Austerity: The History of a Dangerous Idea by Mark Blyth (2013)
I could start and end my commentary with this simple imperative: BUY THIS BOOK.
Economics was one subject about which I had little interest and a lot of hostility when forced to take it in college. The teacher tried his best, but trying to explain economic theory to a bunch of kids who have possibly never had any knowledge of how much money their parents make, spend, or what things cost is a rather hopeless proposition. At least for me, combined with minimal exposure to life long enough to seen the actual consequences of economic theory in policymaking and being able to see the short-term and long-term impact of such policies, made the content just too much of a word salad to be useful.
If this book had existed then, I think I may have grasped the concepts much more easily. However, I would have come to the same conclusion I did back in the day: economic theory is bullshit.
When applied to REAL LIFE with CONSEQUENCES (always adverse as it seems to happen, well at least to poor people) economic theory is basically a bait and switch or other con that ALWAYS makes the rich richer and justifies all manner of horrors by the power (rich) elite in the name of the god Economicus. They even have a new name for contemporary people: homo economicus as if the ONLY value of humanity is the capacity to labor for the benefit of a few who already have more wealth than the bottom 50 percent or more of the rest of America.
Oh, it is worse than that: 20 PEOPLE have more wealth than half of ALL Americans. That is 152 MILLION people living in 57 MILLION households.
How we got here is beautifully and elegantly explained by the author, Mark Blyth, a professor of International Political Economy at Brown University. He is also the author of Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century (2002 link, but checking there is a 2008 Cambridge Press edition but probably not a revised edition, also available in 2012 ebook). I plan to read this book in the future. However much nonsense this intellectually invalid theory collection is, the people in charge of the world are using it for political ends and justification of crimes against humanity. This conclusion is, amusingly enough, EXACTLY what the Goodreads text (probably from book jacket) says the Great Transformations book is about.
Since the wretched daylight savings time went into effect [WHEN OH WHEN WILL SOMEONE HAVE THE GUTS TO STOP THIS NONSENSE!!!!!], and this book and another interlibrary loan book are both due Monday, I am just going to hit some highlights that so perfectly expressed what I suspected, I feel vindicated in my belief that the real world needs people who look at reality instead of theory to make economic policy.
I know, I am an idealist. I just said I agreed with the author’s assertion that economic theory is an exercise in intellectual masturbation by academicians with tenure working in a field that they desperately want to believe is scientifically sound when the opposite is true. Economics is a male dominated field, so of course they all believe they are right no matter what the facts are, especially if a women were to disagree and actually know facts. Present author excluded of course; the exception that proves the rule.
To contrast the hierarchy of value that represents patriarchy so well, the comparable academic area of study, social science, is predominantly women’s work, and despite the word “science” in the name — almost as if they are trying to label themselves into acceptance as a legitimate scientifically valid subject — social science remains, at best, considered a “soft” science. Oh, the irony.
The opponents to the Theory of Evolution deliberately or ignorantly misunderstand what a scientific use of the word theory means to pretend it is NOT any more valid that their theory of an invisible being that is both omniscient and all powerful who loves humanity yet has left us to kill each other by the billions over more than their estimated 6,000 years that earth has existed.
My take on economic theory is that it is closer to the invisible being level of “reality” than Darwin’s theory, or continental drift, or fossils, or anything that is actually factually, provably true.
As the author so perfectly explains in this book that is indeed a History of a Dangerous Idea, the notable economists that are cited and refined or disputed are all MAKING THIS SHIT UP. Though he says it without the vulgarity that more accurately expresses my take on where these false theories have led us: to a world of massive disparities between the PEOPLE actually doing WORK, and the .01 percent that are enslaving them to provide their obscene wealth while CONDEMNING millions and millions of us a “lazy” or “takers” or “dependent on government” when it is THEY who are using government in all its manifestations to pillage the reset of us.
The level of Newspeak that the Republicans and their elite masters have going on is worse than I was even aware looking back in retrospect. From the infamous “trickle down economics” used to justify the mass transfer of wealth to the already obscenely wealthy, to the cutting of all social safety nets and social justice programs that is going gangbuster even as I type this. Perhaps unstoppable, and most dangerously, irreversible: EPA director wants to eliminate all environmental protections and basically declares that PRIVATE PROFIT has more legitimate claim on the government for the people than the people’s right to clean potable water.
I was not paying as much attention as I should have during the Reagan destruction, feeling quite powerless and trying just to survive like so many other people. Unaware that my survival would have been better assured had I been an activist that actually did something to protest instead of just bitching and moaning to the choir of equally unhappy dissenters. So it may not be accurate when I ask: Why did not one person question the premise that the rest of us only deserved a TRICKLE from the wealth generated by OUR labor?
The entirely fraudulent, corrupt, debacle brought on by the banksters was the most abhorrent and terrifying and enraging experience of my adult life. I personally suffered enormously from it, but thanks to some really unfortunate circumstances, I actually came out modestly secure, until November 8th, 2016. Now I am terrified and in danger of only having an actual death sentence because of the current administration’s madness of economic beliefs based on provably FALSE economic theory.
I have multiple sclerosis. I need Medicare. Without Medicare, I will die.
Economic theory by the likes of such sociopaths as Paul Ryan who lives and breathes the “philosophy” of a cheap novelist, Ayn Rand, and fancies himself the embodiment of her hero, John Galt, finds her belief that the “strong” (aka “rich”) are providing an “ACT OF MERCY” to let the poor die. (Paul Ryan March 2017). She/he likens the poor (aka not rich white males) to parasites, “takers,” who suck the life (aka luxury of wealth and economic security, gold toilets, and tasteless decor in their homes, private jets, and yachts) of the people who have “earned every dollar they made on their own” (aka inherited it). The great delusion that they have become success all on their own is one certainty that is an unshakeable belief. When called on it by Elizabeth Warren, her correct statement to the contrary of this cherished belief was vociferously denied by the rich and led to substantial personal attacks attempting to discredit her. They were, of course, wrong. She was right to point out that it is the taxpayers who pay for the roads they use for their business to transport goods, public schools to educate their workers, electricity provided and maintained by government or regulated by government (at least for now), and in millions of other ways. Hell, even the capital they use to start their business was probably from a government insured load or possibly subsidized in some fashion. The TAX CODE is nothing but a give-away to millionaires and the NOT PEOPLE corporations.
People are required to adhere to the authoritarian theocratic Xtian beliefs of “morality” viewed not as compassion, empathy, kindness, generosity, and love for thy neighbor, but rather morality 2.0: work without complaint (or vacation) until you die for less than a living wage and no medical care.
Morality 2.0 includes forced birth, reinforced poverty, scapegoating, public shaming, ridicule, taxes and taxes and taxes overtly in the tax codes or stealth taxes like on common household purchases (TAMPONS! DIAPERS!), the gas tax (“it’s reasonable to charge the people using the roads the cost of maintaining them” versus, “Corporations who expect workers to be able to come to work should pay for road maintenance so the workers can get to their location.” See how easy it is to reframe “business as usual.”
