Reverse Austerity and Trickle-Up Economics

Now that the election is over, attention in Washington is turning toward the fiscal cliff and the supposed dangers of our large budget deficit.  Economists worth listening to (such as Paul Krugman and Dean Baker) don’t think that in our current circumstances budget deficits are a problem.  The United States is able to borrow at historically low interest rates, indicating that investors around the world want to buy U.S. government bonds, which would not be the case if we were in real budgetary trouble.  Rather, budget deficits are being used as an excuse in yet another attempt to cut the major working- and middle-class public programs, Social Security and Medicare.  The argument is that we can’t afford to sustain the modest programs that we already have, much less expand them to help out people during tough economic times.  Therefore, regular working people have to “tighten their belts” to prepare for the “tough decisions” that comfortable lawmakers and their wealthy backers say are needed in order to avoid fiscal catastrophe.  It sounds right, but is driven by ideology, not actual budget realities.  Instead, we should have a major Keynesian stimulus, to include expansion of Social Security and Medicare benefits, in order to kick-start the economy. 

However, let’s say for the sake of argument that we actually were in a situation that required cutting incomes, benefits, and programs.  The argument that cuts should come from the poor, working, and middle classes, rather than from the wealthy, is exactly backwards: you should cut from those who can most afford it first, for both moral and economic reasons.  It’s common sense, and just humane, to make economic cuts first from the top, only then working your way down the ladder to those at the bottom once those above them have faced their fair share of cuts.  In principle, this would mean that you cut from the wealthiest person until his or her income is equal to the second wealthiest, and then from both of them until their income is equal to the third wealthiest, and so on in stepwise fashion, until you get to the very bottom.  Let’s call this “Reverse Austerity.”

You can see how Reverse Austerity would work in the graphs below.  Imagine that we have a simple, small company with a highly-paid CEO, well-paid mid-level managers, and less-well-paid regular workers.  If cuts are needed, they must start at the top and work their way down; it is only when the situation is really dire, so that executive and manager salaries have been equalized with those of workers, that cuts to the already-low workers’ wages are justified. This model is, of course, a very simplified one, but it is meant to be in order to illustrate the general principle.  In the real world, more complex variation in incomes would require more involved accounting to apply it.  But this would not be beyond the capabilities of modern accountants and computers, for it would only require listing salaries in descending order and cutting from the top down, in stepwise fashion.  And while my illustration depicts a business enterprise, it could just as easily describe the distribution across society as a whole. 

If Only We Could Fire CEOs for Firing Workers to Protest the Election

Democratic wins in the 2012 elections have led conservatives to moan, ridiculously, that America is becoming a land of lazy welfare recipients dependent on government: Bill O’Reilly complained that people voted for Obama because he’s supposedly giving them “stuff,” and interpreted this as a rejection of the “traditional” American ethos of the White Protestant Work Ethic.  He said, “People feel that they are entitled to things and which candidate, between the two, is going to give them things?”  Sore loser Mitt Romney said that Obama won because he had given “gifts” to his supporters.

Hence, yet again for conservatives we are on a road to creeping socialism.  Yet Obama’s has governed not as an enthusiastic New Deal populist but as a moderate conservative who has been quite stingy on economic stimulus.  These sour grapes also neglect the fact that corporations are the beneficiaries of the largest government “gifts” of handouts, bailouts, tax breaks, bloated contracts, and subsidies. 

Nonetheless, many businesspeople have concluded that America is ungrateful for their services, and some seem intent on showing us how valuable they are by childishly picking up their bats and balls and going home.  There are several examples of business owners who have said that they will raise prices or cut worker’s pay or hours in response to the election results.  This Florida owner of several Denny’s franchises has declared that he will offset the costs of Obamacare by cutting worker hours, and the CEO of Papa John’s pizza is going to do the same, even though the company's free pizza giveaways cost several times more.  It’s important to note that these clowns are threatening people’s incomes and livelihoods -- by which they meet the needs of themselves and their families -- and that they are not doing so a business matter, but as a political protest of election results that they don’t like.

This is important as a matter of structural justice in economic institutions: this withdrawal of worker pay, benefits, and hours is just another form of capital strike.  I previously wrote:

Capital flight, sometimes also called capital strike, is the refusal by a company to productively invest unless its demands for special privileges are met, either by relocating capital or by hoarding it… Capital flight/capital strike is significant because it is a form of extortion: society's capital funds are used against it to the advantage of the investor class. It is the relocation or withholding of society's investment assets, not for rational reasons, but as a threat.

Change We Could Believe In: The Value of Third Parties

America has been stuck in a state of political stasis since the 1960s, in which progress on social issues such as women's rights and gay rights has been slow and halting, our environmental crisis is ignored, and we have gone backwards on issues of economic class and equality.  There are many reasons for this, but one of the most pertinent ones as we go to the polls this November is the two-party duopoly that the Republicans and Democrats have locked on our political system, by which these two parties control most of the politcal resources of electoral competition, government access, and legislative power.  Multi-party democracy is the international standard for democratic practice, and a one-party state is usually a dictatorship, even when it keeps the formalities of democracy in place.  Can a two-party state be that much better?  Because both the major parties are committed to neoliberal ideology and are fundamentally in the service of corporate forces, the two-party system keeps competition trapped within boundaries that are acceptable to the big money elite: the parties compete mainly on cultural issues and a small slice of the distribution of social benefits, while real reform, to say nothing of radical democratic change, is kept out of the arena of public debate, thus defeating it before combat is even begun.  A viable, credible third party committed to labor and the environment, not to neoliberalism and corpratocracy, is needed shake up the system. (I have written before why protest politics alone will not do the job).

The term "third party" is something of a misnomer, because there have been so many of them (there were five parties on my absentee ballot this year) and because the phrase itself perpetuates the dominance of the major party duopoly by making alternatives seem outside the norm.  But it is the most recognized term used for alternative parties in America, so I'll go sometimes go along with it, although I will also use other terms such as "alternative" or "minor" parties.  The kinds of alternative parties that I have in mind are not the boutique individual "parties" of those like Ross Perot or Teddy Roosevelt, who ran mainly on the force of their personalities and had success in getting votes mainly because they could throw money into a campaign machine due to either great personal wealth or the backing of wealthy donors.  The kind of third parties I'm talking about are instead those bottom-up ideological parties held together by shared political concerns and principles held by their members.  Neither Roosevelt's Bull Moose party nor Perot's United We Stand fits this description.  Nor am I talking about single-issue parties like the Prohbition Party, but parties with a broad agenda potentially capable of addressing the full range of political, economic, and social concerns of a wide constituency.

Going back to the Granger, Greenback, and Populist parties of the nineteenth century, the Progressive and Socialist Parties of the twentieth, and the Green and Libertarian parties of the twenty-first, such alternative parties have always been part of America's politics and have historically served very important and legitimate functions.  The first function that minor parties have is to introduce new ideas into the political system: the two main political parties become beholden to entrenched interests and resistant to new ideas, so creative reform can only come from outside them, and other parties have been  a main sorce of political innovation.  The reform parties of the late nineteenth and early twentieth centuries included in their platforms all sorts of new economic and political ideas that were eventually adopted widely during the period of liberal governance that began with the New Deal.  These included things like a minimum wage, ending child labor, an eight hour work day, social security, floating currencies, professionalization of the bureaucracy, and other reforms.