The Potemkin American economy pretends that it can afford trillion-dollar wars, trillion-dollar military budgets, and trillion-dollar bailouts despite having sent much of its tax base offshore and undermining the dollar and creditworthiness of the U.S. Treasury.
Amidst high and intractable unemployment, President Obama’s Deficit Commission finds the solution in squeezing the American people harder so that the rich are not deterred by taxes from monopolizing every dollar of wealth growth. Social Security recipients have been selected to pay for the wars and the bailouts by having the retirement age raised and benefits reduced. To spread the misery, commissioner Alice Rivlin wants a 6.5 percent national sales tax, which, if enacted, would further reduce consumer spending during the worst downturn since the Great Depression.
In the USSR, a defunct ideology prevented the Soviets from saving themselves by using price and profit signals, instead of gross output indicators, to organize their economy. In the United States, politically powerful interest groups, such as Wall Street and the military-industrial complex that President Eisenhower warned us about, prevent the measures that would rejuvenate the consumer economy by bringing the offshored jobs home and reduce the deficit by ending the counter-productive wars.
The advantage to corporations and the financial sector of cheap foreign labor can be offset by taxing corporations according to where value is added to their product: a low tax rate if value is added with American labor and a high tax rate if value is added with foreign labor. This simple change would bring jobs back to Americans, rebuild the ladders of upward mobility that made the U.S. an opportunity society, restore the tax bases of cities, states, and the federal government, and reduce the trade deficit by the amount of the goods and services that are produced offshore by U.S. firms for U.S. markets.
Yet just as the Soviet communist bosses held on to power to the point of their self-destruction, the American oligarchies will squeeze the U.S. economy to its death. Is President Obama’s failure to bring any change yet another indication that change in America will only follow catastrophe?