PARKING REFRAMING DIGRESSION
My latest reframing, if you will excuse the diversion, is PARKING. Where was it written that EMPLOYEES should be the ones who must pay for parking if the business does not have it’s own lot? Why should employees have to spend AN HOUR OR MORE of minimum wage earning for the PRIVILEGE OF making profit for a company with no obligation to even PROVIDE parking but can require employees to park on the city streets?
Then the City, doing their bit to add to the “working” tax pool, charges parking tickets for (a) plugging the meter, (b) restrictive times that actually require you to move your car (they chalk the tires) or get a ticket, (c) compound the original fines exponentially if you don’t have the $20 within 10 days to pay the ticket, until the point is reached where they PUT YOU IN JAIL OVER A FREAKING PARKING TICKET causing you to lose your job, your home your car, etc. but of course, they were a “bad” person breaking the “law” about parking (aka revenue generator).
This cost/benefit of paying high priced police officers to drive around burning up gas to “catch” people who have parked too long at a meter is surely not offset by the revenue parking tickets generate. Even if it were, HOW MUCH REVENUE of the backs of working citizens who can least afford it justifies a police state over something as trivial as parking meter times? I plan to find some numbers. I bet that it is a cost sink but that accounting games make it less obvious that it is not cost effective.
Anyway, the point remains, WHY SHOULD CUSTOMERS OR EMPLOYEES BE REQUIRED TO PAY FOR THE PRIVILEGE OF PARKING?
BANK BAILOUTS AND GOVERNMENT DEFICITS
A crucial reframing that the author mentions and discusses at length is the fact that the nightmare that was 2008 for billions of people worldwide WAS and REMAINS a private debacle. It was not the “fault” of the government but was caused by the corruption and greed of the people allowed by the people in government who based their policies on bad economic theory. Bad for most of us, but surprisingly beneficial to the banksters and the wealthiest among the country’s elites who never ever have to worry about where they will get their next mortgage payment or even a meal from, and medical care? Forgetaboutit!
Right away on page 5 he states a central theme of the book:
It’s Not Really a Sovereign Debt Crisis
That austerity simply doesn’t work is the first reason it’s a dangerous idea. But it is also a dangerous idea because the way austerity is being represented by both politicians and the media — as the payback for something called the “sovereign debt crisis,” supposedly brought on by states that apparently “spent too much” — is a quite FUNDAMENTAL MISREPRESENTATION OF THE FACTS. These problems, including the crisis in the bond markets, started with the banks and will end with the banks. The current mess is the banks that sovereigns have to take responsibility for, especially in the Eurozone. That we call it a “sovereign debt crisis” suggest a very interesting politics of “bait and switch” at play.
Before 2008, no one, save for a few fringe conservatives in the United States and elsewhere, were concerned with “excessive” national debts or deficits. Deficit hawks in the United States, for example, pretty much disappeared in embarrassment as, under the banner of FISCAL CONSERVATISM, the Bush administration pushed both DEBTS and DEFICITS to new heights while INFLATION remained steady. (fn 8) Even in places where fiscal prudence was the mantra, in the United Kingdom under Gordon Brown, or in Spain and Ireland when they were held up as economic models for their dynamic economies — really — deficits and debt did NOT garner much attention. Italian public-sector debt in 2002 was 105.7 percent of GDP and NO ONE CARED. In 2009, it was almost exactly the same figure and everyone cared.
What changed was of course the global financial iris of 2007-2008 that rumbles along in a new form today. The cost of bailing, recapitalizing, and otherwise saving the global banking system has been, depending on, as we shall see later, how you count it, between 3 and 13 TRILLION dollars (fn 9). Most of that has ended up on the balance sheets of GOVERNMENTS as they [aka taxpayers] absorb the COSTS of the bust, which is why we mistakenly call this a sovereign debt crisis when in fat it is a transited and well-camouflaged BANKING CRISIS.
I’ve read a few books on economics and the crash of 2008 but didn’t pay too much attention to the significance of the Euro, despite that becoming more of an issue after BriExit. This book explains the Euro problem in an understandable way, and now when I hear Euro I also hear “That’s going to be a problem.” Here is a brief introduction to the problem from page 6:
What actually happened in Europe was that over the decade of the introduction of the euro, very large core-country European banks lots of peripheral sovereign debt (which is now worth much less) and levered up ( reduced their equity and increased their debt to make more profits) [leveraged] far MORE THAN THEIR AMERICAN COUSINS. [!!!!] Being levered up, in some cases forth to one or more, means that a turn of a few percentage points against their assets can leave them insolvent. (fn 10)
This means that the European banks had 1 Euro but loaned out 40! They made out like bandits at usurious interest rates until the people to whom they loaned the money could not pay the loan much less the interest back. Wouldn’t it be a fun lifestyle to live on 40 times your salary and then have the government use taxpayer dollars to bail you out and give you a clean start to do it all again? Too bad they wouldn’t do that for HUMAN PEOPLE instead of BANKSTERS, but good old Joe didn’t think your mortgage was his problem. I wonder how much of his tax dollars contributed to the billions of dollars of bonus money Wall Street rewarded their “good” employees with in bonuses.
AND NO ONE HAS OR EVER WILL GO TO JAIL.
I am starting to get a grip on the way the GDP (gross domestic product) functions in economies (not necessarily accurately, adequately, or on a rational and sound calculation). But the short version is:
France’s biggest three banks, for example, have assets worth nearly TWO AND A HALF TIMES French GDP. (fn 11) In contrast, the total value of the ENTIRE US BANKING SECTOR is about 120 percent of GDP. The United States can PRINT [MONEY] its way out of trouble because it has its own printing presses and the dollar is THE GLOBAL RESERVE asset. Franc cannot do this since the French state doesn’t run its own printing press anymore and so can’t BAIL ITS BANKS OUT DIRECTLY. Neither can Spain nor anyone else. As a result, French government bond rates are going up, no because France can[t pay for its welfare state, but because its banking system constitute a TOO BIG TO BAIL liability for the state.
Nonetheless, if one of these behemoth banks did fail it would HAVE TO BE bailed out by its parent state. If that state is running a debt-to-GDP level of 40 percent, bailing is possible. If it is already running close to 90 percent, it almost impossible for the state to take the liability onto its balance sheet without its bod yields going through the roof. This is, as we shall see over the next two chapters, why all of Europe needs to be austere, because each national state’s balance sheet has to act as a shock absorber for the entire system. Having already bailed out he banks, we have to make sure that there is room on the public balance sheet to backstop them. That’s why we have austerity. IT’S STILL ALL ABOUT SAVING THE BANKS. (pp. 6-7)
When he says Europe NEEDS TO BE AUSTERE, that is really just a short way of introducing the party line so to speak, the FRAMING of the political elite used to justify why the ordinary people must suffer rather than jailing the gamblers that pretend to be a legitimate functionary to benefit anyone other then themselves. A lie, basically.
