This article was first published in Alternet.
Now that the shock of the Gabrielle Giffords shooting is starting to wear off and the country is returning to its normal insanity again, we’re back to facing a far worse, far more serious, and far more violent threat than mere rampage shootings: “Austerity.”
The DC-Wall Street power circuit has already decided for the rest of us that “Austerity” is the Big Word that will define the 2011 political agenda. Austerity is what the oligarch-sponsored Tea Party demanded, what the Republicans are promising to deliver now that they’re in control of drafting the budget, and what the Obama Administration is going to try to enact as part of their neo-Clinton triangulation strategy. They’re backed by the Establishment media, which has been hammering home the same message for months now: Austerity is the answer to our problems—problems that were created by the same Establishment that wants to make us scream in pain again, but that’s beside the point here. The way this “austerity” debate has been framed in all the major media outlets, anyone pushing for austerity cuts and “pain” is automatically labeled “courageous”—which is an odd way of defining courage, since not a single rich politician or pundit pushing for “austerity” will actually suffer that pain, and most will profit from it. But that’s what counts as “courage” in our era. These same media elites used words like “courage” and “bold” to describe how Vietnam War deserters sent other people’s kids to die in Iraq—it was “courageous” because these warmongering draft-dodgers didn’t pander to the protesters in the streets or popular opinion. (Of course by this standard, that would make the world’s worst, most undemocratic tyrants the most courageous leaders in the world.)
Since we’re so shamelessly obsequious already, why not just come out and admit that the word “courageous” means “anything a billionaire ever says or does or approves of”? It’s only a matter of time before we’ll be reading articles that will look like this:
“WITCHITA, KS (AP) — Charles Koch isn’t afraid to tell it like it is in order to get things done. Last week, when Mr. Koch ordered his butlers to wipe the specks of dust off of his shoes before fucking off out of his face or he’ll have them sleeping in cardboard boxes for the rest of their short miserable lives, some were outraged by the free-market billionaire’s bold, courageous choice of words. Sure, it didn’t win Koch many friends among his staff of servants, but Mr. Koch doesn’t believe that running a billionaire estate is about pandering to his servants. That would be too easy–and would lead his servants down the road to serfdom. For their sake and for the sake of freedom, Koch courageously explained, what mattered most was getting that speckle of dust off his shoes before Justice Scalia arrived for a game of croquet. This reporter, for one, was so impressed by Mr. Koch’s courage that he felt impelled to kneel down on the floor and lick Mr. Koch’s shoes—where this reporter observed the tongue-prints of many an enterprising reporter, economist and think-tank analyst before him, proof that most reasonable people today agree that Mr. Koch’s shoes taste like courage.” *
Indeed. By this logic, if they’re the courageous ones, then that means that the opposite of courage is we, the cowardly masses of lazy slobs, who need to be whipped into shape with a steady lashing of the “austerity” whip. We prove our unworthiness whenever we call for “Austerity for the Rich” which is of course the opposite of courage. That’s called “class war”—exactly the sort of totalitarian fascism one would expect from slobs like us who don’t understand that if taxes on billionaires are raised to the same tax rates paid by Manpower temp clerks, then we’re well on the road to Stalinist GULAGs and Nazi death camps.
Gimp-onomics: If you like pain, you’ll love austerity programs
That’s why they need to administer austerity punishments in-advance—we brought it on ourselves, it’s all our fault. Which might be fine and all, if only austerity worked. That’s what makes this insanity something so beyond-insanity that it defies description: the historical record tells a very different, disastrous story about austerity programs. These measures almost always end in the worst worst-case-scenario imaginable: economic disaster, violence, and repression.
Let’s start with the most catastrophic of all austerity programs in history—the one austerity program none of the Austerity Snake Oil peddlers want you to know about. It was the disastrous austerity program tested out in Germany way back in 1930, under Chancellor Heinrich Bruning, himself an austere centrist. The Depression was just spreading around the globe, and Bruning, backed by Germany’s industry titans, believed that Germany would only recover with a strong currency, which he tethered to the gold standard, and a balanced budget through brutal cuts in wages, pensions and unemployment benefits, and hikes in taxes and fees. Bruning learned austerity as a doctoral student at the London School of Economics—which nurtured and promoted free-market whores like Friedrich von Hayek and the “Austrian School” of austerity favored by today’s ruling class, and piped out to the rest of us through the editorial pages of the Wall Street Journal and the vast libertarian nomenklatura. Bruning applied the von Hayek medicine to Germany, and the resulting backlash was so intense that Bruning suspended parliamentary democracy and ruled by emergency decree, setting a fine example for the next guy who took power. After just two years of “austerity” measures, Germany’s economy had completely collapsed: unemployment doubled from 15% in 1930 to 30% in 1932, protests spread, and Bruning was finally forced out. Just two years of austerity, and Germany was willing to be ruled by anyone or anything except for the kinds of democratic politicians that administered “austerity” pain. So in 1932’s elections, the Nazis and the Communists came out on top—and by early 1933, with Hitler in charge, Germany’s fledgling democracy was shut down for good.
That should have sealed the coffin on “austerity” and “Austrian Economics,” but somehow von Hayek and his fellow Austrian aristocrats who were forced to flee from the fruits of their economic programs, did a complete revision of history and retold that same story as if the very opposite of reality had happened. Once they were safely in England and America, sponsored and funded by oligarch grants, hacks like von Mises and von Hayek started pushing a revisionist history of the collapse of Weimar Germany blaming not their austerity measures, but rather big-spending liberals who were allegedly in charge of Germany’s last government. Somehow, von Hayek looked at Chancellor Bruning’s policies of massive budget cuts combined with pegging the currency to the gold standard, the policies that led to Weimar Germany’s collapse, policies that became the cornerstone of Hayek’s cult—and decided that Bruning hadn’t existed. That instead Hitler came to power because Germany’s government grew too fat even as Bruning enacted massive spending cuts, its currency a mere paper currency even though Bruning kept it tied to gold, the German people a bunch of spoiled welfare queens living too high on the socialist hog when in fact they were starving in the streets suffering from unbearable pay cuts, and that these profligate German fat-cat pensioners and unemployment-insurance-queens were so hellbent on enjoying their government handouts that they elected a Nazi, fired up the gas chambers, and launched a world war. Sure it makes no fucking sense whatsoever, but nothing about austerity logic makes sense.
