Tea party? The real party is for the retirees

Indians were bewildered by last year’s rise in the US of the Tea Party, middle class protestors against high taxes, budget deficits and Big Government. Indians more easily understand the Occupy Wall Street (OWS) movement with its class war rhetoric— the bottom 99% against the richest 1%.

Four years after the sub-prime mortgage crisis sparked the Great Recession, western economies remain in trouble, with flagging GDP and high unemployment. Trillions spent in economic stimuli have created gargantuan government debts without reviving rapid growth. The only surprising thing about aleft wing protest like OWS is that it took so long to come.

Indian analysts like Pratap Bhanu Mehta see this as a protest against not just Wall Street but the breaking of the old social contract of welfare capitalism. This social contract accepted high inequality because the bulk of the population also became better off. This contract, say critics, has eroded with middle class and working class stagnation, which now challenges the very fundamentals of liberal democracy.

Such analysis exaggerates the impact of OWS and neglects that of the Tea Party. The New York Times estimates that OWS, with trade union backing, mobilized 70,000 people in 150 cities across the US. But the Tea Party, without any organizations backing it, garnered 300,000 protestors in its peak protests last year. The bottom half of the US pays no income tax (it does pay payroll and sales taxes) and so is happy to demand ever-more government rescues. But the Tea Party comes from the middle class that pays the bulk of taxes, and so seeks very different solutions.

The Tea Party has no love at all for Wall Street. But it also castigates the Bush and Obama administrations for encouraging over-borrowing and overspending by home owners, discouraging saving, and then asking prudent Americans for ever more taxes to bail out the imprudent. They represent a social split not between the rich 1% and the remaining 99%, but between prudent taxpayers and others. The numbers suggest that this split runs deeper than the old rich-versus-poor conflict.

This is not an American peculiarity. In Europe, prudent northern Europeans are fed up bailing out what they see as lazy, spendthrift southern European members of the Eurozone. This is not a Tea Party movement, yet is definitely a Tea Party attitude. Voters in Germany Holland, Finland and other northern countries strongly oppose further rescues, although their politicians desperately want to keep the Eurozone intact.

The Tea Party has a clear agenda—no more taxes, no more government debt, no more Big Government and rescues. This clarity has enabled the Tea Party to enormously influence the Republican primaries and debates. By contrast, OWS is a disparate collection of angry people with no common platform. Some say the lack of an agenda is a strength: it prevents the movement from splintering. Yet such incoherence means its media attention is not matched by influence on policy.

One humorous example of OWS incoherence: a protestor in New York brandished a sign saying “Google: Jewish billionaires .” This anti-Semitism upset a second protestor, who therefore poured hot coffee down the back of the first. The first protestor summoned the police to protect his freedom of speech! The incoherence of this “coffee party” contrasts with the coherence of the Tea Party.

Yet the elephant in the room is the explosive growth of retiree benefits, which are inexorably taking all western countries towards fiscal bankruptcy. Neither the Tea Party nor Coffee Party dares confront head-on the consequences of an ageing population . In earlier decades, working members of the population could easily support a small number of retirees. But with rising life expectancy, the retiree population is rising much faster than the worker population, and medical costs for the aged are skyrocketing . US spending on social security, Medicare and Medicaid is projected to rise from 7% of GDP today to 18% within two decades . Today Greece may seem the only European country trapped in unsustainable spending on entitlements, but others are going the same way. Fears of European government default on debts arise not just from immediate financial problems but from longterm government promises to retirees that cannot be honoured.

It’s easy to take on Wall Street, but very difficult to take on the aged, who have a high voter turnout, have well organized lobbies, and constitute a growing vote bloc. Neither the Tea Party nor OWS, neither the Republicans nor Democrats, want to get tough on the greatest conflict of all, between workers and retirees. It is so much easier to pretend that the problem is just of rich versus poor, or of prudent versus imprudent.

2 thoughts on “Tea party? The real party is for the retirees”

  1. Funny reading.Please explain why Tea party blogs taxing the ultra rich as suggested by Buffet and the job bill?If they dont want a Big Govt,will they give employment for people who are unemployed now because of recession?Whats the problem of taxing the rich heavily?What the heck are they going to do with Billions of dollars?

  2. You amaze me with your clarity of thought & economic logic. Today the developed world faces pain & hardship ahead while developing world may be consequently hurt. I believe you have the wisdom & logic to suggest ways to create economic revival in both developed as well as developing countries. The world needs Swaminomics more than ever, and desperately now. Please save humanity from ruin.

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