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Posts Tagged ‘trickle down economics’

On Thursday, December 3, 2015, Minnesota government officials announced the state was facing a $1.9 billion surplus. Current Governor Mark Dayton faced a $6.2 billion deficit five years ago when he took office from Republican Trickle-downer Governor Tim Pawlenty. So what happened that such a massive change occurred? The state got the extra cash by raising taxes on the rich by 2 percent. The government also increased the minimum wage, and the jobs keep coming, which is why the state has one of the lowest unemployment rates in the nation at 3.7 percent. Demand for goods and services have increased, and so have the number of jobs, as more than 172,000 have been created in Dayton’s first term, compared to slightly more than 6,000 in the eight years when Pawlenty’s voo-doo economics ruled the state house.

The rich have gotten wealthier over the last thirty years by paying politicians to pass legislation and international income redistribution agreements (falsely marketed as free trade agreements), which have redistributed income from the 99 to the 1 percent. They’ve done this so much that the 1 percent currently steal 37 percent of the nation’s total income compared to 8 percent in 1980. That means the 99 percent earn only 63 percent of the income produced in the USA compared to 92 percent back in 1980. In 1980, the 99 percent were able to demand more goods and services, which created more jobs and rising real wages, which is the reverse of what’s going on today, except in Minnesota.

The West Central Tribune says Minnesota’s extra cash appears headed toward early childhood education and high-speed internet for Minnesota residents. “Governor Mark Dayton, of Minnesota’s Democrat-Farm Labor Party, ran for office on a call to implement broadband internet “border-to-border” and has called for a $100 million infusion of funds, in conjunction with private investment, to build the initial infrastructure. While the total estimated cost to complete the job is $3.2 billion, Gov. Dayton has plenty of money to work with — the surplus is more than double what the state legislature had on hand by the end of this year’s legislative session in June.”

Governor Dayton decided to discontinue the failed policies of tossing “subsidies at corporations and offering them more tax breaks that would further stifle growth.” Instead, the governor implemented policies to stimulate real financial growth, including  raising income taxes on top earners by 2 percent. That, combined with a scaled increase to the state minimum wage, created an instant injection of money into his state’s stagnant economy that kept local businesses from shutting their doors.”

Once the economy was stabilized, Dayton doubled down on his plan to stimulate growth from the bottom up by paying down the state’s debt and investing in Minnesota’s schools. This created an environment where people actually wanted to live and raise a family, essentially creating demand where before, people were leaving Minnesota to escape the lower quality of life that continues to plague states still clinging to trickle down policies,” which have stifled demand by redistributing income from the 99 percent to the 1 percent. Trickle down policies also gave the rich more money with which to corrupt governments across the nation, as well as both political parties.

“Minnesota’s dramatic comeback provides a sharp contrast to Wisconsin, their neighbor to the east, where Governor Scott Walker has literally driven the state into the ground. Under Walker, Wisconsin broke up labor unions, driving down the average income of working class families that are the lifeblood of any economy. That, combined with his economic strategy of subsidizing industries to set up shop in his state while offering them huge tax-breaks, has bankrupted their once thriving economy.”

Now, even though the national economy is facing uncertainty due to the continuing burden of student debt and flagging exports, Minnesota has almost $2 billion in state budget reserves and is forced to choose between increasing working family tax credits or lowering property taxes.

It is a problem most states would love to have.

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The governors of the Federal Reserve Bank voted to keep interest rates at historic lows in their September 17, 2015 meeting. The bank has not raised interest rates in nearly a decade. Lucky us, or maybe unlucky us.

Chairwoman Janet Yellen cited a number of reasons why the bank decided to keep rates low. She mentioned, for example, the weakness of manufacturing in China.

However, she didn’t mention that nearly 50 percent of US manufacturing is done in China, which, quite naturally, indicates a slowing down of US outsourced manufacturing, which certainly impacts the US. Like a good politician, she also did not mention that the evil US trade deficit is fueled by US manufacturers exporting jobs overseas, like Microsoft, Apple, Nike and Adidas. These and hundreds of other companies manufacture their products in China and elsewhere, and export their stuff to the US.

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This is precisely and the only reason why the US has a trade deficit. The US trade deficit, in other words, is with US job exporters, not with China, Pakistan, Mexico or elsewhere.