Reagan and Hayek laugh at Americans: “So long as you call it ‘freedom’ you can steal all you want from the fools! Bwah-hah-hah!”
Austerity programs and gold-backed currencies were the cause of enormous pain, violence, and disaster throughout the West in the early 1930s: In England, austerity measures led to one of the biggest mutinies in Britain’s military history since the time of the French Revolution, the Invergordon Mutiny of 1931, when up to half of the Royal Navy rose up against austerity cuts, took over ships and sent fears of a Bolshevik revolution throughout the country. The mutiny and strikes worked somewhat: Britain was finally forced to abandon the gold standard, and wage cuts were softened.
(As a counter example—Sweden, just about the only country that adopted a “mixed economy” model, suffered far less from the Great Depression which affected the whole world; unlike the austerity-dosing countries, Sweden and was already back on its feet and booming by 1932.)
Take a look at just about any austerity program over the past century, and the record is always the same: economic destruction, political destruction, and violence. Take Venezuela, for example: Ever wonder why Venezuelans chose Hugo Chavez? What made Venezuelans so radicalized that they’d to turn to a Fidel Castro groupie to save them? Austerity is what happened, austerity cooked up in Washington by the same financial elite that we’re now facing today.
In February, 1989, Venezuela elected as president a candidate, Carlos Andres Perez, who campaigned as a populist-liberal who promised voters he would fight against the IMF and World Bank, who were trying to force an austerity program on the country. They believed Perez because the last time he was president, in the 1970s, he’d nationalized the oil industry as well as American iron ore interests.
But Perez was a fraud, a fake-liberal who’d secretly sold himself to bankster oligarchs and conned the voters, sort of like a certain president today. Three weeks after winning the election, the same fake-populist, President Perez, rammed through an austerity program written by the IMF that sparked immediate mass protests. Perez did what all austerity-lovers did: he declared a state of emergency and suspended the Constitution, and called out the security forces, who massacred at least 1,000 Venezuelan protesters, perhaps as many as 3,000. (While everyone in the West knows about the comparatively smaller massacre in Tienamen Square that same year, few here have ever heard about this massacre, which Venezuelans call “The Caracazo.”) Naturally, this con-job and massacre was an example of “courage”—that’s how IMF’s Michel Camdessus described Perez’s decision to massacre protesters. Here’s an article from 1989:
I.M.F. Position On Venezuela
Special to the New York Times
Published: March 09, 1989WASHINGTON, March 8 — The International Monetary Fund’s managing director, Michel Camdessus, asserts that economic stabilization measures in Venezuela ”are proving even more painful” because they were ”too long postponed.”
He made the comment in a letter written on Monday, just days after unrest caused by tough economic measures led to up to 375 deaths in Venezuela.
Mr. Camdessus praised the new Government of President Carlos Andres Perez for its ”courage” in embracing an economic shock program that was designed to increase economic efficiency, and said the I.M.F. would support it ”with all the influence at its disposal.” But he rejected charges from Mr. Perez that the I.M.F. was at least partly responsible for last week’s disturbances because it had recommended some of the revamping measures.
Notice the same twisted rhetoric used then as we see today: The elites who impose austerity and slaughter civilians and declare states of emergency to protect IMF programs are labeled “courageous,” while the people who are killed don’t get so much as a column inch devoted to them, they don’t even get the dignity of proper death counts if they died making America’s free-marketeers look bad. Also, they can’t take responsibility for their fuck-ups: notice how President Perez blames Camdessus, and Camdessus blames an alternative history that could have been had only previous leaders been “courageous” too and enacted these insane price hikes and wage cuts earlier.
Venezuela’s austerity programs created greater poverty, richer oligarchs, worse corruption, and the inevitable backlash in the form of Hugo Chavez, who staged a coup in 1992 that almost succeeded…and later won the presidency through the ballot box. Perez had to flee to Miami with his family to avoid being put on trial for the massacre; he died just last month in shame.
Austerity programs in the ex-Communist Soviet countries led to similar disastrous results: As I wrote about in The Nation, Larry Summers oversaw Lithuania’s austerity program in the early 1990s, sparking overnight the world’s highest suicide rate, economic misery, and a backlash that made Lithuania the very first country in the former Communist bloc to vote the Communists back into power–anything to stop the pain.
In Russia, austerity measures dictated by the same Hayek groupies in the IMF led to a complete financial market meltdown, a 60% collapse in the GDP, the untimely deaths of millions, and of course the requisite President Yeltsin ruling by decree, bombing his own parliament, then finally snuffing democracy by handing the Kremlin over to his crony, Vladimir Putin.
The Russian economists who helped design their austerity program spent a lot of time learning from Friedrich von Hayek’s favorite austerity-program-cured country on earth, the Chile of Generalissimo Augusto Pinochet (South Africa’s apartheid regime came a close second in Hayek’s austere little Austrian heart). That austerity program, implemented in 1975 under the advice of von Hayek and Milton Friedman, was implemented AFTER the brutal massacres and destruction of democracy, a clever reversal of the usual formula: Pinochet overthrew the democratically-elected president, Salvadore Allende, in 1973, massacred roughly 3,000 opponents and locked up and tortured countless more, providing the perfect conditions for von Hayek’s austerity measures. In 1975, those measures were implemented, and the results were, naturally, catastrophic: GDP collapsed almost 15% in just one quarter, while unemployment soared from 3% under Allende to 20 percent. The economy didn’t reach 1971 levels until the end of the 1970s—and then the whole house of Austrian-economics cards collapsed two years later. But the good thing for Chileans was, they didn’t have to go through the trauma of massacres and end-of-democracy, since that was already served up in-advance: it was like giving the people free-market dessert before the main course. By the end of it all, Chile was left with a new class of massively-enriched financial oligarchs, the public sector unions in tatters, and one of the world’s worst wealth inequalities.
But you don’t hear about that much, not outside of the subculture of crunchy anti-globalization protesters and Naomi KIein fans. PR works, folks. Thanks to inane but heavily-funded propaganda, Hayek’s experiment in Chile is constantly called a success story: When a private mining firm was too inefficient and corrupt to rescue its own trapped miners last year, the private company got the state mining company to bail its trapped workers out…nevertheless, the story we Americans got through rags like the Wall Street Journal was that the rescue of the miners was somehow “proof” that Hayek and Friedman’s free-market experiments that Generalissimo Pinochet tested out on Chile were somehow responsible for saving those trapped miners. The logic goes like this: The private company got their miners trapped and couldn’t rescue them; the state mining company rescued them; therefore, free unfettered markets rescued the trapped miners. It’s the logic that Hayek used to argue that phantom Big Government New Dealers brought about the Nazis, rather than Bruning’s austerity measures.
