The Chamber’s Same Old Tired Prescription...Again!

© by Mark Dempsey

Loren Kay, from a Chamber of Commerce “think” tank, and Republican State Senator Ted Gaines write that (surprise!) California must lower taxes and reduce regulation to “spread the wealth,” despite all the evidence of the past two generations that such policies concentrate wealth at the very top of the income distribution.

For decades now, deregulation and tax reduction have been tried and tried again, yet since 1972, the bottom 90% of incomes have experienced inflation-adjusted gains of only $59 a year. The rest of the gains--and increases in productivity made enormous real income gains possible--have gone to the top 10%, and the top tenth percent. Investigative reporter David Cay Johnston says that if that $59 were an inch on a bar graph, the bar for the top 10% would be 141 feet tall, and the bar for the top 0.1% would be five miles high.

Kay’s and Gaines’ editorials certainly ignore any positive contribution of government research, too. For one example, most of the iPhone’s innovations are based on government-funded research into transistors, integrated circuits, the internet, GPS, etc. Seventy-five percent of pharmaceutical innovation comes from government-funded research, too.

Besides the tired narrative that government contributes nothing but hassles, Mr. Kay believes deregulated builders and developers will provide adequate affordable housing. Yet most nations without such acute housing problems understand subsidies are what really support affordability.

Unfortunately, America’s subsidies--like the mortgage interest deduction--do not really support low-cost housing. Add the rest of Kay’s prescription--like the deregulation of the private sector mortgage banking that gave us the subprime mortgage / derivatives meltdown--and you’ll see new housing starts ground to a halt, demonstrating yet another of those “miracles” of the market in action.

Kay also believes whatever cheapest is always best when it comes to energy--never mind the climate consequences of continued petroleum dependence. So...drill baby, drill!

The confidence that markets are always right in setting prices is an article of religious faith, really. God has an invisible hand, and markets always price in the long term consequences, is what that religion believes. Sure, global warming means California has record-breaking droughts and hurricanes are stronger than ever, and going to unfamiliar places like Vermont, but we can ignore the climate in favor of saving a few nickels on our electric or gas bill.

It’s sad, really, that any mature human being could continue to promote this short-sightedness as beneficial.

If all of this pseudo-foresight manages to look like prescribing a sledgehammer to cure a headache, well that’s about what it is. Gaines’ and Kay’s cluelessness resembles nothing so much as a hypnotic trance that allows them to ignore anything that does not serve their corporate masters. We’ve had this for the last few decades, and we can see the result: the headlines proclaim that more than 60% of Americans don’t even have enough savings to handle a $500 emergency.

The big question is how long Americans are going to play the sucker in this particular game of three-card monte.