As Republican rhetoric leading into the elections becomes increasingly bizarre (Mitt Romney’s infamous “47%” remark being the latest example), I have scratched my head about what the Party is really trying to accomplish. But then it finally dawned on me. What the Republicans are pushing for, and what their mega-rich financial donors want, is to tie the chains of economic slavery around America, and more specifically, the working class.
If you have any doubts about this, consider the building blocks of success for working class Americans and you will see how the Republicans plan to crush all of them:
Romney has been actively lobbying for replacing public education funding with school choice vouchers, an idea that sounds great but which would instead lead to the gutting of our public education system. While some students might benefit from being able to transfer Title I and IDEA funds to public charter or private schools, public school students will suffer while money is siphoned off from the public sphere. The reason for this is that public charter and private schools have limited space and will accommodate every student who wants to move, leaving the rest of the students, many from low or middle-income families, struggling in an under-funded and neglected school system.
To be fair, there is merit to the Republican push for performance from teachers and schools, and even the Obama administration is trying to motivate schools to perform better through the Race to the Top Initiative (which has offered more than $400 million in grants to the poorest districts in the country for education reform), but the dismantling of our basic public school infrastructure to accommodate personal choice is the wrong solution. It is a variation on the same Social Darwinian principles that the GOP applies to the business sector and which will compromise the future of millions of American children who will fail to receive an adequate K-12 education.
In a display of ideological extremism, the Republicans have called for ending the federal direct student loan program that has helped college students for decades in financing the exploding costs of higher education in America. Instead, they want the government to ensure private student loans made by banks, which will be good for the banks but not the students. In a private system, banks will have the power to impose more stringent requirements, making it harder for deserving students who cannot meet some arbitrary criterion to get loans, and impose higher interest rates. Additionally, House Republicans want to cut the Pell Grant program for low-income students by as much as $170 billion over the next ten years, which would leave almost one million students without the financial aid they need to attend college.
The Republicans also oppose the $8 billion Community College to Career Fund, an initiative put forward by President Obama to train millions of workers for good jobs in active industries. The Fund is an important step in expanding government resources for community colleges, which are the only option for many low-income Americans who cannot afford to send their children to private universities, as well as a powerful vehicle for preparing the workforce for tomorrow’s competition. So why would the GOP object? Because community colleges offer a chance for the kids of working class families to gain higher education, and create competition for more expensive private schools.
Which brings us to for-profit colleges (not the Ivy League variety but the other kind), which are widely regarded as scams since the value of the degrees from such schools is debatable, half of the enrollees leave without collecting a degree at all (despite paying through the nose for their time at school), and on average these institutions channel less than 18% of their revenues towards education. But Republicans love them and use every opportunity they get to applaud this dubious industry. Other than the fact that one of Romney’s major campaign donors is the CEO of a leading for-profit college, the GOP’s inexplicable support of this business just betrays their wish to dismantle public education and to hand over our future to the private sector.
The wealth gap in America has doubled over the past 50 years. The top 1% of Americans are now 288 times richer than the median household, which is staggering. This wide chasm between the rich and the working class is mainly because of income inequality: while the wages of working class Americans have declined over the past few decades, the income of the top 1% has risen, partly due to exorbitant compensation for senior executives at companies, and partly due to investment income – which the wealthy have a lot more of. Here too, the GOP exhibits its slaveholder mentality, rejecting corporate reform that would help reduce the income gap, attacking the union system that protects workers’ rights, advocating eliminating the minimum wage, ignoring calls for fairness in pay, and pushing for Wild West capitalism – even though that has already destroyed the lives of millions of Americans.
On top of that, the Republicans want a 20% tax cut for everyone in America, which is a wonderful sentiment except that a report by the Tax Policy Center shows that those making more than $1 million per year will benefit much more from those cuts than the rest of us.
The reason for this is that the playing field is already so uneven that any cuts will offer a disproportionate benefit to the wealthy. Romney himself probably paid about 13% in annual taxes for the past few years, while most Americans paid between 35-40%. The rich enjoy lower tax rates because of the preferential treatment of income streams like capital gains as well as by taking advantage of loopholes. While Romney has promised to close some of those loopholes, odds are that he will close the ones that benefit the middle class, which will have no impact on the rich. Plus, he wants to lower the tax rate on investment income even more. What all this means is that the wealthy will get a windfall, even though they are already paying much less in taxes. Sheldon Adelson, the casino magnate and a leading donor to the Romney campaign, for instance, stands to gain $2 billion from Republican tax breaks.
Low to middle-income Americans, however, will reap much less value from the tax cut since any gains will be offset by higher costs on other things due to the effects of Republican policies – like higher interest rates on student and consumer loans, higher subway fares and road tolls as public sector spending shrinks and the burden shifts to citizens, higher healthcare costs and insurance premiums under President “Repeal Obamacare” Romney, lower wages for government jobs, and a host of other de facto taxes.
If you take all this into account, it is not difficult to see how the Republican tax cut would actually benefit only the privileged 1%, while at best, leaving the welfare of the rest of America unchanged. But more importantly, it will widen the income gap between the rich and the working class even further.
Debt and Consumer Protection
Here are the statistics: total credit card debt in the United States now stands at $704 billion, auto loans at $734 billion, student loans at $867 billion, and mortgages at a whopping $13.4 trillion. The median household debt is $75,600 while median income is only $49,800. This is probably the clearest sign of the Republican agenda to enslave Americans. In use around the world for millennia, the formula is well-tested and proven: loan people money, land, or something else, impose a high enough interest rate so that they can never actually pay it down, and then “own” them. At one time it was noblemen and landowners, now it is banks with sharp logos and fancy offices, but the basic principle remains the same.