We Americans alone among the world are the only suckers who take it on faith that Pinochet performed an economic miracle in Chile.
Now, at last, the same austerity programs that have led to massacres, wars, pain and catastrophe all over the world are finally coming home to the very people and country they were intended to poison all along.
Why now, you ask? Why, after all the economic destruction and inequality that resulted from decades from deregulation, privatization, slashing taxes on the rich, and relentless bashing of evil big-government—why would we adopt a far more purified, radical version of the same disastrous free-market program? Why would we have to take more pain medicine from the same people who already poisoned us?
Simple: Because we’re weakened after having our wells poisoned by free-market, libertarian ideology over the past three decades. We’re weaker, poorer, we’ve turned against the unions and the government, the only two potential sources of counter-power to billionaires and corporations—what predator wouldn’t move in for the kill at this very moment? Now’s the perfect time take everything that Austrian economics offers to its practitioners. Plundering the weak and shooting them in their heads when they resist—that’s the definition of “courage” to America’s degenerate ruling class.
* * *
* = I thought I was making a funny with that fake Kochjob, but then I ran across this real-life throating in the Wall Street Journal by the paper’s “senior economics writer” and founder of the Koch-funded Club For Growth, Stephen Moore:
WICHITA, Kan. — Meet Charles Koch. Philosopher, engineer, self-trained economist, libertarian activist, philanthropist — and the CEO of Koch Industries, a $60 billion, 80,000-employee empire, which just recently became the largest and most profitable privately held company in America.
But you’ve probably never heard of it.
Neither Charles Koch nor his firm are household names. Mr. Koch (pronounced “coke”) has managed to live in relative obscurity despite being one of the richest men on the planet, with a net worth estimated at $14 billion. He is a man of modesty who craves none of the fame or public adulation that seems to preoccupy other members of the billionaires’ club.
Yet celebrity seems to intrude. On the day I visit the company’s Kansas headquarters, his office is atwitter over a recent issue of Forbes magazine featuring the world’s billionaires. The issue includes a glossy photo of Charles Koch smiling contentedly, and right below him on the page is a picture of a slightly better known titan: Oprah. Running in company like that is bound to bump up Mr. Koch’s public profile — whether he likes it or not.
My mission, then, is to unwrap at least a few of the secrets of his success.
Hoo-wee, open the windows, tell the kids to hide in their bedrooms–seriously, I’ve read steamy erotica opening chapters in my day, but Stephen Moore may just be the Danielle Steele of free-market rim-jobbing hagiography.
Mark Ames is the author of Going Postal: Rage, Murder and Rebellion: From Reagan’s Workplaces to Clinton’s Columbine and Beyond.
Click the cover & buy the book!
Read more: austerity, bruning, free-market, hayek, hitler, Larry Summers, Lithuania, milton friedman, pinochet, putin, Russia, summers, von hayek, Wiemar German, Mark Ames, Class War For Idiots
Got something to say to us? Then send us a letter.
Want us to stick around? Donate to The eXiled.
Twitter twerps can follow us at twitter.com/exiledonline
53 Comments
Add your own1. Chris L. | January 26th, 2011 at 8:37 am
Nice article Mark, thank you very much!
We’re being force-fed the same crap over here across the pond, and this is all we have to show for it:
http://www.bbc.co.uk/news/business-12272717
Thanks a lot motherfuckers.
2. Zirb | January 26th, 2011 at 8:40 am
So if we look at Germany, hyperinflation in the 20s and austerity chaos in the 30s. So, does anything work?
3. thomzas | January 26th, 2011 at 9:03 am
Mr Ames, have you seen Stephen Moore on Real Time with Bill Maher?
He’s a frequent conservative punch bag for Bill on that show, so obviously has a masochistic side. And he laughs weirdly, like a whiney, sniffling dog…
In fact, the way he acts is so close to The Gimp, I’d check the Pulp Fiction credits just in case.
4. Ben | January 26th, 2011 at 9:07 am
Excellent work once again, Mr. Ames!
5. Ben | January 26th, 2011 at 9:16 am
The axe-wielding image you included brings to mind Jack Nicholson’s character in “The Shining,” that devastating critique of American capitalist genocide.
Would this rant be out of place on FoxNews:
http://www.youtube.com/watch?v=pxTfw8QgLIQ
Wendy Torrance: Oh Jack, what are you talking about?
Jack Torrance: Have you ever had a SINGLE MOMENT’S THOUGHT about my responsibilities? Have you ever thought, for a single solitary moment about my responsibilities to my employers? Has it ever occurred to you that I have agreed to look after the OVERLOOK Hotel until May the FIRST. Does it MATTER TO YOU AT ALL that the OWNERS have placed their COMPLETE CONFIDENCE and TRUST in me, and that I have signed a letter of agreement, a CONTRACT, in which I have accepted that RESPONSIBILITY? Do you have the SLIGHTEST IDEA, what a MORAL AND ETHICAL PRINCIPLE IS, DO YOU? Has it ever occurred to you what would happen to my future, if I were to fail to live up to my responsibilities? Has it ever occurred to you? HAS IT?
Wendy Torrance: [swings the bat] Stay away from me!
6. Jeff | January 26th, 2011 at 10:06 am
Perfect, never stop.
7. Doug | January 26th, 2011 at 10:13 am
Okay Ames, what’s your plan. Let’s get some real figures out here to go along with the Nazi comparisons:
US deficit in 2010: 10.6% of gdp
US federal debt in 2010: 94.27% of gdp.
US state/local debt: 11.63%
Mortgage debt guaranteed by the federal government: ~80% of gdp
Average duration of US debt: 3 years.
Unfunded medicare and social security liabilities: ~600% of gdp.
So my question for you is what is your counter-policy to austerity. Yes, yes, we get it laying off a few postal workers, increasing medicare co-pay and changing defined benefit government pension plans to defined contribution saving accounts is a hair’s width away from doing Heil Hitlers, letting death squads roam the street and instituting national apartheid. Let’s pretend the people have heard you and made you the absolute ruling czar of the economy. Now what do are you actually going to do?
