In The "Interest" Of The Wealthy

Something often lost on many Americans is the fact that huge amounts of payments from "interest" flows into the accounts of the wealthiest Americans. This is "almost always" a transfer of wealth, in that the borrower likely wouldn't need the loan, if they had sufficient resources to fund their needs. Credit is something that's been around from ancient times, but as the wealthy saw they didn't really have to do physical labor, they let their money do the work for them. I won't necessarily beat up on them for this idea, because most, or all, of us would do the same if we could. The thing is, as the conservatives like to say about welfare, it becomes a way of life, and a way of life far detached from the lives of "payers of interest." Just as with dish detergents, televisions, cars, casinos, just name it, the people collecting interest have to convince you to "buy their product/service."

During the 1980s, President Ronald Reagan claimed to be a conservative. He told people how his predecessor, Jimmy Carter, had just let government deficits run amok.* Reagan dramatically cut taxes, dramatically increased military spending, yet he told us his program wouldn't cause deficits and that it would pay for itself. Such nonsense was pointed out by his 1980 nomination opponent, George Bush, Sr., when he called Reagan's program "voodoo economics." Of course, as is often the case in politics, including with Democrats, that didn't stop Bush from accepting Reagan's offer to be his vice presidential running mate, and then vice president. Carter's deficits, which include the budgets of 1978, 1979, 1980, and 1981, totaled a bit more than 250 billion.** Reagan's deficits, which include the budgets of 1982, 1983, 1984, and 1985, totaled more than 730 billion. 

The above mentioned deficits were financed by borrowing. Borrowing form whom? Mainly from the wealthy segment of America's population who bought government bonds, to which billions were paid in interest by taxpayers, many of whom were middle and working class Americans. So Reagan's program cut taxes tremendously for the wealthy, then ran deficits, then paid the wealthy large interest sums on those deficits, funded to a great extent by less than wealthy taxpayers. That's called "transfer of wealth," folks. 

Further, just to point this out, interest from all sorts of loans, like from homes, cars, and credit cards goes mainly to very wealthy people, often directly in the form of compensation to CEOs and other high corporate officials, but also in the form of dividends and higher stock prices, since a large percentage of stocks are owned by ..... the wealthiest Americans. After tax cuts for the wealthy, income taxes were finally raised on the wealthy by Bill Clinton and Democrats in 1993. No Republicans voted for the increase, and in fact, Republicans assured Americans the end of the world was near because of such increases, a scenario that played out only in their imaginations, as the economy actually boomed. So let's just take an "accounting," if you'll pardon the expression: Reagan said he could cut taxes big time, increase military spending big time, and that these actions would not cause deficits. Turned out NOT to be true. In 1993 Republicans were adamant that Democratic tax increases on the wealthy would bring doom to America. That too turned out NOT to be true.

* Democrats shouldn't crow about Reagan's inconsistency, as Democrat Franklin Roosevelt attacked Herbert Hoover for deficits in the 1932 election. Once in office, FDR's administration ran far bigger deficits than Hoover. Interestingly, FDR was long a hero of one Ronald Reagan, who was a Democrat for quite some time, and Reagan frequently quoted Roosevelt in speeches. I point out the discrepancies in Roosevelt's and Reagan's campaign admonishments of their opponents and then their own far larger subsequent deficits, not to argue about the effectiveness or ineffectiveness of deficit spending, but simply to show their rhetoric compared to the reality of what they did in office. 

** Just a note, I calculated the deficits under both Carter and Reagan from their second year in office (1978 for Carter; 1982 for Reagan), as their predecessors actually presented the budget for the first year of their term. Of course, this means that each president's budget extends, by one year, into the next presidential term, which for Reagan was his own second term (1985).

