Is America Headed For Civil War Or Collapse?

Perhaps we are, according to a mathematical model by Professor Jack Goldstone.  Based on trends in inequality, selfish elites, and political polarization that began since the 1980s, the conditions for civil violence are the worst they have been since the 19th century.  In fact, this same model accurately predicts the (first) American Civil War, and if it is correct this time around, we are dangerously close to the precipice of another one very soon.  If so, it will make the pandemic look like a walk in the park by comparison, and the past three months look quaint.

The powder keg has been building for decades now, and recent events have been both a consequence (our national failure to mount anything close to an effective response to COVID-19 before it was too late) and a spark (recent civil unrest from pent-up rage over both persistent racial injustice and increasing police-state authoritarianism, along with the toxic effects of the lockdowns).  Throw in record levels of unemployment and economic anxiety followed by the cliff that results from the impending and abrupt ending of the extra $600 per week in unemployment benefits come July 31 (unless extended further).

But the biggest flashpoint of all is yet to come in a few months from now:  the 2020 presidential election.  Whichever side wins, the other side loses, and plenty of people on the losing side will be very, very angry.

It is probably not too late to stop a full-blown civil war and/or collapse before the Rubicon is crossed, but that window is closing very, very fast indeed.

So what do we need to do to save the Republic (again) before it is too late?  I mean, we really don't want to give the reich-wing accelerationists like the Boogaloo movement the satisfaction, right?  For starters:

• Immediately implement Universal Basic Income (UBI) for all, no strings attached, via federal or central bank money creation.  Start it at $2000 per month for everyone over 18 and $1000 for everyone under 18, for three months, then drop it to half that amount ($1000 and $500, respectively) indefinitely. 
• Immediately implement single-payer Medicare For All.  Yesterday.  And along with that, increase much-needed funding for hospitals and healthcare providers across the board.
• For both above items, include anyone with a SSN or ITIN, regardless of citizenship or immigration status.  No means test, no discrimination, no perverse incentives.  And no bank account required--use debit cards whenever needed.
• Free college (and trade school) for all, thus improving stagnant economic mobility.
• Implement the rest of Rodger Malcolm Mitchell's Ten Steps to Prosperity as well.  That includes, among other things, progressively taxing the very rich 0.1% very heavily to reduce inequality.
• Implement the Green New Deal, including a federal job creation program. 
• Implement much-needed and long-overdue reforms to police nationwide, rooting out structural racism and abuses of power.  Yesterday.  What are we waiting for? 
• Extend any moratoriums on evictions and foreclosures for an additional 30 days or until the aforementioned UBI payments reach everyone, whichever is longer.
• It should go without saying, but DO NOT LOCK DOWN EVER AGAIN!  Even in the worst COVID-19 hotspots, mandatory mask requirements and bans on very large gatherings are sufficient to prevent a worst case scenario at this point.
• And of course, we must go back to actually being a Constitutional Republic rather than an unconstitutional empire.  No more over-bloated military and unnecessary wars of choice to make the rich richer.

As the saying goes, "all models are wrong, but some are useful".  The TSAP sure hopes that this model is very wrong, but there is no denying that this one is highly useful.  The evidence is all around us.

The Real Cause of "Secular Stagnation": Extreme Inequality

Much has been made of the concept of "secular stagnation", namely, that the current and future long-term potential for economic growth has slowed dramatically compared with the not-too-distant past.  Larry Summers defines it as "a prolonged period in which satisfactory growth can only be acheived by unsustainable financial conditions".  And at least since the Great Recession, the data do indeed seem to bear this out.  Most notably, for decades now the American economy has been requiring lower and lower interest rates to get the same effect in terms of boosting aggregate demand, the sine qua non of economic growth.  One can even argue that, relatively speaking, the United States will have had a whopping "lost two decades" of growth from 2000-2020.  We are "turning Japanese", and not in a good way either.

But why is this happening, exactly?  Some blame demographic changes, particularly population aging, as one of the causes.  But while this theory is interesting, it only seems to explain, at most, a tiny portion of the overall trend of secular stagnation.  In fact, a recent study by the American  Economic Association found that there is essentially no robust correlation between population aging and economic growth (or lack thereof).  Why?  Advances in automation and robotics seem to offset the putative adverse effects of an aging workforce to the point where the effect of aging is practically negligible.