Cause the way I see it if you don’t want to cut government spending you can only have a few options. One is to keep running deficit spending at current rates, we’ll see how excited the Chinese are to keep making trillion+ loans to a country that will soon be 200% of gdp in the whole…
The second is to keep printing money (which the fed is doing with abandon now). However the monetary base has already nearly tripled since 2008. And as those dastardly economists like to point out price level is a function of money supply times money velocity divided by gross output. The only thing holding back massive inflation is the incredible drop in monetary velocity from the recession. The very same thing your anti-austerity measures hope to cure. So I don’t know how happy bondholders are going to be refinancing debt when inflation is >10%, at least not at rates favorable to doing anything but paying servicing the debt.
The third you can do is raise taxes. Now immediately I bet you wanted to append to that sentence “on the rich.” The problem is though that the rich are nearly tapped out. The rich in New York and California pay about 60% marginal rates, which make them the highest taxed people in the world about the same as Sweden. You can keep pushing higher but after a certain point, yes people do stop working or move somewhere else.
In addition your “pro-equality” policies are going to make sure there’s a fuckload less of the super-rich to tax at those super high tax rates in our progressive tax code. The reason Europe has such larger tax collection isn’t just because they tax the rich, it’s because they tax everybody. In Sweden middle class people also pay 60% income tax. Let’s see you introduce that concept to a country where 50% of the people literally pay no income tax and see how popular that is.
So your last option is to start strategically defaulting on the outstanding debt. You’re going to want to be careful on this one. See American isn’t some backwards third world nation that can just go self-sustainable and default. Nope Americans are used to having access to some seriously nice shit. Americans want their iPads, their flatscreens, their (relatively cheap) gasoline, meat, computers, $5 jeans from Wal-Mart, $12k new Kias, etc. The problem is all that shit comes from foreign countries. And why do they send us all that stuff, well it ain’t because we’re making useful shit ourselves. It’s because they want to hold sweet sweet safe American treasuries.
And it would be one thing if we had all that foreign income locked up in long duration debt. If we had issued nothing but 30 year treasuries go finance all this, we could give them the finger and take their money. Get our shit together, and maybe people will mostly forgive and forget in a couple of decades. This is mostly the success story you hear about when it comes to countries strategically defaulting.
Problem is America has no viable way to get it’s trade or spending deficit down (well besides austerity…) and no way to keep financing itself because the duration of its debt is 3 years. We default now and we’ve still got some seriously heavy bills that we’ve got to pay in only a few years times. Guess what, global bond markets aren’t going to forgive and forget in a few years.
So all of the options look pretty damn shitty too me. 1) Rack up debt until the whole thing becomes unsustainable and collapses, 2) keep printing until hyperinflation occurs, 3) raise taxes on the poor and middle-class or 4) default on our creditors when we still need to borrow boatloads.
All of these options suck compared to laying off some useless government workers, cutting back on medicare reimbursements for what are basically fraudulent medical devices and procedures, and renegotiating government pensions.
8. Bronzilocks | January 26th, 2011 at 10:29 am
Let’s not forget it does take a certain kind of courage to keep the masses docile and firmly under your boot.
9. joe | January 26th, 2011 at 11:21 am
@ Doug
You are a liar.
The rich do not pay 60% taxes. Capital gains tax is at 15%. That is how most rich people receive money. Social security and Medicare max out after a certain income level. When the income tax was first implemented in the United States the top marginal tax rate was 90%. This is still the top tax bracket in Sweden.
When you say “The rich in New York and California pay about 60% marginal rates, which make them the highest taxed people in the world about the same as Sweden.”
You are lying.
The statement that the the rich are “tapped out” is simply absurd. I could try to explain to you how graduated income tax works but that would be like explaining it to a brick wall.
10. Pingu | January 26th, 2011 at 11:34 am
Hey, Doug! Doug, Doug, Doug.
Wow. “The rich are nearly tapped out”
for everyone who thought your contribution was tl:dr, that is all you need to hear.
When the richest 1% own 34% of the wealth in this country, and the next richest 10% own another 40%, what does that mean, Doug?
I think it means you’re so full of shit you’re about to pop.
11. Matt | January 26th, 2011 at 11:34 am
I’m amazed Doug managed to spill all that out around the fat cock of the plutarchy.
12. Patriot | January 26th, 2011 at 11:44 am
Doug,
You’re not only a liar but you don’t seem to understand how our currency actually works. The U.S. government does not have to borrow money from China. Time for some remedial education:
http://bilbo.economicoutlook.net/blog/?p=10554
13. HS | January 26th, 2011 at 1:04 pm
Now, austerity isn’t a bad idea in principle. The government could cut some programs without and help the economy. They could cut corporate welfare. They could not bailout the next disastrous business decision by a huge corporation. They could cut a lot of pointless high tech military spending and reduce overseas military operations. They could cut spending on drug enforcement and reduce incarceration.
This isn’t going to happen. The programs that are likely to be cut are those that benefit the common man, not the rulers. I expect welfare for those in the bottom 10% of the population to be cut before welfare for those in the top 1%. Without specific targeting of the worst government programs, austerity will make things worse. I say this as a libertard. So yeah, you can disregard everything I just wrote here. Hell, I’d disregard it if I wasn’t getting paid to think this way.
14. Rob | January 26th, 2011 at 1:45 pm
This is gold. I think if Ames is looking to write another book this would be a good article expand on.
15. Marquelot | January 26th, 2011 at 4:21 pm
The ‘net used to be full of libertards like Doug: revisionist historians spouting their own “facts” without anyone to counter their horseshit. Over the last ten or so years the libertards have become outnumbered, but not any less vocal.
16. joe | January 26th, 2011 at 5:28 pm
@HS I will I agree there is a lot of wasteful spend in the government. Wasteful spending has a positive effect on the economy.
Having the government pay people to dig holes and fill them back in will have a more positive effect than spending the equivalent money on a tax cut.(Obviously this could be better spent building roads and schools or even tanks)
The evidence for this is WW2. We spent enormous amounts on the military. If Hitler became a painter the US could have simply built liberty ships and Shermans and sunk them to the bottom of the ocean. This would have the same effect on the economy as WW2 did.
