Dean Baker wrote a powerful piece today deserves much coverage because understanding what he says about our economy and the purposeful impoverishing of the masses will be necessary during the Trump budget debate that is intent on expanding the pilfer. The economist hit the nail on the head.
Economist Dean Baker’s article is rather short, but some of the points deserve expansion for those who did not study economics. The economist first referenced a misleading article by Maya MacGuineas, the president of the Peter Peterson–backed Committee for a Responsible Federal Budget.
President Trump entered office facing the worst ratio of debt to gross domestic product of any new president in American history except Harry Truman—an onerous 77 percent.
Baker illustrates the shallowness and lack of economic depth of the statement.
It could have also begun with the announcement that the ratio of debt service (interest on the debt, net of payments from the Federal Reserve Board) to GDP is less than 1 percent. This contrasts with a ratio of almost 3.0 percent in the early and mid-1990s. Are you scared yet?
Actually, you should be. Folks like Ms. MacGuineas have pushed austerity policies in the United States and around the world for the last decade. These policies have prevented the government from spending the amount necessary to restore the economy to full employment. This has not only kept millions of people in the United States from having jobs, it has prevented tens of millions from getting pay increases by weakening their bargaining power.
It does not take rocket science to understand that these policies where the government refused to spend to prop up an economy the private sector was unable to or unwilling to invest in, made Americans poorer. Worse, it destroyed wealth they would have otherwise banked. The results, these policies have purposefully negatively affected future generations. They stole money that would have been available for college, to build a new home, to invest in retirement and much more.
Baker also points out how it affected America’s worker’s skill set and the results.
Furthermore, the lower levels of output have an enduring impact on the economy. They are associated with less investment in public and private capital, and less money spent on research and development. In addition, unemployed workers don’t gain the experience they would have otherwise. Many of the long-term unemployed drop out of the labor force and may end up never working again.
Interestingly, these the effect of austerity under the premise of deficit control is quantifiable.
As a result of these effects, the Congressional Budget Office now estimates that the economy’s potential level of output for 2017 is 10 percent less than what it had projected for 2017 back in 2008 before the Great Recession really took hold. The loss in output due to this austerity tax is roughly $2 trillion a year. This is the reduction in wages and profit income as a result of the smaller size of the economy. That comes to $6,000 per person per year.
This is the burden that the Peter Peterson crew have imposed on our children and grandchildren due to their scare tactics on the deficits. (Hey, remember the Reinhart-Rogoff 90 percent debt-to-GDP cliff?) And fans of logic everywhere know that it will not matter one iota to our kids’ well-being if the government were to increase taxes on each of them by $6,000, or whether its austerity policies lead them to earn $6,000 less each year.
I wrote the article “28 Year Old Grad Student Destroys Economists Destroying European & American Economies ” a few years back that covered the two faux economists Baker named above, Carmen Reinhart and Kenneth Rogoff. But Baker’s next point is the most important. It hits at the core of the grotesque extractive form of capitalism we practice in America.
Not to mention the rents from government-granted patent and copyright monopolies. As I point out in Rigged, these come to close to $400 billion a year in the case of prescription drugs alone. This is the difference between the patent-protected price and the free-market price. It is effectively a privately collected tax. If we add in the rents from medical equipment, software and other items, the figure could easily be twice as high. In other words, we are making our kids pay $400 billion to $800 billion a year to pay for the research and creative work that was done in the past.
Anyone seriously concerned about the burden we impose on our kids has to include this cost in their calculations. Otherwise, they just deserve to have their pronouncements treated with ridicule.
Those are two of the most important paragraphs and likely least understood concepts in our economy. Baker attempts to explain the corrosive nature of patents. The intent of patents intent was to allow inventors to recover their investments in developing products. It has evolved into an instrument of legalized theft. Drug companies have used it to charge exorbitant prices for drugs. Other product manufacturers have done so as well. It has been used to sue farmers for growing crop from cross-pollinated patented seeds.
But it is not only the unfair use of patents that is destroying the middle-class. It is all aspects of the structure of our economy, unfair taxation, the military industrial complex, healthcare, and much more. A few years ago I wrote the book “As I see it: Class Warfare The Only Resort to Right Wing Doom” that holds true as it did then especially under the advent of an even more, pilfering agenda.