A recent New York Times article has highlighted a significant problem in the tax reform proposals surrounding the looming “fiscal cliff,” namely that current tax brackets are not even relevant to the actual levels of existing wealth. Unfortunately, this problem is a symptom of something much deeper; it is the sign of extreme inequality, a crippling condition that the hostage-holding “fiscal cliff” situation, imposed upon the country by “deficit hawks,” is designed to perpetuate.
At the outset, the arguments made by “deficit hawks” as to the necessity of spending cuts, a core piece of the “fiscal cliff,” is entirely fictitious. Public finances are not a current concern among investors. If they were, interest rates for government securities would not now be trending at historic lows.
What’s more, despite the hawkish claims that spending cuts would lead to robust recovery, the current unfolding tragedies in Europe provide a stark contrast to these chilling and unfounded claims. Countries that have implemented austerity measures, such as Spain, Greece and Italy have seen significant decreases in productivity, a downturn that corresponds to the record high unemployment levels that are now devastating the EU. Even the IMF has admitted that its calls for austerity were misguided, given the undeniable results. Most importantly, let’s not forget the unbelievable social costs that are taking their toll on populations suffering under the yoke of austerity; suffering that has driven unemployed Greeks to seek underground medical care and forced impoverished Spaniards to seek their meals in garbage dumpsters.
Thus, the rationale behind spending cuts is entirely spurious and can be summarily dismissed. The deficit crisis, as Paul Krugman rightly puts it, is no more than a phantom. Then why have “deficit hawks” propagated such an obvious hoax and why has there been a huge campaign of fear and disinformation promoting policies aimed at damaging the American public?
Hold your breath: it promotes the interests of the wealthy.
Perhaps the best example of this is the Campaign to Fix The Debt (CFD), which has seized upon the opportunity of the “fiscal cliff” to promote its proposals for spending cuts, social welfare annihilation, and tax reform. Unfortunately, it has been exposed as nothing more than a front for elite interests intent on further crippling the struggling American public and enhancing elite wealth; simply put, it is a profound call for greater inequality.
Despite a valiant attempt to veil its true objectives, a recent report by the Institute for Policy Studies has highlighted the real consequences of CFD’s proposals. Not only are social welfare programs on the chopping block, but the long list of CEOs who have thrown their weight behind the campaign would see enormous gains in wealth. An example is the “$134 billion in [corporate] windfalls” that would result from a “territorial tax” proposal, a proposal that amounts to no taxation on foreign profits brought back into the United States. That translates, of course, into greater “elite entitlements,” on top of the already enormous amounts of elite welfare that the super-wealthy have enjoyed during the past decade.
As the report points out, “Of the 63 Fix the Debt CEOs at publicly held firms, 24 received more in compensation last year than their corporations paid in federal corporate income taxes.” A grotesque fact that highlights the overwhelming levels of wealth at the top, a top that routinely avoids paying its taxes. And to add insult to injury, as the Huffington Post points out, “In 2011, $40 billion of taxpayer money was divided among just nine CFD member companies,” or in other words, the same CEOs now decrying the atrociousness of the public debt and the awfulness of social welfare programs have been raking in the public’s money for some serious welfare of their own. Not to mention the bailouts and easy credit Wall Street has been lapping up and turning into record profits, that is, of course, at the expense of the public. As the Financial Times reports, dominance of mortgage generation by a few Wall Street banks has “meant that banks were not passing on low interest rates to borrowers.” It is ironic then, that the CEO of JPMorgan, one of the largest beneficiaries of this blatant exploitation, Jamie Dimon, is a vociferous “deficit hawk” and backer of CFD. Inequality must taste real good when you are at the top.
So much for the “deficit hawks” and their blatant deceptions; while they have been throwing up illusions and falsehoods to frighten the public into submission, the reality of the situation has not changed: government securities are still sought by investors, signaling investor confidence and as recent events have proven, cuts in spending will have devastating effects on the American public. How about it then? Should the public follow the wisdom of the “deficit hawks” and jump off the cliff into the sea of inequality? Or should the public buck the falsehoods of the “masters of the universe” and push for real economic recovery and reform? Let’s hope for the latter.