Austerity When Stimulus Is Needed
by Stephen Lendman
On December 31, 1933, The New York Times published John Maynard Keynes “Open Letter” to Franklin Roosevelt.
On November 25, 2008, the London Guardian republished an abridged text. It urged:
supply “cheap and abundant credit;””spend, spend, spend;”
stress “speed and quick” recovery; reform can come later;
focus on “increas(ing) the national output,” boosting purchasing power, and “put(ting) more (people) to work;”
“increasing aggregate purchasing power is the right way to get prices up and not the other way around;”
undertake “a large volume of loan expenditures under government auspices;” at the same time, work cooperatively with business; and
choose projects that “can be made to mature quickly on a large scale, as for example the rehabilitation of the physical condition of the railroads.”
Roosevelt, in part, followed Keynes’ advice. More was needed. Depression continued. End of decade war spending ended it.
Obamanomics is polar opposite FDR’s. Cut, cut, cut, replaced spend, spend, spend. People needs get short shrift. Imperial priorities matter more. Do do corporate ones and benefits afforded America’s rich.
Conventional wisdom is wrong. Economic policy is wrongheaded. Conditions are dire. Main Street’s in protracted Depression. Austerity deepens hard times. Sequester piles on more.
Paul Craig Roberts calls America’s economy “dead.” Recovery is illusory. There is none. The worst is yet to come. More on that below.
“The consequences of a dead economy when the government is wasting trillions of dollars in wars of naked aggression and in bailouts of fraudulent financial institutions is a government budget that can only be financed by printing money,” says Roberts.
“The consequence of (doing so) when jobs have been moved offshore is an inflationary depression.” It can arrive when least expected. Forewarned is forearmed.
Roosevelt vowed to revive economic growth. Obamanomics prevents it. Don’t expect media scoundrels to explain.
March 1 triggered $85 billion in sequestered cuts. They’re automatic. Obama ordered them. He blamed Republicans. He lied. Throughout his tenure, he demanded them.
He wants America’s social contract destroyed. Both parties share blame. Bipartisan duplicity targets Medicare, Medicaid, Social Security, publicly-funded pensions, food stamps, unemployment benefits, and other domestic programs. They’re vital to sustain.
Initial cuts are for starters. Much more is planned.
The New York Times supports the worst of Obamanomics. It blames Republicans. “Why are (they) so happy when they should be ashamed,” it said?
Left unsaid is Obama’s slash and burn demands. He insists deficit reduction be made on the backs or ordinary people. He’s been cutting social programs all along. He wants much more.
He’s hardline and unsympathetic. TimesSpeak blames Republicans alone. Doing so turns truth on its head. The criminal class in Washington is bipartisan. Don’t expect Times editors to explain.
Economic conditions are dire. Open-ended QE failed. Money printing madness doesn’t work. America’s economy is contracting. Markets pay no attention.
When asset prices detach from fundamentals, bubbles result. The more they inflate, the greater the eventual pop. Systemic failure looms. When is anyone’s guess. Deficit cutting promises harder than ever hard times.
In Q IV 2012, America’s economy stalled. Since 2007, no growth occurred. Weakness defines things now. Conditions steadily erode. Sequestered austerity accelerates the process.
So does raising the payroll tax. On average, household income takes a $1,000 annual hit. Spending is declining. Deficit cutting exacerbates it.
In Q IV 2012, business spending rose ahead of January 1 tax changes. It’s slowing. Expect more going forward.
Progressive Radio News Hour regular Jack Rasmus says the deficit faces no cliff. America’s economy does. Wrongheaded policies promise harder than ever hard times. He predicted it earlier. “Epic” recession conditions exist, he explains. They’re worsening, not improving.
Wealth redistribution reached obscene levels. It exceeds “moral outrage,” he says. It prevents economic recovery. It makes hard times harder.
Inequality defines America. Since 1979, America’s top 1% tripled its share of national income. It went from 8% to about 24%. It continues rising.
In 1928, America’s wealthiest got 22% of national income. Inequality today is greater than ever.
It’s growing at an accelerating rate. It’s contributing to America’s decline. From 1993 – 2000, top earners got 45% of income growth.
From 2000 – 2008, they got 65%. In 2010, it was 93%. Before long, they’ll get it all. They’re doing fine. So are bankers and other major corporations.
From 1998 – 2007, corporate profits rose 10% a year on average. In 2009 and 2010, they increased 243%. Excluded are sheltered amounts offshore. In 2012, best guess estimates put them at $1.4 trillion.
Increased sales didn’t produce profits. Cost-cutting did on the backs of workforces. Jobs, wages, benefits, and hours worked suffered. Productivity rose.
In 2011, profit margins reached their highest level in over 80 years. At the same time, federal, state, and local government tax cuts benefitted bottom line performance.
In less than 18 months, it doubled. It increased twice as fast as pre-tax profits. High income households benefitted proportionately. They did so through equity appreciation, dividends, interest, rents, and other ways they increase wealth.
In contrast, ordinary people lost out. Increasingly they’re more hard-pressed to get by. Force-fed austerity promises worse.
If federal tax revenues reverted to pre-2000 levels (20.6% of GDP), $458 billion annually would be raised. Over $4.5 trillion in 10 years would offset planned sequestered cuts.
Letting Bush era tax cuts expire last December 31 would accomplish the same thing. Another way is by taxing America’s wealthiest more.
On average they pay 22.5%. An effective 45% top marginal rate produces nearly half a trillion dollars annually. Doing so raises federal tax revenues from 14.4% to their pre-2000 20.6% level.
It also restores fairness. America’s social contract can preserved and enhanced. A modest Tobin financial transaction tax above certain investment amounts goes further.
So does taxing offshore transnational corporate subsidiaries. Doing so adds hundreds of billions in government revenues annually.
Much more can be done. Targeting America’s bloated defense budget is long overdue. Taxing trillions in hidden tax haven wealth would raise enormous amounts annually.
America’s deficit problem is self-inflicted. Solving it is as simple as making corporate America, wealthy elites, and tax cheats pay their fair share. Don’t expect media scoundrels to explain.
Class war is official US policy. Popular needs go begging. America’s middle class is declining. Low wage/poor benefit/part-time or temp jobs replaced higher paying full-time ones.
Union representation is weak. It’s on the way perhaps to being eliminated altogether. Free trade works one way. At the same time, it lowers wages and destroys jobs.
Offshoring is a national disease. Paul Craig Roberts calls it worse than terrorism. Millions more jobs are at risk. Upward mobility is disappearing. America’s decline is assured. Only fools claim what’s hugely destructive is good.
Many other national priorities cause enormous harm. Ordinary people suffer most. The gap between rich and poor is unprecedented.
Since 1990, middle America lost 28% of its wealth. At the same time, rich elites increased theirs by around 50%.
Sequester madness promises worse. America’s heading for dystopian backwater status. Stagnation and decline are certain. Rebalancing is long overdue. Bipartisan complicity prevents it.
Ordinary people are on their own to change things. Duopoly power won’t do it on its own.
It bears repeating. Revolution is the only solution. It’s high time grassroots activism initiated it. It won’t happen any other way.
Stephen Lendman lives in Chicago and can be reached at [email protected].
His new book is titled “Banker Occupation: Waging Financial War on Humanity.”
Visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.