This is a BANKING crisis first and a sovereign debt crisis second. That there is a crisis in sovereign debt markets, especially in Europe, is not in doubt. But that is an EFFECT, not a CAUSE. There was no orgy of government spending to get us there. There never was any general risk of the whole world turning into Greece. There is no risk of the United States ever going bust anytime soon.* THERE IS NO CRISIS of sovereign debt caused by SOVEREIGNS’ SPENDING unless you take account of actual spending and continuing liabilities caused by the RUPTURE OF NATIONAL BANKING SYSTEMS. What begins as a banking crisis ends with a banking crisis, even if it goes through the states’ accounts. But there is a politics of making it appear to be THE STATES’ FAULT such that those who MADE THE BUST don’t have to pay for it. Austerity is NOT JUST THE PRICE OF SAVING THE BANKS. It’s the price that the banks want SOMEONE ELSE TO PAY. (p. 7)
* “going bust anytime soon” might have been too generous; remember the book was published in 2013 and no one saw the debacle that was the 2016 election coming.
You can see why the narrative that we 99 percent must be austere to reduce government debt (acquired by the banking bailout and reckless spending on undeclared and unnecessary wars) appeals to politicians. Their bad decisions and cronies shouldn’t have to suffer any consequences of reckless actions. They say the real villains are THE POOR (TAKERS), THE DISABLED (NON-WORKERS), THE ELDERLY (HURRY UP AND DIE), and of course immigrants, refugees, the poor, and WOMEN. Since the Democratic party PRETENDS to give a shit about those groups (but they really don’t, not since Bill Clinton’s neoliberalism ideology overtook the previous loyalty to labor, women with children, etc.) and the propaganda machine ratcheted up the hate against them, too many ignorant fools believed a purported billionaire con man despite ALL EVIDENCE TO THE CONTRARY and now we are all fucked.
The next few pages should be mandatory reading by all politicians, economists, banksters, everyone. It offers in a nutshell why austerity won’t work. But you will have to buy or get from library because I am only on page 9, the book is overdue a week, and i have a least 6 more sections bookmarked.
Page 40, the Phillips curve distillation from Keynesian macroeconomics.
Page 58: A PERVERSE POLITICS
It is worth remembering how perverse the politics of this [crash 2008] was. When the crisis hit the United States in 2007 and 2008, it was a Republican administration with an ex-CEO of Goldman Sachs at its fiscal helm that invented the $700 BILLION Troubled Asset Relief Program (TARP) and engineered the bailout of the US financial system. Putatively Keynesian economists, such as Larry Summers who were part of the Obama economic team in 2008, merely continued the work of their Republican predecessors.
Page 73: THE GREATEST BAIT AND SWITCH IN MODERN HISTORY
Although with the election of 45, I am not 100 percent sure we can say that any longer.
Austerity’s moment in the sun had arrived courtesy of the Greeks. The offensive against Keynesianism at the global level was married to the discovery of the Greek debt crisis and AMPLIFIED via the threat of contagion to establish fiscal austerity as the new policy du jour. But in doing so, CAUSE and CORRELATION were confused, quite DELIBERATELY, on a MASSIVE SCALE.
The result of all this opportunistic rebranding was the greatest bait-and-switch operation in modern history. What were essentially PRIVATE-SECTOR DEBT PROBLEMS were rechristened as “the Debt” generated by “OUT-OF-CONTROL” PUBLIC SPENDING. [!!!!] Yet of all the PIIGS (Portugal, Ireland, Italy, Greece, and Spain), only Greece was in any meaningful sense profligate. Italy may have been lax, but no one minded them having the third-largest bond market in the world until 2010, when contagion plus demographics gave pause to the holders of Italian debt. Portugal may have spent a fair amount on modernizing its infrastructure and built a few high-speed rail lines of dubious need, but it was hardly spending itself into oblivion. Iceland and Spain were quintessential private-sector-housing-cum-banking crises, governed by states more fiscally prudent than Germany, where private-sector weaknesses ended up creating PUBLIC-SECTOR liabilities that make the situation worse rather than better. The fiscal iris in all these countries was the CONSEQUENCE of the financial crisis washing up on their shores, NOT ITS CAUSE. To say that it is the cause is to DELIBERATELY, and POLITICALLY, confuse cause and effect.
In this world spending, and with it debt, especially by the government, becomes good policy. Individual saving as a virtue, in contrast, falls to the paradox of thrift: if we all save (the very definition of austerity), we all fail together as the economy shrinks from want of demand. Austerity was, then, in the eyes of liberals, after Keynes sacrificed on the altar of profligacy. Yet after two decades of failure, austerity’s arch deniers had little to say or show for all its virtue. Chief among those who were quieted was Joseph Schumpeter himself.
Sidebar: Wikipedia linked him to “creative destruction” of economies, which has been embraced by NEOLIBERALS despite a Marxist genealogy:
In Capitalism, Socialism and Democracy (1942), Joseph Schumpeter developed the concept out of a careful reading of Marx’s thought (to which the whole of Part I of the book is devoted), arguing (in Part II) that the creative-destructive forces unleashed by capitalism would eventually lead to its demise as a system (see below). Despite this, the term subsequently gained popularity within neoliberal or free-market economics as a description of processes such as downsizing in order to increase the efficiency and dynamism of a company. (Wikipedia)
Several more pages discuss this at length and are quite fascinating to read. Somewhere along here I read but failed to note the page that our economy is essentially catering to the SOCIALIZED RISK for private profit economic model, also known as greed, corruption, and theft.
As anyone who has read previous posts, you will know that I regard Milton Friedmans’ theories to be cruel, invalid, and therefore the delight of the Republicans and neoliberals alike.
Friedman’s monetarism pushed hard against one of the key ideas of the postwar economy instruction sheet — the Phillips curve — that was also discussed in chapter 2. Crucial was his idea that there is a NATURAL rate of unemployment, an evolutionary throwback to classical ideas about labor markets clearing at the equilibrium wage, with the amount of employment generated being a function of structural supply-side factors plus the degree of trade-union militancy. As Michael Bleaney once observed, accepting Milton’s monetarism ensure that “ideas concerning a lack of effective demand have disappeared out the window . . . we are back in a completely classical world where. . . full employment follow automatically.” (fn 62)
Take your time, read it slowly, read it two or three times. It will help make sense of the meaning. Note, that the very fundamental ASSUMPTION by Friedman that employment or UNEMPLOYMENT has anything to do with NATURAL states of being is ludicrous. Wage work is completely unnatural on every level. Capital gains profiteering off the backs of labor is NOT natural or necessary to any economic system. Applying “supply and demand” as a philosophy of what wage workers should be paid for their labor is a completely absurd and false application of the concept of supply and demand as it applies to objects and is not appropriate to apply to labor.
