Tax the American Empire

[Note: much of this article first appeared as Post-Imperial Mendocino County at MendoDay.com]

The American economy, the economic crisis of 2008, and ongoing sluggish growth, cannot be understood without first admitting that we are in a post-imperialist era.

We cannot move the economy forward again without getting out of the double-bind we are in: paying for the trappings of imperialism, without its economic benefits.

The federal government's budget is still deeply in deficit mode, yet has not provided enough stimulus to get us up to even moderate growth. So we are not really out of the crisis that swept over us starting in 2008. Food stamps and long-term unemployment benefits have staved off starvation for most citizens, but hardly amount to a long-term solution.

The idea that the United States of America ever went through an imperialist period will surprise many of its citizens. Imperialism often implies an emperor, but in our case it mainly means being able to extract wealth from foreign nations through the exercise of military and economic power.

There was no clear beginning to U.S. imperialism. Grabbing native American Indian lands was a major way of extracting wealth from outsiders even before 1776. Most historians would say modern U.S. imperialism started with the Spanish-American War in which the U.S. grabbed Puerto Rico, the Philippines, and Cuba (we later sort of gave Cuba to its local elite, although the process was not really completed until Fidel Castro came to power). Or you could go back to the Mexican-American War, in which we grabbed the northern half of Mexico.

To understand how we might revive the economy and government, we should focus on U.S. imperialism after World War II. How did we get to that happy situation? From 1929 until just before World War II the United States economy was pretty sleepy . By the late 1940s and into the 1950s the U.S. economy was bustling. Why did World War II make such a difference?

The United States has had some pretty clever leaders. Even in the 1700's many of them wished for our nation to be a Great Power like the British Empire or France. Presidents like James Polk (who grabbed California), William McKinley (Spanish-American War) and Theodore Roosevelt came to symbolize U.S. global ambitions.

It was World War I, by accident or strategy, that became the template for future U.S. success. Under President Woodrow Wilson the U.S. stayed out of the war, selling all the goods our farms and factories could produce to both sides. Then, when Russia had collapsed and Italy, Germany, France and England were exhausted, the President, under pressure from U.S. bankers, found a pretext to declare war.

It was great, World War I. Not that many American soldiers died (just 117,000), but we tipped the balance for Great Britain and France. Germany was defeated. We did not grab any territory to speak of, but we became the world's bankers while leading the world in industry.

The rematch known as World War II went even better. President Franklin Roosevelt rearmed the United States while putting the British Empire even more heavily in our debt. We let the Communists defeat the Nazis and, again, came in towards the end to claim victory and its spoils. English, French, Italian, German, Japanese and Russian factories had been largely destroyed by aerial bombardment. In contrast the U.S. had built many more factories.

As the French and British empires collapsed after the war it was U.S. factories that supplied the goods for most of the world. In the U.S., in the 1950's, most Americans who wanted one could get a job that paid well. An interstate highway system was built, suburbs were built, colleges expanded and filled. The whole imperialist deal was so profitable that even though the U.S. maintained what was by far the world's most expensive military establishment, paying for it detracted little from the economy.

The Sixties were even better, with John F. Kennedy (a Democrat) engineering the biggest tax cuts for the rich in American history. Even those Americans whose race, geographical location, or just plain laziness and incompetence had prevented them from sharing in The American Dream were soon helped by President Lyndon Johnson's Great Society social programs.

The prosperity might have gone on for centuries, but America's capitalists betrayed it. Rival gangs of capitalists pursued opportunities that turned imperialism on its head. It was profitable to keep costs for consumers high in the U.S. It became more profitable to produce the goods sold in the U.S. in other sectors of the world, certain of the "third world" nations like Mexico and Korea, then later China and Brazil. Meanwhile another gang clung to the profits of the military-industrial complex, and even added profits by whipping up a Homeland Security spending bonanza.

As a result American military, homeland security, and domestic budgets had to be skimmed from a thinning layer of middle-class taxpayers. The capitalists received tax cuts, notably special treatment for dividends and capital gains, as well as no taxes on financial transactions. Factory workers, most of them, dropped back into the proletariat, losing their middle-class incomes. Low-paid service work came to make up most of the American economy.

In classic imperialism, as say run by the British Empire from about 1700 to about 1950, the economic idea is to extract wealth from the enslaved nations. The extracted wealth is brought home, and while the rich get most of it, enough is trickled down to the middle class and proletariat to keep them happy and patriotic, or at least not rebellious. It is important to keep the cost of the military used to dominate other nations low enough so there is a net, major profit for the homeland. The Brits were very good at that. They even drafted soldiers from their subject nations and used them quite effectively. The British Empire fell because England exhausted itself fighting Germany, not because the empire itself was not profitable. At the end of World War II, for practical purposes, the Brits had mortgaged their empire to American bankers. We foreclosed.

Starting in the 1990's, and accelerating this last decade, the U.S.A. has done the opposite. You can see from our Trade Deficits that wealth has been draining from the nation for two decades. At the same time we are being bled internally by the military and homeland security industries.

Look at Afghanistan. Where's the loot? We give money to the corrupt government of Afghanistan. We give them weapons. They sell the weapons to the Taliban, who then use them to shoot at U.S. troops. We get nothing out of it. Not oil, not a market for U.S. goods, not slaves or concubines or the usual imperialist loot.

There are only two solutions. One is to tax every nation in the world that we can. That is the classic imperialist solution: give unto Obama the things that are Obama's. The plan probably would not go down very well in most countries. But they would have no choice. Look what we did to Iraq, and most nations don't have the defenses Iraq did.

Taxes should be modest and imposed gradually, so as not to shock the world economy. A 1% sales or income tax on developed allies and a 0.25% to 0.5% tax on less-developed dependents would probably work for a starter. While the rate is low, by taxing some 6 billion people, quite a bit of money would flow into the United States. It would pay for our work as the world's police, and also pay for our education, welfare, bread, and circuses.

The only other solution is to Cut the Military and Homeland Securities budget. Cut it to the size needed to defend us from Mexico and Canada. Something along the size of the New York Police Force budget.
Unfortunately we are maneuvering in is a sea of continued massive stupidity by American capitalists and both the Republican Party and the Democratic Party. Don't expect those bozos to start taxing England, Korea and Pakistan, or to reduce the military budget in a meaningful way, in your lifetimes.

Expect America to continue to decline. As the empire unravels, our homeland will unravel. To keep military muscle, we will loose economic muscle. If we keep on this course, at some point, our colossus will fall.