Anyway, keeping interest rates low was a good thing for the US economy. Typically, the Fed waits to raise interest rates until just after the US economy begins to slide into recession.

That process begins when US corporations see a slowdown in their earnings growth, in the aggregate. These businesses begin to lay people off, which jacks up their profits. Perhaps the folks running the Fed take this as some sort of sacred signal that everything is all right. However, laying enough people off throughout the economy ignites recessions in the process of jacking up those profits, because the demand for goods and services slackens, jobs and profits decline, and a recession begins even while corporate earnings expand.

This is why I mentioned the slowdown of Chinese manufacturing, which in all likelihood, represents something of a slowdown of US manufacturing abroad. Profit growth has been shaky the last two years, though still growing in fits and spurts with sudden quarterly declines followed by rapid growth.

In other words, the US and world economies are still quite weak, especially since the rich have stolen 95 percent of all income growth in the US since 2009, an historic high by a wide margin. This has meant sluggish US and world economic growth since the more money the 1 percent steal in the US and elsewhere, the weaker the demand for goods and services by the 99 percent.

Yellen has the brains to understand all of this. This is likely why the Fed has kept interest rates at historic lows for years. To maintain their standards of living, the 99 percent had to keep borrowing because they haven’t gotten a raise in 35 years on average and in real terms. Raise interest rates and the demand for goods and services begins to die.

Raising interest rates will likely be the straw that sends the world economy into the monstrous fangs of the biggest economic crisis since the Great Depression. This crisis may already be in its early less visible stages.

Not a single world leader has learned the lesson from the last Recession. The current US economic expansion is fueled by the same artificially created housing and stock market bubbles as the last recession. Wall Street executives are calling the economic shots in the White House, on Capital Hill and the US Supreme Court. That’s why nobody who could do anything did squat about the corrupt forces that brought about last recession, and now the bill is coming due.

The last recession was the worst since the Great Depression. The next one, as I have pointed out in my book, The Rigged Game: Corporate America and a People Betrayed, will be far more hideous.

The Fed has literally no tools to fight off this coming Great Depression, but it will print trillions of dollars to save billionaires and others from their foolish investment decisions. See breakdown-of-the-26-trillion-the-federal-reserve-handed-out-to-save-rich-incompetent-investors-but-who-purchase-political-power–JohnHively.wordpress.com

The federal government will be forced to expand the deficit, and instead of having 48 million people permanently on food stamps, the US will have 60 to 100 million, unless the madness of redistributing income from the 99 to the 1 percent via job exporting trade treaties, unsustainable and illogical immigration policies (both legal and illegal, HB1 visas), and privatization scams.

Much of this can be reversed simply by amending income redistribution schemes known as international trade agreements, limiting immigration by restricting the flow of people moving into the USA at least until wages begin to rise, enforcing current immigration laws, and putting a halt and reversing many privatization follies.

All three of these policies have stolen jobs from American citizens, while enriching the politically and financially affluent in the process, all at the expense of people who produce goods and services.

Of course, that is precisely what the corrupt US government (all three branches), and both corrupt major political parties, have been driven to do by the money unleashed in the political markets since and because of the Reagan tax cuts for the rich.

The ultimate end game of Reaganomics is coming to its ugly conclusion.

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Trickle down economics was the lie that said if you made the richer more wealthier, everybody would get richer, and all boats would rise with the rising tide. The American public bought it under a massive media propaganda blitz, and Reaganomics was born.

Trickle down economics, in reality, was an income redistribution scam designed to redistribute income from the 99 to the 1 percent, and, as you can tell from the graph above, it has worked really well.

It all began with President Ronald Reagan and his tax cuts for the rich. Thus ended the most prosperous period for the middle and lower classes in US history as trickle down economics sucked more and more of their income, like a vacuum cleaner, right up into the pockets of the affluent.

The affluent used their new found purchasing power via the tax cuts to corrupt government to the maximum. They bought legislation to redistribute income into their already fat wallets. In short, that’s how we got to where we are today.