While technically true that Americans often dig their own graves when it comes to debt, all too often we find that most major banks in the United States use a mixture of deceptive marketing and strong-arm collection tactics to ply their trade, tricking and defrauding customers. The abuses by credit card companies and mortgage lenders – including making attractive offers in bold print while hiding all sorts of other fees and penalties in complex language and small text, jacking up interest rates dramatically when consumers are unable to pay (thereby making it even more difficult for the consumer to settle up), threatening and harassing borrowers through proxy debt-collectors, all the while refusing to work with them in good faith to pay down their debts – are now a matter of common public record, and yet the GOP seems to have no problem with such predatory lending practices.
The Consumer Financial Protection Bureau, introduced as part of the Dodd-Frank Act to prevent these types of abuses, has been ferociously attacked by the Republicans. Their claim is that the CFPB will hinder free enterprise, but in reality what it will hinder is the bank’s ability to put Americans in to large amounts of debt through trickery and deceit, therefore their ability to own them. If the Republicans have their way, consumer protection will become a charming relic of the past, opening the floodgates for large-scale exploitation of Americans by Wall Street.
Closely connected with the above is Republican opposition to business regulation, which is a necessity for a level playing field, and for our economic stability. Even after the market disaster of 2008, which was the result of increased deregulation over the previous 40 years, and despite recent debacles like the massive trading losses at JPMorgan Chase and LIBOR manipulation by dozens of banks, the GOP still maintains that leaving banks and corporations alone “to do their thing” will benefit America. Perhaps they should ask the 8.3% of Americans who are still unemployed, or those people who lost their homes when mortgage rates suddenly shot up, or the senior citizens who cannot get basic healthcare, or the workers who cannot afford transportation to their jobs because of price-gouging by the oil companies.
But of course they won’t, because those very banks and corporations are some of their biggest financial backers. Despite some election-year lip service by Romney, the GOP basically wants no business regulation whatsoever; and by removing the roadblocks to corporate greed and risk-taking, they can make sure that Americans stay at the mercy of big business.
Social Safety Net
Probably the most publicized aspect of the Republican plan – especially after Paul Ryan was added to the Romney ticket, the demolition of the social safety net for Americans is just an atrocity. These programs, including Social Security, Medicare, and Medicaid, are actually the hallmark of an advanced and civilized society that takes care of its weakest members. It is also an important part of the social contract that enables citizens from all walks of life to take risks and become entrepreneurs without fear of destitution and neglect in their older years. The GOP’s assault on these programs is two-pronged:
Passing the Buck to the States
By advocating that Medicaid, the government health insurance program that covers more than 50 million low-income Americans, be turned over to the states and cut by $750 billion over ten years, the Republicans are making sure that this program no longer remains a reliable option for poor people. Not only do some states lack the funds or ability to administer this program effectively, but it is very likely to meet with a partisan response from the Red States, who can opt to starve Medicaid of resources or make the requirements for eligibility so tough that it becomes useless.
On the Social Security side, the Republicans want to raise the retirement age, which amounts to cutting back the program by decreasing the total disbursements in a person’s lifetime. This idea is such a favorite of the Koch Brothers that they have spent millions on “think tanks” to promote it. The problem is that increasing the retirement age will force older people to work much longer than they can comfortably do and bind them by necessity to an undignified existence.
Ah, this brings back fond memories of the Bush era, when Republicans almost got away with privatizing Social Security. Let’s see now – if that had happened, not only would millions of people have lost their homes, their jobs, and their pension plans in the two market crashes since 2000, but their Social Security as well. Yet Ryan’s 2010 “Roadmap for America’s Future” and its election incarnation, which would allow workers to invest more than a third of their Social Security taxes into private accounts, calls for exactly that.
It may be accurate that something must be done to protect the long-term solvency of Social Security, but privatizing people’s main insurance policy after retirement is inviting disaster. If there is anything that Wall Street has proved to us time and again, it is that bankers work primarily for themselves. Banks will do whatever they can to maximize short-term profits, even if it means gambling recklessly with client money or selling crap to investors that they are secretly betting against. Handing over Social Security to these people is like putting Little Red Riding Hood in the care of the Big Bad Wolf, and you can imagine how that will turn out.
The biggest outrage, however, is that even if these private Social Security accounts lost all their value, the investment managers themselves would still make a killing from managing all that money. Welcome to the economic plantation!
All of this is driven by the fact that the Republican Party is the Party of the Rich, and its top priority is to reward its wealthiest contributors. These donors stand to benefit tremendously from herding working class Americans into the “paycheck” trap, so that the majority are so bound by their financial needs and so limited by their lack of opportunity that they practically become slaves to their employers. I had speculated about this type of oligarchic future a while ago in an article but over the course of these elections, I have come to believe that this is really what will happen if Romney succeeds.
By systematically dismantling the public education system and clamping down on college aid, the GOP is ensuring that children from low and middle-income families are denied the opportunity to obtain the basic skills and training needed to land well-paying jobs in the future. The lack of job choice, combined with wage exploitation, debt, and discriminatory tax policies that only favor those in the highest income brackets, will widen the income gap in America even more. And finally, the removal of the social safety net will permanently relegate the working class (and their children) to “cog” status in the ruthless machine of runaway capitalism.
Let’s not let that happen. Let’s recognize what the Republicans are really trying to do, acknowledge the true intentions of their wealthy and power-hungry bosses, and put a stop to their plans to enslave us all in November.
Sanjay Sanghoee has worked at leading investment banks Lazard Freres and Dresdner Kleinwort Wasserstein as well as at a multi-billion dollar hedge fund. He is also the author of the financial thriller, “Merger”. Please visit www.sanghoee.com for more information.