NEOLIBERALISM: DEMOCRACY IS A PROBLEM
Public choice theory emerged at about the same time monetarism did as a full-blown critique of the state in the economy. Rather than simply reassert how the state would eat itself, such economists as George Stigler, William Niskanen, and Jame Buchanan brought the tools of microeconomics to bear on the analysis of politics and policy to show how the state would eat the economy too.
Their point of entry was to assume that agents inside the state behaved no differently from agents elsewhere: they maximized their incomes subject to their constraints. Rather than seeing politicians as neutrally steering the economy according to the vagaries of the business cycle with an eye to the public betterment, public choice theorists discerned a POLITICAL BUSINESS CYCLE, wherein state spending was matched to the ELECTORAL CALENDAR to produce booms and slumps that were the cost of elected officials seeking to maximize votes. This argument combined with monetarism to produce a new — or neo — [his emphasis] liberal interpretation of APPROPRIATE ECONOMIC POLICY. [NOT!]
The logic was both simple and universal. Given Friedman’s NOTION of the NATURAL unemployment rate, politicians cannot simple pick the point on the Phillips curve that suits THEIR PREFERENCES for levels of EMPLOYMENT and inflection and trade them off in a stable way. Rather, as detailed earlier, once the state intervenes to stop a slump, expectations adapt, and the economy shift to a new, higher rate of inflation that leaves unemployment unchanged over the long run. So far, so Friedmanite. Now for the Virginia twist. (fn 69)
Unable to sustain this inflation politically, the government has to deflate to bring UNEMPLOYMENT DOWN to the NATURAL state. Unfortunately, this does not wring inflation out of the system since expectations have adapted to the new, higher rate of inflation. Meanwhile, unemployment has gone up, and as a new election approaches politicians must once again reflate to ensure their reelection. The result is a boom and bust cycle that produces ever-higher inflation. In other words, it is ELECTIONS that determine the CONTENT OF ECONOMIC POLICY MAKING, and not the other way around.
Inflation is then the inevitable outcome of democratic governments trying to interfere in the economy. Just as market agents maximize income, so political actors maximize votes: inflation is the inevitable result. Unlike the invisible hand [his emphasis] that promotes the PUBLIC WELFARE by giving FREE REIGN to individual’s income [his emphasis] maximization, the visible hand [his emphasis] that maximizes votes [his emphasis] brings nothing but chaos to the social order and inflation to the economy. As public choice theorists James Buchana and Richard Wagner argue, government-induced “inflation destroys expectations and creates uncertainty; it increases the sense of FELT INJUSTICE and causes alienation. It prompts behavioral response , which reflect a generalized shortening of time horizons. ‘Enjoy, enjoy!’ . . . becomes a rational response . . .where the plans made yesterday seem to have been made in folly.” (fn 64)
OKAY, now go back to the start of this section and read it over again, slowly, perhaps repeating a paragraph at a time. Remember the author REJECTS the economists’ theories cited — with good reason — and so you have to be careful reading this to understand that he is not saying what the sentences are because he agrees with them, quite the contrary. He is simply pointing out the lameness of their biases and illogical thinking. The next paragraph makes this somewhat more pointedly emphasizing the Orwellian doublethink and new speak spew of these talking heads making stuff up.
Similarly, Milton Friedman opined that because of GOVERNMENT-induced inflation, “[p]rudent behavior becomes RECKLESS and ‘reckless’ behavior becomes ‘PRUDENT.'” The society is polarized; one group is set against another. Political unrest increases. The capacity of any government to govern is reduced at the same time that the PRESSURE FOR STRONG ACTION GROWS.” (fn 65) Given these PATHOLOGIES that are ENDEMIC TO DEMOCRACY [ha ha ha], what must be done to SAVE THE LIBERAL ECONOMY from the DESTRUCTIVE FORCES OF DEMOCRACY? Banning democracy would be EFFECTIVE but might be unpopular. [ha ha ha] A second-best solution would be to have an institution that would effectively OVERRIDE such inflationary decision making. Luckily, such an institution already listed thanks to those ordoliberals, or neoliberals would have had to invent one: the independent central bank.
He goes on with well argued and clear description of issues of central banks, including the U.S. Federal reserve that is “nominally independent” but not really (Goldman Sachs has basically run it and is currently running it for decades). The Fed is supposed to have as its mission to “FIGHT INFLATION and UNEMPLOYMENT” and that would be really good if they actually did that, but alas, “according to neoliberals, [that] was exactly the PROBLEM.”
There is a bunch more that really, once read two or three times and appreciating the total tone and sarcasm about trusting a private BANK instead of the government to do right by the people and therefore neoliberals believe:
. . . policy making should be delegated away from democratically elected politicians to INDEPENDENT, CONSERVATIVE CENTRAL BANKERS who will dish out the bad medicine when required because their jobs do not depend upon pleasing constituents (aka voters) — EXCEPT, perhaps, their constituents [hedge fund managers, not wage workers] in the FINANCIAL SECTOR who benefit from ULTRALOW INFLATION — but that’s another story. (fn 68)
He does describe why rich people want low inflation and how it benefits them. Naturally, low inflation is therefore not good for wage earners since it advantages stock market gamblers with more money than their economic security requires.
I was planning on stopping here because I still have bookmarks to go, but the next bit (pp. 158-159) is too good not to share immediately.
Austerity and Neoliberalism: Opening up the Policy Space
The acceptance of these ideas by a GENERATION of policy makers, politicians, and economists as the COMMON SENSE [choke gag] of the day considerably narrowed the space for any type of “spend against the cycle” compensation arguments — Keynesian or otherwise — long before the current crisis. Conversely, these arguments widened the policy space for austerity’s comeback considerably. After all, why compensate when we know that compensation only causes inflation? Why expect a STIMULUS to work when we know that it only ever promotes inflation and when politicians ONLY ENACT a stimulus to get reelected?
Well, that last bit is not accurate because W implemented when he was not going to be able to run. But I suppose, the Republicans or the power behind the throne, the Heritage Foundation, could have believed their candidate would win (Hmm had they smoothed out the corrupted election procedure then to have this expectation? But Obama versus Hillary primaried her out, something they probably hadn’t accounted for but were ready for it in 2016?)