In fact, another recent study finds the ideal total fertility rate (TFR) in terms of standards of living overall is in fact in the 1.5-2.0 range, basically the same as what the TSAP has long advocated since our founding nearly a decade ago in 2009.  Yes, really.  Take that, birth dearthers!

Others blame the decline in EROEI (Energy Returned on Energy Invested) as cheap and easy fossil fuels are increasingly less readily available than in the past, as well as the planetary limits to growth.  That is indeed true in the very long run at least, and all the more reason to end our inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host, by the way.  Though meanwhile, renewable energy technologies are making massives strides, which again looks like it will offset such trends at least partially.

But in the relatively near term at least, the biggest elephant in the room by far in terms of the causes of secular stagnation would be the extreme level of economic inequality in this country that is now back at Gilded Age levels.  Or should we say, at banana republic levels these days.  The top 1% controls roughly 40% of the nation's wealth, the top 20% controls roughly 90%, and the bottom 80% is left to fight over crumbs.  Wages have lagged behind the cost of living for decades despite exponential increases in technological progress and resulting increases in labor productivity.   The oligarchs at the top took nearly all of the gains.  And the rest of us simply cannot afford to keep spending enough to keep the economy going without digging ourselves deeper and deeper in debt.  Eventually, something has to give, since there is not enough aggregate demand, and increasing debt clearly cannot be sustained forever.

Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth".  They really hit the nail right on the head here.  After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.

Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII.  The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system.  And we also had a trade war from 1930-1934, which further deepened the Depression.  The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.

But what about in the long run?  Well, the Keynesian punch line to that is, "in the long run, we are all dead".  Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well.  That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral.  Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.

Thus, policies designed to tackle economic inequality would be beneficial in this regard.  In addition to more progressive taxation of both individuals and corporations (like it was before Reagan) and/or the Universal Exchange Tax and/or Georgist taxation on natural resources, that would also include things like Universal Basic Income (UBI) as well.  And nationalizing the Feral Reserve to make it a truly public national bank that creates money interest-free would be even better still, since usury (interest) and debt-based currency are essentially the biggest weapons of the oligarchy.  Problem solved.

In fact, in our Monetarily Sovereign federal government, Congress can simply spend new money into existence without the strings of interest attached, and without any corresponding increase in tax revenue either.  Rodger Malcolm Mitchell notes this in his Ten Steps to Prosperity, which includes, among other things, Medicare For All, free college for all, and a form of UBI as well.  Interest rates can still be used by the central bank as an inflation-fighting tool, but the creation of money will be decoupled from it.

(Note to Japan:  You should do the same thing as well, especially the helicopter money (QE for the People) and UBI.  Then you will finally get out of your 30 year funk, and possibly even raise your birthrates a bit.)

At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale.  Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well.  Yesterday.

So what are we waiting for?

Americans Are Still Having Fewer Kids, and That's a Very Good Thing

Even in 2018, after several years of ostensible economic recovery, Americans (particularly Millennials) are still having fewer kids than they were before the Great Recession.  The total fertility rate in the USA has thus fallen to around 1.8 children per woman, down from 2.1 before the Great Recession (replacement rate is around 2.1).  And contrary to what the naysayers may claim, that is actually a very GOOD thing on balance.  The world is grossly overpopulated and in serious ecological overshoot, and Americans' truly elephantine ecological footprint per capita due to our massive pollution and overconsumption of resources only makes it that much more important to reduce birthrates in the USA relative to the rest of the world.  And such grave ecological concerns greatly dwarf any social and economic concerns about population aging and other consequences of low birthrates.  Especially since with a Monetarily Sovereign government like our own federal government, money is literally no object when it comes to things like Social Security, Medicare, Medicaid, and things like that--the government can literally only go broke if they choose to.  And our addiction to economic growth is also part of the problem in terms of ecological sustainability, so that fear needs to be jettisoned at once as well.

In fact, one recent study finds the ideal TFR in terms of standards of living overall is in fact in the 1.5-2.0 range, basically the same as what the TSAP has long advocated since our founding nearly a decade ago in 2009.  Yes, really.  Take that, birth dearthers!

