Supply side doesn’t have anything for your small town

I posted this on dailyKos last week, under my other handle I use there.  It passed by there as most diaries do.  This morning I woke up and started my weekly dose of opposition research and MSM lunacy.  I got 5 minutes of Fox News with Senator Dorgan arguing for taking 25-30 of the already allocated 700 billion to help the car companies (responsible for 3 to 5 million jobs).  Senator Kyl and Chris Matthews countered with the same supply-side crap and “blame the poor people” grandstanding that has gotten us in to this mess.  Then they asserted that the Democrats should “compromise” with the Republicans and not bail out the car companies (just the banks).  I got so angry, I turned the channel to ABC, where Ahnold was saying that Fannie May and Freddie Mac forced so many banks into loaning to people who had no business getting a home mortgage.  As a VP in a community bank, let me tell you that this is a baldfaced lie, but it is one of the somber “explanations” that the wingnuts peddle to again place the blame on “the poor”. (It is also designed to appeal to racists, BTW) I only got through about 6o seconds of Arnold’s  crap before I turned off the TV and decided to repost my rant here.

We’ve sold all the drywall and insulation out of the house that is the American economy, along with the siding, furniture (not the tv, of course), plumbing, and the “unnecessary” parts of the roof.  We’re down to the studs, people, and winter is coming.  What is left of the American middle class is about to be pushed forever into poverty, the the long term GOP-corporatist plan of feudalizing America is about to become complete, and the Sunday morning shills are suggesting we “compromise” with these thieves.  Its time to fight back.  We must obliterate supply side economics and expose it for the insidious farce that it is, with overwhelming force and all due haste.  Now, the repost:

This rant started in a bar in a 2700-person town, arguing politics with a mostly Republican group on the night after the election.  While (thankfully) they accepted the results of the election, and generally wished success for Obama, they also wished he would continue “supply side” and “free market” policies.  Our town, like most others, has been economically decimated the past 30 years.  It started a rap that is roughly transcribed here:

There are relatively few people who have benefited greatly from supply side economics, but if you live in a small town, the numbers are ridiculously skewed against you.  Supply side doesn’t have anything for your small town, except for job losses, poor quality products, the end of locally based businesses, and the erosion of community political and economic power.  These ill effects also spur on other problems such as bad customer service, lack of pride in workmanship, and lethargy in general. This is why researching manufacturers that deal in top quality for things such as Private Label Softgels, supplements, skincare, etc. is important for businesses to do, it will stop the lethargy and help customers.

We’ll get to some of those points, but let’s go to the gut of this nonsense.  Who on earth would produce more if sales are slow?  Who expects our companies to sell products if their customers have less and less to spend?  Why would you expand production, specifically, hire more workers, if you have no increase in demand for your products?  

Well, you might be looking at an increase in demand if you sell really cheap products.  In America today, that actually sounds like a business plan.  Which begs the next question:  When was the last time a company specializing in “quality products” opened up in your town (as opposed to specializing in “lowest price”)?  When was the last time a locally-owned mom and pop business had a big expansion?  Or was the only new business in town a fast-food franchise that took the profits out of the community, leaving only minimum wages, bad nutrition and a boarded up locally owned restaurant in return?

“Supply side” is a propaganda scheme disguised as an economic plan.  Clever in how it sounds like a good idea, millions of poor and middle class people have been fooled into supporting their own demise.  Under the banner of promoting capitalism, supply side ushers in a new realm of feudalism, with a smaller and smaller group of owners, remote and removed from your community, with masses and masses of people who work for lower and lower wages, and who do not own what they labor on.  

Helping businesses in the immediate time frame sounds like an ok thing to do, but even in this short time period it rewards the status quo, where existing businesses have all the advantages over emerging businesses.  It rewards a business, regardless of whether or not they are competitive.  It rewards investment capital in those businesses, regardless of whether the business is worthy or not.  What’s worse, the mid and long term effects of supply side policies are stagnation of the economy, and a huge host of businesses unable to truly compete.  (Sound like our auto industry?)

Speaking of the car companies, do we really think that a “bailout” is what they need, or do they really just need to sell some cars?  Have they been surviving the last few years on their great new vehicles, or were they just living on their fat “tax breaks”?  Did they feel the urgency to develop a fleet of cars that get 50 miles per gallon, or did they feel complacency because their bottom lines were doing just fine?  Was it coldly rational and certainly financially better to avoid the risk of research and development for such cars, and instead just continue doing the status-quo that supply side policies had made so lucrative?

