (SSA)
Securities and Exchange Commission (SEC)
Rural Utilities Service (formerly Rural Electrification Administration)
Farm Security Administration
Food Stamp Program
Aid to Families with Dependent Children (AFDC)
Unemployment Insurance program.
In addition, several pieces of legislation were passed that significantly contributed toward the welfare and quality of life for the average American. Prohibition was repealed as soon as FDR could manage. The G.I. Bill of 1944 and support for higher educational institutions enabled millions of people who would not otherwise have been able to do so to obtain a college or university education. The Wagner National Labor Relations Act of 1934 supported formation of labor unions, collective bargaining, and the right to strike, while amendments in 1934 and 1936 to the Railway Labor Act of 1925 did the same for railroad and airline employees. The Indian Reorganization Act of 1934 provided a means to tribal governments dissolved under the Dawes Act to reorganize. The Fair Labor Standards Act of 1938 mandated a national minimum wage, an 8-hour workday, overtime pay for work beyond that, and outlawed child labor.
This is the big, bad New Deal over which Republicans, Libertarians, Tea Partiers, and Blue Dog Democrats are constantly wringing their hands. Though many of its features are included in the programs of what many socialists advocate, they were all in fact enacted for the rescue and maintenance of the capitalist system.
Harry Truman’s (1945-1953) Fair Deal continued and enhanced nearly all the New Deal programs and created the Civil Rights Commission. He also tried to pass through Congress legislation for universal health care like that in every other country in what was then called the Free World, but lost in the right-wing backlash accompanying the Second Red Scare.
The captains of industry and their Congressional allies also got their revenge with the Taft-Hartley Labor-Management Relations Act of 1947. It was this legislation which not only authorized but encouraged right-to-work laws such as that which was passed almost immediately in Tennessee and currently in Indiana. It also prohibited jurisdictional strikes, wildcat strikes, solidarity strikes, political strikes, secondary boycotts, mass picketing, closed shops, and monetary donations to federal campaigns, as well as restricted union shops. Furthermore, it authorized the feds to enact strike-breaking in the name of “national security” along with forbidding communists and socialists, who had been some of labor’s most effective organizers, from joining unions.
Dwight D. Eisenhower (1953-1961) continued the New Deal and Fair Deal programs unchanged, and also began building the Interstate Highway System.
Adding to the above, John Fitzgerald Kennedy’s administration (1961-1963) New Frontier created the Department of Housing and Urban Affairs, the Peace Corps, and the Appalachian Regional Commission (ARC), the latter serving primarily the Southern Appalachians but also the whole region.
The biggest additions to the social support apparatus came with Lyndon Baines Johnson’s (1963-1969) Great Society. Among his most important actions were the passing of the Civil Rights Act of 1964 and the Voting Rights Act of 1965. His administration also created the Volunteers in Service to America (VISTA) program, Job Corps, Head Start, Community Action Program, Medicare, Medicaid, National Endowment for the Arts (NEA), National Endowment for the Humanities (NEH), Corporation for Public Broadcasting (CPB), National Public Radio (NPR), Public Broadcasting System (PBS), Equal Employment Opportunity Commission (EEOC).
Unfortunately, LBJ also pushed through the Revenue Act of 1964 just as he was beginning these new programs and at the same time the surge in Viet Nam. Inexplicably, at a time when even more than ever was being spent, the tax rate for the lowest bracket was cut to 14% from 16% and slashed from 91% to 70% for the top bracket, with the threshold doubled to $400,000. This proved to be the first step on the way to the stagflation which choked the American economy, and the world, in the 1970’s.
Even Richard Nixon (1969-1974) added to the programs benefitting the many rather than just the few. His New Federalism created both the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA). He also took the United States unilaterally off the Bretton Woods monetary control system, of which the only remaining vestige is the International Monetary Fund (IMF). In reaction to the sudden spiraling upward of prices resulting from the latter, Nixon instituted price controls initially intended to last just 90 days but eventually lasting nearly three years.
The Evil Empire Strikes Back
In the Seventies, the Counterculture Revolution became the Me Decade. Love-ins, protest marches, sit-ins, rap sessions, coffee houses, pot, and LSD gave way to mood rings, pet rocks, being dazed and confused, cocaine, disco, yoga, swinging, and leisure suits. Feminism became about more and better orgasms rather than about equality. Civil rights gave way to Blaxploitation. The Gay Liberation Movement (which began on my 6th birthday) gave way to bath-houses. The New Left had nothing left.
On TV we watched Soul Train, Hee Haw, Sonny and Cher, Toni Orlando and Dawn, The Brady Bunch, Happy Days, and M*A*S*H.