What would have once been, without these ideas, simply the old-fashioned musings of cynical policy makers and their ancient economic advisors was now given a firm, and very liberal, theoretical foundation. THEIR EVIDENTIARY BASIS, however, was another matter entirely. (fn 69) The fact that they are highly effective policy rhetorics that only narrows the menu of choice for governments is what MATTERS. (fn 70) [to the wealthy]
Nonetheless, these “neo” neoliberal ideas revolutionized economic policy making in the developed world in the 1970s and 1980s, so much so that by the 1990s CENTRAL BANK INDEPENDENCE, for example, had spread like a rash over the face of the PLANET, most notably throughout ALL OF EUROPE, with the drive to the euro and the founding of the ECB marking its high point. (fn 71) When the ECB was unleashed on Europe in 1999, it was arguably the most independent central bank around, charge with only one goal: fight inflation, even in the middle of a DEFLATION, a task it has been succeeding in rather well up to this point.
Monetarism as a specific policy of targeting the money supply to fight inflation foundered on the rocks of reining what money in the modern world actually is back in the 1980s. But its legacy of ASSUMING A NATURAL RATE OF UNEMPLOYMENT has been critical in sustaining arguments AGAINST SPENDING AND COMPENSATION. [for the 99%] After all, why spend to get past the NATURAL RATE when that will only ever produce more inflation? If unemployment is “structural,” and not due to a lack of demand, then spending will not have any effect on it, so we should not try. (fn 73)
That’s a big IF you will note and is, as he demonstrates throughout the book, is a FALSE ASSUMPTION and it is what has destroyed wage earnings relative to the 1950s or a few decades up from there — essentially post-Reagan and wages were killed dead by that smooth talker Bill Clinton.
As I was listening to the news today (3-18-2017) I began to wonder about the “sudden” influx of right-wing authoritarian nationalists and the punishing attitude about anyone not a white male. Maybe it’s the economy, stupid? Maybe neoliberalism as a policy based on imaginary “natural” levels of unemployment has fueled this hate more than has been commented on, say, in the press, or gosh, by a “Democratic” politician. Bernie Sanders having made the mistake of thinking the NEOLIBERAL DINOs and their corporate masters would actually let him have a fair shot at the presidency. I wish he could have know that many people just like me would give $27 over and over again and that he could have made a go of it as an independent (apart from all the “rules” put in place to make sure only the two parties ever have an actual chance of winning. Like Nevada, paying PRIVATE entities (the Party cults) to run the public election and mandating that only PARTY MEMBERS (communist much?) could vote in the primaries for a candidate while receiving funds PER REGISTERED VOTER who were excluded. Combined with the ridiculous voter suppression rules, like no same day registration, so an independent has to pick the lesser of two evils up to six months before a primary — before, sometimes, a candidate has actually declared!
But I digress. Here is the continuation of the above quoted paragraph:
The fact that the “natural rate” [of unemployment] jumps around far too much across countries and time periods to be reduced to structural factors or unionization rates has done nothing to discredit it. (fn 71)
This is the post-truth world. Nothing about fact and reality will sway the current administration and their True Believers from their point of view. This is why so many people, particularly progressives, are going nuts. Irrational beings are running the world for the benefit of them and their cronies, destroying democracy, and still we are called “libtards” (offensive AND STUPID on so many levels) for wanting, gosh MEDICAL CARE FOR ALL. Or TAX THE MILLIONAIRES AND BILLIONAIRES! They are so brainwashed by propaganda — come on people, surely you saw this coming when Reagan killed the FCC rules about equal time and such — that they actually believe their paltry $20,000 a year wages will be taxed to pay for someone else to go to college (“when I can’t afford to go myself” Bernie Sanders on Chris Hayes some months back, gently pointed out that SHE would NOT be paying. There would be a tax on FINANCIAL transactions to pay for it. And the very wealthy might actually have to pay some taxes if loopholes like carried interest and so much else of the tax code treated corporations like people. Why do we subsidize multi-billion dollar profit making fossil fuel corporation when they don’t even have an obligation to sell oil from their leases of American wells to us? We have to compete — oh that’s why CAPITALISM, the invisible hand requires that we compete to pay the most for our own resources!
Oops, digressed again. Page 159 continues (you really do have to buy this book, I’m going to, it is a book that can be read over and over and it will still provide new insights):
Similarly, the notion that UNEMPLOYMENT IS VOLUNTARY is, in the context of the current self-inflicted wound in Europe, downright OFFENSIVE. Real workers must pay bills and feed families from jobs that have fixed hours and fixed wage rates. The idea that workers “trade off” labor against leisure by figuring out the real wage rate and then slacking off or going on an indefinite unpaid leave is the type of thinking that leads us to see the Great Depression a giant, unexpected and astonishingly LONG UNPAID VACATION for millions of people: original, yes, helpful, no.
Public choice theory, like any universal gizmo, has not only helped revolutionize the institutional relationship between voters, politicians, and bankers in democratic societies, it has become, as Daniel Dennett said about evolution in Darwin’s Dangerous Idea, the “universal acid” that eats away everything it touches by turning everything into a principal-agent/rent-seeking problem. (fn 74)
The whole issue of unemployment as being immoral should be another idea that deserves rethinking because of the FALSE ASSUMPTIONS it is based on and has been used to beat people to actual death by starvation or by truncheon when non-living wages are protested. It is one thing to demand that people work (although false, based on the non working lives of the wealthy or the true choice to work as a high priced CEO or manager because they don’t HAVE TO WORK to have basic economic security) IF BUSINESSES WERE OBLIGATED TO PAY AT LEAST A LIVING WAGE. But they do not pay a living wage. Politicians like Jeb Bush proclaim we wage slaves don’t work hard enough to stave off hunger and therefore do not deserve government assistance. Well, instead of blaming the victims, maybe the blame workers’ needs on the subsidized, bankrupt proof, corporations-are-people with more rights than actual people of contemporary capitalism. The wage-thieving-while-profiteering on their overpriced unregulated goods produced at the cost of the very minutes of working people’s actual lives blame immigrants, women with children (and no husband, whether widowed, abused, divorced for a trophy wife, or any circumstances that allow women to live their lives WITHOUT A MAN should they prefer not to be a maid, cook, chauffeur, sex slave, and ego-massager of some man ON TOP OF THEIR DAY JOB.
Damn, digressed again. Pages 159-160 continued:
Think that countries in a currency union might actually come to each other’s aid out of a sense of solidarity? Don’t be so naive. MORAL HAZARD is ever present. Worried that you can’t tell what the future may hold? Don’t worry. Properly defined rules will make the future conform to your preferred vision. Terrified that profligate governments will NOT REFORM their economies when you compensate for their unemployment through transfers? You are right. They will not do so, they will “hide and rent seek” off your taxpayers; so their governments should be replaced with ones that you can trust. Welcome to Europe.
