Class Warfare

Class Warfare increased last week with Congress passing a New Budget that cuts Medicaid. Republicans claim this will put the country on a path toward lower federal deficits. Republicans must be piss poor at math because even though the budget would cut benefit programs by $35 billion over five years it will also cut taxes by as much as $106 billion over the same period.

Medicaid, the federal-state health program for needy and disabled Americans, gets marked for the single biggest change, a $10 billion reduction over four years. Before anyone hyper-ventilates, I freely admit that $10 Billion is a drop in the bucket to this massive program. The problem is that Congress is doing nothing to address the root issues of a medical insurance system grossly out of whack, while still handing out tax cuts as if we could afford them.

President Bush said the budget plan "protects America, helps economic growth, funds our priorities and keeps us on track to cut the deficit in half by 2009." Can someone tell me how a bill that will cost $71 billion dollars over 5 years will keep us on track to cut the deficit in half by 2009?

Tom DeLay of Texas, the House majority leader, called the spending plan "the best since the historic Balanced Budget Act of 1997." Let me see, how many Balanced budgets have we had since 1997?

Two years ago, with the passage of the "Job Growth and Taxpayer Relief Reconciliation Act of 2003" the maximum individual income tax rate that stockholders pay on dividends was reduced to 15 percent. This dividend tax cut primarily benefited the wealthiest of Americans. Yes there is merit to the idea that taxing dividends is double taxation. There is also merit to the idea that this Congress is spending well beyond its means and if it wants to hand out tax cuts that primarily benefit the wealthiest, perhaps it ought to reduce spending elsewhere. Warren Buffett called the plan "voodoo economics" that uses "Enron-style accounting" and puts a burden on low-income families. I defy anyone to show me that this bill has created any jobs.

Jobs, Jobs, where are the jobs? I'm still Searching for Jobs, how about you? That's OK because I am quite sure that Bill Gates needed the windfall money on that massive dividend that Microsoft handed out last year and Warren Buffett needed breaks on his dividends as well.

This year Congress passed an energy bill that gave over 8 billion dollars to the obviously impoverished oil companies. See Energy Bill Lowlights for a discussion. The Nattering Naybob posted the following comment: "The Energy Conservation Act has as much to do with Energy Conservation; as the Jobs Creation Act had to do with creating jobs". Yes Naybob that is 100% correct.

Meanwhile, in this bill that cuts Medicaid by $10 Billion, Congress funded another $50 Billion for the sinkhole known as Iraq. We have already wasted some $300 Billion in Iraq for absolutely zero benefit, and now we want to repair Iraq's infrastructure while ours continues to go to hell. Actually zero benefit is incorrect. HAL shareholders benefited (at taxpayer expense) with huge no-bid government contracts. If that was not enough, HAL blatantly overcharged for items as well. All the oil companies benefited as well. Iraq is pumping less oil now than before the war. I have a friend who claims that was part of the plan from the outset. The Iraq war was not meant to increase the flow of oil but to guarantee supply would drop and oil prices and oil profits to go up. I will leave that thought for Mish bloggers to ponder.

President Bush is hell bent on destroying Social Security if he can. This is NOT about solvency some 50 years down the road, this is about cutting entitlements to the poor any way possible. Yes Social Security does need reform but the original purpose was a safety net to the poor not some absurd forced savings plan with the government telling everyone what choices they have to invest in.

Let's consider The Medicare Reform Bill of 2004.
What kind of "reform" bill would you expect when companies have more than 600 lobbyists on Capitol Hill and donate more than $100 million to political campaigns over three years? The answer is obvious: a "reform" bill with the financial interests of pharmaceutical companies in mind, of course. And that's exactly what we got. Make no mistake about it. The Medicare Reform Bill was written by the medical industry, for the medical industry. We may as well just turn over the legislative branch to the lobbyists right now because they either write our legislation or bribe lawmakers to write it for them.

Less than four months after the president signed the Medicare Reform bill, the Miami Herald reported Medicare Reform Bill Becomes a Nightmare for GOP. It turns out the administration deliberately didn't tell Congress that the measure could cost more than $100 billion more than advertised. In addition the administration spent millions of taxpayer dollars on public service TV ads touting the Medicare reform law that looked suspiciously like Bush campaign. Unfortunately, this scandal, the lies about Iraq, and all of his other class warfare actions did not cost Bush the election.

Fast forward to 2005. In a bill written by the credit card companies, for the credit card companies, Bush signed into law the The Deflation Guarantee Act of 2005 otherwise known as the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". This bill is an attempt to keep the average consumer in debt for something close to forever, while doing nothing to curb the practices of predatory lending

Let's summarize in historic order:

Job Growth and Taxpayer Relief Reconciliation Act of 2003 had nothing to do with jobs and provided "relief" only to the wealthiest Americans.

The War in Iraq was heavily dependent on recruitment of inner city youths. No one in Congress that I am aware of had a son or daughter in Iraq. The economic stimulus of the war as well as corporate tax cuts that expired in Dec of 2004 were both precisely timed to help Bush win re-election.

The Medicare Reform Bill of 2004 had nothing to do with reforming Medicare but provided generous handouts to the Medical industry.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 may in fact prevent an extremely small number of abuses at the expense of the vast majority of people that go bankrupt due to medical problems, loss of job, or other unfortunate circumstances. It has negative consumer protection implications.

The Energy Conservation Act of 2005 had as much to do with Energy Conservation as the Jobs Creation Act had to do with creating jobs. Nothing.

The Medicaid Reform Bill of 2005 (pending) is supposed to help balance the budget but as currently written gives another $71 billion in tax cuts primarily to the wealthy.

Social Security Reform (preliminary) is not designed to reform it, but to eliminate it. Social security could be fixed in a flash by the simple method of uncapping the max paid SS rate, not granting benefits to the wealthiest Americans, increasing the retirement age, or some combination thereof. Since those simple measures are not being taken, and instead measures are being taken that will guarantee profits to the big stock brokerage companies, this "reform" should be seen for what it is too: class warfare.

What do Tulip Manias, Social Security, and the Stock Market all have in common? Enquiring minds just might wish to consider this Fairy Tale Comparison. If you have not yet read that piece you might wish to do so. Hopefully you will get a good laugh. Unfortunately it may not be so fictional.

Unfortunately, there will likely be an insane reaction to the left when this administration’s policies are violently repudiated along with Greenspan's policies that created the housing bubble. It will NOT be pretty, nor will the stock market reaction to it.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/