Tuesday, April 23, 2019
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Class-Based Austerity

goldman-sachsWhen those ultimate welfare queens of capitalism—the super-rich who pocket 85% of their unearned income as the result of their very special capital gains “money stamps”—get a hugely discounted tax rate for income that just flows into their hands as interest without their actually doing anything while the disadvantaged (which happens to be more and more of us lately) are forced to accept unemployment, foreclosures, revocation of pensions, bad health care, and temporary jobs without benefits, then you know you have a system of class-based austerity: welfare for the rich funded by austerity for the rest.

The fat-cats comfortable in their mansions (financed by their capital gains welfare benefits) are absolutely correct that some poor individuals game the system, though hardly as effectively as a billionaire taking a monstrous tax break and sneaking the profits into an offshore account or a banker who hands out a liar’s loan on a mortgage loaded with “fees” (that will be taxed at the capital gains welfare rate) who then instantly off-loads the mortgage to, say, a Chinese bank, after which both banks will “lose” the paperwork and one or the other will foreclose on the house.

We can all agree that there are indeed both lazy and criminal individuals among the men-in-the-street, but most of the working and middle class aspire to stand on their own feet, whereas it seems that absolutely 100% of the rich aspire not just to receiving unearned income but also to getting a welfare bonus on that unearned income through a reduced tax rate! (For the financially challenged, let us be clear: in the U.S., today (unlike a few decades ago) if I grab a shovel and dig something in order to earn $100.00, I will pay the government somewhere between $20 and $40. If, instead, I borrow $10,000.00 and pay $100.00 in interest to use that money for, say, one day and turn around and loan that $10,000.00 to someone else at $200.00, I will have an unearned profit of $100.00 but will only pay the government $15. This difference between earning your own money and manipulating money frequently belonging to others is the greatest welfare give-away in history.)

When this system of welfare for the rich is up and running, the rich obviously get richer. Given an expanding economy, everyone else may also benefit enough to tolerate the obvious unfairness. Such was the state of the U.S. from the New Deal until roughly the 1980’s. But note that the capital gains rate is totally arbitrary and has been steadily going down. In 1978, when we Americans still fancied ourselves—with good reason, at the time—to be a middle-class country, the capital gains rate was 40%.  Indeed, the more trouble the economy is in, the greater the welfare benefit for the rich, bringing us, in this era of endless recession, to the blatantly extortionist rate of 15%. The highways, schools, and military that we all rely on get built either way – the difference is who pays for them.

It is in this context that austerity must be understood: if society requires austerity, i.e., sacrifice, belt-tightening, then it should begin with the elimination of tax code privileges for those who do not need such privileges. Even a two-year-old can understand that if one cookie is available to be handed out and a fat man with a plate full of cookies is at the table next to a skinny, hungry two-year-old with nothing to eat, it is not the fat man with cookies in both fists and two more sticking out of his mouth who deserves that last remaining cookie.

In the midst of a U.S. banker-caused recession that continues to rock the world, U.S. billionaires pay 15% on their unearned profits. The rich in Greece pay only 10%. The rich in Spain pay 18%. Italian billionaires pay nothing! Isn’t it just possible that when a society faces hard economic times, that if the rich did their share—instead of demanding welfare handouts, that the society might be able to pull itself up by its own bootstraps?

But no, the rich in their wisdom demand austerity for the poor accompanied by a decrease in the capital gains rate for themselves – welfare for the rich funded by austerity for the poor. That, obviously, has nothing to do with “the nation joining together to build a better tomorrow by sacrificing today” or any such nonsense. It has to do with piracy. To put it in more modern terms, it is class war. There is nothing new about such class war by the rich against everyone else. Pinochet did it in Chile with Kissinger smiling from the balcony, and the New York banks did it in Mexico during the peso crisis. Indeed, the New York banks did it to the U.S. all during the U.S. effort to colonize Iraq, until they went just a bit overboard and everything exploded in their faces in 2008, necessitating that little bailout to “save the (crooked) system as we know it.” Banker Paulson on his tour in Washington of course never explained why the American people should want to save the system as we know it. The system that we know today is not the system that we grew up in following the New Deal or during the era of American growth in the 1950s and 1960s.

When the policy of welfare for the rich plus austerity for the poor was applied to Chile or Mexico, well, that was just a couple of far-away third world places, and anyway, we didn’t really see what was happening. As for the Great Recession of 2008, well, most of us did not really see what was happening then either. But now, it is being done not only to rich Western societies, one after another, but completely out in the open. Everyone can see as clear as day what is being done to the Greeks, Italians, Spanish, Portuguese, and—yes(!)—even the French and British: a wave of austerity for the poor of the banks, by the banks, and for the banks…funded by social injustice. Moving forward the heavy wagon of an economically depressed society is best accomplished not by having the weak passengers hand their cash to the strongest but by having everyone work together to pull the wagon out of the economic mud.

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