Tax Wars

Spengler explains the rise of the Tea Party as a war between the tax eaters (public unions mostly) and tax providers (working stiffs near or past retirement age). Which explains why the OWS is mostly young uns and why the Tea Partiers tend to be an older crowd.

Has America become irrational? Not since the 1930s have politics been so polarized, from the Tea Party movement on one side of the spectrum to the Occupy Wall Street protesters on the other. Why does the right object so vehemently to government spending? And why does the left attack private capital with parallel passion? The answer lies not in the American psyche, but in the statistics.

America is engaged in class war, but not of the sort one reads about in the mainstream press. The truly indigent – young African-American men, for example, most of whom are now unemployed – have little to do in this war. Large corporations for the most part are bystanders as well; they will make their peace with the victor. This is a war of survival between the productive middle class on one hand, and the dependents of the state on the other.

He provides quite a bit of statistical evidence, including the fact that it is State and local taxes that are strangling the middle class by lowering property values. People buying a home in the current market will pay as much in taxes as they do in mortgage interest. This is destroying the main store of value people in the middle have for their retirement. Their homes.

State and local governments, though, have exhausted their tax base, and the continuous rise in property taxes through the crash in property prices has kept the real estate market more depressed than economic conditions otherwise might indicate. A further increase in tax rates would yield less revenue. In effect, the government would have to proceed from taxing private capital to expropriating it, de facto or de jure – for example, nationalizing banks and directing them to make loans to politically-favored projects, after the fashion of Latin American banana republics.

The alternative is to renegotiate pension and health benefits already promised to public sector unions.

In either case, households that considered themselves comfortably middle class, and looked forward to a comfortable and secure retirement, find themselves on the edge of calamity. During the bubble years of 1998-2007, when America imported $6 trillion of overseas capital, the ride was easy.

Here is where the gomma meets the via:

The crisis has called into being a political movement of the exasperated middle class, namely the Tea Party. It has erased the image of the government unions as champions of progressive causes, and exposed them as an “aristocracy of labor” (in Marx’s phrase) parasitizing the public revenue.

The outcome inherently favors the Republicans. Debt – the catchall name for the crushing tax burden – has become a hot button issue even for many Democrats. But this election will be fought more desperately, and nastily, than any other that comes to mind during the past century. This is an existential struggle, a political war of survival for the American middle class. If the government unions go down in the fight, the Democratic Party of Barack Obama will cease to exist in its present form – and that would be a beneficial outcome for the United States.

In the scripted words of Bette Davis “Hang on…it’s going to be a bumpy night!“