David Cay Johnston has this funny idea that sound economic theories predate Ronald Reagan’s 1980 election. By, oh, say, 2,400 years. But make no mistake – our current economic dilemmas are, indeed, historical, and we may be battling them for tens, if not hundreds, of years from now.
“Our societal panic is about what we as a nation fear almost as much as death itself — the end of American abundance, the death of the idea that each generation would do better than the last, the end of the notion that everyone who works hard and plays by the rules will at least prosper in the sense of having a roof over their heads and enough to eat. Our societal panic is about a new world of mind-numbing complexity where speculation with algorithms and borrowed money pays more in a day than thoughtful investment may return in a lifetime, where jobs pay less tomorrow than yesterday, and where loyalty is something we associate with frequent flier programs rather than careers.
“The fear of what the new American economy means is killing reasoned debate about taxes, tax policy, and how to distribute the burdens of making our great nation function.
“Fear keeps us from talking about how to create an economy in which prosperity is widespread and how using taxes can make us richer by insuring the efficient and bountiful supply of the common goods and services that modern economies require: education, research, infrastructure, and universal healthcare as a service, not a profit-making insurance product.
“The 20th century, what some historians will look back on as the American Century, prospered under a national, industrial-wage economy, flush with high-paying jobs and tax rules that discouraged withdrawals from operating businesses. Taxing wages was a smart way to finance government because wages were rising. But since 1973, with some brief exceptions, this has not been true for the vast majority, whose average income in 2008 was less than 1 percent greater than in 1980, while incomes at the top soared, spurred in part by rules that encourage withdrawals of capital from business for unproductive consumption because of extremely low tax rates.
“The 21st century is an era of a global, digital, and asset economy with rules that favor the free flow of capital over labor, which is brutally suppressed in China and legally suppressed in America through anti-union laws, lack of enforcement of wage laws, and the dampening effects of a growing reserve army of the unemployed.
“America’s current societal panic is not going away soon. Tens of millions of people are out of work and tens of millions more fear their next paycheck could be their last. The temporary Bush-era tax cuts will not end next month, even though the huge deficits run up since 1980 hover over us like dark clouds of debt that could drop enough worthless government bonds to drown us all.
“The adoption of misguided economic policies, the election of politicians unwilling to be disciplined in opening the public purse, and the artificial deadlines imposed on us by the legislative gamesmanship used in enacting the 2001 and 2003 tax cut laws, together with our faux free trade policies, have put us in a deep hole.
“In clawing our way back we must keep in mind that those Bush tax cuts were not tax cuts at all but simply loans against a future which has now arrived in giant waves of red ink.”