The reason for this is subtle but it due to increased price of labor. Increasing the price of labor increases demand for products which boosts the economy. A more even distribution of wealth increases the efficiency of labor as the marginal utility of a dollar increases as you get poorer(a dollar is worth a lot more to a hobo than a millionaire.) Poor people spend money much more efficiently. The evidence of this is India where they still hand roll cigarettes and they have massive poverty. In fact the entire industrial revolution began because of a demand for cloth. There was much less demand for cloth when the peasants of Europe could only afford one shirt. When the English colones in the Americas started a peasant could get free land and be freed of landlord rent that siphoned off most of his productivity. Because of this there was now a much larger group of people that could afford more than 1 shirt.
17. rick | January 26th, 2011 at 7:09 pm
Great man. A man of vision and guts. And there isn’t even a plaque, or a signpost for him, in this town.
18. Doug | January 26th, 2011 at 7:29 pm
@Pingu/Joe
There is deep confusion here about the difference between wealth and income. Wealth is total economic power that an entity controls. Income is the amount of wealth acquired in a period. The latter is derivative of the former. There are two types of income: labor income and investment income. The former comes from a job, the latter comes from investing pre-existing wealth. The former is taxed at regular top marginal rates. The latter at capital gains rates.
For someone who is your regular Joe Schmoe top 1% earner, corporate layers, hearth surgeons, accounting firm partners, investment bankers, media executives, defense contractors, etc, they’re paying ordinary income tax. Even most hedge fund managers are paying ordinary income tax because they hold most of their positions short term (you have to hold for over a year to get 15% instead of ordinary tax rate).
The only people primarily paying the capital gains are your creme de la creme of the top 1%, your Buffets, your Gates, your Zuckerbergs, private equity partners, etc. So while the top 1% pay 33% of income taxes, in the words of the CBO:
“Individual income tax receipts from capital gains realizations normally make up about 4 percent to 7 percent of individual income tax revenues (see Table 1); they are usually between 2 percent and 3 percent of total receipts.”
http://www.cbo.gov/doc.cfm?index=3856&type=0
So even quadrupling capital gains from 15% to 60%, even if there was no deadweight loss (and trust me there would be a ton, capital gains tax elasticity is far higher than income tax elasticity) would only increase federal revenue by a puny 6%.
In reality the only way to get significantly more out of the rich is either
1) Raise top marginal income tax rates. If Bush tax cuts are allowed to expire and without repeal of Obama care top marginal federal rates 47.9%. In New York and California top state/local federal rates are another 12% on top of this, which top marginal rates of 58%. And this is before the needed tax hikes to plug the holes in Obamacare and state budgets.
http://s.wsj.net/public/resources/documents/BA_ObaCare090720.pdf
In contrast Sweden’s top marginal rate comes in at 56%, the Netherlands at 52%, France at 50% and Germany at 49%
http://www.econlib.org/library/Enc/MarginalTaxRates.html
2) Tax wealth instead of income as Pingu seems to suggest. Well now you’re getting into some really serious Marxist shit. See no Western country taxes wealth. Wealth redistribution is something a lot more serious than income redistribution. You’re talking about taxing people a percent of everything they own every given year.
Anyone with basic logic can understand that this doesn’t exactly have a very positive effect on savings and investment. And without private saving and investment there’s no way for the economy to grow unless the government takes over the job of investment and development. Needless to say this position will not be too popular with your typical voter outside the Soviet bloc.
@Patriot,
Okay, I don’t give a fuck what your “alternative economics” grad school reject article says. Let’s use some basic logic. I want you to go to a Wal-Mart, Best Buy, Apple store or anywhere else Americans buy stuff. Pick up a sampling of products count how many are made in Asia and how many are made in the US. Now fly to China and do the same thing. You’ll find everything in the US is made in China and everything in China is also made in China.
Now do you think Chinese manufacturers “give” that stuff away to the US or do the sell it? Now the only reason American dollars are worth something is because people find the stuff they can buy valuable. The only reason thing a foreign currency can buy is either stuff made in that country or investment assets denominated in that currency. It’s obvious we’re not selling any of the former to China, so it has to be the latter. In fact it is China purchases trillions of dollars of US treasury bonds because they find them valuable.
These bonds are claims on future US dollars which supposedly will be redeemable for some products made in the USA at some point in the future. If China decides that these claims ain’t worth so much they’re not going to be too happy giving us real manufactured shit for these worthless pieces of paper. Ergo all that stuff at Best Buy and Wal-Mart will now have to be made in America at 10x the cost.
Let’s see what Obama’s poll ratings are going to look like when a 36″ plasma TV costs $20,000 or t-shirts at Wal-Mart now cost $40
19. Victorvalley Villain | January 26th, 2011 at 7:46 pm
“The rich are nearly tapped out”
If that was even close to true, I’d be a great rallying cry for finishing the job.
20. Chas | January 26th, 2011 at 8:11 pm
Doug… what a dude !!
But then I realized he is just some data entry type from Any One of the Foundations tax-deductibled by the Gateses, Kochs, Fochs, and Blankfeins and trhat this is just drivel dictated to him by his thesis adviser / employer …
21. DoesNotMatter | January 26th, 2011 at 8:18 pm
I was going to post something totally idiotic trying to defend ludwig von mises, the man of my dreams, but then i realized, wait, I’m just a total fucking dumbshit. See cuz I didn’t want to believe that von mises got help from an oligarch. but then–whoa daddy, turns out von mises was sponsored by none other than Rockefeller and that he was given a seat at New York University even though he was a complete retard. oh well, sucks to be libertardian like me.
Anyway, when i found this out i cried out to my mommie and she said yes it’s true von mises got money from the rockefellers, so then i yelled out to my mommie:
“you liar! if von mises had oligarch funding, he would have taught in Harvard instead of some obscure community college. You fucking cocksucking liar….bloody whore! does telling lies like this give you an orgasm? Go suck that politician dick you bloody cunt”
22. Zirb | January 26th, 2011 at 9:14 pm
Dude Doug, #7, you’re an idiot, and I say that being on your philosophical “side” (i.e. private property vs not). No one can argue that the rich don’t have almost all the wealth and power.
The questions are: 1) why? 2) is it a function of the power of government or inherent in private property?