You’ve heard of the “trickle down” theory.  Well now you need to hear about the “flow up” theory, which is:  Money flows up, quickly.  The poorer you are, the lower your savings rate, which means you don’t save any of it, you spend it all.  Now days in America, the savings rate of the poor and middle class is less than zero.  Which is another way of saying that not only is no money being saved, but people are going into debt to buy things.

The money flows up, almost as soon as its out in the economy.  In to the hands of business owners.  Not just any business owners, but those who make a competitively better product.  If they make a great product, they will make a lot of money, they may even have to hire some new people, or build a new building.  They might have to retool.  All because there demand had risen.  Not supply, demand.  

Supply side economics also brings on a downward spiral of product quality.  In a normal world, consumers balance the concerns of price versus the concerns of quality in their purchase decisions. Now think about it,  who in their right mind would try to compete on “quality” in today’s America?  With real wages stagnant, you’d have to be an idiot not to compete on “price.”  Which means the lowest price wins.  Which means the cheapest labor wins.  Which means many jobs get outsourced.  Which means the American consumers have even less money to spend, so we have to produce the goods even cheaper, so we can sell them even cheaper.  Downward. Quality. Spiral.

And when less quality goods are made, those same goods begin to cost more than they would have been otherwise.  This in turn causes less to be sold, which again causes those that are produced to cost more on the margin.  Again, this contributes to the downward quality spiral, and a gap in products that is similar to the gap in wages.  Not only does it cause an income gap, where a small number of people are very well off, and multitudes of people are poor, but it also causes a quality gap, where there are a few quality goods that are very expensive, and a large number of poor-quality cheap goods.

Now there have been many who benefited from supply side economics, free trade, and market only philosophy.  If you have the money and means to globalize your business or finances, you can really take advantage of the situation.  Flat demand in America? No problem.  You now have the cash to move your production overseas.  It is on this point that I specifically say that supply side economics has NOTHING for your small town.

Let’s talk specifically about small towns in America.  Do you have a locally-owned business that has globalized?  If you do, then I congratulate you on being an extremely rare case.  You likely have some citizens who have made a tidy chunk of change.   I’m sure they have a nice home in the area, and I imagine that family eats out a lot.  Of course, they probably eat out down in the city because the local restaurants aren’t fancy enough.  Where do they buy their clothes, home appliances, or vehicles?  In town, or in the city, or off the Internet?  Does your town even have stores to buy such stuff anymore?  Is there a multiplier effect at all for the small town?  Hardly.

Now your small town probably has people with money on the stock market.  Certainly that is (strike that, was) the smart place for investment money.  I mean, even with the fall in the market, it’s only back at year 2000 levels.  Would you have made any more money (or lost any less) by direct investment in your town?  For most small towns in America, probably not.  

We have been so brainwashed the past 30 years that some even ask what is direct investment, as if the stock market were the only way.  Of course, its hard for the people in New York or Dubai to make any money off you if you are investing in your local mom and pop business in anytown USA (or anytown EARTH for that matter).  They can only make some money off you if you put it up on the world markets.  So yet another motivation to skew the system towards the centralized top and away from the small, local economy.  

It works like that in banking as well.  Does your town still have a locally owned bank?  If you do you are lucky.  Then you just have to deal with a stingy local resident that you may know personally, as opposed to a stingy faceless resident of a city hundreds or thousands of miles away.  When a local bank makes a loan and then has the audacity to fulfill the loan, no one else makes any money on it.  All the cash stays local. Its much better if its put on the secondary market, then some money can be made back in New York.  Better yet, that local bank should sell out to a larger bank so we can eliminate the local cut all together.

Now for those of you who have been following along this far, you know that I long ago left strictly supply side economics, and have thrown in large doses of deregulation and free market globalization.  Its taken all three to kill the economies not only just of small towns-but all kinds and sizes of communities.

But back to the bar.  Those I argued with continued with their points that the free market had made America what it was, and that government regulations and progressive taxation only inhibited the economy.  I then hit upon the question that left them all speechless.

Just what is the plan of the free market supply-siders?  Is it to just wait until wages in America drop to the point where they equal those in China, India, and Mexico, and then at that point manufacturing in America can compete?  

