Democratic Underground

The Velvet Banana, Part Two: The Era of Good Stealings
November 23, 2001
by Jack Rabbit

Part One: The Coup d'etat of 2000
Part Three: An Attack on Freedom
Part Four: The Velvet Dictator

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Every since the first man stepped out of a cave and declared himself leader, there has been corruption. Apart from government being something necessary for national defense and the construction of public projects like roads and canals, it is also a great business opportunity. Government must consume goods and services, like everyone else. In order to purchase the necessary goods and service to maintain the army and build the roads, government needs money and therefore collects taxes. Government also has police power to enforce contracts.

One may argue all day long about the virtues of having "a government of laws, not men," but the fact of the matter is we must still depend on men to make, enforce and interpret those laws, and sometimes they do that in ways consistent with personal rather than public interest.

That happens, it always has happened, it always will happen. We run into problems when those who are expected to enforce the law think of themselves as a law unto themselves, able to do whatever they want for themselves and their allies.

A banana republic - a third world nations governed by petty military strongmen and juntas whose power derives from tanks and rigged elections - is often referred to as a kleptocracy, meaning government by thieves. The banana republic dictator uses his police power to seize somebody else's wealth - imprisons the property holder on trumped up charges, for example - and then either keeps it for himself or gives it as a gift to a political ally. Often, this redistribution of wealth from a legitimate property owner to a political ally is called crony capitalism.

In countries where government has to keep masses of people satisfied - not just the military and wealthy - government designs economic policy to keep people working in the long run. The idea is that employed, prosperous people vote for the party in power. Government has the power to redistribute wealth up or down through tax policy.

Liberals and progressives favor tax policy where government taxes wealth progressively - the more one has, the higher percentage is paid - and redistributes towards the poor and middle class. The idea is to generate economic activity by giving cash to people who will spend it, creating demand for goods and services and thus create jobs (and votes for the party in power).

Conservatives favor a tax policy where the tax burden falls on the middle class; the poor by definition have no money with which to pay taxes and the wealthy should have the money to stimulate investment in new business growth and thus create jobs (and votes for the party in power). This last theory is the one favored by the Bush administration. It was the centerpiece of his election campaign last year.

However, the Bush administration came to power by stealing the election. Bush owes the voters nothing. Indeed, the voters rejected Bush's tax proposals. A combined 51 percent of the voters cast ballots for either Al Gore or Ralph Nader, the two candidates who most explicitly condemned Bush's tax package. On the other hand, Bush rejected federal matching campaign funds in order to raise unlimited amounts of money from wealthy donors, particularly from oil companies, power generating companies and the new, global manufacturers whose interest is trade liberalization. He may owe the voters nothing, but he owes his rich friends quite a bit. They expect a return on their investment.

And they are getting it.

The goal of the Bush team was to pass the tax package, no matter what it meant. During the election campaign, the Bush team argued that times were good and the federal government could therefore afford to give back some of the budget surplus. After the election, with the American economy losing steam and slipping slowly into recession, the same people argued the tax package was needed as an economic stimulus. Although tax laws are usually complicated, it shouldn't take a Harvard economist to tell that a tax plan spread out over ten years is not a stimulus, which is a short-term matter.

The Bush tax plan passed Congress. The total tax package cut taxes by $1.35 trillion. According to the Citizens for Tax Justice, the benefits of the tax package broke down as a $600 saving on average to those at the median income level and a $53,000 on average saving to those at the top of the income scale. The Republican argument that the rich will save more because they pay more has some merit on the surface, but this kind of discrepancy should ring alarm bells.

Following the September 11 attacks, Bush again used the occasion to ask for a new economic stimulus. It started with an airline bailout that did nothing for laid off airline employees. An interesting story in the Village Voice tells of an airline stewardess who got $744 in severance pay after losing her $22,000-a-year job, while her airline's CEO, largely credited with running the company into the ground, also lost his $900,000-a-year job and was given a $3.2 million severance package. That tells us how the airlines are distributing their bailout bonanza.