23. my talkative ringpiece | January 26th, 2011 at 9:54 pm
Hell the poor are nearly tapped out. My neighbor used to make $20 an hour as a tiler, now it works, part-time, on-call, for a vegetable stand for I estimate somewhere between $5 and $10 an hour. Cash. I used to make, running a small biz, $25 an hour, now I make $5 a DAY. If I work hard, $10 a day. I consider myself extremely fortunate. No $5 jeans for me, I get ’em for $1 or so at garage sales. I don’t make enough to tax. There are millions of us. The gov’t, or someone, something, has forced austerity on us, and we’re adapting to it. We’ve fallen off the edge of the American aircraft-carrier and….. learned to swim. Yeah we hollered a bit, and at first could only dog-paddle, buoyed by our bodyfat, now most of us are learning to enjoy the water, know a lot of strokes (ways to get by) and don’t miss the body fat (posessions) that would now mostly just weigh us down. The water’s fine! Pretty soon there won’t be enough frightened, slave-like sailors to keep the aircraft carrier going. And we’re getting good at teaching the newcomers how to swim. Frankly the lifestyle is better, less stress, the ‘swimming’ is good for the body and mind, and the food is good too – I eat fresh fruits and veggies and eggs etc, a diet that was way above my “pay grade” when I was slaving away. Sure the richies may tighten up on laws, may even call in the military on us unruly peasants, but so far it’s not working – witness an awful lot of cops buying it over the last few days. Not that I advocate this, but nevertheless, it is happening. As for the military, most of us are vets, the military IS us. Good luck with that.
Impose “austerity” on us, we may impose it on YOU…..
24. Padilla | January 27th, 2011 at 1:20 am
In a nutshell and to the point… Wunderbar.
25. Skeeve | January 27th, 2011 at 1:37 am
This whole argument may shortly become irrelevant. Straight from the horse’s ass (Geithner) himself:
Treasury Secretary Admits U.S. Default Is Imminent (From Seeking Alpha)
The money quote, IMO:
“That the United States has already defaulted on its obligations is beyond dispute at this point, as the rate at which its debt service obligations is growing exceeds the rate at which the United States GDP could possibly grow. This means that, without drastic cuts to government spending, the debt can only continue to grow.”
And it looks like they’re gonna do it. Geithner’s wish list:
“Payments on a broad range of benefits and other U.S. obligations would be discontinued, limited, or adversely affected, including:
U.S. military salaries and retirement benefits;
Social Security and Medicare benefits;
Veterans’ benefits;
Federal civil service salaries and retirement benefits
Individual and corporate tax refunds;
Unemployment benefits to states;
Defense vendor payments;
Interest and principal payments on Treasury bonds and other securities;
Student loan payments;
Medicaid payments to states
Payments necessary to keep government facilities open.”
Austerity might still avoided, but:
“I personally am stunned. No mention is made of sales of assets held by the United States government. Rather than liquidate its own real estate to cover its debt, the defective and fiduciarily delinquent U.S. government plans to first eradicate the incomes of its poorest citizens.
If this document is not a harbinger of impending civil unrest on a national scale in the United States, I can’t imagine what is. Big, big changes are on the horizon though. Of that there is no doubt.”
26. Septeus7 | January 27th, 2011 at 1:43 am
Doug, your list of three ways to increase tax on the rich is pathetic. How about a Sales Tax on financial paper turnover aka a Tobin Tax. Poor people pay sale taxes on the things they buy so why shouldn’t the rich seeing as the rich spend most there buying power on speculative paper?
Or how about a Henry George’s single tax solution. I know you’ll probably say that Henry George was a communist so as to prove your vast historical knowledge.
Quote: “Now do you think Chinese manufacturers “give” that stuff away to the US or do the sell it? Now the only reason American dollars are worth something is because people find the stuff they can buy valuable.”
Yes and dollars are valuable because they are the world reserve currency thus having dollars is a good idea because you can trade them everywhere.
Quote: “The only reason thing a foreign currency can buy is either stuff made in that country or investment assets denominated in that currency. It’s obvious we’re not selling any of the former to China, so it has to be the latter.”
And are we going to run out of dollars? No, because we just make them up. They are tokens. The NY subway doesn’t borrow it’s own tokens back in order to have future tokens and neither do sovereign Governments.
Quote: “In fact it is China purchases trillions of dollars of US treasury bonds because they find them valuable.”
Yes, the Chinese like keeping their dollars in their saving accounts called Treasure Bonds( CDs for governments) at the FED. Big Deal. Who cares if the Chinese keep their dollars in their checking or their savings account. It makes no difference.
Quote: “These bonds are claims on future US dollars which supposedly will be redeemable for some products made in the USA at some point in the future.”
No, bonds are only redeemable in more dollars of which we can never run out. All the Fed does to make them “redeemable” is move money from the Bond aka Savings account to the the Chinese checking account.
Doug, you simply do not understand monetary operations or even the idea of currency.
Even if you understanding was correct how does an austerity program increase US productivity? If currency is backed by productivity then shouldn’t spending on “internal improvements” ala Alexander Hamilton?
Austerity is self-cannibalization. You are claiming to be eating nutrition while gnawing on you own limbs. The more you do it the faster you bleed out.
Have you even read Hamilton’s Reports which are essentially the economic constitution for this country?
I suggest you stop reading libertarian economics and try reading Alexander Hamilton, Henry Clay, Friedrich List, Henry C Carey (Lincoln’s economic advisor) aka real American economics.
I hope you understand that Libertarianism nothing more than 19th century British Imperialist economics combined with Social Darwinism which this country was founded to destroy.
27. John Hughes | January 27th, 2011 at 3:19 am
Doug: “See no Western country taxes wealth”
So, France isn’t a western country any more? All wealth over the 1st million odd euros is taxed here.
28. lol | January 27th, 2011 at 3:36 am
Well, US has highest level of debt in the world, so sooner hey die out, the better for everyone else.
I want to see dolar going for 0.1€. So, please die faster, fuckers.
29. A Silver Mt. Paektu | January 27th, 2011 at 3:57 am
My question for all of the so-called “budget hawks” is where the spending cuts will actually be made. Social Security is not only self-sustaining, but so wildly successful that FICA money is regularly used to subsidize the rest of the government. Shrinking the size of the SS pot means an even larger annual budgetary shortfall. I guess you could keep FICA taxes where they are, cut SS payouts, and raid the remaining pot even more deeply, but it’s hard for me to believe that Americans are sufficiently stupid and defeated to tolerate that.
