Michael Hudson has consistently been one of the best guides through the labyrinth of lies that surround the monumental act of elite thievery known as the “economic crisis.” Patiently and perceptively, he applies his economic expertise to the realities behind the blather, laying out – in grim, heart-sinking detail – how our great and good are using the crisis they created to move in remorselessly for the final kill on any dreams of a decent life for the rabble – that is, the 99 percent of us who fall outside the golden circle of the rentier class.
So when Hudson speaks, we should pay serious heed. And his latest piece in CounterPunch is heedful – and heart-sinking – indeed. We are, he says, entering the end-game of a decades-long process of wealth transference in which the entire burden of sustaining society – a degraded, hollowed-out, inhumane society – and a bloated, belligerent militarist oligarchy falls entirely on working people and the poor, while the elite reap all the profit.
Hudson sees yet another manufactured crisis hitting the battered system next spring: the “debt” crisis, when Republican legislators and Blue Dog Democrats refuse to raise the federal debt ceiling, “forcing” a most willing (yea, eager) Barack Obama to effect an “historic compromise” to “save” the government from closure and collapse: a flat tax.
You should read Hudson’s entire analysis, which is set up carefully with very pertinent historical background, but here are some disturbing excerpts:
The danger the United States faces today is that the government debt crisis scheduled to hit Congress next spring (when Republicans are threatening to vote against raising the federal debt limit as the government deficit soars) will provide an opportunity for the wealthy to give a coup de grace on what is left of progressive taxation in this country. A flat tax on wage income and consumer sales would “free” the rentiers from taxes on their property. ...
The flat tax actually would tax wage earners much more steeply than the wealthy, whose income it would largely exempt! ... The tax does not fall on “empty” pricing in excess of value – what the classical economists termed “economic rent,” that element of price (and income) that has no counterpart in actual cost of production (ultimately reducible to labor) but is a pure free lunch: land rent, monopoly rent, interest and other financial fees, and insurance premiums. This economic rent is the major return to wealth. It is grounded in the finance, insurance and real estate (FIRE) sector.
The effect of untaxing the FIRE sector is twofold. First, it increases the power of wealth, privilege, monopoly rights and property over living labor – including the power of hereditary wealth over the living. Second, it helps “post-industrialize” the economy, creating a “service” economy. A service economy is mainly a FIRE-sector economy.
And now for the end-game, the kabuki theater in which the FIRE-breathing – or rather, FIRE-bought -- politicians of both parties finally give the One Percenters what they’ve always wanted: everything.
The wealthy want just what bankers want: the entire economic surplus (followed by a foreclosure on property). They want all the disposable income over and above basic subsistence – and then, when this shrinks the economy, they want the government to sell off the public domain in “privatization” giveaways, and they want people to turn over their houses and any other property they have to the creditors. “Your money or your life” is not only what bank robbers demand. It is what banks themselves demand, and the wealthy 10 per cent of the population that owns most of the bank stock.
And of course, the wealthy classes want to free themselves from the share of taxes that they have not already shed. The flat-tax ploy is their godsend.
Here’s how I think the plan is intended to work. Given the fact that voters have already rejected the flat tax in principle, it can only be introduced by fiatunder crisis conditions. Alan Simpson, President Obama’s designated co-chairman of the “Deficit Reduction Commission” (the euphemistic title given to what is in reality a “Shift Taxes Off Wealth Onto Labor” commission) already has suggested that Republicans close down the government by refusing to increase the federal debt limit this spring. This would create a fiscal crisis and threat of government shutdown. It would be a fiscal 9/11, for the Republicans to trot out their “rescue plan” for the emergency breakdown of government.
The result would cap the tax shift off finance and wealth onto wage earners. Supported by Blue Dog Democrats, President Obama would shed crocodile tears and sign off on the most right-wing, oligarchic, anti-labor, anti-black and anti-minority, anti-industrial tax that anyone has yet been able to think up. The notorious Flat Tax would fall only on wage income (paid by employees and employers alike) and on consumer goods (the value-added tax, VAT), while exempting returns that accrue to the wealthy in the form of interest and dividend income, rent and capital gains.
Barack Obama is already one of the most right-wing presidents we’ve ever had, building upon and expanding virtually every pernicious policy of his oligarchic predecessor. But as Hudson warns us, we ain’t seen nothin’ yet.
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This story was published in the Baltimore Chronicle on November 27, 2010.