By Henry McRandall
U.S. Federal Reserve chairman Ben Bernanke yesterday opined that government spending must be brought into line with government revenues. He was explicitly talking to Americans but implicitly also talking to Canadians and the citizens of other western industrial countries.
The perversity of Bernanke’s partisan political pronouncement was not just its stunning audacity.
The dire warning was perverse coming from an economic “guru” whose sociopolitical obtuseness and questionable econopmic acuiity contributed so greatly to the global economic meltdown.
It was perverse in the elitist nature of the post-depression prescription that it proffered.
And it was perverse in its assignment of culpability and responsibility for the meltdown and its ultimate resolution.
Bernanke was right to point out the unacceptable gap between government spending and government revenues. But he got the consequent equation wrong. It is not spending that must be brought into line with revenues but revenues that must be brought into line with spending.
For the past 30 years now, the advanced, (primarily western) industrial countries have lavished tax cut after tax cut after tax cut on corporations and the billionaires and mega-millionaires who control the corps. And, to finance those tax cuts, it has imposed real spending cuts that have punished the masses (the poor and the middle class) and largely crippled government.
At no time in the 500-year history of corporate capitalism have corporations or the wealthy been asked to pay their fair share of taxes, especially in Canada and, very especially, in the U.S.
At one particular juncture, both North American countries flirted briefly, circa 1950, with tax fairness for corporations and the wealthy.
At the time, corporations carried about half the total tax burden in both Canada and the U.S. Now they shoulder less than nine percent of that burden.
And at the same time, the marginal tax rate – the rate charged on just the highest portion of the incomes of the extremely wealthy – approached 80 percent, although in practice those rates were highly mythical. Today the maximum rates in both Canada and the U.S. are less than 30 percent.
The tax cuts for those who could most afford to pay have cumulatively reached the point where they now cost Canada’s federal and provincial governments more than $40 billion a year in lost revenues and American state and federal governments more than $500 billion a year.
This is sheer madness!
And what has it wrought other than increased hardship for the masses? Investment rates today are lower than they were circa 1950, so it would appear tax rates would not be an impediment to investment as long as the entire G20 agreed to simultaneously and drastically increase taxes on corporations and the wealthy.
If Canada – and especially the U.S. – were to drastically cut military spending and drastically increase taxes for corporations and the wealthy, they could cut taxes for the masses and still have the money to provide some of the services they should but can’t finance now.
The often-bantied phrase “fiscal responsibility” has been usurped by right-wingers to always mean cuts in both corporate- and high-income- taxes and government spending, a menu perfectly suited to the corporate capitalist agenda.
But fiscal respsonsibility can also be exercised by increasing taxes on corporations and the wealthy, while still inxcreasing spending on the masses – but only if the insane levels of military spending are pared significantly.
Bernanke babbles big-business bluster
By Henry McRandall