Monday, August 18, 2014


Several years ago I wrote about the Republican-led 30 year 'race to the bottom.' In the post, which I later turned into an editorial piece for our local paper, I described how the primary goal of the GOP was not to put out any new ideas. Their goal is simply to turn the state into a toxic and inept governing body by depriving it of the resources it needs to function.

In 2007 over 100 cars were traveling on Minnesota's I-35W bridge when it collapsed.

Slashing taxes and dumping the worst private sector disasters on the federal government has saddled federal and state governments with so much debt that they are unable to make even the most basic repairs on our crumbling infrastructure, let alone major public investments.

This was no accident.

Conservative political advocate Grover Norquist admitted as much when he said, "I don't want to abolish government. I simply want to reduce it to the size where I can take into the bathroom and drown it."

Apart from not being able to represent and protect the will of the people, the GOP's 30 year race to the bottom had the added effect of making market players fabulously wealthy through a string of tax cuts, bailouts, reckless deregulation, and favorable legislation. Getting the government off of our backs was really the GOP's way of weakening the regulatory arm of the state while transferring wealth to America's economic elite.

The race to the bottom rationale is a simple one. The Republican 'trickle down' (based on the notion that if the rich had more money in their pockets they would invest more, thus creating more jobs) anti-tax jihad was always a gimmick. Economists who don't drink their lunches made it clear that tax cuts for the rich would not produce jobs or create the budget surpluses needed to pay down the debt, as Ronald Reagan promised.

What we need to keep in mind is that the promise of paying down the national debt or creating jobs were never the real goals of trickle down economics. Tax cuts were always a Trojan Horse designed to - in terms the GOP likes to use - "starve the beast" (i.e. the government).

While cutting taxes worked out well for the GOP's base and the richest 1 percent trickle down economics ended up robbing the state of the revenue it needs to operate, while creating income inequality gaps that threaten the larger American economy - as Standard & Poor's recent report on inequality has recognized.

Again, this was no accident.

Since the race to the bottom began federal and state governments have had to borrow and use budgetary gimmicks to fill in he financial cracks. This has worked out great for Wall Street's biggest financial institutions.

For example, cash starved states ended up using anticipated tobacco settlement revenue to secure loans from Wall Street's biggest financial institutions to pay current expenditures and stay afloat financially. Today they're paying the piper. Tobacco settlement based loans of $3 billion (transactions that are called capital appreciation bonds) will cost states about $64 billion.

If it sounds like a loan sharks dream come true to you, rest assured, you're not alone in your thinking.

But wait. It gets better.

States continue to borrow from Wall Street to fund specific programs that are cash starved because of tax and budget cuts. When states borrow from Wall Street to fund basic programs like Head Start, transactions that generate social impact bonds, states must pay dividends to private market players rather than use cost savings or surpluses to fund other state programs.

Then we have Wall Street refusing to renegotiate complex interest rate swap deals with American cities, in spite of the fact that Wall Street continues to be bailed out with taxpayer backed funds after they collapsed the American economy in 2008. City services and programs have been cut, privatized, or made available to social impact bond investors in the process.

Again, none of this is an accident. Starving the beast has served Wall Street well.

The best part of these developments for Wall Street, when it comes to social impact bonds, is that they get to pat themselves on the back for doing "the right thing" (providing loans and funding social programs). But, the reality is they are cherry picking cities and programs they want to fund - and make money off of - years after one party has deliberately sabotaged the functions of the state.

In effect, they are coopting the policy making prerogative of the state, while sucking off of the tax payer funded tree life.

Ignored by the GOP (and the media) in all of this is that their anti-tax jihad resulted in Ronald Reagan effectively tripling our national debt, and saw President Bush effectively double it. Worse, apart from squandering hundreds of billions in budget surpluses, President Bush also left his successor trillion dollar deficits as far as the eye could see.

Not coincidentally, President Obama's financial hands have been tied ever since he entered the White House. None of this has worked out for America's middle-class.

This, once again, was no accident.

Then we have the seemingly never-ending IRS story.

The Center for Public Integrity is reporting that the IRS can no longer do the work that it's supposed to do, which is helping to serve the supporters of the Republican Party well. Here's how.

Hobbled by the IRS-Tea Party investigation - which Rep. Darrell Issa (R-CA) keeps digging up - the IRS no longer has the resources, time, or institutional will to go after the 'dark money' that flows from unaccountable political organizations that claim to be non-profit institutions.

When it was learned, for example, that the non-profit Crossroads Grassroots Policy Strategies - co-founded by Ed Gillespie and former Bush political manager Karl Rove - had spent more than the legal limit on political campaigns it was expected that the IRS would flag it and take action. Then the IRS-Tea Party allegations hit the scene.

Allegations were made that conservative groups were being singled out for review by the IRS at a higher rate than progressive liberal groups. All of this, if we are to believe the story line, was initiated by President Obama and his administration. This is what's being ignored:

1. IT STARTS UNDER BUSH APPOINTEE: The targeting of conservative non-profit groups with political agendas started internally within the agency under IRS commissioner Douglas Shulman, who was appointed by President Bush. 
2. THE TEA PARTY CURVE: Liberal groups were also called out, though not to the same degree. Here's why. After the Tea Party entered the picture in 2010 thousands of new conservative groups popped up, asking for non-profit status. In this case, being grouped together is a numbers game. It's the same as when you find yourself lumped into your teachers "curve" when being graded in a larger class. 
3. DOING THEIR JOB: Going after organizations claiming non-profit status is the job of the IRS, period. What's happening is that the GOP is simply harassing the IRS, to their benefit, for doing their job.

Unfortunately, none of this matters. Since the congressional-led IRS investigation began the agency has been cowed into ignoring legitimate investigations. With budget cuts already hindering the investigative arm of the IRS this is especially the case today (check out IRS investigation tracking charts here).

Today the IRS can no longer function as it once did.

As former U.S. Treasury fellow Alex Reid put it, when it comes to money and politics the IRS is effectively "working to sweep up after the parade." This is working out especially well for the mysterious dark money pools used to fund political campaigns.

Again, none of this is an accident.

The point here is that going after the IRS when the agency was effectively doing its job after a sudden surge in politically inspired applications makes this more political than it should be.

In reality, the IRS story should be seen as part of the GOP's larger "hate the state" 30 year race to the bottom, and nothing more.

- Mark

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