The Republicans can’t help themselves. Dominating all branches of the federal government, and bolstered by decades of anti-government, pro-market rhetoric, they are actively repealing the 20th century. With veto-proof majorities, and no strong opposition from the Democrats, they are in the silly position of being unstoppable, even when they’d probably rather lose a vote.
As policy, a national sales tax is more useful as a wedge issue, one of those “class warfare” issues that they keep beat the hapless Democrats over the head with. It’s not actually a sensible policy for government or economy. Nevertheless, Alan Greenspan recently came out in favor of a modified consumption tax. At what point does Wall Street realize that Greenspan is not some grand wizard of economics, but really just a partisan hack? When Clinton was president, Greenspan would constantly mumble and sputter warnings about cutting spending and paying down the nation’s debt and send the bond markets into turmoil whenever Clinton didn’t do as Greenspan would say. Suddenly, with Bush as president, Greenspan feels that enormous budget deficits and a weakening dollar have their upsides. He likewise agrees with Bush that Social Security is in immediate crisis and that the federal government should move away from a system that taxes income towards one that taxes spending, which anyone who can do basic math knows is deeply regressive and taxes the poor at a higher rate than the rich.
Greenspan’s mumbles were translated thusly:
“Many economists believe that a consumption tax would be best from the perspective of promoting economic growth – particularly if one were designing a system from scratch – because a consumption tax is likely to favor saving and capital formation.”
The only people who will be able to “save” money under this scheme would be the wealthy, who are being aided by the government in the creation of financial dynasties. Working people can’t save money because our wages are going down, or not keeping up with inflation. We’re losing purchasing power, which is why so many working and middle class families are so deeply in debt to credit cards and other financiers: we borrow in order to live the lives that our parents could afford through their real wages. It’s no wonder personal bankruptcy is on the rise.
But the Republicans want to do repeal bankruptcy protection, too! The Senate is poised to pass a bill that denies bankruptcy protection to millions and makes the terms much more putative for those who still qualify. This is obviously bad policy, as all the Senators who will vote for it surely know. But, they’ve all been bought and paid for by the financial industry. This is an example of that basic flaw in capitalism: the principle that everyone acting in their own selfish interest will somehow produce what’s best for society as a whole. Of course the credit industry wants to protect its investments and has the political power to do so, but if they plunge us into a “debt-peonage” society, how many consumers will be able to afford to carry their credit cards anymore?
There is a school of thought, espoused most prominently by William Greider, that global capitalism is in for a day of reckoning when falling wages and crippling debt finally break the backs of the millions of American consumers whose very consumption fuels the global economy, and we can no longer afford to buy, buy, buy in the numbers that the system desperately needs. I’m not one for doosmday predictions about capitalism. We Marxists have been predicting the “imminent” demise of industrial capitalism for almost as long as there has been industrial capitalism. It’s a remarkably resilient system – that’s its strength. It is however, unfair and globally produces misery for many more than it benefits. The falling consumption of Americans is more likely to be supplanted by China’s sleeping giant than to cause the machinery of capitalism to collapse. The system will soldier on, even if the American working class becomes a peasant class. Those wealthy dynasties and the politicians they buy had better hide the guillotines, though.