  1. The worst economic expansion in terms of job growth in US history.
  2. The worst economic expansion in terms of wage growth in US history.
  3. The best economic expansion for the rich in US history, where 95 percent of all wage growth has gone to the 1 percent since 2009.
  4. Rising poverty.
  5. Rising permanent unemployment
  6. The top 1 percent steal 37 percent of all income produced in the United States, compared to 8 percent in 1980, when Jimmy Carter was president.

There are some interesting things we can now see that have remained clouded to our eyes due to the media propaganda.

It makes one understand that Jimmy Carter was the last great US president. Everybody else has been a puppet of Wall Street. Under Carter, wages rose, and more jobs were created per year on average than under any other president since. He also staged a diplomatic coup when he engineered the Camp David Accords. Makes you wish for the good old days doesn’t it?

Sure, Carter had a few failings. There was relatively high inflation. You know, something like 6-8 percent per year. Carter appointed Paul Volcker to head the Federal Reserve. Volcker jacked up interest rates until the Fed crushed inflation. So Carter should be given credit for eliminating the 1970s inflation during the early 1980s, when he was already out of office. But guess what?

The federal government has changed the way it measures inflation 20 times since Reagan took office, so that unofficial inflation today is running at 6-8 percent. The government no longer counts energy and food prices, like it did back then. That’s why a can of tuna has increased in price from 3 for a dollar to 1 for a dollar over the last five years, and it isn’t among the items the government uses to determine the official inflation rate.

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According to former US Labor Secretary Robert Reich, “If the Trans Pacific Partnership is enacted, big corporations, Wall Street, and their top executives and shareholders will make out like bandits. Who will the bandits be stealing from? The rest of us.”

The TPP is “…being sold as a way to boost the U.S. economy, expand exports, and contain China’s widening economic influence.

In fact, it’s just more trickle-down economics.

The biggest beneficiaries would be giant American-based global corporations, along with their executives and major shareholders.

Those giant corporations initiated the deal in the first place, their lobbyists helped craft it behind closed doors, and they’re the ones who have been pushing hard for it in Congress – dangling campaign contributions in front of congressional supporters and threatening to cut off funding to opponents.

These corporations made sure the deal contains provisions expanding and protecting their intellectual property around the world, but notprotecting American jobs.”

Check out the rest of the story at the Christian Science Monitor Trans-Pacific-Partnership-is-more-trickle-down-economics-gone-wrong

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Inequality in the United States began with a simple idea; give more money to the rich so they can purchase the favors of government. This was called the Reagan tax cuts. The rich used their money to purchase more tax breaks in the political markets, and that’s exactly what the political area is; a market with buyers and sellers.

When President Franklin Roosevelt pushed for a 90 percent top marginal tax rate, he did it to act as a maximum wage, to save democracy from being purchased by the rich. Reagan let the genie out of the bottle.

Since Reagan, all sorts of legislation has been passed to redistribute income from the 99 to the 1 percent, including income redistribution treaties, falsely referred to as trade agreements.

Now President Obama is pushing the Trans-Pacific Partnership (TPP), the largest income redistribution agreement of all time. Since 2009, the rich have stolen 95 percent of all income growth. The TPP will increase this inequality. Wall Street Senator’s Orrin Hatch, Mitch McConnell and Ron Wyden are all for the TPP, since they have a history of siding with legislation that redistributes income from the 99 to the 1 percent.

In other words, Reagan’s tax cuts began rigging the game of economics and politics in favor of the 1 percent.

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by
Elizabeth Warren

Reprinted with permission from Readersupportednews.org

Today, United States Senator Elizabeth Warren spoke at the AFL-CIO National Summit on Raising Wages. The text of Senator Warren’s remarks as prepared for delivery follows:

Good morning, and thank you MaryBe for the introduction, and for your work with the North Carolina AFL-CIO. Your efforts make a real difference for our families.

I want to start by thanking Rich Trumka and Damon Silvers for your leadership on economic issues, for your good counsel, and, for a long time now, your friendship. I also want to give special thanks to my good friends from the Massachusetts AFL-CIO who are here today, Steve Tolman and Lou Mandarini.

I love being with my labor friends, and I’m especially glad to join you today for the AFL’s first-ever National Summit on Wages. You follow in the best tradition of the American labor movement for more than a century-always fighting for working people, both union and non-union. Today you’ve spotlighted an economic issue that is central to understanding what’s happening to people all over this country.

