Austerity With Justice


Is austerity an excuse to enable the rich to steal from the poor or a necessary sacrifice to hold a society together? The proof is in the pudding, and this pudding is rancid.

Austerity with justice appears to be a concept no one even considers. Those facing austerity oppose it; those advocating it make others suffer while feathering their own nests. But the fact is that societies, just like families, have to accept austerity after spending years on a binge…or perhaps even if they did nothing wrong but just got hit by an external emergency.

Americans clearly overspent in an idiotic manner in the years before the 2008 recession – using rising home values to buy consumer goods, a practice everyone knows is financial suicide and frequently buying unaffordable homes with the intention of flipping them and handing the inevitable loss to a stupider neighbor. Americans also enjoyed throwing their weight around internationally, without regard to cost. But the U.S. elites also launched a concerted campaign to cheat the American people for their own private enrichment. Whether or not Greeks are equally to blame or are mostly the innocent victims of the Germans who, in the end, have turned out to be the real winners of World War II would be hard to assess.

Wherever blame may be due, it is very hard to find anyone in either the U.S. or Greece who has a clear idea how to implement austerity with justice. For example, the rich in Greece pay an utterly irresponsible capital gains tax rate of 10%, worse even than the tiny 15% U.S. rate and much less than the typical European rate. To cut the minimum wage for workers who actually earn their living (as just done by yesterday’s parliamentary vote in Athens) while the rich continue to enjoy one of the lowest tax rates on their unearned income of any European society is an example of the kind of unfairness that might well make a worker look favorably upon Molotov cocktails.

Another example is the income tax rate. Greece has a fairly progressive system (18-45%), but if the minimum wage rate is being cut and pensions for retirees are being cut (effectively breaking a contract), then the maximum income tax rate should be raised. California’s example this week of raising the income tax rate for the rich and rescinding planned tuition increases shows a more morally defensible approach. California’s approach is also more patriotic: even if austerity is unavoidable, building a successful society over the long term (in the event, by maintaining broad access to higher education) remains an important goal.

Otherwise, how can one be blamed for concluding that all the talk about austerity is just one more plot by the rich to steal from the poor?

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