Austerity: Why and for Whom?

RICHARD WOLFF
Recently back from Europe, Wolff is author of the book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It. He recently wrote the piece "Austerity: Why and for Whom?" which states: "Nearly all current political leaders of major capitalist countries responded positively to the banks' demand for austerity (as in Canada's recent G-20 meeting). ... An Athens trucker says, 'Public employees here don't work hard enough, so it is reasonable to cut their pay.' A Parisian clerk thinks it 'reasonable to postpone the official retirement age a few years; we all live longer now.' A Minneapolis office worker agrees that it is 'reasonable, in crisis times, to get by with fewer public services.' A New York laboratory technician supports a new tax on cell-phones as 'probably reasonable; after all, people overuse them.'

"Remarkably, such notions of 'reasonable' are silent about other possible and, to say the least, more 'reasonable' forms of austerity. Let's consider some alternative 'reasonable' kinds of austerity (i.e., austerity for others) and then question austerity itself. Serious efforts to collect income taxes from U.S.-based multinational corporations, especially those who use internal pricing mechanisms to escape U.S. taxation, would generate vast new federal revenues. The same applies to wealthy individuals. The U.S. has no federal property tax on holdings of stocks, bonds, and cash accounts (states and localities levy no such property taxes either). If the federal government levied a 1 percent tax on assets between $100,000 to $499,000, and 1.5 percent [tax] on assets above $500,000, that would raise much new federal revenue (everyone's first $100,000 could be exempted just as the existing U.S. income tax exempts the first few thousands of dollars of individual incomes). Exiting the Iraq and Afghanistan disasters would do likewise."

Wolff is professor emeritus of economics at the University of Massachusetts, Amherst. He is currently a visiting professor in the Graduate Program for International Affairs at the New School University in New York City. Video of his talk "Capitalism Hits the Fan" is available here.