Down with the Bah Humbug of Taxes, Surpluses, Spending, and Deficits, up with What We Need and Can Do
The flagrantly unjust and harmful policies for taxes, governmental spending and real and imagined surpluses in place or on their way had their beginnings in the last years of Carter's presidency — prodded and facilitated by what Richard Du Boff termed “the corporate counter-attack,” against unions and decent social policies. In the ensuing quarter century, governments at all levels have become dominated by GOP and Democratic conservatives, a domination achieved by a public effectively taught (in Paul Baran's memorable phrasing) “to want what they don't need, and not to want what they do.”
Some of what we do need from governmental policy was first effected late in the depression of the 1930s, and both broadened and deepened in the Fifties and Sixties. The policies were reformist, not radical; and/but they helped to meet some deep needs of the people and the economy. That it took a depression, a world war and a Cold War to make such good sense possible is a severe indictment of our Right-skewed politics, as is the fact that the West Europeans pursued such reforms much further, even though it has always been easier for us to do so.
The nature and importance of those policies may be understood by the reminder of where matters stood in the USA in 1935, as the “second” New Deal began: the USA had NO unemployment insurance, NO provisions for the old, survivors, or the disabled, NO laws against child labor, NO minimum wage or maximum hours, NO Medicare or Medicaid or the social benefits (pensions, paid vacations, health care) paid wholly or partially by employers, NO environmental laws, NO subsidization of low-cost housing, NO educational policies to counter the problems of low-income parents and children — none of those (among other) policies essential to a safe and decent society, and to which we became accustomed (as we also became politically lazy and socially indifferent: just what Dr. Capitalism wants).
What passes for economic wisdom today is frighteningly reminiscent of the 1920s — as is, in many ways, the behavior of the economy; then, as now, a laissez-faire set of guiding principles which views governmental intervention for social well-being as it would child molestation — a viewpoint joined in and propagated-propagandized by the economics profession. As in the 1920s, mainstream econ believes that if and when the economy moves toward and into recession, manipulation of interest rates is not just the best but the only solution: Greenspan, as a follower of Ayn Rand and Milton Friedman, accepts that as being right and proper, implicitly or explicitly — as do most of those in Congress, most of whom, after all, came to their “adulthood” in the late 1970s, as this particular Hell was breaking loose.
The general public has reacted to this set of regressive developments with puzzlement or acquiescence or enthusiasm or apathy, in one or another combination — either forgetting or never knowing that the realities and economics of the 1920s carried us to socioeconomic disasters almost unimaginable for today's all too pervasive smug and greedy mentalities.
But this too must be brought back to attention: if the ongoing rightwing juggernaut is to be halted and reversed now and in the future, what is required is what made the earlier reforms possible: hard work by those who formed unions, and political involvement and hard work by a significant portion of the general public.
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To make any progress along that path, we must know the whys and wherefores of the relevant economic analysis and related economic policies. They are not very complicated; but they involve unlearning as well as learning.
In an earlier ZNet commentary on the “New Economy,” I compared the present with the 1920s, noting both important differences and important similarities, and argued that serious trouble lay ahead. That commentary may be worth re-reading along with this one. Its emphasis was on the extraordinary fragility of the U.S. and the global economy, due to mountains of consumer, business, and foreign debt, rampant speculation, and pervasive excess productive capacities, problems all more severe than their 1920s counterparts.
There is much debate as to whether or not the U.S. economy is at the beginning of a recession (something seen as totally unlikely even a few months ago). Nobody can predict economic futures with anything like precision; but one can point to probabilities. They are 1) there will be a recession in the USA soon; 2) in that the U.S. economy is “the consumer of last resort” for an export-dependent world economy, the recession here will occur soon afterward there; 3) in that this economy is wildly over-borrowed, and all other economies also heavily debt encumbered, once trouble begins it is likely to spread and deepen; 4) virtually every government now takes “free market” and monetarist policies as undebatable; 5) in the near future, as in the past that began in 1929, it will take years for good sense to catch up with and replace today's “common sense.” What is that good sense?
It is not monetary policy, which is what the Greenspan and the Fed do: manipulating the rate of interest (and the supply of money) to stimulate the economy. Its underlying creed is that the economy never needs more than a little push: hands off, now and then a tickle — the sort of thing a pilot delicately does by adjusting trim tabs, as distinct from flying. Such a remedy is effective only when the problem is minor — good for a cold, but not for the flu, let alone pneumonia.
Duplicative excess productive capacities over the globe mean that too many factories are producing the same things and trying to sell them to the same people or places in the face of a broad and deep inadequacy of consumers and businesses able and willing to buy all that supply at prices that allow profits. That is the problem whose smoke trails now darken the horizon. It will not be resolved by “the free market,” for that is its cause. Confronting such structural imbalance between supply and demand with interest cuts — as the Japanese have been learning for a decade now — is akin to “pushing on a string.”
In the face of serious recession (to say nothing of depression) what is not only economically necessary, but, as well, socially desirable, is to add governmentally induced demand to private consumer and business demand; that is, for the government to subsidize what Keynes once called “social consumption” and “social investment,” and to run a budget deficit (increasing expenditures, but not taxes) to do so. A moment's reflection reveals that such policies create jobs and increase incomes and stimulate sales for all businesses and improve the health of the entire socioeconomy.
The U.S. economy has been moving toward surplus budgets in the years of expansion; now, as we move toward contraction, we should be accumulating deficits: not by reducing the already too low taxes on the rich, but by leaving them where they are, while giving a quick rebate to the bottom third of the population and lowering income taxes for the next 50% or so in some reasonable progression.
More specifically (as I argued in a Zcom on Social Security last year), the USA should cease to be unique in its financing of social security through payroll deductions, and finance it instead through the general tax fund based on income taxes. The average family now pays more in payroll deductions than in income taxes; and those with incomes $72,000 and higher pay zero tax on anything above that. It is stupid and unjust: the poorer you are in your working years, the less you receive in retirement; the richer you are, and thus needing nothing, the more you get. Devilish.
On the expenditure side we should be pushing for what is socially necessary and, in the process, move toward the decommidification of essentials: social expenditures for housing, education, a single-payer health care system, environmental projects to save our air, water and soil, and expenditures of all sorts on our creaking infrastructure (not least, in the realm of public transportation).
Sounds good, no? To you and me, yes. But there has been no “sounding” of such notions now for a full generation; just the opposite, with an ongoing bamboozlement of the general public “teaching” that what sounds good for us is bad for the economy (read: big business), and thus, bad for us.
So it is, once more, that we must exert ourselves to build a politics that will do what will work for a safe and sane and decent and buoyant socioeconomy. If we can do that we can then go on to do something better than that: work toward a new and better system.
That, in this the richest nation in all of history at its richest point, any individual or family should be unable to meet fundamental needs is an obscenity verging on social criminality. That the U.S. public should accept the ideological ravings of the installed and ascendant Right is shameful. Change for the better has never depended upon a fulsome majority acting to bring it about, but on a dedicated minority. That's who we are, who we could be, who we must be.