Economist Michael Hudson views the conventional wisdom on economic matters as a farce. In a pair of articles on his site and on Counterpunch, he pushes against the undemocratic efforts of Wall Street and the banks to paint aid for average Americans as irresponsible. (He also was interviewed on Truthdig Radio earlier today.)
Hudson’s article, “America’s Deceptive 2012 Fiscal Cliff,” raises a simple question: Why is it OK to print money when the banks are in need, but not when the rest of us face economic distress?
Wall Street lobbyists blame unemployment and the loss of industrial competitiveness on government spending and budget deficits – especially on social programs – and labor’s demand to share in the economy’s rising productivity. The myth (perhaps we should call it junk economics) is that (1) governments should not run deficits (at least, not by printing their own money), because (2) public money creation and high taxes (at lest on the wealthy) cause prices to rise. The cure for economic malaise (which they themselves have caused), is said to be less public spending, along with more tax cuts for the wealthy, who euphemize themselves as “job creators.” Demanding budget surpluses, bank lobbyists promise that banks can provide the economy with enough purchasing power to grow. Then, when this ends in crisis, they insist that austerity can squeeze out enough income to enable private-sector debts to be paid.
The reality is that when banks load the economy down with debt, this leaves less to spend on domestic goods and services while driving up housing prices (and hence the cost of living) with reckless credit creation on looser lending terms. Yet on top of this debt deflation, bank lobbyists urge fiscal deflation: budget surpluses rather than pump-priming deficits. The effect is to further reduce private-sector market demand, shrinking markets and employment. Governments fall deeper into distress, and are told to sell off land and natural resources, public enterprises, and other assets. This creates a lucrative market for bank loans to finance privatization on credit. This explains why financial lobbyists back the new buyers’ right to raise the prices they charge for basic needs, creating a united front to endorse rent extraction. The effect is to enrich the financial sector owned by the 1% in ways that indebt and privatize the economy at large – individuals, business and the government itself.
The policy, as he says, is “destructive” and “aims to distract the public from asking why peacetime governments can’t simply print the money they need.”
Given the option of printing money instead of levying taxes, why do politicians only create new spending power for the purpose of waging war and destroying property, not to build or repair bridges, roads and other public infrastructure? Why should the government tax employees for future retirement payouts, but not Wall Street for similar user fees and financial insurance to build up a fund to pay for future bank over-lending crises? For that matter, why doesn’t the U.S. Government print the money to pay for Social Security and medical care, just as it created new debt for the $13 trillion post-2008 bank bailout?
The answer involves a double standard, he says, and a hidden tax on the vast majority of working Americans.
Shifting the tax burden onto labor and industry is achieved most easily by cutting back public spending on the 99%. That is the root of the December 2012 showdown over whether to impose the anti-deficit policies proposed by the Bowles-Simpson commission of budget cutters whom President Obama appointed in 2010. Shedding crocodile tears over the government’s failure to balance the budget, banks insist that today’s 15.3% FICA wage withholding be raised – as if this will not raise the break-even cost of living and drain the consumer economy of purchasing power. Employers and their work force are told to save in advance for Social Security or other public programs. This is a disguised income tax on the bottom 99%, whose proceeds are used to reduce the budget deficit so that taxes can be cut on finance and the 1%. To paraphrase Leona Helmsley’s quip that “Only the little people pay taxes,” the post-2008 motto is that only the 99% have to suffer losses, not the 1% as debt deflation plunges real estate and stock market prices to inaugurate a Negative Equity economy while unemployment rates soar.
What he is describing is a form of socialism, but not one that benefits society. Rather, it is a socialism for the rich — a way of socializing losses while privatizing gains. Rather than using the resources of society to improve society’s conditions — to provide retirement income, health care, upgraded infrastructure and environmental reconstruction and protection — we have allowed the banks and Wall Street to colonize the government, the entity charged with stewarding our public resources. The government then takes these resources — tax revenue, the ability to borrow, our physical resources — and hands them over to the private sector, asking little if anything in return.
Hudson goes on to say that the “$13 trillion debt creation” that saved “banks from having to suffer a loss” has been exempted from the standard argument that printing money causes inflation. Instead, the bailout “enabled them to resume paying exorbitant salaries and bonuses, dividends to bondholders and also to pay counterparties on casino-capitalist arbitrage bets.”
These payments have helped the 1% receive a reported 93% of the gains in income since 2008. The bailout thus polarized the economy, giving the financial sector more power over labor and consumers, industry and the government than has been the case since the late 19th-century Gilded Age.
That, of course, is the ultimate goal of austerity, especially when combined with a policy of aiding the banks. It speeds the upward redistribution of wealth (conservatives say they abhor redistribution, but the truth is that they have no problem with it so long as their prime constituency — the 1 percent — is the recipient) and leaves the society at large in the lurch.
What is clear to me, at least, is that we have no problem with socialism, so long as the socialism in question helps the elites and not the rest of us.