It’s time to ask that question of each and every Republican.

Whenever a return to tariffs is discussed, they quickly cry “isolationism” and point out how much we profit from exports.  Of course, the crux of the matter is, who is the “we” they are talking about?  Is it the consumer who is buying cheaper goods, but earning less, or is it the ownership-investment class who has seen their labor costs drop, their taxes drop, and their markets increase?

Do those who oppose tariffs really think that the consumers of America, the largest and (still) richest economy in the world can’t buy enough products to keep American industry going?  No they don’t. but they keep up this propaganda because they are wildly profiting from the situation.

A conscious decision was made a few decades ago, by those politicians representing the wealthy classes of our society, to take a larger share of the wealth of this country, and destroy the political power of countless citizens comprising America’s middle class.  The move not only enriched themselves, but insured their unchallenged rule for the foreseeable future.

Of course, American democracy being what it is (was), a propaganda scheme had to be devised to make millions vote against their own self interest.  Supply side economics was touted as being pro business, pro individual, freedom, justice, and the American way.  Then it was packaged hand in hand with divisive rhetoric.  Unions were demonized, as were welfare recipients.  “Liberal,” a term derived from the term “liberty,” as been turned into an insult.  Add in anti-intellectualism as well, because we certainly wouldn’t want anyone thinking critically about these issues.  It’s much better just to leave it at the broad strokes of pro business versus anti business, capitalist versus socialist, conservative versus liberal.

And now, even after the 8 disastrous years of the George W. Bush presidency, after 8 years of relative prosperity and budget surpluses of the Clinton presidency, and the 12 years of skyrocketing deficit (at least for its day and age) and recession during the Reagan-Bush era, people are still defending supply side economics.  And not just people benefiting financially from such policies, people from small towns, with little or no businesses or individuals getting anything good from the deal.  Quite the opposite, small towns in America are getting plastered.  About the best a small town today can hope for is a foreign-owned factory locating in their town, or an interstate exit, where corporate franchises can locate.  The locally owned restaurant, let alone the locally-owned factory, are you kidding?  Few and far between.

Its time to stick a fork, or rather a stake, into the myth of supply side economics.  We have already traveled down this path for almost three decades, and the corporate feudalization of our country and the planet has almost been made complete.  We must seize the moment of the victory of a progressive government in America, and expose supply side economics for the dangerous farce that it is, and bring about prosperity for all through progressive and egalitarian economic policies.

Just a quick note on the auto company bailout.  I don’t just want to throw money at a problem, and if something is not done to increase demand, and if they just continue to produce SUVs, this only staves off disaster.  But we do need to stave off disaster.  We need some time for Obama’s policies to take hold.

What really angers me is the argument that we can allowcate 700 billion to save banks (oh like they have it so hard) but we can’t use a small percentage to save companies that directly affect up to 5 million jobs.  The real reason the GOP doesn’t want to do it is they seek to destroy the UAW and other unions, and they’ve just about succeeded.  

On that bank bailout, my bank has no sub-prime loans.  Get that?  Zero.  We actually have been doing great business, as people look for a stable bank to do business with.  We were getting a lot of business from one bank in particular, until they were “saved” by some bailout money.  We and the other banks in the area were more than ready to take their depositors, and their realistic loans.  But now they’ve been saved, or rather their stockholders have been saved.  And we’ve in effect been penalized for having sound business practices.  Makes you think…

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    • bigtwin on November 16, 2008 at 4:06 pm

    Sisters too!

    • Edger on November 16, 2008 at 4:21 pm

    Call Henry Paulsen for help, of course? Who else? 😉

    • RiaD on November 16, 2008 at 5:06 pm

    it’s past time to shed some light on these shady dealings….get the truth OUT to the people.

    thank you for taking the time to post this here!

    • bigtwin on November 16, 2008 at 5:33 pm

    About this very subject, and the Repug lies being peddled.  

    The CRA (Community Reinvestment Act) is a good law that makes sure banks are continuing to support the community they are located in.  Banks have to show they are lending to locals, following fair lending practices, and donating to local groups and civic projects.  It has been in place since the 70’s, and is not only NOT the cause of the problem, but a positive thing.  

    Please take time to educate yourself on the economy, and take the fight to them, NOW.

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