Medicare won’t be touched either. Despite libertards using it as a socialist bogey, private insurers love Medicare and will use their massive influence to keep it intact. America is an aging society and the existence of Medicare has created a marketplace in which private insurers won’t provide anything but paltry supplementary coverage to Americans over 65. During the healthcare debate the private insurers saw to it that the loophole-ridden “inability” to refuse coverage didn’t apply to the elderly. Medicare–despite being a good idea inspired by the best medical systems in the industrialized world–currently functions as a subsidy to Big Insurance. It’s protected.
So what about the discretionary budget? Well, the lion’s share of that goes to supporting our enormous national security apparatus and the bulk of that money is paid to unbelievably influential private powerplayers like Lockheed-Martin and their ilk. Even the remaining portion of the NatSec fraction that’s paid out to actual public employees goes to those directly tasked with protecting and enforcing the social/productive relations, domestic and international, that the ruling class depends on.
What’s left to put on the chopping block (DOE money, the NEA, the National Park Service, etc) will surely make Teabaggers salivate, but it won’t make a bit of difference. The rich won’t accept austerity for themselves and the rest of us simply don’t receive enough federal dollars to sacrifice to any real effect.
30. Peter | January 27th, 2011 at 6:47 am
Also, there’s a pretty simple question here: we’ve been doing most of what people like Doug have wanted us to do for the last thirty years, i.e., sacrificing to make the US a better investment climate. And it’s brought us here.
Expropriate the billions, probably more like trillions, of dollars from the real estate and security scammers and put it into building shit again. It’s not like there’s not enough necessary infrastructure that needs rebuilding after thirty years of neoliberal neglect, let alone all the infrastructure we’re going to need to get some kind of alternative energy going. We all know the government is going to need to step in and pay for both eventually anyway, after the “free market” spends however long playing grab-ass with the country’s money again.
31. P.T. Barnum | January 27th, 2011 at 9:01 am
Doug makes a few more “mistakes”:
Doug’s “pays 33% of income taxes” ignores the Social Security and Medicare taxes. Which is about half of the FEDERAL taxes of ordinary people. There is sales taxes and other taxes that would bring the percent down even lower.
As for the “small amount paid on capital gains taxes”… that’s because of a concept called “tax fraud”. Or does Doug somehow believe that the rich pay every single dollar they owe without any legal trickery. Go ahead Dougy, say it!
32. Zorg | January 27th, 2011 at 11:39 am
I always thought Koch was pronounced “cock”.
33. CensusLouie | January 27th, 2011 at 3:28 pm
“The rich are tapped out.”
I can die and go to heaven now, knowing that I’ll never hear a better Libertarian quote.
34. Josephus P. Franks | January 27th, 2011 at 3:54 pm
Septeus7 should get a regular column here.
35. Phoenix Insurgent | January 27th, 2011 at 4:32 pm
Time to expropriate the rich motherfuckers and send them packing, I say! We make all the wealth they steal anyhow, and most of it is pretty useless to regular folks not interested in yachting or buying politicians. Best to be rid of it entirely. A good ol’ fashioned, bottom up revolution sounds good time me. Workers councils, neighborhood councils, etc, etc. A little bit of Greece, a little bit of Argentina during the heady days of the anti-IMF revolt there, a little bit of the Zapatistas in Mexico. Ames is right for the most part, but he misses the boat when he says only the government and the unions can take on the capitalists, though. There is another way. For anarchy!
36. Crapoff | January 27th, 2011 at 5:49 pm
@32 Zorg…thats whats I was gonna say !
37. calripson | January 27th, 2011 at 5:58 pm
France, Switzerland, and Norway all have wealth taxation. It is no accident that the established elite favor income taxation over wealth taxation – it retards up and coming competitors and helps to reinforce the wealth status quo. As an idealogical consideration, an annual wealth tax is absolutely defensible: Why should rich waste of protoplasm line Paris Hilton live the high life when she has produced absolutely zero in her life (other than a second rate night vision porn movie).
38. calripson | January 27th, 2011 at 6:14 pm
As far as the rich paying all those taxes, don’t make me laugh…I work managing money for high net worth individuals and I see the world of Wall Street and capital markets from the inside out. My clients routinely make more in a day than most people make in a lifetime with almost no risk exploiting legal loopholes. How much tax do they pay on those millions ? Zero. Most of them invest (speculate) via 100% legal profit sharing plans that defer all taxation. That’s only a sample of what legally can be done. The little guy is getting so f***ed it is not even funny. Europe is no better, despite the perception of progressive taxation. The super rich in Europe legally reside in places like Monaco,Andorra, Liechtenstein etc.and pay almost no taxes. Has it ever struck one as odd that the shadiest “off shore locations” are all British Commonwealth nations? Why no outrage from the U.S./EU to shut them down ? Well, all those descendants of English aristocracy interbred with the offspring of dynastic banking families need some place to park their money, don’t they ?
39. Mustapha Mond | January 27th, 2011 at 9:37 pm
You all are in big trouble now because I have irrefutable evidence that just about anything said against the Brethren Koch are lies and “mean” words meant to cast a negative image on the greatest and most powerful entity to ever allow you to live. You are jealous! Thats it. Your fucking jealous. Fuck you guys. Just fuck it. God. Go fuckin bother someone else because these people dont deserve it.
SEE..
http://www.kochind.com/kochFacts/
They are kind and deserving people.. They are from Kansas for god sakes! Doesnt anyone see any irony in that!? They are not the world controllers that you think. They are an inspiration. True Philosophers and historians.
SEE..
http://www.kochind.com/Perspectives/perspectives_detail.aspx?id=19
Isnt that enough? Just stop. Please.
40. my talkative ringpiece | January 27th, 2011 at 11:56 pm
#38 I’d never have believed it until, I LIVED it; moved up (and then more recently way DOWN) the income curve. Making $5 an hour in the 80s, I paid about 30% in taxes. Making $9.50-$11 an hour in the late 80s to 1990, same thing, a third. I worked a lot of overtime when I could, that meant I paid MORE taxes. It wasn’t until I became a small businessman that I learned what anyone paying taxes at ALL in the USSA needs to know – get a GOOD accountant, not H&R Block, a real one, and have ’em do your taxes. Grossing $70k, I paid LESS in taxes than I did grossing $20k. Bigger fish than I, friends of mine, paid next to none at all. The few even wealthier people I met from time to time, paid none, or actually got money back – they get paid to make money! The little guy pays all the taxes in the US. We are Atlas. We can shrug.
