Demopublicans

Beginning with the election of Ronald Reagan a new more intense class war was launched against the American people. Along with the election of Reagan in 1980, a very conservative Democratic/Republican congress was also elected in reaction to the incompetent economic policies of the Carter administration regarding the growing inflation crisis. The strategy Demopublicans pursued was rather simple-minded but very effective. Reagan-Bush began printing and selling massive numbers of Federal Treasury bonds and other Federal Government revenue building instruments. To entice investors, these Demopublicans paid high interests rates (over 9%) to anyone who had the money to buy. Cash rich Gulf State Arab princes working through British banks, and Japanese, German, and American transnational corporations began buying up these high yielding bonds. Between 1776 and 1980 the United States government incurred a debt of 1 trillion dollars. By 1988 Reagan-Bush elevated the debt to 2.8 trillion dollars. By 1992 the debt reached 4.2 trillion dollars with annual interest reaching 300 billion dollars.

Absorbing this flood of foreign capital into the economy could create a variety of obvious problems such as inflation. Besides keeping Carter's interest rates high to avoid inflation, Reagan-Bush, with the cooperation of their newly elected reactionary legislative branch did two new things: First, they deregulated the banks and savings and loans allowing them to loan money on a variety of risky ventures. Second, they loosen up the availability of credit cards. As a result of the deregulation of all financial institutions, the West Coast and New England economies experienced a heady speculation fueled real estate market. Meanwhile the banks and S&L's were allowed to operate on reduced amounts of reserve capital and little regulation or oversight. To protect these banks and S&L's from their risk taking, deposit insurance was raised from $40, 000 to $100,000. Reagan-Bush and the Demopublicans told these "venture capitalists" that if they fail, the middle and working classes would bail them out through tax hikes.

When the S&Ls finally collapsed the bail-out initially cost middle and lower income taxpayers 500 billion dollars. Bank failures are now occurring and if established patterns continue, the bail-out will begin after the November 2002 elections! The locking up of huge amounts of capital in treasury bonds and the easy availability of credit cards absorbed much of the new borrowed capital flowing into the economy and deferred its payback to the future. These credit cards allowed folks to spend more money then they had and encouraged them to buy more things including foreign manufactured commodities.

To pay the principle and interest on this huge debt without burdening the upper-class power base of Reagan-Bush Demopublican coalition, the Demopublican congressional Ways and Means Committee rewrote the tax laws. The Ways and Means Committee reduced multiple tax brackets to three brackets and thereby lower taxes on the rich from a theoretical 72% (without using loopholes embedded into the tax laws) to 28% and raising taxes on most everyone else from 15% to 28%. Moreover, this committee closed a variety of middle income loopholes while preserving upper-class loopholes such as writing off the interest on two homes, lowering the capital gains tax, and accelerating capital goods depreciation from 5 years to 3 years. In a mean-spirited afterthought the Reagan/Bush team even forced waitress and waiters for the first time to pay income taxes on their tips. To add insult to injury, the tips wait people were expected to earn was set at 15% whether customers paid that much or not!

During the 1980's and after general bank deregulation, there was a proliferation of small banks and savings and loans. Every small town or village now had a new bank or S&L on main street. The "Banking Reform Act" sponsored by the politically dead and conveniently retiring Jake Garn, Republican Senator from Utah, and Fernand St. Germain, Democrat ex-congressman from Rhode Island (and now Washington's top banking industry lobbyist) was set into law to not only protect "venture capitalist" but to gathering up loose capital in the economy and transfer this money to the upper class. Banking across state lines, via electronic teller machines, was permitted for the first time since the heydays of the 1920's. Banks and now S&L's loaned money to anyone for any reason and charged high interest rates mandated by the Demopublican controlled Federal Reserve Bank. To facilitate the looting of the middle class, Demopublicans in state governments all over the United States did away with "New Deal" usury laws allowing banks and big corporations to charge whatever interest rate the "market" would bear. High interest bank credit cards thus found their way into the hands of everyone including young children and even dogs!. Quietly, the Demopublicans believed high interest credit cards would keep inflation down by absorbing excess capital and also help defer the cost of bad third world loans made in the 1970's. Meanwhile, the Garn/St. Germain banking reform act made no attempt to reform the bankruptcy laws of the United States. Anyone with any compelling reason could write off their debt and transfer it to the American taxpayer. Internal U.S. debt reached more than two trillion dollars by 1986!

The last twelve years can be characterized as the wealthy looting the American economy and, through their control of the American government via the Demopublican coalition, forcing the middle and working classes to pay for the damage. As Federal government monies dried up the Demopublicans shifted taxation to the states reviving ousted President Nixon's "New Federalism" policies from the 1970's. The states began to raise regressive taxes such as the sales tax, fees on services, auto registration, college tuition, and regressing the progressive state income tax. At the same time Demopublican controlled state governments began shifting taxation to local governments knowing that the local governments were for the most part controlled by local special interests such as chambers of commerce and other local business organizations. This strata of people would never raise progressive taxes on property, big or small, or on income. They will, however, raise regressive taxes such as sales taxes, park fees, water rates, garbage pick-up fees, increase building permit fees, increase hotel/motel bed-taxes, and put into place legal lotteries (also called voluntary tax or desperation tax ). Meanwhile Republicans gleefully torture the truth with such phrasing as “Voluntary Taxes,” and “Death Taxes,” and “Flat Taxes” when what they really mean is “stick it to the middle and working class tax” while at the same time they reduced all around services The pay back burden on the middle and working classes became so heavy and coupled with the widespread unraveling of Reagan's "social safety net," social conflict of the kind the economist John Maynard Keynes hoped to avoid loomed evermore largely on the horizon.

In a capitalist society money is power. Democracy is the empowerment of the people yet the budgetary behavior of the federal government flys in the face of democracy. Instead the Federal Government empowers the wealthy elite. This is not democracy in the sense of the traditional New England Town Halls, but a benign form of dictatorship, an elite Athenian form of democracy whose goal is to prevent the rabble from gaining any power by waging a stealthy protracted class war. Don't expect things to get any better in the future.