Meanwhile, Marcos declared martial law in the Philippines, Pinochet carried out a coup against Allende in Chile, American military involvement Viet Nam ceased, the Yom Kippur War brought gas crisis of 1973, urban terror by the Red Army Faction and Red Brigades in Europe and by the Symbionese Liberation Army in America sped us up, the ’73-’75 recession slowed us down, we saw the evacuation of the American embassy in Saigon, the Watergate hearings ruined a whole summer of TV for me and other kids, Rocky Horror Picture Show the movie became a cult, we listened to Southern rock, the U.S. had its bicentennial, we read about the Khmer Rouge killing fields, President Carter and his national security guy Brzezinski thought it would be a good idea to poke the Soviets in Afghanistan so they helped organize the Taliban, Star Wars changed movies forever, Lynyrd Skynyrd crashed, the people of Iran overthrew the Shah then found themselves subject to an even greater tyranny, the Hostage Crisis began, Solidarnosc organized the Polish workers in Gdansk first for their rights as workers then a citizens of Poland, John Lennon was shot by a psychopath, and The Empire Strikes Back came out.
Then the Empire struck back for real. The Baby Boomers became yuppies, Reaganauts, and neoconservatives, peddling rescued excrement dressed up in a pathetic attempt at repackaging. The same message with a new vocabulary. This time they called it neoliberalism and/or the “Washington Concensus”, and every president since Reagan, including Clinton and Obama with Bush I and Bush II, has followed the same path.
The Fed raised interest rates on borrowing to 17-18% trying to cure stagflation, which resulted in the housing crash of 1978-1981 bringing with it 22.5 % unemployment among those in the construction trades.
The Hunt brothers tried to secretly corner the silver trade and crashed the stock market on 27 March 1980.
Congress passed the Depository Institutions Deregulation and Monetary Control Act in 1980 which forced all banks to obey the Federal Reserve; allowed banks to merge; removed power of the Fed’s board of directors to set savings interest rates; allowed banks to set own interest rates; and allowed credit unions and S and L’s to offer cheques and other banking services but without regulatory safeguards.
America slipped into recession from January 1980 through January 1983.
In the midst of this recession, Reagan pushed through Congress the Economic Recovery Tax Act of 1981, which lowered the top tax rate from 70% to 50% AND lowered the threshold for that top bracket to $106,000.
He also destroyed our nation’s air traffic safety when he strutted his stuff and fired all the controllers who went out on strike with PATCO in 1981.
Commodities underwent a pricing crunch beginning in 1982 that lasted until 1998.
The Kuwaiti stock market crashed in 1982.
Also in 1982, Congress passed the Depository Institutions Act, which deregulated credit unions and savings and loan banks (S and L’s). It also created the adjustable rate mortgage, which would prove so helpful to the overall health of the economy in the 2000’s.
From 1982 through 1988, there was a boom in the real estate market. During the same period, perhaps coincidentally or perhaps not, predatory capitalism which does no one any good had a field day with leveraged buyouts (LBO). In an LBO, a larger company obtains a controlling interest in a smaller one, uses the assets of the smaller company to finance the loans it used to buy it, and most often sells off anything left over after the loan defaults.
In 1986, Congress at Reagan’s behest passed the Tax Reform Act which lowered the rate for the top bracket from 50% to 38.5% and RAISED the rate for the lowest bracket from 11% to 15%. It also lowered the threshold for the top bracket to $90,000.
Thanks to the deregulation of 1980 and 1982 and mismanagement by its executives, the savings and loan industry underwent a crisis from 1986 to 1991 that nearly destroyed it completely. Half of all S and L’s bankrupted, and the FSLIC collapsed completely; its function are now performed by a fund within the FDIC.
On Black Monday, 19 October 1987, the stock market crashed in spectacular fashion while being broadcast over Voice of America, National Public Radio, and other outlets due to market panic, program trading, illiquidity, and overvaluation.
The booming real estate market crashed in 1988 and remained on life-support until 1995.
Reagan’s last gift to his friends was to lower the tax rate for the top bracket from 38.5% to 28% and also to lower the threshold from $90,000 to $29,750.
In 1989 the stock market crashed on Friday 13th in October due to the failure of the United Airlines buyout.
Also in 1989, Congress passed the Financial Institutions Reform, Recovery, and Enforcement Act which did, in fact, make some actual reforms, but also allowed bank holding companies to acquire thrift institutions such as savings banks and savings and loan associations, taking a few more bricks out of the wall erected by Glass-Steagall.
Not surprisingly, the USA had a recession in 1990 and 1991.
In 1993, the Omnibus Budget Reconciliation Act of 1993 raised the tax rate for the top bracket to 39.6%.
Michael Doonesbury and other get-rich-quick entrepreneurs went boom on the World Wide Web dot com from 1995 to the beginning of the new millennium.
In 1996, Congress passed the Clinton administration-sponsored Personal Responsibility and Work Opportunity Act which placed a lifetime limit on welfare benefits, devolved responsibility for welfare to the states, and instituted a workfare-for-welfare program requirement.
In 1996, Congress passed the Clinton administration-sponsored Personal Responsibility and Work Opportunity Act which placed a lifetime limit on welfare benefits, devolved responsibility for welfare to the states, and instituted a workfare-for-welfare program requirement.
The 1997 Asian financial crisis helped bring on the 27 October crash that year.