The House passed the main part of the new economic stimulus package last month, but as yet the Senate has taken no action. A feature of this bill is the repeal of the alternative minimum tax, a tax imposed on the wealthy so that they will not gain by placing all of their income in tax shelters. Not only does the new economic stimulus abolish the tax, but does so retroactively to 1986. The largest corporations will get a fat check from the government to the tune of $25 billion. According the Citizens for Tax Justice, over 40 percent of the proposed tax savings in this new stimulus package will go to the wealthiest 1 percent of the population.

The budget surplus that was to be used for paying down the debt is now gone. Republicans assert that it's the people's money and that they trust the people to do the right thing with it. However, when the people voted for Gore or Nader rather than Bush, they were telling the politicians what they wanted done with it. That has been ignored. Besides, the people aren't getting a lot of this money. Most of it is going to the wealthiest 1% and to large corporations.

This is a velvet form of crony capitalism. Bush has his accomplices in Congress to pass tax laws, so it isn't stealing. As for what the rich save on their tax bills, some of it will be invested, some of it will be used to buy new toys and some of it will go to Republican campaign coffers.

Bush has benefited his corporate friends in other ways. Last winter, power generating companies - many located in Texas and all of which contributed to Bush's election campaign - took advantage of California's ill-conceived deregulation of gas and power. California ratepayers may have been overcharged as much as $9 billion. Although Bush's Federal Energy Regulatory Commission appointees ruled that the market was dysfunctional, but they balked at granting California and other western states regulatory relief for weeks while rates remained high. One of the energy companies which made out best in this fiasco is the Enron Corporation, whose CEO, Kenneth Lay, is a personal friend of Mr. Bush and one of his most generous campaign contributors. Enron's star has since fallen; so has its stock price. It is now under investigation by the Securities and Exchange Commission.

Even Bush's foreign policy is designed to favor wealthy corporations over any other consideration. One of Bush's first and greatest outrages after assuming office was the abrogation of the Kyoto Protocol on Global Warming. Perhaps no multinational corporation will benefit more from this than Exxon-Mobil, the world's largest private corporation and another major source ($1.2 million) of Bush campaign money. The official position of Exxon-Mobil is that it is not proven that burning of fossil fuels causing global warming. In rejecting the Kyoto, Bush adopted a similar argument.

This argument is phony. While not everything is known about global warming, it is known that the burning of fossil fuels is a major contributor. The Exxon/Bush position is the very same kind of obfuscation in which the tobacco industry engaged for decades in denying the linkage between cigarette smoking and heart and lung disease. This may not be theft, but it isn't honest, either. The reader is referred to an April 17 article in the London Guardian, "How the high priests of capitalism run roughshod over fears of planet."

What can be done to remedy this situation? The problem is that what belongs to the people has been taken from the people without the consent of the people. Indeed, since Bush received than Gore and Nader (or Gore alone, for that matter), it has been taken from the people in spite of their express disapproval.

First of all, the Senate should reject any economic stimulus package even resembling the one passed by the House last month. No package at all would be better than that bill. In fact, Congress should begin to consider repealing part of the tax cuts passed earlier this year. No bill that does not directly benefit working people should be considered.

Let's get the power suppliers off our backs. In California, we know what untrustworthy business partners they make. They were able to do to California and the west what they did because there is no effective market. Since there is no effective market, there is no to hold to any platitudes about the virtues of private enterprise. Support public power. Ratepayers should own the power that comes to their homes and offices.

Finally, boycott Exxon. This is being done in Britain, why not elsewhere? We could perhaps put a little goal on such a boycott, such as a boycott with the end of getting Exxon to stop obfuscating about global warming, admit that obfuscating is what it has been and support Kyoto Protocol.

On to Part Three: An Attack on Freedom »