I recently read an article in Politico called “Everything is Awesome.” The article detailed the good news about the economy: 5% GDP growth in the third quarter of 2014, unemployment under 6%, a new all-time high for the Dow, low inflation.(i)

Despite the headline, the author recognized that not everything is awesome, but his point has been repeated several times: On many different statistical measures, the economy has improved and is continuing to improve. I think the President and his team deserve credit for the steps they’ve taken to get us here. In particular, job growth is a big deal, and we celebrate it.

I’ve spent most of my career studying what’s happening to America’s middle class, and I know that these four widely-cited statistics give an important snapshot of the success of the overall economy. But the overall picture doesn’t tell us much about what’s happening at ground level to tens of millions of Americans. Despite these cheery numbers, America’s middle class is in deep trouble.

Think about it this way: The stock market is soaring, and that’s great if you have a pension or money in a mutual fund. But if you and your husband or wife are both working full time, with kids in school, and you are among the half or so of all Americans who don’t have any money in stocks,(ii) how does a booming stock market help you?

Corporate profits and GDP are up. But if you work at Walmart, and you are paid so little that you still need food stamps to put groceries on the table, what does more money in stockholders’ pockets and an uptick in GDP do for you?

Unemployment numbers are dropping. But if you’ve got a part-time job and still can’t find full-time work — or if you’ve just given up because you can’t find a good job to replace the one you had — you are counted as part of that drop in unemployment, but how much is your economic situation improving?

Inflation rates are still low. But if you are young and starting out life with tens of thousands of dollars in student loan debt locked into high interest rates by Congress, unable to find a good job or save to buy a house, how are you benefiting from low inflation?

A lot of broad national economic statistics say our economy is getting better, and it is true that the economy overall is recovering from the terrible crash of 2008. But there have been deep structural changes in this economy, changes that have gone on for more than thirty years, changes that have cut out hard-working, middle class families from sharing in this overall growth.

It wasn’t always this way.

Coming out of the Great Depression, America built a middle class unlike anything seen on earth. From the 1930s to the late 1970s, as GDP went up, wages went up pretty much across the board. In fact, 90% of all workers-everyone outside the top 10%-got about 70% of all the new income growth.(v) Sure, the richest 10% gobbled up more than their share-they got 30%. But overall, as the economic pie got bigger, pretty much everyone was getting a little more. In other words, as our country got richer, our families got richer. And as our families got richer, our country got richer. That was how this country built a great middle class.

But then things changed.

By 1980, wages had flattened out, while expenses kept going up. The squeeze was terrible. In the early 2000s, families were spending twice as much, adjusted for inflation, on mortgages as they had a generation earlier. They spent more on health insurance, and more to send their kids to college. Mom and dad both went to work, but that meant new expenses like childcare, higher taxes, and the costs of a second car. All over the country, people tightened their belts where they could, but it still hasn’t been enough to save them. Families have gone deep into debt to pay for college, to cover serious medical problems, or just to stay afloat a while longer. And today’s young adults may be the first generation in American history to end up, as a group, with less than their parents.

Remember how up until 1980, 90% of all people-middle class, working people, poor people-got about 70% of all the new income that was created in the economy and the top 10% took the rest? Since 1980, guess how much of the growth in income the 90% got? Nothing. None. Zero. In fact, it’s worse than that. The average family not in the top 10% makes less money than a generation ago.(viii) So who got the increase in income over the last 32 years? 100% of it went to the top ten percent. All of the new money earned in this economy over the past generation-all that growth in the GDP-went to the top.(ix) All of it.

That is a huge structural change. When I look at the data here – and this includes years of research I conducted myself – I see evidence everywhere about the pounding that working people are taking. Instead of building an economy for all Americans, for the past generation this country has grown an economy that works for some Americans. For tens of millions of working families who are the backbone of this country, this economy isn’t working. These families are working harder than ever, but they can’t get ahead. Opportunity is slipping away. Many feel like the game is rigged against them – and they are right. The game is rigged against them.

