NO DEATH BY A THOUSANDS TAX CUTS, PLEASE!
As Krugman puts it:"President-elect Barack Obama’s economic plan falls well short of what’s needed. To fix it, he needs to stop talking about “jump-starts” and focus on long-term investment." Krugman disapproves of the tax rebates, because they have proven highly ineffective. Searching deeper in history, we find more reason to condamn this old trick of the US plutocrats.
My advice to Obama: please do not imitate the Roman empire, and its death by a thousands tax cuts.
Obama does not have to feel bound by promises made when the economy was still cruising in choppy seas. Now the economy is sinking, and it's not a cruise anymore. Obama was going to be captain of the ship of state, instead he finds himself in command of a sinking wreck. All hands should be on deck, everybody should sacrifice.
A thousand dollars of tax rebate will be mostly spent to buy stuff in Asian factories set up by US plutocrats. These rebates to not help create an economy at home, they just help the infernal machine that suck jobs out of the USA. Trade is good, but right now all governmental money should be reserved to create an economy at home. Anyway without the later, there will not be any trade looking forward.
These tax rebates, long a weapon of those who wanted to weaken the state, are akin to the distribution of money new Roman emperors were making. Throwing money at the people bought people off in Rome. Of course, two years later, those same people were worse off, and the economy had sunk further. Rome went on like this for a long time, sinking ever lower. Roman investments in factories, engineering and industrial infrastructure were actively discouraged, although grandiose economically useless projects were still engaged in (such as displacing the capital city to Byzantium).
The Roman empire became characterized by a dying off of the central state, as more and more money was sucked by rich, increasingly provincial plutocrats, who manipulated the system so that they paid ever less taxes (think about today's US hedge fund managers and other money manipulators with their 15% maximum tax rate, and enormous tax evasion overseas by the richest US citizens). The industry and production of the core of the Roman empire was eviscerated. The Roman plutocracy did all this intentionally, to prevent a revolt against the plutocracy, and a return to the republic. Weakening the Populus Romanus was a must. Putting people out of work in the center of the empire while throwing money at them was the key concept. (Progressively the feodal system appeared, although emperors were endowed with ever greater powers, and the Roman Senate sieged for centuries more.)
The American plutocracy has embarked on a very similar course, ever since Reagan. It is death of the republic, by a thousands tax cuts. As the state relatively shrinks, essential services that cannot be provided by the free market die off, and the later starts to freeze. A difference with Rome is that, whereas Rome stood in magnificent isolation for three centuries of quiet decay, the USA is far from being alone, so the decay of the USA will be much faster, if counter measures are not imposed swiftly.
The first thing to do is not to persist with the contempt of the Roman emperors, giving their subjects crumbs to keep them happy from one day to the next, as if they were birds.
The second thing to do is to free the subjects by giving them real work. There is plenty of work to do, it's capital and the will to use it that is missing. Obama at this point has plenty of capital, as long as he does not waste it on crumbs (or on the plutocracy as a lot of the TARP has been). What is now needed is the will to create as much of an economy as possible, as soon as possible. The occasion will not show up again, it's a one time shot.
An important thing to understand is that, whereas the economists that talk in the name of the plutocracy claim that the state should not grow, there is no theory of the ideal size of the state. After a giant military built up by Bush, the entire US State (Federal plus States) is 36% of GDP. Big European states such as Britain and France are exactly at 45% of GDP (with a smaller military spending). Now Europe is doing much better than the USA in the present crisis. Conclusion: the Federal State should grow, a lot, and that means new taxes. For all. An obvious one should be a higher gasoline tax. As it is, roads cost 107 billion dollars more than what the gas tax brings.
Patrice Ayme
Patriceayme.wordpress.com
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