The MORAL HAZARD logic embedded at the core of PUBLIC CHOICE arguments covers, and infects, all possible circumstances. Yet in doing so, it mistakes the mechanisms that generate trust — diffuse reciprocity, norms of mutual aid, and so on — for naive weaknesses that can only be eliminated by more RULES and stronger SANCTIONS: exactly the things that eliminate the possibility of trust. While social capital does not trump MORAL HAZARD per se, when policy makers view all mutual interactions as agency problems, where on party will inevitably TAKE ADVANTAGE OF ANOTHER, the only solutions imaginable are the elimination of institutional ambiguity, the tightening of rules, and the writing of superficially complete contracts — which looks a lot like current Eurozone reforms. The problem is that what economists call MORAL HAZARD is what normal people call trust. You cannot eliminate the former without destroying the capacity for generating the latter. . . The EU’s political project was built on trust, not the elimination of MORAL HAZARD. That’s why it worked. Its monetary project is based on opposite principles.
Oaky, this gets a little off being about Europe, but I love the way he pointed out the issue of MORAL HAZARD throughout. The one thing that absolutely proves corporations are NOT people is that they have no morals.
The next bit on the IMF reminds me of the Warren Zevon song that guts the IMF and the World Bank. Which reminds me of the Elvis Costello tune featuring the line line about Margaret Thatcher needing to be dead and buried so he can “stamp the earth down.” Reagan’s British equivalent proving women can be heartless bastards too.
Page 174: just a little sentence without context but basically points out the fallacy of the economic policies of our world today:
In such a world, the slump is the perfect place to cut while spending is always and everywhere the wrong policy.
In terms of actual policy, taxes should not be raised and entitlements should be cut. (fn 151)
Drawing on separate work on the composition of governments and policy making, Alesina assures the assembled finance ministers that if they go in this direction [no tax increase and entitlement cuts] and start to cut budgets in the middle of a recession, not only will it MAKE THINGS BETTER [for the rich], it will not cost them their jobs. In fact, the public will reward them for their boldness since CUTTING THE WELFARE STATE IS NEITHER UNFAIR NOR AVOIDABLE since “the rhetoric about the immense social cost of fiscal adjustment is blown out of proportion and is often used strategically by CERTAIN GROUPS, not necessarily the most disadvantaged, to protect themselves. (fn 152) And it’s unavoidable because the welfare state and its TRANSFERS are TOO BIG not to touch and precisely what need to b cut to make GROWTH RETURN and REDUCE THE DEBT. (fn 153) Remember, increasing taxes or spending more has the opposite effect. [sarcasm]
Note, this was about a European group of financial policy makers when referencing the DO NOT RAISE taxes which is, in fact, the OPPOSITE WORLD version of what should be done. But the US under Republican presidents and governance by Republic Congress has doubled down on this policy that was already tripled down by George W. Bush with his tax cuts for the wealthy and other cheats to benefit the “capitalized” 1% with so much money already that they cannot spend it in a lifetime or their children or their children’s children, but by god, that whore in the “inner city” doesn’t deserve a nickel of tax relief, even on the “estimated” tips she is taxed on by the IRS. Wealthy homeowners get to deduct the INTEREST on their McMansions or actual multi-million dollar mansions to reduce their tax burden but by all that is holy in this FISCALLY CONSERVATIVE world, she needs to pay income tax on tips at a rate higher than Mitt Romney’s cushy $200,000 income from dividends and such, never having to mow his own grass as far as actual work work goes.
Page 180 discusses the foolish notion that many conservative ideologues have that the return to the gold standard will salve “any and all economic problems” when adhering to this standard caused two massive depressions (1870s and the 1930s).
I can only assume that the folks peddling the reign of gold as a good idea are ignorant of the actual history of the gold standard. Working on that assumption, and to enable us to understand why austerity in the 1920s and 1930s lasted so long, did so much damage, and why its history matters for the Eurozone today, it is worth revisiting the workings of the gold standard.
It matters for the U.S. too because there are always some cranks that bring it up and fool clueless people into believing them. It is fascinating but I won’t recap it here. It relates to trade deficits too.
Inflation, the great fear of the rentier class, never appeared. NEVER ONCE DID AUSTERITY HELP.
I always thought inflation was a bad thing for working people because of the post WWI debacle of German reparations that were, as I understood it, punitive. Inflation meant that their currency was next to worthless. I remember reading an anecdote about people carrying shopping carts of currency to buy a loaf of bread. Might be an urban myth, but I somehow think it was true at least as a metaphor. Turns out the German government tanked their economy deliberately and the people’s suffering be damned. This “hyperinflation” then set the stage for the rise of Hitler. Hatred of those countries and people (i.e. Jewish bankers) who punished them for being responsible for millions of deaths in their world conquest efforts part one (though I really do not believe the little Kaiser really was the one who kept the push on).
The hyperinflation that still says the contemporary German psyche so deeply was not, as noted in chapter 3, promoted by some kind of misguided Keynesian stimulus. Rather, it was the German government’s DELIBERATE POLICY, design to make the payment of reparations, especially after the French occupation of the Ruhr, all but impossible. In that regard, it was quite successful. Knowing that the reward for putting their fiscal house in order would be GIVING THE FRENCH EVEN MORE MONEY meant that Germany decided to pull the fiscal house down. (fn 45) As Albrecht Ritschl put it succinctly, “Inflation proved to be a formidable weapon against reparations creditors, at least in the short run. It help insulate Germany from the international slump of 1920/21, improving her export position and fueling internal demand . . . .It also exploited Germany’s remaining foreign creditors, largely neutral countries, by depreciating the paper mark reserves they had accumulated during the stabilization period. . . . Above all, it paralyzed the financial system that would have been needed to organize an orderly transfer of reparations.” (fn 46)
Passive resistance plus devaluation plus deficit monetization equals hyperinflation.
But even if the IMF has lost faith in austerity, it does not mean that its champions will not try to find other examples where it has SUPPOSEDLY worked. TOO MANY REPUTATIONS and too much sunk political capital are at stake for mere facts to get in the way of this ideology. It is in this regard that we turn to the new hop for austerity champions — the REBILL alliance of Romania, Estonia, Bulgaria, Latvia, and Lithuania. These countries have supposedly demonstrated, in the real work, never mind in the econometric world, that austerity works. As such, the Greeks, the Spanish, and everyone else simply AREN’T TRYING HARD ENOUGH.
The author then goes on to dissect why it just ain’t so. Once again, the MORALITY of economics is the fatal flaw in the economic policies.
Page 229 the start of chapter 7:
A conjecture in Lieu of a Conclusion
This book has examined the case for austerity as both a sensible economy policy and as a coherent set of economic ideas, and it has found austerity to be LACKING IN BOTH RESPECTS. Austerity DOESN’T WORK. Period. . . . It has instead brought us class politics, riots, political instability, more rather than less debt, assassinations, and war. It has never once “done what it says on the tin.”
A set of ideas, what begins as an absence in the history of liberal economic thought becomes a schizophrenia over the role of the sate in the economy — the “can’t live with it, can’t live without it, don’t want to pay for it problem” — which in turn becomes a neuralgia regarding the state in general. EXPELLED FROM THE CORPUS OF REASONABLE IDEAS after the Great Depression, austerity waited for its chance, was enabled by other supporting intellectual developments during its long hibernation in the institutions of Germany and in the minds of Austrian and Italian economists in the United States, and reappeared full-blown in the 1990s and 2000s.
