The collapse of America’s middle class

Monday, August 1, 2011
By Paul Martin

By Spengler
Aug 2, 2011

People seem to act irrationally when they have nothing to lose. Often we observe in wars that the losing side expends more blood and treasure after its position becomes hopeless.

The American South sustained most of its casualties in the Civil War after July 1863, when the dual defeats at Gettysburg and Vicksburg made its position untenable. Athens suffered its worst casualties in the Sicilian gamble at the end of the Peloponnesian War.

The Spanish ruined their empire and depopulated their core provinces during the second half of the Thirty Years War of 1618-1648 rather than cede dominance to France. Germany took most of its casualties after Stalingrad. Japan was prepared to absorb an arbitrarily large number of casualties after Okinawa, and its resistance was terminated only by nuclear attack.

Some aspects of the apparently suicidal behavior observed in great wars may be at work in the present budget stalemate in Washington, where the Republican right and the Democratic left yet may undo a compromise. I do not think this will happen – yet. But the extremes of polarization in the American body politic are different from anything I have seen in my lifetime.

If the Tea Party wanted most of all to govern, it would declare that a split government cannot accomplish the agenda on which its members were sent to congress, and that the 2012 presidential election would become a national referendum on America’s future. It would then agree to an interim compromise on the debt ceiling.

The trouble is that both the Tea Party and President Barack Obama have existential reasons to force a crisis. Obama, as I wrote two weeks ago, faces probable defeat with a becalmed economy, and may benefit from a crisis in which he casts himself as savior-in-chief (see Obama could stir a Tea Party crisis, July 19). The Tea Partiers may conclude that no compromise will benefit them, and decide to take the system down in revenge.

There is an underlying economic motive for this confrontation: the cure for the American economy is not necessarily a cure for the majority of the American middle class. The only recovery thus far (and the only recovery possible under the circumstances) has occurred in corporate profits and equity prices.

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