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The Definition of Insanity: Deregulating Over and Over and Expecting Different Results
A cynic might argue that business leaders and their friends in Congress weren't expecting different results.
In either case, we've become a bipolar nation, 1% manic and 99% depressive. Our affliction is caused by a 30-year experiment in the dismal economics of delusion. Deregulation for corporations and tax cuts for the wealthy have defined conservative policy since the 1970s, when University of Chicago economist Arthur Laffer convinced Dick Cheney and other Republican officials that lowering taxes on the rich would generate more revenue.
(Photo: AP/Mary Altaffer)
Ronald Reagan complied in the 1980s by dramatically reducing the top marginal tax rate. And while declaring government "the problem" he eased a half-century of protective regulations on mortgage lending.
In the Clinton years, Larry Summers and Alan Greenspan and Phil Gramm and others lobbied against regulations on the derivatives that evolved into toxic assets a decade later. A lonely voice of opposition, Commodities Trading Commission head Brooksley Born, was denounced by the powerful Treasury men, who were shocked by her affront to the nation's "financial stability."
The repeal of the Glass-Steagall Act in 1999 removed long-held protections for commercial bank deposits, as the newly liberated financial institutions now coveted the unprecedented profits in high-risk investments. Soon after, the 2000s brought us the Bush tax cuts, which have cost the nation over two trillion dollars, and a further assault on the Securities and Exchange Commission by Goldman Sachs and other financial institutions committed to "self-regulation."
So what's the result of all this? The financial collapse of 2008, of course. But it goes way beyond that. Tax cuts and deregulation led to the worst inequality since the Great Depression, with the top 1% nearly tripling their income while wages leveled off. The richest 10% own 80% of the "unearned income" that gets taxed at rates lower than those for teachers or health care workers. Corporate profits are at a record high, having accounted for 88% of the recovery after the 2008-9 recession.
Yet taxes on corporate income have been shrinking dramatically. The total tax revenue derived from corporate taxes has dropped from about 20% in the 1960s to under 9% in 2010. From 2008 to 2010, the top 100 U.S. corporations paid only 12.2% of their income in taxes, and thirty of them paid nothing at all.
The lack of SEC regulation has also allowed corporate America to seek tax dodges beyond our borders. Citizens for Tax Justice reports that the 280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010. The "Ugland House," a single building in the Cayman Islands, is now the 'home' of 18,857 corporations. While the worldwide average corporate profit per employee is $40,000, in Bermuda in 2007 it was $5.4 million per employee.
But corporate heads, especially in the financial sector, keep lobbying for more deregulation, often infiltrating the regulatory agencies with former employees to get their point across. The Washington Post reported on the clamor by business leaders to link regulations to job losses. Congress listens. "Dodd-Frank obviously is a disaster," proclaimed Ron Paul. "But Sarbanes-Oxley costs a trillion dollars, too. Let's repeal that, too!"
Ironically, even earnest attempts at regulation can be foiled by big business. The Daily notes that "Stringent regulations tend to protect incumbent firms from...innovative start-ups that could drive them out of business...Google, Apple and other technology giants, for example, have spent billions of dollars on software patents to defend themselves against pointless litigation. Shoestring entrepreneurs can't even begin to do the same, so many new tech firms are never established."
We don't have the political will to regulate greed in a reasonable and effective manner. Instead, wealthy Americans continue to insist that more for them is better for everyone, and that the system will work if we just leave it alone. As Rachel Marsden said, "If capitalism is perceived to not be working in America...it's because the system isn't capitalist enough."
After 30 years of economic devastation for most Americans, it's sad to watch our rapid fall from sanity.
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9 Comments so far
Show AllHave you noticed? The insanity is spreading and quickening.
What's REALLY annoying is being one of the few who saw this happening when the Alzheimer's president first spit it out, and having to watch everyone else go right along with it, no matter HOW hard you tried to show them the foolishness in it all. And when every once in a while, someone else finally seems to get it, it disappears as quickly as it shows up and it's all business as usual. No matter HOW much you prove to people that what we're doing is a disaster, they CONTINUE to do it over and over.
No matter how many times you point out how our slide started the instant Reagan took over, that giving those who already have too much doesn't help anyone but those same rich people, how doing such things cost the rest of us and gains us nothing, backed up with facts, figures, proof of all kinds, NONE of it matters. We need to free business from ANY responsibility to the country! NO regulations at all! Let business kill as many of us as they need to, just let them make profits!
WHY? Aren't they making profits NOW? Why do they need to pay less? How does that help ANYONE but them? It's sure not helping any of US, is it? All it's doing is costing us what we no longer have: everything.
It's time for us to recover from the Alzheimer's that Reagan gave us.
Ronald Reagan said government was the problem. Reagan was a big part of the government, so by reason Ronald Reagan was a big part of the problem...