(Don’t worry I hate Rand but the atlas shrugging bit is kinda cool.)
41. joe | January 28th, 2011 at 1:02 am
@doug
Apparently I was wrong about the top marginal tax rate in Switzerland. I had not realized it had been lowered so much.
You also said:
“In reality the only way to get significantly more out of the rich is either[:1)tax income or 2)tax wealth]”
Well there you go. You agree with me. Lets tax income. That just solved our financial problems.
42. fajensen | January 28th, 2011 at 2:03 am
@calripson | January 27th: Why no outrage from the U.S./EU to shut them down?
There is “outrage” alright – of the kind used to market yet another power-grab by the EUSSR to the plebeians.
You see; Problems are the *resources* that fuels our entire political system.
You don’t Solve problems, you Manage them!
With luck & skill you can build an entire career from saying and doing the same things for 30 years while doing exactly nothing effective. An entire ecosystem of useless waste can be built up over time, effectively protecting your chosen dominion – and getting up & coming people in on the game on your side.
What do we do? This:
Any rational person should sit themselves down and get to understand EU’s CO2 credit system; that is *the* new scam, almost as if it was designed for fraud. Apart from the way the higher-up’s (governments, mainly) can print new CO2-credits by having “trusted authorities” approve the issuing, the system facilitates fast, secure, anonymous, transfers of money in the form of carbon credit certificates. Perfect for money-laundering. A CO2 trading account (or two) will go very well with some channel-island charitable trust fund and a drug business, I Think. It’s ‘e-money’ with real government backing. Whee!
43. acabaca | January 28th, 2011 at 6:37 pm
If the rich are “tapped out”, I say we go for the kill. There should not be super-rich people, not anywhere in the world.
44. Keri | January 28th, 2011 at 9:42 pm
A lot of Kock suckers around here I see
45. David | January 29th, 2011 at 10:28 am
Doug: Of the facts you mention, the only problem in them is Medicare. And that’s a problem because of the United States’ awful system of financing health care. Even if you got rid of Medicare entirely, that would only shift the problem to the private sector, which already isn’t containing costs for younger, healthier people.
There is no problem with Social Security, which you disingenuously lump in with Medicare, unless you think that productivity growth and population growth are going to be extraordinarily low for the next several decades. If that’s the case, I’d like to hear your reasoning.
The current budget deficits are a function of the recession. If austerity prolongs the recession, it’ll take a lot of austerity to actually get rid of the deficits.
46. CaptainMongles | January 29th, 2011 at 1:14 pm
Much of the US economy is illusory bullshit and if Americans believe they can maintain their standard of living without adapting to reality they are totally deluded. This is what happens when too many people undeservedly have it too good for too long: You get whiny, lazy little bitches who’d rather install a dictator than work hard or spend less.
47. Arch Stanton | January 29th, 2011 at 3:33 pm
Thanks, Ben, for that Shining link. Shelley Duvall is so hot. She turns my unit to solid granite and … What? Oh right. Neo-liberal fascists to the wall! Onward comrades! Erin Go Bragh!
48. WT | January 29th, 2011 at 8:36 pm
You need to read Hayek & VonMises before quoting their theories as the basis for oligarchic repression. Assuredly, nowhere in their writings do we find the directive for fascism presented by America’s ruling class.
I encourage readers of this blog to read The Road to Serfdom & Human Action, and then decide for themselves whether Austrian economics = fascism.
Ames, you are wrong.
49. Pinkbat | February 1st, 2011 at 8:51 pm
Pretend I just farted on the libertard who posted above
50. Jeremy | February 3rd, 2011 at 12:43 pm
Speaking as an insurrectionary anarchist flying the black flag for team chaos, I couldn’t be happier about our prospects for fiery revolution in the next 10-20.
As wealth and power concentration becomes so painfully obvious, and the rich get more and more fat and lazy, they forget why they ever agreed to those concessions to the unions etc, a century ago.
They forget they were playing chess, handing out benefits and living wages and dignity for the working man, because if they hadn’t done so … BOOM!
They’ve forgotten why they have to share the pie, the kids born since the 80s are going to get angrier and angrier.
This collective rage will be beautiful and terrible.
Here’s to the bright future ahead! *evil laughter*
51. Trevor | August 15th, 2011 at 6:26 am
Given the proven failure of austerity, you have to wonder if the guys at the top are really just lucky morons. For all their fruity financial formulas, they can’t grasp the simple fact that when all the serfs suffer, it cuts deeply into their bottom line.
Then again, maybe they’re just evil and get boners at the sight of starving brown people…
52. Matt Dubuque | November 17th, 2011 at 4:40 pm
Why do you call Chavez a “Castro Groupie”?
That’s pathetic.
Castro has been RAILING against austerity since 1982. He coined the term “casino economy” back then when derivatives were in their infancy.
What were YOU doing in 1982?
53. Garygoddmn | November 20th, 2011 at 1:22 pm
At one point, Hayek said he approved of some kinds of social welfare, that wealthy societies could afford it. Today’s politics are beyond Hayek, and meaner.
For anyone interested, Kevin Carson explains how ACTUAL free markets help the poor, but not faux “free markets” run by a corporate state and approved cartels.
THE IRON FIST BEHIND THE INVISIBLE HAND
Corporate Capitalism As a State-Guaranteed System of Privilege
Mutualist.Org: Free Market Anti-Capitalism
http://www.mutualist.org/id4.html
INTRODUCTION. Manorialism, commonly, is recognized to have been founded by robbery and usurpation; a ruling class established itself by force, and then compelled the peasantry to work for the profit of their lords.
But no system of exploitation, including capitalism, has ever been created by the action of a free market. Capitalism was founded on an act of robbery as massive as feudalism. It has been sustained to the present by continual state intervention to protect its system of privilege, without which its survival is unimaginable.
The current structure of capital ownership and organization of production in our so-called “market” economy, reflects coercive state intervention prior to and extraneous to the market.
From the outset of the industrial revolution, what is nostalgically called “laissez-faire” was in fact a system of continuing state intervention to subsidize accumulation, guarantee privilege, and maintain work discipline.
Leave a Comment
(Open to all. Comments can and will be censored at whim and without warning.)
Subscribe to the comments via RSS Feed