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December 26, 2017

The following, lightly edited for blogging, was a recent response I gave to another’s invitation to respond to the topic for that day.

Joseph E. Stiglitz, one of my favorite economists, won a Nobel Prize in economics for his work on information inequality between buyer and seller. Like the “free market” idea, there has rarely been information equality other than in isolated cases. Buyers and sellers do not obey the gentlemanly ideas of Adam Smith with his theory of perfect competition in a market where both buyer and seller have all the pertinent information necessary to make honest transactions. On the contrary, the truth is that buyers and sellers are almost always trying to con one another by subtle word or deed in order to gain pecuniary and/or other advantage.

We have similar problems in information inequality between government and its citizens as politicians come up with phony rationales in order to reward their campaign-contributing friends. Taxpayers are misled into believing, for instance, that tax breaks for Wall Street and the oil industry are in the public interest. Thus we see obvious giveaways such as the depletion allowance of a wasting asset to the fossil fuel industry, accelerated depreciation schedules etc. Most of us are only vaguely aware of the enormous subsidies given over to fossil fuel businesses and, for that matter, to the Wall Street financiers, where hedge and equity fund managers pay a “carried interest” tax rate on their commissions far below what they would have to pay if such commissions were treated as what they plainly are – ordinary income.

In this latter connection, it is interesting to recall that both Trump and Hillary pledged if elected to end this “carried interest” fraud but it somehow survived in the tax bill just passed, and when the Ways and Means Chair was asked how that happened, dismissively replied: “People don’t care about that.” Wrong. I care when billions of dollars in revenue per annum is stripped from our treasury – which increases our debt by the legislative trickery of defining what is plainly ordinary income into a hybrid “carried interest” redefinition so that ordinary rates are reduced to only fifteen percent on these superrich hedge and equity fund managers. I don’t know how much more we can put on our bill of debt before our Chinese and other creditors come calling with, among other things, a demand that we give up our dollar’s status as the world’s reserve currency, a status we have enjoyed since the Bretton Woods Conference in New Hampshire in 1944 and one we dare not surrender.

I could but for time and energy write a book on this topic for today., but suffice it to say that if all these hidden (and some of the unhidden) subsidies not in the public or national interest were ended and the “defense budget” were halved (at no risk for readiness) and the tax rates were the same as today and wage inequality were ended, we would see economic growth even greater than that after WW II, be enabled to substantially reduce or in time pay off our debt, see multinationals come home with their capital for investment in our booming market with aggregate demand in the stratosphere. etc. etc. etc.

Fleshing out such a Pollyanna view with the superrich in control of our politics is, admittedly, highly unlikely, as the greedy insist on even more public subsidy for their operations (but sans a share of the profits in return for our investment), so we are left with a situation where we cannot broadly attack the current corporate swindle of our till with Republicans and Wall Street propaganda organs in full swing, and must nip at the edges for the time being. As my fellow commentators know, my nip is wage inequality, but unfortunately, there remain many other public-private swindles available for nipping, so let’s keep nipping while awaiting the election less than a year from now when we will end the larcenous conduct of this Congress and replace its members with those devoted to the public good.       GERALD       E



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