Barack Obama was trained as a lawyer. I’ve rarely met a lawyer who understands economics. That’s not their mind-set. They make deals to minimize the risk of surprises, often settling in the middle. That is legal pragmatism. When candidate Obama promised “change,” I don’t think he had any particular change in economic policy in mind. It was more a modus operandi. I suspect that he simply thought of the Presidency as being referee on “bringing people together.” Probably this personality trait was formed as a teenager, in the kind of popularity contest that teenagers engage in student council elections. Obama’s aim was to be accepted, even admired, by negotiating a compromise. He probably didn’t care much about the content.
Contra Obama’s pretense, cutting taxes for the rich will not spur recovery. The wealthiest 2 per cent do not spend their income on consuming more. They invest it financially – mainly in bonds, establishing more debt claims on the economy. Giving creditors more money will deepen the economy’s debt deflation, shrinking “the market’s” ability to spend on goods and services. And part of the tax subsidy will be recycled into Congressional lobbying and campaign contributions to buy politicians who will promote even more pro-financial deregulatory policies and tax benefits. There still has been no prosecution of banking crime or other financial fraud by large institutions, for example. Nor is there any sign of Attorney General Holder initiating such prosecutions.
It is a travesty for Obama to trot out the long-term unemployed (who now get a year’s extension of benefits) like widows and orphans used to be. It’s not really “all for the poor.” It’s all for the rich. And it’s not to promote stability and recovery. How stable can a global situation be where the richest nation does not tax its population, but creates new public debt to hand out to its bankers? Future tax payers will spend generations paying off their heirs.
Wednesday, December 8, 2010
Bringing People Together
Michael Hudson, economist, writes in CounterPunch something I've hinted at before: