K. Galbraith is Chair of Economists
Allied for Arms Reduction and a Vice President
of Americans for Democratic Action. He teaches
at the Lyndon B. Johnson School of Public
Affairs at the University of Texas at Austin,
and is senior scholar with the Levy Economics
Institute. The following is the text of a
speech delivered at the Take Back America
conference in Washington, D.C. on June 5.
sung the hymns and heard the readings.
This is the sermon. To begin on a somber note,
the bubble and the bust of high technology,
the debt build-up of American households,
the obsession with a strong dollar -- all
of this existed before we got George Bush.
The late 1990s were a fine time, but they
set the stage for a slump which began in late
2000, from which we have not recovered, and
will not recover soon.
Today almost nine million are unemployed.
Many millions more are underemployed, and
most of all, underpaid. That is our economic
problem. Bush and company did not entirely
create these conditions, but they have done
nothing to make them better and much to make
them worse. We have lost well over two million
jobs since he took office, and almost half
a million just since the last election.
Full economic recovery is going to be hard.
It is not only a matter of spending more.
Excess capacity affects the future of business
investment no matter what. The reputation
of American financial markets has been damaged
by fraud and abuse. American households know
they are in financial trouble. If you give
them more income they will use it, in large
part, to reduce debt. This is not a bad thing,
but it does not promote recovery right away.
And quite a bit of what households do spend,
with extra income, drains away to imports.
In the near term, it is true that new tax
cuts and more military spending may bring
another false dawn. Alan Greenspan -- does
anyone remember him? -- will do his best to
keep the housing bubble blown up. Mr. Greenspan
knows about blowing bubbles, but not even
he can forever prevent them from popping.
These measures will not bring us back to full
The men in charge talk about growth, but actually
they like stagnation. Do they really want
full employment and strong labor unions and
rising wages? I doubt it. Stagnation helps
to justify more tax cuts. Their goal is plain:
that financial wealth should be freed of tax.
Two years ago, estate and income taxes were
cut. This year it was capital gains, dividends
and again the top tax rate. Next year the
sunset provisions in these measures will be
removed. Quite soon, taxes will fall mainly
on real estate, payrolls and current consumption.
Which is to say that taxes will be paid mostly
by the middle class, by the working class
and by the poor.
As financial wealth escapes tax, neither states,
nor cities, nor the federal government can
provide vital services -- except by taxing
sales and property at rates that will provoke
tax rebellions. Every public service will
fall between the hammer of tax cuts and the
anvil of deficits in state, local and federal
budgets. The streets will be dirtier; so will
the air and the water. Emergency rooms will
back up even more than they have; more doctors
will refuse public patients. More fire houses
and swimming pools and libraries will be closed.
Public universities will cost more; the public
schools will lose the middle class. Eventually
federal budget deficits will collide with
Social Security and Medicare, putting privatization
back on the agenda. I am from Texas, where
you can see this future happening now.
We need to talk about the world outside. To
the men in charge, it appears that the world
outside is not really a partner or an ally.
It is mainly a supplier. Cheap labor and cheap
oil. I want to stop short of saying that we
went to Iraq for the oil. We don't know that.
But we do know that when we got there, we
found that the oil was there, and the weapons
of mass destruction were not.
The fact is, we are acquiring an empire. But
the men in charge do not want to pay for it.
They have no serious interest in providing
security, infrastructure or civil administration
to the territories they have conquered. And
indeed none of these things are being provided.
Yet the burdens of empire can only grow as
time passes. Sooner or later, we will have
to choose between leaving our conquered territories
or putting in the full force required to control
them. One way we lose control, while the other
can only add to the miseries of our balance
of payments. How can the cost be met, especially,
if the coin of our realm, the U.S. dollar,
is at the same time losing its position? It
won't be easy. The problem of empires, historically,
is not military defeat. It is bankruptcy.
Empires do not tend to business at home, and
they tend to lose out to rivals who do. As
once with Britain and America, so now with
America and Europe? That could be how it will
turn out. Do we want this? Much as we may
admire and like our European friends, I don't
think we do.
There is irony here for America's wealthy.
While Bush may leave them untaxed, he will
not leave them rich as they were. Already
their stocks are off by trillions. Soon it
will be their houses (and ours). And finally,
as the dollar declines, it will be their cash
holdings. An economy that fails for working
Americans cannot work, in the long run, for
What then is our alternative? This is not
a moment for "me-too" politics. If you accept
the Bush administration's agenda on taxes,
or on empire, the game is up. You can't escape
from the rest. This is a moment for serious
alternatives or none at all.
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