Since the 1980s, too many of the people running this country have followed one form or another of supply side – or trickle down – economic theory. Many in Washington still support it. When all the varnish is removed, trickle-down just means helping the biggest corporations and the richest people in this country, and claiming that those big corporations and rich people could be counted to create an economy that would work for everyone else.

Trickle-down was popular with big corporations and their lobbyists, but it never really made much sense. George Bush Sr. called it voodoo economics.(x) He was right, and let’s call it out for what it is: Trickle-down was nothing more than the politics of helping the rich-and-powerful get richer and more powerful, and it cut the legs out from under America’s middle class.

Trickle-down policies are pretty simple. First, fire the cops-not the cops on Main Street, but the cops on Wall Street. Pretty much the whole Republican Party – and, if we’re going to be honest, too many Democrats – talked about the evils of “big government” and called for deregulation. It sounded good, but it was really about tying the hands of regulators and turning loose big banks and giant international corporations to do whatever they wanted to do-turning them loose to rig the markets and reduce competition, to outsource more jobs, to load up on more risks and hide behind taxpayer guarantees, to sell more mortgages and credit cards that cheated people. In short, to do whatever juiced short term profits even if it came at the expense of working families.

Trickle down was also about cutting taxes for those at the top. Cut them when times are good, cut them when times are bad. And when that meant there was less money for road repairs, less money for medical research, and less money for schools and that our government would need to squeeze kids on student loans, then so be it. And look at the results: The top 10% got ALL the growth in income over the past 30 years-ALL of it-and the economy stopped working for everyone else.

The trickle-down experiment that began in the Reagan years failed America’s middle class. Sure, the rich are doing great. Giant corporations are doing great. Lobbyists are doing great. But we need an economy where everyone else who works hard gets a shot at doing great!

The world has changed beneath the feet of America’s working families. Powerful forces like globalization and technology are creating seismic shifts that are disrupting our economy, altering employment patterns, and putting new stresses on old structures. Those changes could create new opportunities-or they could sweep away the last vestiges of economic security for 90% of American workers. Those changes demand new and different economic policies from our federal government. But too many politicians have looked the other way. Instead of running government to expand opportunity for 90% of Americans and to shore up security in an increasingly uncertain world, instead of re-thinking economic policy to deal with tough new realities, for more than 30 years, Washington has far too often advanced policies that hammer America’s middle class even harder.

Look at the choices Washington has made, the choices that have left America’s middle class in a deep hole:

* the choice to leash up the financial cops,
* the choice in a recession to bail out the biggest banks with no strings attached while families suffered,
* * the choice to starve our schools and burden our kids with billions of dollars of student loan debt while cutting taxes for billionaires,
* the choice to spend your tax dollars to subsidize Big Oil instead of putting that money into rebuilding our roads and bridges and power grids,
* the choice to look the other way when employers quit paying overtime, reclassified workers as independent contractors and just plain old stole people’s wages,
* the choice to sign trade pacts and tax deals that let subsidized manufacturers around the globe sell here in America while good American jobs get shipped overseas.

For more than thirty years, too many politicians in Washington have made deliberate choices that favored those with money and power. And the consequence is that instead of an economy that works well for everyone, America now has an economy that works well for about 10% of the people.

It wasn’t always this way, and it doesn’t have to be this way. We can make new choices – different choices – choices that put working people first, choices that aim toward a better future for our children, choices that reflect our deepest values as Americans.

One way to make change is to talk honestly and directly about work, about how we value the work that people do every day. We need to talk about what we believe:

We believe that no one should work full time and still live in poverty – and that means raising the minimum wage.
We believe workers have a right to come together, to bargain together and to rebuild America’s middle class.
We believe in enforcing labor laws, so that workers get overtime pay and pensions that are fully funded.
We believe in equal pay for equal work.
We believe that after a lifetime of work, people are entitled to retire with dignity, and that means protecting Social Security, Medicare, and pensions.

We also need a hard conversation about how we create jobs here in America. We need to talk about how to build a future. So let’s say what we believe:

We believe in making investments – in roads and bridges and power grids, in education, in research – investments that create good jobs in the short run and help us build new opportunities over the long run.

And we believe in paying for them-not with magical accounting scams that pretend to cut taxes and raise revenue, but with real, honest-to-goodness changes that make sure that we pay-and corporations pay-a fair share to build a future for all of us.