WORD HISTORY:
Hire-The ultimate origins of "hire" are uncertain, and for a fairly common word, it's history is sketchy, but it "seems" to go back to a West Germanic (see note below) form "hyurja," which "seems" to have had to do with pay/compensation for men working on ships, but it then became more general in meaning, "to pay for any type of work." Whether the word was a West Germanic invention or whether it was borrowed from another unidentified language, perhaps no longer in existence, is unknown, but it's seeming connection to men working on ships gives that some credibility, as words could easily be picked up from more distant places that way. "Apparently" the Anglo-Saxon dialects (before they went to Britain to combine into English) and the dialects that became Low German, Dutch and Frisian had forms of the word, which then spread to other Germanic languages. All of these West Germanic dialects/languages were geographically close together back then along the North Sea coast, where seafaring was a way of life. Anyway, the West Germanic form gave Old English (Anglo-Saxon) "hyr," a noun meaning "a payment for a service," and "hyrian," a verb form meaning "to pay for service or work." Both later became "hire," with the same general meanings, although the verb form used reflexively "means to hire oneself out for work/employ." The noun and verb forms are also used in England and Britain, in general, where Americans would use "rent;" as in America we are more likely to say, "I rented a car," whereas in England they are more likely to say "I hired a car." The other Germanic languages also often use their forms to mean "to rent, to lease," and as a noun meaning "rental contract or agreement." Similar to above, it sounds a bit odd to Americans to hear, "I have many workers in my hire," since we now more typically say "in my employ," or just "employed." Standard German has "Heuer" (noun, properly pronounced as if "hoyer," but in some dialects it can sound pretty much like the English pronunciation), and "heuern" (uncommonly used verb), but these were borrowed from Low German, which has "Hüür" (noun) and "hüren" (verb). Dutch has "huren" (verb) and "huur" (noun). West Frisian has "hier" (noun) and "hiere" (verb). Danish has "hyre" (both noun and verb form), but borrowed from Low German or Frisian; Swedish "hyra," perhaps then borrowed from Danish. Not sure, but neither Norwegian nor Icelandic seem to have picked up a form of the word; at least I could not find one.   

NOTE: Indo European was an ancient language. Its speakers did NOT call themselves, nor their language, Indo European, as that is simply a more modern classification term used in the study of languages. One of Indo European's offspring was Germanic. Germanic divided into what linguists classify as three parts, East, West, and North, although the last of East Germanic died out a few centuries ago. English is Germanic, and even more specifically West Germanic, along with its closest relatives Frisian, Low German, German, Dutch, and Yiddish. I'm planning to do an article on Yiddish.

It's About Coalitions Not Purity, Part Thirty-Four

"Tax Cuts and 9/11" (Part One)

The core of George W. Bush's initial domestic agenda was a huge tax cut totaling more than one and a quarter trillion dollars over tens years. The President argued that with "projected" surpluses of about five and a half trillion dollars over the same ten year period,* this would give taxpayers a sort of rebate on their over payment of taxes and help boost the economy, which was in a slowdown. The tax cuts were to be generally phased in over a period of years, then expire after ten years (12/31/2010).** The new law both lowered the estate tax rate and excluded a larger amount from that tax, with a total elimination of the tax scheduled after ten years. This was a major boon to the wealthiest Americans. Income tax rates were generally reduced 3% for the overwhelming percentage of taxpayers, but rates were reduced by more than four and a half percent for the wealthy. Some conservatives argued the cuts would eliminate national debt, while opponents argued the skewing of cuts toward the wealthy would worsen the already growing concentration of wealth in the hands of a small percentage of Americans, and that the surpluses would be greatly diminished, if not eliminated. The bill passed the House of Representatives by a vote of 230 to 197 (with 5 not voting), with support from only 13 Democrats, but all 216 Republicans (one independent also voted "yes"); in the Senate the vote was 62 to 38, with 12 Democrats joining 50 Republicans for passage, with 38 Democrats opposing.

