The short answer is purely pragmatic: since people can’t spend, and corporations won’t spend, and investors won’t spend (see below for more on this), it is up to the government to spend – on specific infrastructure projects, or investment in the free market. Right? This is to increase employment, which increases consumer buying power which increases aggregate demand, which spurs production. We agree on this, at least in theory? So, it can do so by increasing the deficit, or it can raise revenue. Since the deficit is all the Right can whine about, revenue it is (cutting spending is the opposite of what we are trying to achieve, ergo it is counterproductive, as much as the GOP seems to hate clean air and water).
To begin with, I think the issue is multifaceted: We have cash-rich businesses not hiring nor investing, a Fed lending money at 0.001% to make up bank losses, but not spurring new investment, a lack of both consumer and investor confidence, record deficits across the world, and a contraction of wealth in specific sectors, i.e. funds that overplayed the derivatives market, and real estate.
The moral argument for taxing those who have both exploited the system and manipulated it for their sole benefit and who can afford it best aside, the economic argument is that capitalism is best served by capital at work. In a climate where both spending (the article correctly points out that rich individuals do not equal the spending power of a flush middle class) and investment is low, the case can be made that the government has an obligation to spur investment – and this isn’t delving into the government’s responsibility to maintain full employment, a more important notion now that the modern worker is completely dependent for survival on the economy. But that’s another discussion, that one cannot simply walk off to find one’s fortune among untamed lands. We are completely dependent on participation in the modern economy, something that makes the moral case for the Welfare State, as well as it’s being a balancing force on downward wage pressure, but again, I digress…
First of all, what we’re talking about as a practical matter is letting the Bush tax cuts expire. We’re not talking raising the rates back up to 90%. So let’s not get carried away. Letting the Bush tax cuts expire accomplishes a few things immediately that need doing: by providing revenue lost by the contraction of wealth to the middle class (the crisis affected the two areas where the vast majority of accumulated wealth in the middle class is located: real estate (homes) and pensions, who were duped into investing in funds rated AAA when they were as safe as unprotected sex with Courtney Love), it enables the government to fulfill it’s already mandated responsibilities (Medicare, Medicaid, Federal Unemployment Insurance), continue to provide the services already in place, and to honor the T Bills that represent our national debt. All of this would be accomplished just by letting the Bush tax cuts expire. Tax cuts that were meant to be temporary anyways, and clearly did not fulfill the promise that the Neoliberal adherents claimed, despite Grover Norquist’s desperate spin.
We’re talking a few percentage points here, man. Neoliberals and Libertarians act like it’s some thievery in the night. But at the end of the day, if you are riding in a ship, and you’ve hoarded all the food, more than you could ever eat if you tried, and the crew needed to keep the thing afloat start to starve, you SHARE THE FUCKING FOOD. At the end of the day, is it fair to say to a worker who is already being fucked by artificially low wages, high health care costs because his work is too fucking cheap to hire full time workers to whom they would have to give benefits, and has just had his house devalued and his 401(k) disappear, “you have to sacrifice your daughter’s college education”, “you have to sacrifice your wife’s cancer treatment” or “you have to sacrifice your retirement” because John McCain needs another house? Oh, yeah, man, that’s freedom.
Even the CBO has shown that the stimulus accomplished much – however, EVERYONE, including the Neoliberals, knew the stimulus was too small, with not enough of a cash component, and too much reliance of tax relief. Yet this was the plan on the Hill in the first place – limit the success of the stimulus, prevent any further action, ride the wave of economic downturn to electoral success.
However, because private investors are not investing, and corporations are sitting on cash, not investing it even into their own R&D, it becomes incumbent upon the government to act as an investor, providing the innovation spending needed to develop the new goods and services that will ultimately get the economy moving again is provided . Indeed, businesses are contracting, buying back stock, laying off workers, and consolidating their holdings, the OPPOSITE of what is needed. But that is what companies do during a recession. It makes fiscal sense to their bottom line. Shore up the bulwarks, and wait until aggregate demand picks up again. They are in no way persuaded to do anything that Neoliberal ideology would claim would be the “natural” way that these problems would be solved. In point of clear fact, they are exacerbating the problem. In times of famine, you don’t go running around giving everyone else your food, right?
Without innovation to spur growth, and new American products – especially ones we can export to get more money into our supply, we are dead in the water. We are not a strong enough economy to stand as a closed system (selling only to Americans, or balancing the economy solely on the service industries), nor can we rely on an influx of demand from elsewhere to make up the shortfall because everyone else has the same low demand problem. You cannot simply make aggregate demand out of thin air relying on Neoliberal forces to somehow magically reverse itself. It just doesn’t work.
For example, the complete failure of the traditionally normative effect of currency fluctuations that supposedly would weaken the dollar and improve exports increasing demand for American products elsewhere shows the weakness of real world expression of the Neoliberal ideology. Other forces that depend on either a closed system (when we are not, with way too large a trade deficit), or outside exploitation (which is not an option because of rival deficits and lack of investor confidence) are shown to be so much dust in the wind as well. The only mechanisms available to us are regulations, monetary policy, and taxation.
