Obama tears Congress a new one

It’s been a long held belief of mine that career politicians know nothing of the intricacies of economics, be they on a global or local scale, and ESPECIALLY when it comes to “supply-side” economics.

Why do I believe this of the worlds politicians? Well, irrespective if they are either “democratically elected” ones in the west, or dynastic dictatorship families in the Middle East, or self appointed Oligarchs like those in Russia and the CIS, they all have one thing in common….and that is that they have NOTHING in common with the common man. In order to have entered into office in the first place, the vast majority have used their amassed fortunes (and those of their cronies and benefactors to whom they’ll repay with government grants and contracts) just to get into Parliament. The fact that they are already super wealthy means that they have no idea how Joe or Jane Bloggs struggle to make ends meet in times of economic hardship, such as the current ongoing recession. They are well positioned to weather out the storm. Their pantries are fully stocked, their stockpiles of cash and liquid assets available to fund any whim and any need, or more importantly, any opportunity to pick off the flesh of failing businesses at rock bottom prices, like vultures circling a dying Wildebeest.

Meanwhile, Joe and Jane Bloggs are struggling. Their hours have been cut back, or, two incomes have been reduced to one…or in the more extreme cases…into NONE. They struggle to meet their mortgage payments, they’ve sold off as many assets as they can just to keep themselves afloat until the recession stops biting them hard.

Politicians however live a life, safe in the knowledge that they will not be downsized and that they can still claim expenses for their second homes, their travel and entertainment and their £1,600 duck islands, such as the likes of Tory MP Sir Peter Viggers, and yet they force upon the nations they serve hair-shirt budgets and cutbacks on public spending.

Logically of course, this is economic suicide. After-all, the biggest employer in any country is the government. Think about it for a second. Doctors, nurses, teachers, police officers, sanitation workers, armed forces personnel and all manner of office based civil servants and pen pushers are all paid for out of the governments coffers. If the government suddenly decides to cut jobs and spending, what happens? Well, those people stop spending in their local shops and restaurants, which have knock-on effects for the local economies servicing those people, which means THOSE people stop spending money, and eventually the economy spirals downwards. People are afraid to spend their money, resulting in massive economic stagnation, or in some cases, a shrinking economy.

This is exactly what President Obama was getting at when he was diplomatically dressing down the members of the U.S. Congress about the amount of time and wasted energy it took for them to vote and approve the most recent US Federal Budget.

In his speech, he chastised his fellow politicians and pointed out the need for the wealthy to pay their fair share. Of course, the Republicans have had a field day since he gave his speech on the lawn of the Rose Garden on August 2nd. Why? Well, for starters, his highlighting the need to remove tax breaks that currently allow for billionaires to avail of loopholes in tax laws, resulting in their paying lower taxes than teachers and nurses, hit a raw nerve. The rank and file of the Republican party are typically the self-made elite, and the last thing that they want to do is share their hard earned cash with the masses…least of all pay it in the form of taxes. They counter this by claiming that they believe in philanthropy, but that’s not really the same now is it?

The Republicans have always said that they stand for “smaller government” and “lower taxes”. They oppose the concept of “big government”, translating any increase in government spending, (even if it’s for real services like teachers, nurses, firemen  police officers) into higher taxes and misclassifying this into “big government”. However, what they typically fail to highlight is the fact that Republicans are largely about protecting their own wealth. They are not interested in the idea of sharing the burden or helping low and middle income families also live the “American Dream”. I’m not 100% sure exactly what the standard American Dream looks like these days. A cursory glance at MTV would suggest that it’s about Daddy buying their son or daughter a flashy car at the age of 16, living in a huge house with eight bedrooms, all of them en-suite and with walk in wardrobes, and heading off to Florida or the Caribbean for Spring Break.

The reality is very different however. More often than not, people are struggling when they fall ill because the insurance companies managing the healthcare system have failed them and are more interested in profits than people. Parents more often than not have two, sometimes three jobs, just to make enough money to make ends meet. Salaries and hours have been slashed, and unemployment is at unprecedented levels not seen since the ‘80’s. Meanwhile, Congress refuses to increases taxes in order to balance the budget, instead opting to ringfence their wealth by way of vetoing tax hikes at the expense of Joe and Jane Bloggs.

Raising taxes need not be viewed as a negative thing. You don’t have to raise them by much….just 3%-5% on average. And using the money wisely helps too. Countries who have adopted a program whereby they spend their way out of recession usually recover far quicker than those who save their way out of recession. Germany benefited hugely from the Marshall Plan which was a combination of loans and grants used to help rebuild the country after the war. By creating jobs in rebuilding the country, they were able to build one of the strongest economies in the world today.

The United Kingdom created the NHS (National Health Service) right after the war. Their logic was that if we had close to 100% employment DURING the war, then we could also have 100% employment AFTER the war by using the governments money in a more productive way….free healthcare. This would ensure nobody had to worry about the costs of getting ill, but would ensure her nation was fit and healthy and able to contribute to society.

Building projects, refurbishment programs, educational programs all help contribute to the fight against unemployment. The people involved in the programs earn money and spend their money. Also, giving tax breaks to the lower and middle classes also helps free up a few extra bucks in a persons pay cheque for them to spend in their locality….thus helping create future demand for goods and services which results in more jobs. And it’s not like there is not a single country out there that could not do with rebuilding or infrastructure improvements.

There’s an old saying my Grandfather taught me….”You’ve got to spend money to make money”. The only question remaining….is the government listening?

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