Austerity has been applied with exceptional vigor during the ongoing European financial crisis, and it has produced exactly the SAME FAILURES one would expect if its previous intellectual and natural histories had been investigated. The costs of this EPISTEMIC ARROGANCE and IDEOLOGICAL INSISTENCE have been, and continue to be, HORRENDOUS. (fn 1) If European economic policy makers, like medical doctors, had to swear “to do no harm,” they would all be banned from “practicing” economics. If AUSTERITY becomes the policy mantra of the United States ANYTIME SOON, despite all the evidence to date, we can expect it to be equally DESTRUCTIVE THERE, too, and remember, we Americans ARE MORE HEAVILY ARMED.
But the desire to apply austerity is not JUST IDEOLOGICAL, although it is that. There are also good material reasons for the continuing application of austerity, especially in Europe — that is, clearing space on the balance sheet of sovereigns in case one of the region’s TOO BIG TO BAIL banks goes bust. What began as a banking crisis in the United States continues as one in Europe. The euro has TURBOCHARGED this problem by effectively turning the twenty-first century European economy into a classical GOLD STANDARD. The results are once more PREDICTABLY AWFUL. How did we get into this mess again?
In one sense — and leaving behind the Mother of All Moral Hazard trades that was the generator of the European side of the crisis — the trigger for all this was a classic case of good intentions gone bad. While the US financial system was, as we saw in chapter 2, AN ACCIDENT WAITING TO HAPPEN, what brought us down the particular path we find ourselves stuck on now was the DECISION TO BAIL OUT THE BANKS starting with the US TARP program in 2008.
I gave an analogy for why governments, especially the US government, did this earlier in the book: 150-odd MILLION workers, 72 percent LIVING PAYCHECK TO PAYCHECK, 70 MILLION HANDGUNS, no cash in the ATMs. It still focuses the mind. Personally, back in 2008 I thought bailing out the banks was the right thing to do. I thought “there was no alternative.” But as with all TINA logics, there are ALWAYS alternatives. When we consider now the costs of this decision, I am no longer so sure it was the right thing to do. (pp. 229-231)
Note, the TINA framework (there is no alternative) is itself a lie. The Goldman Sachs people in charge of the government economic policy didn’t even try to consider, say, wiping out the mortgages of underwater properties that were underwater because of the cheating and gambling of banksters NOT A MORAL FAILURE OF HOMEOWNERS.
The IMMORALITY of bailing out people who had been coerced and duped into “buying too much house” they could not afford was NOT THEIR FAULT. The realtors make a percentage of the sale price. There is an inherent conflict of interest for a buyer to rely on a real estate agent to sell them a cheaper house. There is probably masses of research out there discussing the psychology of hopes and dreams that distort practical and critical thinking in the face of pressured sales talk and tricky running of the numbers to illustrate what you can afford. No one goes into buying a home with the expectation that they will be screwed if they lose their job.
“Your mortgage is not my problem!” was the furious phrase I heard some old white man announce with absolute certainty of the righteousness of the truly godly. [sarcasm] Another variation was along the lines of: “My neighbor remodeled to put in a second bathroom and now can’t afford the payments on the second mortgage. I don’t have two bathrooms, why should I pay for my neighbor’s!”
The framing here is that the $30,000 a year people would be paying a significant portion of their already pathetically small earnings to help their PROFLIGATE — IMMORAL — neighbor. The Jedi mind control of the Republican greedy bastards and self-righteousness combines in a perfect storm of economic disaster for Main Street at the hands of Wall Street — whose purpose is to save themselves and to hell with everyone else. The stinking Democrats, more properly named neoliberals but with the word liberal in there it really is inaccurate and confusing to too many people. Republicans Lite might be closer to reality. But “lite” sounds so benign, it won’t do either. A more accurate label would be something like, “Work or Die” party, WoD for short. That actually would include both the corporation and wealthy policy makers who so far have succeeded in persuading too many Americans that THE RICH are NOT the problem; immigrants, refugees, bitchy women, PoC, basically YOUR NEIGHBORS are the problem. And any fix will come out of your pocket despite the fact that the wealthy got there by cheating the wage workers, like your neighbor. The wealthy and corporations CONTROL POLICY and therefore control every aspect of your life. How anyone cannot see this as a simple clear truth is beyond me. THE POLITICIANS ARE NOT REPRESENTING THE INTERESTS OF 99% OF THE PEOPLE; they want to keep their cushy jobs rather than work for a living (you know they just tell their staffers to do the work to achieve their idealogical and dogmatic beliefs (the Party line) and just spend two or more hours a day doing all they can to sell themselves to the rich to maintain their illusion of power and influence when they are simply prostitutes with an UNCONDITIONAL BASIC INCOME and THE BEST MEDICAL CARE that taxpayers can pay for. Plus benefits, perks (fly home on the weekends to be with your family, as opposed to moving your family to D.C. thanks to the taxpayer dime).
To the immediate costs of the crisis discussed in chapter 2 one must add the DEVASTATION and waste caused by years of austerity policies that have cost far more than any simple bank run, no matter how big. Perhaps we should have let the banks fail. Yes, systemic risk says otherwise. But if the alternative produces nothing but a decade or more austerity, then we really need to rethink whether the costs of systemic risk going bad are any worse than the austerity we have already, and continue to, put ourselves through.
Bailing led to debt. Debt led to crisis. Crisis led to austerity. (p. 231)
Here’s the thing: the men in charge of making these decisions had a conflict of interest. They were the banksters. They did what they did to save their own wealth, the wealth of their cronies, and the wealth of their campaign donors. The people in our government ARE NOT PUBLIC SERVANTS; they are greedy grasping corrupt power mad self-righteous authoritarian theocrats with delusions of superiority who will do anything to remain millionaires among billionaires and not have to do wage work for a living or live with the economic insecurity of the rest of us.
This will never change because the Founding Fathers wrongly believed that enlightened men who would put country first (i.e. the people), perform their duty as public servants for a few years, then go back to their real life. It did not take long for drunken, womanizers, selling off ambassadorships and thousands of other “political appointments” became the order of the day. Since Congress makes the rules, they made the rules to benefit their perpetual career for life and making fortunes on the side and getting cushy “Board of Directors” posts or lobbying jobs requiring golf games, cocktails, and phone calls to their old pals if they ever failed to get reelected, though they gerrymandered and cheated their way to maintain their sinecure.
They continue to be self-serving madmen determined to inflict their own immorality on the 99 percent of us by policies that punish people for the adverse effects of their policies that enrich themselves. They make the rules by which they choose to abide and therefore everything they do is “legal” a feat of circular logic that makes me weep.
