Nobel Prize-winning economist Joseph Stiglitz wrote a good column in Politico March 28 detailing why he refused to sign on to the Bowles-Simpson Deficit Commission recommendations, which he characterizes as a “near-suicide pact” for our economic future. It is well worth reading, and I won’t recount all the details here. Rather, I’d like to discuss several points that he brings up, and a couple he did not, that reveal both the depths of our current economic and political crisis (and this stagnation is indeed every bit as political as it is economic) and the growing chasm between sound, reasonable economic policy prescriptions on the one hand, including from a highly respected economist, and major segments of both political parties and their backers on the right on the other hand. In sum, what Stiglitz proposes is increasing taxes on the wealthiest citizens who, as he rightly says, are the one class “in the country that has prospered for the last decade,” in order to stimulate the economy and reduce the growing, yawning gap between rich and poor.
Why this proposal? Because the top 1% of Americans haul in over 25% of all income–to say nothing of the vast majority of assets they control. This concentration of wealth at the top stifles economic growth in our consumerist society and at the same time disincentivizes business investment in employment and infrastructure. On broader infrastructure, Stiglitz frames his argument in terms that would, in theory, attract pro-business people and interests by contending that significant opportunities exist for businesses, government, and people alike through a renewed focus on our long-ignored infrastructure:
Years of underinvestment in the public sector—in infrastructure, education and technology—mean that there are ample high-return opportunities. Tax revenues generated by the higher short- and long-term growth will more than pay the low interest costs, implying significant reductions in deficits. Any firm that could borrow at terms similar to those available to the U.S., and with such high return projects, would be foolish to pass up the opportunity.
While he immediately shifts his arguments to cover taxes, certainly vital to rectifying the flagging American (and global) economy, Stiglitz’s proposal has clear implications and benefits for workers that he should have accentuated. Such projects have enormous potential to employ people for years to come in both the private and public sectors, across scores of occupations. They can improve areas of our economy and society that segments across the political spectrum agree have been blatantly, dangerously overlooked, even if they differ on some of the reasons and what recommendations for remedies they have.
That public works, as just one aspect of a more expansive investment in broadly construed economic infrastructure such as schools, telecommunications especially public-access Internet, in addition to bridges, roads, levees, and more, does not receive far greater focus for economic and employment growth is in good part a testament to attacks from the right wing on the legacy of the New Deal. While the New Deal did not end the Great Depression (which had multiple phases including one in the late 1930s that economists such as Paul Krugman argue returned in force because of reduced government jobs investments), its aggregate programs did reduce unemployment, ameliorate the worst effects of the crisis for millions, spur vast economic investments in infrastructure, and importantly construct what became a fairly expansive social safety net encompassing labor rights, modest long-term economic and social security for the at-risk, and more. Some form of New Deal-like spending and programs are just what the US needs, but is exactly where politicians and political discourse will not go.
Nor have there been any serious discussions or efforts in mainstream political circles to implement another of Stiglitz’s proposals–reducing the deficit through reductions in the country’s vast military expenditures including two enduring wars and occupations. Says Stiglitz:
The Cold War ended more than two decades ago, but we continue to spend tens of billions on weapons that don’t work against enemies that don’t exist. Fruitless wars have not increased our security and our military’s credibility. Rather, they have undermined both.
One could certainly include in this analysis the vast sums Americans through their tax dollars spend on a more privatized system increasingly dominated by contractors. Yet asking crucial questions about the efficacy, need, and cost-effectiveness of steering hundreds of billions of dollars into this privatized, largely unaccountable, and under-regulated contractor system is off the political radar.
Stiglitz concludes with a critique of the vast web of corporate tax loopholes that deprive the treasury of hundreds of billions every year. It is hard to describe just how out of control the problem of corporate tax avoidance has become, but Allison Kilkenny did an admirable job in her piece in The Nation. How bad has corporate tax avoidance become? Kilkenny writes that two-thirds of US corporations, frequently dubbed “job creators” in right-wing circles despite profit levels of about $1.659 trillion in the third quarter of 2010, pay no federal taxes, with many profitable corporations actually receiving rebates. These include banks, such as Bank of America, which received back $1 billion despite having already taken $45 billion from American taxpayers as part of an enormous bailout of investment banks.
Yet what dominates right-wing circles and much of mainstream discourse is not just an utter avoidance of these long-standing problems, but is an attack on workers’ union and political rights, and threats to shut down the federal government should the right wing not receive sufficient cuts in social spending for what they derisively term “entitlement programs.” This is despite some steep cuts that President Obama’s budget has already proposed, including to cut heating assistance for elderly and low-income citizens, and community service block grants.
In sum, attacks on everyday people through austerity prescriptions, while the wealthy have never been wealthier or more financially distant from everyday people in America, hold political sway over sober, moderate assessments from award-winning economists like Stiglitz who have long studied such problems and their ramifications. Without effective, countervailing arguments and proposals among our political leaders, and popular pressure to support such, it appears unlikely that our nation will anytime soon bridge this gap between the needs and wants of most Americans living day-to-day on the economic and political margins on the one side, and the power of few, wealthiest Americans who dominate our bleak landscape on the other.
(Note and Disclosure: The similarity between this post’s title and that of the AlterPolitics post to which I linked in the text is strictly coincidental. In fact, I was unaware of it until I searched for some good references to Republicans’ more frequently employing the term “job creators” recently to refer to the business community as a whole. In fact, the post to which I refer is much more economics-oriented than mine, is quite good and worth reading in its own right.)
(Additional Note: Kilkenny has a strong article at truthout that makes strong connections between the country’s infrastructure, political economy, and the recent tragedies in the aftermath of the earthquake, tsunami, and nuclear meltdown in Japan. Read it here. This makes tax policy and infrastructure issues all the more prescient.)