Another major initiative was in education, and the "No Child Left Behind Act" had bipartisan support. The complex law basically required states to administer standardized tests to all students, with emphasis on basic education skills. Further, states had to set criteria for hiring and retaining qualified teachers. Schools where students performed poorly in certain subjects were to be targeted for improvement, which could mean the replacement of teachers and administrators. The law is very complex and for those interested, check online for more information or, better yet, check your local library. The "basic measure" passed the House by a vote of 384 to 45, with 34 Republicans, 10 Democrats and 1 independent opposing (4 not voting). In the Senate, the bill passed 91 to 8 (1 not voting), with 6 Republicans and 2 Democrats opposing.***  

* It is important to note the figures were based upon ten years. Politicians and political operatives in both parties love to toss figures around, but a perspective should be kept on the time period involved, although the cumulative effect is important. Just for the sake of example: "We're going to cut a half a trillion dollars from program XYZ." Politicians love to use that word "trillion" and they'll use it whenever they can, as it is more attention grabbing than saying "500 billion." Notice though too, no time frame is included. A 500 billion dollar cut in any of the nation's biggest programs in one or two years would be staggering, but if it is over ten or twenty years, the cut is likely to be much more manageable.

** Once these phased in tax cuts became law, many were then expedited in a new tax law in 2003.

*** These votes were on what really constituted the basic bill, but differences between the House and Senate versions required those differences to be worked out in a joint committee, and then the finalized version had to be passed again and then signed into law by the President. These vote totals varied slightly from the earlier votes on the basic measure given in the main text above; 381 to 41 in the House and 87 to 10 in the Senate.   

WORD HISTORY:
Quell-This verb traces back to Indo European "kwel," which had the notion of "to inflict pain, to torture, torment." This gave its Old Germanic offspring "kwaljanan," with the same basic meanings. This then gave Old English (Anglo-Saxon) "cwellan," which meant "to kill, to murder." Later the "cw" came to be spelled "qu," and the main meaning softened to "suppress," as the "kill" meaning is now obsolete. One German source mentions that the English "suppress" meaning was initially literary and poetic in usage, but then became the main meaning. Other Germanic languages have: German "quälen," which still means "to torture;" Low German Saxon "quelen," which means "to inflict pain, torture;" Dutch "kwellen," which means "to torment," but also "to beat to pieces." The Old Norse form "kvelja," meant "to torture, torment," and "presumably" these are the descendants of that form, but with a shift in meaning, although still with the idea of "inflicting pain (torture)," but also of "choking, smothering;" that is, "suppressing," in a figurative sense: Danish "kvaele," which means "to strangle, to choke," Norwegian "kvele," meaning "to choke, to suffocate," Swedish "kvävas," also meaning "to choke, to suffocate," Icelandic "kaefa," meaning "to smother." Interestingly, the North Germanic languages still use forms of the word to mean "torture, torment, pain, agony," but they are all noun forms, as they use other, unrelated, words in modern times to convey those meanings in verb forms. Notice both Swedish and Icelandic have lost the "L" sound, Swedish has added another "v" sound, and Icelandic has transposed the vowel and "v/f" sounds.

The Great Depression, Part Eight

As the federal budget deficit ballooned, Hoover made a decision to try to get the budget back into balance; and his whole attempt to do so has been controversial ever since. Many leaders in both political parties felt the budget had to be balanced and that taxes would have to be raised to do so. The idea of some type of sales tax was floated, but public outrage squelched the idea, and rightly so, as much of such a tax would have been paid by poor and middle income Americans, many already struggling to provide food for their families. The tax package that passed Congress and was signed by the president into law was a pretty comprehensive piece of legislation, with support from both parties. The largest tax increase was on “true” millionaires (very few in number in those times, as people with incomes of like one hundred grand were certainly more than the equivalent of someone making more than a million dollars by the value of today’s money), who saw an increase in surtaxes on their hefty incomes. I’m sure the increase in the surtax contributed to a large part of the wailing that the Depression was made worse by the tax increase. Although he was no longer in the Hoover administration, Andrew Mellon had served throughout the 1920s as Secretary of the Treasury, until Hoover replaced him with Ogden Mills well into the Depression. One of the wealthiest Americans of his time and so conservative to be called "reactionary" by many, Mellon had a deep abiding sympathy for the plight of  millionaires, and it was with his urging, that Coolidge and congressional leaders cut taxes on millionaires by a large amount in 1926.