Of course, it is not all wine and roses either.  The very same New York Times article referenced in the beginning of this post does note that both women and men are on average having fewer kids than their own self-reported ideal numbers, primarly due to economic reasons.  Part of the decline in fertility is due to Millennial women having more choices than previous generations, of course, but at the same time those choices are severely constrained by economics.  Our nation has a truly abysmal record of providing paid family leave, high-quality childcare, and social safety net benefits in general compared to most other modern and even semi-modern countries.  And in spite of increasing gender equality in many ways, the modern workplace remains both largely male-dominated and male-defined, and thus stuck in the past in terms of work-life balance.  And while the perennial fears of low birthrates are largely overblown, it is still entirely possible that if they eventually fall to extremely low levels (such as Japan's 1.2-1.4 over the past two decades) and remain that low for decades at a time, we may very well hit a "pothole" on the road to sustainability.  So there is still plenty of room for improvement in that regard, even if current TFRs are right where they should be.  And besides, it is simply the right thing to do regardless of fertility rates and any concerns about such numbers.

If the pro-lifers and pro-natalists really cared, they would instantly advocate not only very generous paid family leave and subsidized (if not free), high-quality childcare, but would also support things like Universal Basic Income (UBI) to eliminate poverty (especially child poverty) while also (partially) compensating the unpaid work of mothers (and some fathers as well).  They would also advocate better quality education from pre-K through post-grad, also free, as opposed to currently trying to kill the entire public education system via death by a thousand cuts.  They would advocate better work-life balance for both women AND men, higher minimum wages, and especially shortening the workweek (what's the point of having kids if you are never going to see them?).  And they would also advocate single-payer Medicare For All.  But do you see them advocating any of those things?  Of course not.  Gee, I wonder why.

So can you really blame young people for effectively going on a (partial) reproductive strike given the world we currently live in?  Of course not.

The best way to sum things up:  Want us Millennials to have (more) kids?  Give us a quarter-million dollars, then we'll talk.  Because that's about how much it costs on average to raise a child from birth through age 18--and that doesn't even include college.  And besides, our Mother Earth will truly thank us in the long run.  Otherwise, silence is golden.

The Real Cause of "Secular Stagnation": Extreme Inequality

Much has been made of the concept of "secular stagnation", namely, that the current and future long-term potential for economic growth has slowed dramatically compared with the not-too-distant past.  Larry Summers defines it as "a prolonged period in which satisfactory growth can only be acheived by unsustainable financial conditions".  And at least since the Great Recession, the data do indeed seem to bear this out.  Most notably, for decades now the American economy has been requiring lower and lower interest rates to get the same effect in terms of boosting aggregate demand, the sine qua non of economic growth.  One can even argue that, relatively speaking, the United States will have had a whopping "lost two decades" of growth from 2000-2020.

But why is this happening, exactly?  Some blame demographic changes, particularly population aging, as one of the causes.  But while this theory may be at least partially true, it only seems to explain, at most, one-third of the trend of secular stagnation.  Others blame the decline in EROEI (Energy Returned on Energy Invested) as cheap and easy fossil fuels are increasingly less readily available than in the past, as well as the planetary limits to growth.  That is indeed true in the very long run at least, and all the more reason to end our inane and insane addiction to growth for the sake of growth, the ideology of the cancer cell which eventually kills its host, by the way.

But in the relatively near term at least, the biggest elephant in the room by far in terms of the causes of secular stagnation would be the extreme level of economic inequality in this country that is now back at Gilded Age levels.  Or should we say, at banana republic levels these days.  The top 1% controls roughly 40% of the nation's wealth, the top 20% controls roughly 90%, and the bottom 80% is left to fight over crumbs.  Wages have lagged behind the cost of living for decades despite exponential increases in technological progress and resulting increases in labor productivity.   The oligarchs at the top took nearly all of the gains.  And the rest of us simply cannot afford to keep spending enough to keep the economy going without digging ourselves deeper and deeper in debt.  Eventually, something has to give, since there is not enough aggregate demand, and increasing debt clearly cannot be sustained forever.

Thus, a more accurate definition of "secular stagnation", would be, in the words of the Economic Policy Institute, "a chronic shortage of aggregate demand constraining economic growth".  They really hit the nail right on the head here.  After all, one person's spending is another person's income, by definition, and any business without enough customers will clearly not stay in business for long.