Also in 1997, the Clinton administration enacted a change in welfare from Aid to Families with Dependent Children (AFDC) to Temporary Relief for Needy Families (TANF) on the basis of "workfare for welfare" that penalized those unable to work and limited total lifetime benefits to 60 months.
Prices on commodities started climbing steadily in 2000, helping bring on a recession that lasted two years.
President George W. Bush and the Republicans passed the Economic Growth and Tax Relief Reconciliation Act of 2001 which significantly reduced the capital gains tax by 15% and the estate tax by 10%.
A few months later, the U.S. invaded War in Afghanistan.
Between 2002 and mid-2007, there were booms in the housing market, in leveraged buyouts, in collateralized debt obligations, and in debt repackaging.
After invading Iraq in 2003 so that the country was now fighting two wars at the same time, Bush and the Republicans passed the Jobs and Growth Tax Relief Reconciliation Act which reduced revenue by cutting the top tax rate from 39.6% to 35% and raised the top threshold to $311,950.
As if consumers were not getting screwed enough by the credit industry, Bush and the Republicans, with surprising support from a number of Democrats, passed the Bankruptcy
Abuse Prevention and Consumer Protection Act in 2005. Drafted in 1997 while Bill Clinton was in office, the legislation severely restricted the relief consumers can get from debt should their circumstances or that of the general economy change.
Due to the “China Correction”, stock markets world-wide crashed in February 2007. The subprime mortgage market in the U.S. fell not long afterward and the Great Recession began. It hasn’t ended yet.
Meanwhile, irresponsible speculation on food and fuel futures sent food prices and fuel prices both spiraling upward.
With the credit industry, including some of the largest banks in the world and insurance companies too, on the verge of collapse, Congress authorizes and President Bush authorize the Troubled Asset Relief Program (TARP) in 2008. Eventually totaling four hundred seventy-five billion dollars ($475,000,000,000), the program calls for the American taxpayers to rescue the financial bourgeoisie from the results of their own myopic greed and avaricious dishonesty.
While the public rages over TARP, future 2009 TIME Person of the Year Ben Bernanke and the Federal Reserve board of directors secretly loan American and foreign banks and financial institutions what respected finance magazine Bloomberg Businessweek totals as seven-point-seven TRILLION dollars ($7,700,000,000,000). Other sources investigating further give the figure twenty-nine TRILLION ($29,000,000,000,000).
Presidents Bush and Obama and Congress bailed out the troubled American automotive industry (Chrysler, General Motors, Ford), which kept manufacturing suburban assault vehicles long after those became highly impractical, with the total coming to $130 billion.
President Barak Obama and Congress passed the American Recovery and Reinvestment Act (ARRA) in 2009 for $787,000,000,000.
The stock market has crashed at least three times in the past couple of years, several days in a row this past August (2011), in fact.
Up to the Past, and Beyond
For thirteen of the past thirty-one years we have been in severe recession. In real terms rather than the rosy forecasts from government offices, 18-25% of America’s working people are unemployed or underemployed either in type of work according to their abilities or in hours, and for our youth, that rate climbs to 40%.
Soon, we in America will find ourselves in the same position relatively speaking, to that of our ancestors in the Gilded Age, the Belle Epoque, when the robber barons were masters of the universe, the golden age for Hoover and his cronies.
According to Edward Bellamy, author of Looking Backward: 2000-1887 and president of the Nationalist Clubs, at the apex of the Gilded Age 31,000 men held half the wealth of the nation’s 65,000,000 persons, 9% of the U.S. population owned 71% of the wealth of the country, leaving 29% to the remaining 91% of the population; and 4,074 persons or families owned one-fifth of the total wealth of the country, nearly as much as that bottom 91% of the people.
Then again, maybe we’ve slidden all the way back to the early days of the Republic, when Congress mirrored the legislative assemblies of Europe minus their clergy and hereditary nobility. The 400 richest persons in America (0.000001% of the population) have as much as the bottom 150,000,000 people (50% of the population). Figures from the 2010 census indicate that the approximately the same number as the poor in our country. That top 1% we’ve been hearing so much about control 60% of the wealth of the country, leaving a mere 40% of the wealth for the bottom 99% upon which they sit.
The number of poor relative to the wealthy who graduate college or university has dropped by 50% since Reagan and Stockman first started slashing federal aid to undergraduate institutions in the early 1980's.
During the Golden Age of Capitalism (1946-1971), the income tax rate for the wealthiest Americans was 91%, with the threshold for that rate being $200,000. As for the estate tax which Republicans fondly refer to as the “death tax”, during this period of prosperity, once an estate surpassed the $60,000 a tax rate of 77% kicked in. Today, the tax rate for the top bracket is 35% with a threshold of $379,150, while the estate tax is 35% of anything more than $5,000,000.
If Mr. Herbert Hoover lived today, he might have a different idea of his “golden age” for the wealthy in America.
“If you feed the horse enough oats, some will pass through to the road for the sparrows.”
Meanwhile, the rest of us follow behind them with a pooper-scooper to catch the oats trickling down from the arses of their horses.