Hayek’s great claim – expounded upon by Milton Friedman – is that competition is the great equalizer, correct? That competition reacts faster than government regulations or monetary policy. Yet what we are seeing is something Hayek himself predicted – the rise of overpowerful monopolies, a situation he decries as much as centrally planned economies. To cling to the notion that to restore balance with competition we have to allow those who have corrupted the system to REMOVE competition is completely absurd.
Neoliberal ideology is too rigid and inflexible to deal with this problem. Neoliberalism demands a balance of forces that sounds good on paper, but is obviously too easy to manipulate in real life. I really do appreciate the Neoliberal/Libertarian perspective, but as a monolithic political and economic policy, it’s obviously and horrendously flawed. What we are left with is NOT a “free market system”, but Economic Feudalism. Road To Serfdom, indeed.
And this gets to the heart of the moral argument – how much is enough? At what point does money no longer contribute to the actual quality of life of an individual? At what point, when you can have every need fulfilled immediately until they put you in the ground, do the practices necessary to keep that wealth constitute evil? When labor and consumer protection has been so dismantled that wealth inequality is at the highest point since the DARK AGES, these profits come at too high a cost, and it goes from symbiotic – what Neoliberals CLAIM – to parasitic. The fact is that it is – not the “rich” per se, but those who manipulate the system for specific gain – that are self entitled, privileged parasites on a system that they have sickened to the point of death.
Your snide comment about trust fund dilettantes aside, generational wealth is a clear form of privilege that I would think those who say so much about “hard work” would challenge – and a 10-25% Estate Tax with provisions for Trusts and education spending wouldn’t seem like OMG YER TAKIN MAH MONEY AT TEH POINT OF A GUNZ0RZ.
Look, part of the reason why these arguments depend so much on ideological rhetoric is because reality shoots it to shit. There is no fucking reason one person’s ability to manipulate huge sums of money just because they have access to the mechanisms of finance should net them so much more than any other office drone. Hey, J. K. Rowling and Bernie Madoff are (were) both Billionaires, but for very different reasons. In a perfect world, we could ensure that one is punished and one is not. But at this point the balances are so far out of whack, that everyone must make the sacrifices needed to get back to base line. It’s that simple.
The irony is that Hayek saw the need for regulation, and for strong labor – indeed, his whole CASE is that you make the system fair UP FRONT, so you don’t have to make Keynesian repairs on the BACK END. That’s where the greedy mosquitos of industry have fucked up. We need government intervention to right the ship, that much is clear. To deny this is to have one’s head in the sand. Stupidly enough, if deregulation had not been taken to the level of religious holy war, not only would this crisis not have happened, but an ACTUAL Hayekian economy would have been possible.
I’m really not fond of the idea of Keynsian micromanagement of an economy any more than I am of the Socialist idea of the centrally planned economy. Ideologically, I favor strong regulation to keep the game honest so we don’t have to keep rebalancing this shit. But the fact is that all the money is concentrated in too few hands, and they aren’t letting go of it. It’s no longer a matter of ideological purity, or of some imagined back side morality (where was this moral outrage not only during other deficit-friendly administrations, but in the last 50 years of corporate criminalism? Where is the same vitriol reserved for “freedom” directed at those who have devalued the American worker? Huh? So you deserve “Liberty” but not a fair wage?), it’s a matter of SURVIVAL. If we do not get the water from the top of the fountain back to the bottom, it will not circulate at all, and everyone dies of thirst.
There is a segment of the economy that has waged war on all of us for half a century, and they’ve won. They have accomplished Sherman’s March, and salted the Earth behind them. Now they whine when justice becomes survival. Fact is that businesses and entrepreneurs that follow the rules will still succeed. We will still have a strong consumer culture. But we have to adapt to human nature, and the fact is that at a certain point, even the rich don’t give a fuck about money – it’s a game, and they don’t really care. Oh, they bitch, and they manipulate, because ego goes hand in hand with this sort of classist bullshit, but in the end, they benefit from increased government spending as much if not more than the rest of us. Why do you think they never want to touch defense spending? Because that’s where they make THEIR money. Cut defense spending, and watch Boeing, Halliburton, Koch, McDonnell Douglas, and a hundred other companies start screaming about the evils of government.
I am NOT a fan of long-term government intervention in an active role. I view regulation is a passive necessity, but constant manipulation of the money supply, of interest rates, of monetary policy to be too rife with conflict to be reliable. But in times of crisis, I view the government as a sort of capacitor, a buffer, or a compressor, with a responsibility to act on behalf of all of us to cushion these blows, and to provide redress when the system is unbalanced. This is one of those times. This whole song and dace about “job creators” and “they’ve earned their money while everyone else is parasite” is bullshit. In the end, we can quibble about semantic and sophistic rhetorical ideological nonsense amongst the ruins, or we can do what is clearly the correct thing to do.
In the end, the game has to be fair. It’s not just a factor of “social justice”, it’s a pragmatic function of systems analysis. Without the checks and balances, capitalism becomes, well, unchecked and unbalanced. To restore that balance is not only a moral obligation based on the principles of fairness and opportunity that DEFINE this great nation, but it is a survival tool to ensure that our system doesn’t just collapse. Pleading the case that the haves should be able to cling to their castles while the serfs starve outside is not just moral reprehensible, but economically irresponsible. There has to be limits to avarice, and there has to be a limit to poverty, or we will not only become morally bankrupt, but economically bankrupt.