Obamarama - the Republican Drama.

Starve the Beast.

The talks between the Democratic administration and the Republican leadership have broken down just days before the deadline for the decision on the ceiling on borrowing for $14.3 trillion. There is the real possibility of an American default for the first time in the country's history. The results of which could be catastrophic for the US economy and other economies around the world. The shock-jocks and attack dogs have been out of control for years. We can hear Rush Limbaugh yelling that the GOP can't cave in or Obama will be re-elected in 2012. The negotiations will effect the next 10 years of American life, which might be the reason for the stalemate initiated by the Republicans as there could be a Republican administration in office by then. The policies initiated in the next 10 years will effect the pretext for a second Republican term in 2020. A huge surplus would provide the means for another round of tax-cuts, which would in turn create another deficit and the means to cut even further into programmes for the poor.

Just a couple of days ago Larry Elliot thought that the Republicans are not serious about tipping the US economy over the edge and taking the global economy down into recession once more. Rather the GOP will push this as far as they can and walk away after Obama has made major concessions (which he already has). The GOP will allow the debt-ceiling to be raised but in a way which is satisfying for the Tea Party. If the government was actually shut down as it was briefly in the 1990s it functioned to make Bill Clinton look like a statesman and raised his popularity among the electorate. Today 67% of Americans support Obama in his approach to taxes and spending on this issue. It is possible that the Republicans are looking to walk a fine line between a disaster which would only benefit the Democrats and a cop-out that will leave the Tea Party outraged. It is a serious possibility that the GOP are willing to instigate an economic crisis for indirect political gains, Obama has conceded an awful lot already and there will be a Republican administration in office by 2017.

The organs of the Republican machine have been about a "Starve the Beast" fiscal strategy for a long time, which differs from Goldwater conservatism in that taxes are cut in order to secure lower levels of spending. The approach actually generates huge amounts of debt as spending easily exceeds tax-revenues that have been slashed to bits for the benefit of about 1% of Americans. But this is part of the grand plan as the debt then acts as a means to call for more spending cuts. Keep in mind the huge changes in fiscal policy over the past few decades. In 1950 taxes on corporate profits accounted for 38% of tax revenue and by the 1990s it had been shrunk to 10%. Over the same time period income tax for the highest earners was chiseled from 91% in the 1950s to 28% in the 80s, with the 1990s marked out by a moderate tax increase. Now there is a moderate tax rise on the table, as the Democrats are arguing for a ratio of 83:17 cuts to taxes in tackling the debt whereas Republicans think a ratio of 85:15 is optimal. The narcissism of fine distinctions if there ever was one.

The Starved Beast.

So we now know how to contextualise John Boehner when he said "In the end, we couldn't connect. Not because of different personalities, but because of different visions for our country." Keep in mind, Boehner is the man who personally handed out checks on the floor of the House to sway a vote on tobacco subsidies and backed the bailouts as he was in the pocket of Goldman Sachs and Citigroup. The "Gang of Six" which Boehner belongs to has put forward a plan to cut $3 trillion in spending and to reduce marginal rates in order to relieve the rich of about $1.5 trillion in taxes. The plan aims to reform social security in that the costs of living will be shifted to the extent that the benefits the elderly receive today will be reduced as they get older and older. It is likely that this would lead to a huge rise in impoverished retirees. The premise of necessity of this deal provides a means through which cuts in social security and health-care can be imposed without any fuss from the public. This is the work of the Wall Street wing of the Democrats and the Republican Party as a whole.

At a time when around 45% of Americans oppose tax-cuts for the rich and 55% oppose tax-cuts for corporations, according to a recent Gallup poll. 71% of Americans and 51% of Republicans are opposed to the way the GOP have acted. It's no wonder when you think about. The American tax-payer pays more income tax than General Electric did from 2008 to 2010, when the company paid no taxes and received $4.7 billion from the IRS as it pocketed $7.7 billion in profits. The company has a team of lawyers and accountants working around the clock on ways for GE to avoid taxes altogether. The asses of non-financial companies are sitting on a cushion stuffed with $2 trillion in inert dollars that produce nothing and only earn a minuscule interest. Just 10% of that sum could be used to pump $200 billion into the US economy. Naturally, the Republicans continue to run with the line that the average corporation is overtaxed and actually pays the majority of taxes in the country.

As Ralph Nader has pointed out the 35% statutory tax rate for corporations is an absolute joke. Most corporations are adept at avoiding taxes and do so on a massive scale. These corporations include: American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell, International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo. According to the Citizens for Tax Justice "from 2008 through 2010, these 12 companies reported $171 billion in pre-tax US profits. But as a group, their federal income taxes were negative: $2.5 billion." The actual 35% rate would have raised $59 billion if it had been implemented properly. The highest rate was paid by ExxonMobil over three years it paid over 14%, whilst its net tax rate was a minuscule 0.4% on $9.9 billion in pre-tax profits. Since Obama took office in 2009 as of 2011 there has been a 40% increase in corporate profits. These are the same crowd who'll benefit most out of the "Gang of Six" proposal.