The wealthy and their surrogates have always argued that in order for “capitalists” to let loose and invest, they need the money to do so, and that the tax took too much of their income. Now, there is some truth to that, but the idea that millionaires of those times (equivalent to today’s multi-millionaires and billionaires) were so strapped for cash that they couldn’t invest in plant and equipment is nonsense. The problem remained high inventories and under consumption. Business people were not going to rev up factories to produce goods that were still in abundant supply. Let’s say you own a pencil factory and I work for you. (And no smart remarks like “Get the lead out!”) For whatever reason, pencil sales slow down dramatically. You have a million pencils in supply and you decide to lay me off until your inventory declines enough for it to make sense to manufacture pencils again. After a fair amount of time, you still have 900,000 pencils in stock. If Uncle Sam says, “Hey Mr. or Mrs. Pencil, we’re going to lower your taxes, so how ‘bout producing more pencils?” Are you going to call me back to work to produce more pencils just because of taxes? You can’t sell what you already have. So if Uncle Sam said, “Hey, we’re raising your taxes by such and such an amount,” is that discouraging you from calling me back to work to help produce pencils? Hell no! You weren’t going to produce them even if they LOWERED your taxes. Trust me, if there’s money to be made on something, capitalists will be there; high taxes, low taxes, in between taxes, and that is a part of our system, and I’m not knocking it. So, in the above example, you’re not going to produce pencils until your existing inventory is reduced enough for you to see that there is sufficient market for you to produce pencils again. (Get the “point?” Hey, after all of those “get the lead out” thoughts, you deserved that!) During the Depression, a substantial segment of American society lacked sufficient income, so the problem of under consumption remained. Throughout the 1930s this problem persisted, and it wasn’t until the outbreak of World War Two in Europe, and America’s supply of equipment to the Allies, and the build up of our own armaments, that unemployment fell substantially, incomes began to rise, and consumption picked up. The tax policy passed in 1932 remained essentially the same, and that didn’t stop capitalists from expanding then. There was a market!!!

Hoover, the progressive; that is, his progressive political side, felt that super large estates should not be allowed to be passed on, and part of the tax bill he signed in 1932 had an estate tax of nearly 50%, if I recall, on estates valued at more than ten million dollars. (I know I keep repeating, but 10 million was an absolutely HUGE sum in those times, much more akin to like 200 million dollars today.) Many, but not all Americans have developed a sense of “fairness” during our nation’s existence. If large fortunes are permitted to be passed on, essentially intact, the people in control will pretty much always be the same. Let’s be honest, if I make a fortune on some invention, let’s say; once I’ve got the bucks, that means a certain amount of power, and once I’ve got the drop on you… So, stop and think, I doubt that any of you reading my stuff are millionaires, but if roles were reversed, and I were the millionaire and you the “peasant,” how would you feel? And also how would you feel about immense fortunes being passed on? Many things in life are done in self-interest, and that’s human nature to a large degree. In fact, that’s the argument made by capitalists, but the argument works both ways, not just in their favor, and we are far more numerous Mr. or Mrs. Pencil, so be careful, or we might get to the “breaking point.” Ah, okay, that was a bad one!

WORD HISTORY:
Largess/largesse-Both spellings are used for this word closely related to, and derived from, "large." The ultimate origins of this word are unknown, but Latin had "largus," which meant "plentiful, abundant." This gave Old French, a Latin-based language, "large," with the same basic meaning, but with the secondary meanings "wide" (presumably from the notion of "abundant area") and "generous" (presumably from the notion of so much abundance, a person could afford to be generous). French then developed "largesse," with the meaning "having the desire and ability to spend or give freely." This was then borrowed into English during the early 1200s.