Thursday, April 22, 2010

How the Democrats Help the Rich Little Piggy, Hurt the Poor, and Lie All the Way Home

The neatest political trick of the past 150 years was Franklin D. Roosevelt's strategy of establishing social insurance programs that redistributed wealth within the ranks of the middle class and poor and at the same time abolishing the gold standard. The gold standard facilitated the Federal Reserve Bank's redistribution of wealth from the middle class and poor to the super rich.  Thus, he could do what the Whigs had always done, favor redistribution to the rich, but in addition convince Americans that he was redistributing from the super-rich to the middle class and poor.  FDR was the most talented three card monty player in American history, and among the most talented in world history.  He derived this strategy from the Romans, who gave free bread and circus to the plebes while securing the bulk of the wealth deriving from conquest for the privileged.

Roosevelt's trick was accomplished through the effect of monetary expansion on stock prices.  Because almost all of the super rich's income is derived from assets such as stock and real estate, and because expansion of the money supply reduces interest rates and boosts asset values, the super rich, by definition, benefit from expansionist monetary policy. This gain is acquired by taxing the poor and middle class through  inflation that monetary expansion also causes.

Roosevelt also accomplished the dream of Fabian and Swedish-style socialists of creating rigid classes, in effect recreating feudalism.  The lumpenproletariat class was expanded under the New Deal, limiting the prospects of the lowest one third of Americans in a way that follows English or European class structure. This is accomplished by limiting career success to those who can afford to pay for graduate school and who have the necessary middle class social skills. 

The 40th to 99th percentiles in income enjoy varying effects. Those who acquire more assets through credit tend to prosper, whereas those who save cash tend to lose.  Those who pursue expensive educations but do not find employment in the elite sector may tend to lose.  But career losers can compensate through borrowing and investing. The greater the extent of borrowing and investment in assets, the more successful the middle class becomes.  In the 1990s a book on this subject, Stanley and Danko's Millionaire Next Door, pointed out that the majority of millionaires are people who invest repeatedly in small businesses, overcoming their exclusion from government and corporate jobs because they tend to be foreign immigrants who lack the necessary education.  The extent of disabling brainwashing in the American education system is evidenced by the fact that most successful Americans do not come from America.

The out and out winners of the paper system are the upper classes, who benefit most from borrowing and from the artificial expansion of asset values.  The importance of this phenomenon can be seen in the reaction of both the Democrats and the Republicans to the recent credit crunch.  Their first reaction was to prop up stock and real estate values through massive monetary expansion, the fruits of which we have seen in the past year's stock market performance.

Today, three e-mails arrived from NetRightNation, the Congressional Republicans Ways and Means Committee and Americans for Limited Government that illustrate the Democrats' commitment to inflation and subsidy to the super rich.  Fist, NetRightNation (NRN, h/t Adam Bitely) points out that everyone in the world is worried about increasing government debt except Timothy Geithner and Barack Obama.  That's not quite true because George Soros and Henry Paulson are eager for more stimulus that would lead to more debt hence more monetary expansion.  One of the interesting revelations of the recent show-indictment of Goldman Sachs is that Henry Paulson set up a hedge fund after leaving office and one of its chief investments is in gold. Soros as well has invested in gold.  I wonder if Paulson and Soros know something the editors of the Democratic newspapers don't.

NRN reports that the International Monetary Fund (IMF) issued a "stark warning" about the extent of government debt around the world.  But it's full speed ahead for the Obama administration, which aims to borrow an additional trillion a year over the next ten years.  Likely, this will be too little as the economy fails to generate jobs.

Second, the Congressional Repbulicans' Ways and Means (CRWAM) e-mailed that the Congressional Budget Office (CBO) has found that millions of low- and middle-income Americans will now have to pay a $666 dollar tax (which the Democrats falsely call a fee in order to allow the Supreme Court to lie once again and declare the tax constitutional, which it is not).  According to CRWAM, CBO found that more than half of the 3.9 million Americans who will be forced to pay the tax "will have incomes that are low enough to qualify for premium subsidies" and that in 2016, 3 million Americans with incomes less than five times the poverty level will pay $2 billion in taxes as a result of the tax. 

Adding to the costs will be the need to hire 16,500 inspectors, who will become an interest group that will fight the law's repeal. This is a drop in the bucket of the Democrats' destructive spending plans and is one more example of the Democrats' penchant for authoritarian illegality.

The third e-mail is a press release from Americans for Limited Government (ALG).  ALG writes that the Senate is considering a bill from Senator Chris Dodd (D-CT) that would establish a $50 billion fund to subsidize failing companies, in effect recreating the bailout over and over albeit on a smaller scale. Bill Wilson, ALG's president writes that Dodd is not representing the voters of Connecticut but rather Freddie Mac and Fannie Mae.  ALG writes:

"Dodd bears a great deal of responsibility for causing the financial crisis.  Dodd has no business leading the Senate's effort to 'reform' the financial system.  He is the most corrupt Senator in U.S. history who protected Fannie Mae and Freddie Mac from being reined in while the housing bubble was inflated, and who personally benefited for being a shill for banks with VIP treatment in his loan from Countrywide."

I wish I could be more optimistic about the nation's future, but the public has gleefully committed itself to belief in the three card monty game that FDR devised.  The Democratic and Progressive media call the public's commitment to government incompetence "moderate", but squandering 40 percent of the nation's income is not moderate, nor are the majority of policies that the centralized federal government has pursued.  I am investing in gold and keeping a plane ticket to Hong Kong in my safe.

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