Tuesday, March 03, 2015

Austerity, the by-product of the Reagan Revolution

I've been following a very interesting blog called, Naked Capitalism. It's a place where one can find unfettered debate on the economic issues of our time. A couple days ago, they ran an article on the effects of austerity on the middle age population of the United States, titled, "Austerity Kills: Economic Distress Seen as Culprit in Sharp Rise in Suicide Rate Among Middle Aged", written by Yves Smith. I found the article to be very informative and instructive about the neoliberal agenda.

The article goes into great detail regarding a long-term trend of increasing suicides among the middle aged since the 1980s. Then around 2007, there was an acceleration of that trend among middle aged people as the financial crisis began to sweep away the savings and home values of millions of people across the country.

The last passage caught my eye:
"As Lambert often says about neoliberalism, one plank in the model is for old people to die faster, and higher suicides speed that process along."
Since I'm new to the blog, I'm not sure which Lambert is referred to in the passage, but I guess it's this one. What is important here is the recognition that certain factions in our country seem to lack any concern for the middle class, middle aged population that worked so hard to build a foundation for retirement, only to have it removed by the 1%, with one last jerk of the rug in 2008.

Naked Capitalism has some very interesting debate on the subject, and as you can probably guess, there is a liberal tilt to the blog. The fact that they ran with the story on the suicide rate and the financial crisis tied together should be a pretty clear indication. Yves Smith is a prodigious writer at several news outlets like Politico, Truthout and has over 25 years of experience in finance. You can find more details of her career here.

I find it refreshing to see someone familiar with high finance willing to step out and write a great blog. I am also glad to see that someone is willing to step out of the major media line and show us what is happening with older people who have had their lives destroyed by the results of the Reagan Revolution.

Nice segue, eh? Here is how it works out in my mind. Reagan gets into office and starts the ball rolling on the destruction of unions in the United States, mitigating and even sidelining union power completely. The Reagan Revolution didn't stop when Reagan left office, for it continued well into the 90s and persists today.

The attack on unions started by Reagan led to an unrelenting attack on workers rights and an almost complete freeze of wages (in inflation adjusted dollars) for more than 30 years (some say 40 years, depending on your sources). If wages for the middle class freeze for 30 years or more, you know, the life of a typical mortgage, but inflation continues and the price of everything else goes up, then you might find people cannot afford housing like they used to.

As we saw during the 2000s, people were doing anything they could to get into a home to avoid being locked out of the market. It was assumed that prices would continue to go up at an unsustainable pace, only to have the bottom fall out of the market in 2007. Everyone was in on it. Governments loved to see the tax revenue from the explosion in home prices. Real estate agents, banks, loan companies, and title companies were happy to let the liars loans fly as long as the profits flowed.

Those people that made their money selling loans and homes, they're comfortable now. The people who bought the homes far above fundamental values, and took loans with variable rate mortgages - they've been hosed. This can all be traced to the stagnation of wages in the labor market.

Fortunately, times are changing. The labor market is getting tighter, and wages are rising, but slowly. Even Walmart, the retail titan, has relented and raised wages for 500,000 workers. Why?

Paul Krugman notes that inequality is a matter of political choices and makes a cogent argument to support that idea. Unions didn't come about because of a free market. They came about because a wave of citizens decided that they needed to concentrate their power to counter the power of money in politics. Over the last 30 years, voter turnout has trended down to the point that in 2014, we saw the lowest turnout since WWII.

Austerity for the masses is not an accident. We didn't get here without a plan to impose austerity. If the average American has little to zero influence on public policy at the national level, then the influence has to come from somewhere. Care to guess where?

The one percent that has the money and the influence. Will they ever take responsibility for their actions. No. Not until more than 300 million Americans are willing to call them to account.

True reform of the government could have prevented the financial crisis we have witnessed 7 years ago. True reform of campaign finance is the only way to reform of government short of revolution. We can reform government peacefully, by using money to fight money in politics. We can end the Reagan Revolution for now, since people forget the past as the last generation dies off.

There are many avenues for reform of our campaign finance laws, here are two of them:

mayday.us
Friends of Democracy

To avoid another crisis like the last one, we need a government that understands that inequality is a political choice. To get that government, campaign finance reform is the first step.
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