The Founding Fathers would have been better off if they had devised one additional final arbiter over all things decided by Congress, the President, SCOTUS, or any agency “rules” such as “equal time” from the FCC. The final arbiter would be the ETHICS branch and it would be actually — not theoretically like SCOTUS — non-partisan. The people who would be eligible to serve would be activists, like Ralph Nader, who obviously cared more about people than any government official and, it goes almost without saying, corporate and profiteer interests. Howard Zinn would have been a great member of such an ethics board. Dr. Martin Luther King, Jr. would have been ideal.
Gloria Steinheim, Winona La Duke, Maya Angelou (RIP beloved author and poet and amazing person), the current President of Planned Parenthood, the leader of NARAL, Barbara Ehrenrich, Roxanne Gay, belle hooks; I should do a list of all the great women who would be great to be given a chance to bring some realistic perspective on what has been dominated by rich white men for far too long.
Gee, maybe a “no millionaire” rule for political offices should be enforced!
I would say Bernie Sanders, but I think that such a BRANCH OF GOVERNMENT should only be staffed by people who have never been elected to government office and will never be eligible for elected office. I know there would be all kinds of details to work out since obviously I want it to be people first not just “opposition” to the Party in power. But it is a concept, perhaps inspired by the recent efforts to eliminate the subordinate ethics office that theoretically oversees Congress now.
Page 237: The story we all love, ICELAND
Iceland, in many ways, was Ireland on crack. Its bank assets to GDP ratio in 2007 was nearly 1000 percent [not a typo, one thousand percent]. So when Iceland got into trouble, it was going to be the mother of all banking crises. But there was one important difference. Where Ireland followed the mantra of austerity, slashed spending, and bailed its banks, Iceland LET ITS BANKS GO BANKRUPT, devalued its currency, put up capital controls, and bolstered welfare measures. A comparison of the two is as close to a natural experiment of the effects of austerity and bailouts as you are likely to find.
AND THEY PUT THE BANKSTERS IN PRISON!
Now they have taken further action to do what the private sector proved stubbornly unwilling to do: they have forced wages for women to be actually equal to men’s wages.
Speaking of taxes, it’s not just going to be sophisticated quasi-hidden liquidation and/or so-called Tobin taxes on financial transactions that are levied, either. Personal taxes have room to grow too — especially in the United States. A recent analysis from the Congressional Research Service, which gives an idea of what Congress might be thinking [2013 remember], noted that TOP MARGINAL TAX RATE of income tax in the United States in the 1940s and 1950s, the heyday of US power, “was typically ABOVE 90%” while “the top capital gains tax was 25%.” Meanwhile “the share of income accruing to the top 0.1% of US families increased from 4.2% in 1945 to 12.3% in 2007.” (fn 40) This is an interesting juxtaposition of observations, to say the least. The justification for such reductions and gains is, of course, the SUPPLY SIDE argument that MORE CASH AT THE TOP leads to more investment and growth.
[n.b. the author is NOT saying supply side actually works, it is aka trickle-down economics lie of Reagan; why no one ever questioned why the actual workers producing the wealth deserved more than a trickle is a mystery to solve another day.]
But they [supply side policies] do appear to be “associated with the increasing concentration of income.” (fn 42) Given that the US federal state spends 25 percent of GDP while only RAISING 18 PERCENT, a cynic might conclude that the fact that all this income is concentrated in so few hands might make it a GOOD TARGET TO REDUCE THAT BUDGET DEFICIT.
It’s like the quote (Snopes says falsely attributed to Willie Sutton, bank robber) points out: that’s where the money is! Of course the rich should pay more! They have ALL THE MONEY. Furthermore, they park it offshore to avoid taxes as pathetic as they are, especially regarding capital gains tax which above all else should be taxed at the same rate as wage workers income! You know they will still invest, that the capital gains tax break is not functioning to keep investment pretending to encourage “growth” the holy grail of economists, as opposed to, say, UNRESTRICTED BASIC INCOME for citizens to allow people to live in basic economic security. They can work to earn much more, but my version of it keeps the basic income coming at all times, no means testing at all, so even rich people get it because once you start allocating based on “need” or “deserving” or any other MORAL judgement, the principle is lost. If people had time to find the right job with guaranteed basic income, that would be a win for everyone, though corporate exploiters won’t like the loss of power of the “at will” firing threat to keep employees beggarly and ABLE TO say take this job and shove it when ill-treated.
Pushing us further in this direction [raising taxes on the rich to reduce the deficit], several very serious and very mainstream economists are beginning to say things that a few years ago would have been heard only in the drunken bar huddling of disgruntled lefties. For example, tax economists on both sides of the Atlantic are beginning to argue that higher taxes on top earners can pay for debt reduction. Apparently, THERE IS NO NEED FOR AUSTERITY, after all. And since the upper-income brackets benefitted the most from the last three decades of tax cuts, it would seem only too fair to increase the tax burden on them just a little. (pp. 242-243)
Remember that AUSTERITY policies only apply to the poor, the 99 percent. Austerity is never ever a policy that causes the rich to feel any pinch.
Mitt Romney found such redistribution to be “un-American,” showing an astonishing ignorance of the polls of Dwight Eisenhower (Republican). (fn 44) But there is PLENTY OF ROOM TO TAX AT THE TOP because of the bailouts. [his emphasis] It’s the gift that keeps on giving. After the 1929 crash income inequality and financial-sector pay declined sharply relative to ordinary earnings, but this time they did not, so taxing now is simply taking the bailout back to the taxpayer. This idea DOES NOT JUST RESONATE with progressive circles in the United States.
He goes on to describe detailed arithmetic as to why raising “the average income tax for the top income percentile to 43.5 percent from 22.4 percent, the level of 2007, ” would be “enough to close the US structural deficit WHILE STILL LEAVING very high earners with MORE AFTER-TAX INCOME than they would have had under Nixon.
Unfortunately money does talk even though it should not be considered equal to human speech from a First Amendment perspective. The rich own the politicians. The politicians retreat into cognitive dissonance about their prostitution (and cheap tarts at that) by declaiming the MORALITY of mandatory wage work for non-living wages.
Now with 45 as the token leader of the shadow government of multi-billionaires whose names you never even have heard of are running the show (along with the right wing nuts at the Heritage Foundation who manufacture “think” pieces out of thin air to justify their cruelty and avarice for the few), we have now witnessed the first budget proposal and it is appalling on so many levels that another 10,000 words would not be enough to cover all the defects.
In a nutshell, it is the “work or die” combined with “just die” from lack of medical care, and removes all possible safety net programs, regulatory functions to keep water and air capable of sustaining life (the rich, apparently, plan to live in Zardoz bubbles). I really fail to understand why the prostitutes aka politicians are so eager to give billions of dollars to billionaires. WTF is wrong with them?