I find it amazing that the 19 years of the Fed being run by the libertarian Alan Greenspan which was followed by the banking collapse of 2008 hasn't been even mentioned by the "mainstream media."
What could more powerfully demonstrate the dangers of libertarian concepts than this history?
The people who claim to be "conservative" are in reality liberal. Liberal with your futures, liberal with your taxes, liberal with your environment. The only thing they're conservative on is spending their own ill-gotten lucre.
yes, but; whatever led you to conclude we were ever sane?
though i have to agree, we do seem more insane now!
This is a topic which turns low-information voters in to no-information voters. A friend of mine, who subsists on a steady diet of Fox "news" replied to my suggestion that billionaires should pay higher taxes. His response was - you can't tax business owners. They'll close their factories and put all those people out of work. I countered using Willard Romney as an example - millions off-shored, and Romney doesn't own a business. What about guys like that? Can't tax the rich, he said. The economy will collapse when they all leave the country. We used to argue over things like this; now I just shrug, smile, and shut up. The hidden hand of the market will strangle everyone who can't afford a higher collar.
I have often wondered why people accept that anarchy is not good for society but encouraged in capitalism? Corporations cannot rule themselves any more than a society can exist without rules and parameters.
You need not be a cynic to see that business leaders and their friends in Congress are getting exactly the results they were aiming for.
The true definition of insanity: regulating over and over and expecting different results.
Deregulation for corporations and tax cuts for the wealthy have defined government policy since the 1770s, not "conservative policy since the 1970s." The only exceptions to that were when millions were ready to revolt and overthrow Capitalism, and the politicians were forced to throw a few crumbs to appease us.
Capitalism will always smash through any and all barriers. It is the nature of the beast. The regulation illusion lulls people and deceives them about the reality, which merely sets us up for yet another round of destruction, each one worse than the last.
University of Chicago economist Arthur Laffer did not "convince Dick Cheney and other Republican officials that lowering taxes on the rich would generate more revenue." That was the lie they fed us. But they knew what they were doing - shoveling money to the wealthy. It is not as though there is a "philosophy" behind any of this. "I think I will grab all the loot I can for my backers" is not a political philosophy.
Tax cuts and deregulation did not lead to inequality. Inequality led to tax cuts and deregulation, as it always will.
Of course "the newly liberated financial institutions now coveted the unprecedented profits in high-risk investments."
Of course "corporate America seeks tax dodges beyond our borders."
Of course "corporate heads, especially in the financial sector, keep lobbying for more deregulation."
Of course they "infiltrated the regulatory agencies with former employees."
Of course "attempts at regulation can (and always will) be foiled by big business."
When you leave the fox in the hen house, sooner or later the chickens will get eaten. That is what regulation does.
The inequality comes first. It is the cause, not the effect. When you refuse to address the inequality, which stems from the assumption that those with more access to capital have a "right" to control and dominate the rest of us, that means that anyone who gains even a slight advantage can use that advantage to increase their advantage. That is the nature of Capitalism. The beast has grown far too powerful now to regulate it. It grew more powerful because regulation was held up as an alternative to stopping the beast once and for all.
Regulation treats the symptoms, while ignoring the disease and distracting people from seeing it, and in this way allows the disease to grow and fester,
It is insane to keep calling for regulation and expecting different results. It is regulation - the belief that Capitalism can be harnessed for good - that is the cause of the problems every bit as much as deregulation is, and the Democrats are just as guilty as the Republicans. The alternative to regulation is, and always was, ending Capitalism. Regulation postpones the day and prolongs the suffering. It also allows people to be both for and against Capitalism at the same time, and the consequent mass cognitive dissonance has crippled our ability to perceive reality accurately or to think critically about solutions.
Was a regulated aristocracy better than an unregulated aristocracy? Perhaps. But not if that comes at the expense of keeping the peasants in serfdom longer. Was a regulated slave trade better than an unregulated slave trade? Perhaps. But not if that comes at the expense of keeping the slaves in bondage longer.
Calls for these forms of tyranny to be regulated only happened when there was a growing desire to overthrow them, and for the purpose of saving them.
The day will come when we will look back and see Capitalism as a form of tyranny with just as much certainty and clarity as we do now in regards to serfdom and slavery. We can not clearly see that now, just as people back then could not clearly see the tyranny in their time. But we will, because objective reality is screaming the truth at us and no "philosophy" or "beliefs" will indefinitely supplant perceptions of reality or protect us from it.
It is regulating Capitalism that has not worked - other than to save Capitalism from itself and so prolong the misery - not deregulation. If trying deregulation over and over and expecting different results is insane, than calling for regulation is even more so. Besides, the people promoting deregulation don't expect different results than those they are getting. It is the people promoting regulation who keep trying the same thing and expecting different results.