/ 5 August 2011

Debt deal a coup for elite

There are two ways of cutting a deficit: raising taxes or reducing spending. Raising taxes means taking money from the rich. Cutting spending means taking money from the poor.

Not in all cases of course: some taxation is regressive and some state spending takes money from ordinary citizens and gives it to banks, arms companies, oil barons and farmers. But in most cases the state transfers wealth from rich to poor, while tax cuts shift it from poor to rich.

So the rich, in a nominal democracy, have a struggle on their hands. Somehow, they must persuade the other 99% to vote against their own interests: to shrink the state, supporting spending cuts rather than tax increases. In the US they are succeeding.

Partly as a result of the Bush tax cuts of 2001, 2003 and 2005 — shamefully extended by President Barack Obama — taxation of the wealthy, in Obama’s words, is at its lowest level in half a century. The consequence of such regressive policies is a level of inequality unknown in other developed nations.

Nobel laureate Joseph Stiglitz points out that in the past 10 years the income of the top 1% has risen by 18%, while that of blue-collar male workers has fallen by 12%.

The debt deal thrashed out in Congress at the weekend seeks only to cut state spending in return for raising the country’s debt ceiling. The Republicans secured almost $3-trillion in spending cuts and forced the Democrats to do this without any tax increases.

The Tea Party Republicans got a lot of what they wanted and sacrificed almost nothing in return. They maintained ideological purity, insisting the cuts could be deeper.

That means more economic decline, which means a bigger deficit. As former Republican senator Alan Simpson warned: “The little guy is going to be cremated. It’s insane. How did it happen?”

The immediate reason is that Republican members of Congress, supported by the Tea Party movement, wouldn’t budge. But this explains nothing. The Tea Party movement mostly consists of people who have been harmed by tax cuts for the rich and spending cuts for the poor and middle. Why would they mobilise against their own welfare?

You can understand what happened in Washington only if you remember what everyone seems to have forgotten: how this movement began.

Last Sunday the Observer claimed that “the Tea Party rose out of anger over the scale of federal spending and in particular, in bailing out the banks”. That is what its members claim — and it’s nonsense.

The movement started with Rick Santelli’s call on CNBC for a tea party of city traders to dump securities in Lake Michigan in protest against Obama’s plan to subsidise the losers. In other words, it was a demand for a financiers’ mobilisation against the bailout of their victims: people losing their homes. On the same day a group called Americans for Prosperity (AFP) set up a Tea Party Facebook page and started organising Tea Party events. The movement, the programme of which is still lavishly supported by AFP, took off from there.

So who or what is Americans for Prosperity? It was founded and is funded by Charles and David Koch. They run what they call the biggest company you’ve never heard of and between them they are worth $43-billion. Koch Industries is a massive oil, gas, minerals, timber and chemicals company.

In the past 15 years the brothers have poured at least $85-million into lobby groups arguing for lower taxes for the rich and weaker regulation for industry. The groups and politicians the Kochs fund also lobby to destroy collective bargaining, to stop laws reducing carbon emissions, to stymie healthcare reform and to hobble attempts to control the banks. During the 2010 election cycle, AFP spent $45-million supporting its favoured candidates.

But the Kochs’s greatest political triumph is the creation of the Tea Party movement. Taki Oldham’s film, (Astro)Turf Wars, shows Tea Party organisers reporting back to David Koch at their 2009 Defending the Dream summit, explaining the events and protests they’ve started with AFP help.

“Five years ago,” he tells them, “my brother Charles and I provided the funds to start Americans for Prosperity. It’s beyond my wildest dreams how AFP has grown into this enormous organisation.”

AFP mobilised the anger of people who found their conditions of life declining and channelled it into a campaign to make them worse. Tea Party campaigners take to the streets to demand less tax for billionaires and worse health, education and social insurance for themselves.

Are they stupid? No. They have been misled by another instrument of corporate power: the media.

The movement has been relentlessly promoted by Fox News, which belongs to a more familiar billionaire.

Like the Kochs, Rupert Murdoch aims to misrepresent the democratic choices we face to persuade us to vote against our own interests and in favour of his.

What took place in Congress was a kind of political coup, a handful of billionaires shoved a spanner into the legislative process.

Through the candidates they have bought and the movement that supports them, they are now breaking and reshaping the system to serve their interests. —