Monday, April 29, 2013

How Is A National Economy Not Like A Household Budget?

Krugman is especially good today. He makes some crucial points, one in particular, that most Americans don't understand, and that the conservative power structure, the banks, the 1%, are determined Americans never understand:

"Let’s start with what may be the most crucial thing to understand: the economy is not like an individual family. Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too."

The Austerity mantra tells us that nobody should spend more than they have in their pocket right now. No homeowners, no car owners, no college for you.

Unless you are a member of the 1% who have accumulated all of America's earning power over the past 30 years.

What income and savings ordinary working and formerly middle class consumers used to spend now belongs to the very rich and adds to the leverage that the 1% has to manipulate the economy.

The 1% also uses this leverage to manipulate Congress to ease their taxes and increase ours, to get our tax dollars to bail out the big banks but not help the homeowners who were wrongfully foreclosed, to get government to protect corporate earnings and CEO pay from taxes but cover any losses they might suffer through their own risky behavior.

The concentration of wealth also buys a lot of media, a lot of punditry, a lot of "expert opinion", a lot of public relations that can be used to persuade the mass of Americans that they don't deserve what they used to deserve, that austerity is good for them, that Americans should settle for less and quit grumbling.

Austerity policies take trillions out of the middle class consumer economy and put them into the well-stuffed mattresses of the 1%.

To what purpose? The rich can afford to play a long game. (Call it a long con if you like.) Their goal is to suppress working incomes to their lowest possible degree. They own for a living; they see working incomes as an evil. They have been suppressing working incomes for the past 30 years. What will eventually happen is the U.S. economy will begin to resemble a third world country, with large slums full of workers desperate enough to work for pennies and small gated enclaves of very wealthy people and their bodyguards.

Interestingly, the Austerity preachers give us Greece as an example of what happens if a country doesn't act according to the wishes of the very rich. But Greece is an example of the opposite. The Greek economy fell apart because its extremely wealthy stopped paying taxes and the consequences (unwise austerity policies) were forced upon the working population. But economies are made up of people who work and spend money, not just people who own for a living, who are rich for a living and do nothing productive. Why are the latter group made immune to taxes? What happens when trillions are taken out of a nation's economy and put tax-free in offshore banks? What happens is a Greek style collapse.

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