We believe in trade policies and tax codes that will strengthen our economy, raise our living standards, and create American jobs – and we will never give up on those three words: Made in America.

And one more point. If we’re ever going to un-rig the system, then we need to make some important political changes. And here’s where we start:

We know that democracy doesn’t work when congressmen and regulators bow down to Wall Street’s political power – and that means it’s time to break up the Wall Street banks and remind politicians that they don’t work for the big banks, they work for US!

Changes like this aren’t easy. But we know they are possible. We know they are possible because we have seen David beat Goliath before. We have seen lobbyists lose. We’ve seen it all through our history. We saw it when we created the new Consumer Financial Protection Bureau, when we passed health care reform. We saw it when President Obama took important steps to try and reform our immigration system through executive order just weeks ago. Change is difficult, but it is possible.

This is personal for me. When I was 12, my big brothers were all off in the military. My mother was 50 years old, a stay at home mom. My daddy had a heart attack, and it turned our little family upside down. The bills piled up. We lost the family station wagon, and we nearly lost our home. I remember the day my mother, scared to death and crying the whole time, pulled her best dress out of the closet, put on her high heels and walked to the Sears to get a minimum wage job. Unlike today, a minimum wage job back then paid enough to support a family of three. That minimum wage job saved our home-and saved our family.

My daddy ended up as a maintenance man, and my mom kept working at Sears. I made it through a commuter college that cost $50 a semester and I ended up in the United States Senate. Sure, I worked hard, but I grew up in an America that invested in kids like me, an America that built opportunities for kids to compete in a changing world, an America where a janitor’s kid could become a United States Senator. I believe in that America.

I believe in an America that builds opportunities. An America that ensures that all hardworking men and women earn good wages. An America that once again grows a strong, vibrant middle class.

I believe in that America, and I will fight for that America! And if we fight-side-by-side-I know we will build that America again.

Thank You!

Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.

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Here are some heartening numbers:

From the Great Depression until 1980, during every recession employers shed jobs, but the economy quickly regained the lost jobs and then added more, and with rising real wages for the bottom 99 percent. Here’s what’s happened since then.

* Real GNP has grown 83 percent over the last thirty-four years, and the top ten percent of income earners have garnered all of the income growth during that time.

* In the last twenty-five years, corporate profits have increased 100 percent in real terms, which means if you factor inflation into the equation.

* 81 percent of US counties have a lower median income than fifteen years ago.

* US workers today produce nearly twice as many goods and services as they did in 1989, but they get paid about the same amount as they did in 1989, when inflation is factored in. In other words, their spending power hasn’t grown in 26 years, although their productivity has doubled.

* The average private sector worker earned less in November 2014 than they did in April 2009, almost six years ago. The average private sector worker earned $10.33 an hour in November 2014, in 1984 inflation adjusted dollars.

Shared prosperity changed with the Reagan Revolution, in which corporate leaders, the US Supreme Court, politicians of both political parties, and Wall Street investment banks attacked the middle class with an eye toward redistributing middle class incomes to themselves and their benefactors.

Organized labor was publicly excoriated, and eviscerated in large measure by shipping jobs overseas via trade treaties, and redistributing the difference between the old higher wages and the new lower wages into the pockets of the rich via higher corporate profits, rising share prices and surging dividends. And, oh yes, we can’t forget those bogus tax cuts for the rich, the rationale of which was grounded in the failed 1920s policy of trickle down economics.

Trickle down gave the rich more money to rig the political and economic war against the middle class through the purchase of political advertisements, pundit opinion shaping, rigged economic studies, and politicians that need to grovel for cash from their affluent masters.

We can get back to shared prosperity, and return to a democracy of all the people, rather than the current system in which well-heeled movers and shakers make all the decisions.

Get out of the house, and get politically active. The time is coming when an unprecedented economic tsunami is headed our way. That’s when we working folks can turn the tide, so get organized now.

And if you’re already active, fight against the Trans Pacific Partnership (TPP), the largest income redistribution scheme in the history of the United States.

Many of the TPP’s provisions will be unconstitutional, but the corporate press, corporate spokespeople and politicians will dutifully not note this, and will certainly tell you otherwise.

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