Which, by the way, was also one of the causes of the Great Depression and the long period of secular stagnation that followed until WWII.  The Roaring Twenties also had similarly extreme inequality as well, along with a wildly unregulated financial system.  And we also had a trade war from 1930-1934, which further deepened the Depression.  The only real difference now (aside from the levels of debt today) is the Feral Reserve's monetary policy, but even that will run out of ammo very fast (as interest rates are already low) unless their methods are truly overhauled to accomodate today's realities.

But what about in the long run?  Well, the Keynesian punch line to that is, "in the long run, we are all dead".  Seriously, though, an inequality-induced chronic shortage of aggregate demand not only reduces actual economic growth in the short run, but also reduces potential growth well in the future as well.  That is because less demand today leads to less business investment tomorrow, degrading the economy's productive capacity over time and thus leading to significantly less growth in the long run as well as the short run, creating a vicious cycle and downward spiral.  Hoarding such ludicrous amounts of wealth at the top of the pyramid clearly has serious consequences for the economy and society, and with much larger effect sizes than originally thought.

Thus, policies designed to tackle economic inequality would be beneficial in this regard.  In addition to more progressive taxation of both individuals and corporations (like it was before Reagan) and/or the Universal Exchange Tax and/or Georgist taxation on natural resources, that would also include things like Universal Basic Income (UBI) as well.  And nationalizing the Feral Reserve to make it a truly public national bank that creates money interest-free would be even better still, since usury (interest) and debt-based currency are essentially the biggest weapons of the oligarchy.  Problem solved.

At the very least, in the meantime, we need to raise the minimum wage to $15/hour to give the lowest-paid workers a boost, which will also have a positive spillover higher up the wage scale.  Also, macroeconomic policy (both fiscal and monetary) should seriously prioritize very low unemployment over very low inflation, since tight labor markets have long been known to give workers much more bargaining power relative to employers. And labor unions also need to be revitalized as well.  Yesterday.

So what are we waiting for?

Welcome to Necrotizing Fascism

A recent article confirms what we have already known all long:  too much inequality is bad for the economy, and extreme inequality (like we currently have in the USA as well as globally) can eventually lead to economic collapse.  This occurs because of the "science of flow".  To wit, just like a living organism needs good circulation, so too does an economic system.  And when circulation gets cut off, that results in necrosis--the death of tissue that eventually overwhelms the whole system.  Inequality, and the hoarding at the top that causes it, indeed cuts off the circulation of money, and it is very telling that nearly every major economic crash or depression has been preceded by relatively extreme economic inequality.

We should also note that, as history has shown, such resulting economic crises tend to breed authoritarian political systems, most notably fascism, when such crises are not resolved within short order.  And austerity policies only worsen recessions and depressions, making fascism even more likely.  Look no further than Nazi Germany in the 1930s, the Golden Dawn party in Greece in the 2010s, and of course the Tea Party followed by Trump in the USA as well.  And the resulting fascism only makes inequality even worse in the long run, despite any initial short-term benefits that may occur.  And the vicious cycle continues.
  

Thus, when such necrosis breeds fascism, and that in turn breeds further inequality and necrosis, we have coined a new term for it.  We call it, "Necrotizing Fascism", named after the flesh-eating disease "necrotizing fasciitis".   And that is basically what we have now under the Trump regime.  Believe me.

The American Dream is Dead

It's time to face the brutal truth.  The so-called American Dream is dead.  Finished.  Defunct.  Kaput.  C'est fini.   Except for the top 1% of course.  And it has now turned into a nightmare for the rest of us.

Why do we say this?  Just look at the facts:

• Unemployment remains persistently high despite over three years of "recovery", nearly double what it was in 2007.
• Even as unemployment has begun to slowly ebb and people are returning to work, they are taking lower-wage and less secure jobs than before.
• As a result, poverty has increased in recent years, especially among the working poor.
• The middle class continues to shrink nearly every year. 
• Meanwhile, the rich continue to get richer.  Corporate profits and the Dow Jones are at or close to record highs.  And the top 1% now owns over 40% of the nation's financial wealth.
• In fact, a mere 400 individuals have more wealth than the bottom 50% of Americans combined.
• Statistically, an individual is more likely to go from riches to rags than rags to riches.  Social mobility has mostly one direction now--DOWN.  
• The problems of unemployment, poverty, inequality, and downward mobility are especially true for today's under-30 generation, as America continues to ruthlessly eat its young.

