The Debt Scare of 2009


This story got pushed onto the Times front page by the big players in finance who want to get their money back from the government on the backs of the little guy. How's that, you say? Well, cut services, of course, but fuck all, don't cut military Keysnianism out of the budget. Besides, the rich can afford health care and retirement after all without the government's help.

So the Times goes right along with the scare tactics:

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

Sure, it may be a payment shock. But here's the ultimate problem with this line of thinking. First, don't be fooled into thinking a.) the government can't repay this debt or that b.) it doesn't have the means already at its disposal. The government has a vast pool of wealth it can tap into at any time. That pool is a tax-rate hike on the wealthy in this country. Ratchet their rates up to sixty, seventy, hell, even eighty percent of income after a cool million and we can have healthcare and a decent stimulus package that puts America back to work.

But we don't hear that story. Why? Because the wealthy use the New York Times and other big national papers as their own propaganda organs.


Sean Paul Kelley November 23, 2009 - 12:20pm
( categories: Economics: USA )

Get rid of the giant bloated military machine

OR

Get rid of the idea that the government serves the American people
which, certainly simplifies the Preamble of the Constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

... I'm afraid I know which option is already the reality. I wonder if they will belatedly inform the people.

We need a NATION WIDE STRIKE for Real healthcare reform

Joaquin November 23, 2009 - 12:52pm

Clearly, the New York Times, and most other media outlets, has a conflict of interest. This is a large scale problem. Typically, when there is a conflict of interest in some institution, what happens is that some other entity, above the institution in question, tries to get a more objective opinion by getting somebody outside the institution to examine and rule on the situation. Unfortunately, right now THERE IS NO OUTSIDE place where such somebody can be found. Who would that be? Somebody in China? The vast majority of mid- and high-level politicians in the US are relatively rich. The same holds for academics at prominent Universities. Once you got the dough, certainly you don't want to give it up. A tax hike on income above 1M makes complete sense, it would be the socially responsible thing to do, yet it is not discussed anywhere. As S-P says, 70% or more would make sense, especially given the accumulation of wealth over the last decade. What to do?

creativelcro November 23, 2009 - 1:01pm

would certainly address the problem of continuing inequities in income, but it would do nothing about today's plutocrats and their existing hoards of wealth. These hoards have grown so large and narrowly distributed that they will be an insurmountable ongoing problem, and I fear no form of income tax going forward could dissipate them.

Hyperinflation would fix the problem in time, but only at a grievous cost to retirees and working people with savings. (It may be in the cards for us anyway, which is a good reason to start thinking of progressive taxation based on deviation from median income rather than absolute gross income.)

What I'm saying is we need to consider taxing concentrations of money wealth just like we tax other valuable property. That would provide an institutional incentive to put capital to real economic work rather than playing abstracted financial shell games with it (e.g. credit default swaps). As it is, the economic incentives have been in favor of increasing financialization.

I try to imagine the negative unintended consequences of having a property tax on money, but I can't really come up with any. Does anyone here have some ideas in this regard?

chalo November 23, 2009 - 2:54pm

line of thought that hadn't occurred to me. I don't have anything to add to it right now, but I'd love to see some more discussion in this area.

Bolo November 23, 2009 - 6:03pm

There seems to be a serious disconnect between the front page and the editorial page. One brings up the "scary" debt numbers and the other goes after Goldman Sachs for its greed. It is somewhat sad that the NYT has been reduced to house propaganda for the corporate and wealthy gangsters.

steelhead November 23, 2009 - 3:43pm

is grow out of the debt. The additional debt capacity the US can take on at a 3% annual GDP growth rate is $2.5 trillion. And that is assuming 5% 30-year treasury.

Spending trends will be well below that. The stores of wealth are vast, though US will never need to tap into them.

Scotjen61 November 23, 2009 - 5:25pm

that we are even having this conversation. Seemed like in 2005 such a discussion would never had occurred, or the one proposing such tax hikes would have been immediately mocked.

The NYT or WSJ might not be willing to go there (for the obvious reasons mentioned), but then again their ability to influence is waning for that very reason. This fight can be won, but honestly the first step will be just letting the Bush tax scheme sunset in 2010 - they will push hard for pieces to be renewed. If that goes down in flames, we can start to talk about progressive tax hikes.

As they say: America always does the right thing, just after we've tried everything else.

zot23 November 23, 2009 - 5:30pm

This is too broad a brush you're painting, Sean Paul. I don't see the NYT as a pack of running dogs. I see it as a big paper full of contradictions, one of three national papers left. The others are the WSJ and USAToday, who also hold contradictions.

I heartily support higher taxes on the rich, both at the federal level and at the state level. Here in Seattle, we have a pile of Microsoft millionaires that never paid any state income taxes, and we have the traffic congestion to prove it.

Tom Robinson

trob November 23, 2009 - 8:00pm

Recently, a colleague was talking to some MS execs about a position there. They were kind of embarrassed to reveal that the position she was asking about "only" paid around 800Ks/year, which implies that it is way less than what these folks make.

creativelcro November 24, 2009 - 11:10am

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