It does not have to be this way forever.  There are several things that will, over time, reverse these negative trends and restore at least some semblance of the American Dream.  Just take a look at our party platform for a list of such ideas.  But the entrenched special interests that control our government want these pernicious trends to continue, and they will not stop until there are only two classes:  master and serf.   That, at least for now, is the true state of our union.

Just How Bad Is America's Wealth Gap?

The latest study on America's growing inequality of wealth and income is really quite sobering indeed: we are worse than the Ivory Coast and Pakistan in terms of inequality, and possibly even worse than Ancient Rome was. And Rome was a society built on slave labor and that prided itself on class distinctions, so that really says something. It's especially scary when we remember what eventually happened to the Romans after centuries of such inequality.

Right now, the top 1% of Americans control roughly 40% of the nation's wealth, which is more than twice as much as it was in Rome (16%) or America in 1979 (19%). Income has also seen a yawning chasm as well, with the share of after-tax income doubling from 1976 to 2007 and the share of pre-tax income nearly tripling. From 1979 to 2007, after-tax income skyrocketed a whopping 281%, despite little gains for the bottom 80%. Meanwhile, the average hourly wage has largely stagnated since 1972 when adjusted for inflation, the federal minimum wage has lagged behind inflation since 1968, and real family income actually declined from 1979-2009 for the bottom 20%.   Things are even worse for younger workers.  And the Bush tax cuts, especially for dividends and capital gains, have greatly contributed to the problem.  There are even some billionaires that pay nothing or next to nothing right now due to all the crazy loopholes.  Thus, since 1979, the rich have gotten richer, and the poor have gotten poorer.  And the middle class continues to shrink.

Bottom line: the problem of wealth and income inequality isn't gonna fix itself. The top 1% can easily afford to share their vast wealth and still be very rich, but due to greed they do everything they can not to do so. Thus they need to be taxed more than they are now--a LOT more. To whom much has been given, much will be expected. The TSAP would consider the following graduated scheme of marginal tax rates (loosely adapted from Robert Reich) to be fair:

Under $20,000: no income tax
$20,000 to $50,000: 5%
$50,000 to $90,000: 10%
$90,000 to $150,000: 20%
$150,000 to $250,000, 30%
$250,000 to $1,000,000, 40%
$1,000,000 to $10 million, 50%
over $10 million, 70%

Unlike the current Byzantine tax code, there would be no loopholes or any deductions other than for state and/or local income taxes paid, and a limited amount (up to 10% of income) for charitable donations. Also, all forms of income (wages, interest, dividends, and capital gains) would be taxed equally, unlike the status quo.  And a top marginal rate of 50% or even 70% is actually pretty tame compared to what it was in the 1950s and early 1960s, which hovered around 90%. 

For corporations, a 20% income tax with no loopholes would be infinitely better than the one we have now, with 2/3 or large corporations (including ExxonMobil, GE, B of A, and BP) currently paying zero income taxes while numerous unfortunate small businesses get hit with up to a 35% tax.   Even better would be if the first $500,000 per year was tax-free.

Resurrect the estate tax (aka "death tax") to 50% for all estates worth $2 million or more.  If the Republicans really believe in "meritocracy" like they claim to, why then do they support unlimited tax-free inheritances for the filthy rich?

A modest financial transactions tax (0.25% per transaction) would also raise about $150 billion and charge it all to Wall Street.  Plus, it would help discourage reckless speculation by the parasites that got America into the mess we're in now.  And speaking of Wall Street, other changes are in order as well, including re-imposition of the Glass-Steagall Act that prevailed from 1932 until its repeal in 1999.

In addition, we should seriously consider a one-time 15% wealth tax on those with a net worth above $10 million, similar to the one Donald Trump suggested in 2000 to pay down the national debt.  They would get ten years to pay it, with interest added for every year.  Of course, our debt is much larger now than it was back then (three times larger in fact), but it's a good start nonetheless.

We can just hear the whining and squealing right now.  But taxes are the price we pay for civilization.