US Gov. Spending Cuts: What's On The Table?

Under the first U.S. income tax law that was passed in 1913, only 1 percent of Americans were required to file income tax returns, and to be liable to file you would have had to be earning an annual income of about $120,000 in todays dollars. It was passed during a period called the Progressive Era: "a period of social activism and reform that flourished from the 1890s to the 1920s" during which there were widespread "efforts to reform local government, education, medicine, finance, insurance, industry, railroads, churches, and many other areas" of American life.

It was a period of steady economic growth in the U.S. and produced a since unparalleled level of prosperity that lasted for decades. The politics of the era included the concept of an economy of high wages and the idea that American labor could undersell foreign labor by being highly paid, well clothed, well educated, healthier labor with high productivity. The concept of "free market" during the period was an entirely different concept than it is today.

That idea of steady economic growth is now on the table.

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and is the author of "Super-Imperialism: The Economic Strategy of American Empire" (1968 & 2003), "Trade, Development and Foreign Debt" (1992 & 2009) and of "The Myth of Aid" (1971).

ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East. Hudson acts as an economic advisor to governments worldwide, including Iceland, Latvia and China, on finance and tax law.

As a former advisor to the White House, the State Department and the Department of Defense at the Hudson Institute, and subsequently to the United Nations Institute for Training and Research (UNITAR), Hudson has been one of the best known specialists in international finance. He also has consulted for the governments of Canada, Mexico and Russia, most recently for the Duma opposition to the Yeltsin regime.

On January 01 this year we heard Hudson talk with The Real News Networks' Paul Jay explaining that US economic history shows that the economy grows when top tier tax rates and workers wages are high, and explain that the U.S economy can again outperform foreign economies with high wages, increased living standards, and with high top tier tax rates producing higher productivity - a progressive concept, like Jeannette Wicks-Lim's ideas outlined below - that is nearly the exact opposite of the free lunch economic 'theories' so widespread today that are behind wall street's pillaging of the U.S. economy with the support of both major political parties.

Hudson's thinking has been ignored by the Obama Administration.

Jeannette Wicks-Lim completed her Ph.D. in economics at the University of Massachusetts Amherst in 2005, and now specializes in labor economics with an emphasis on the low-wage labor market and has an overlapping interest in the political economy of race, and is now Assistant Research Professor at the Political Economy Research Institute (PERI). She is author of a paper produced at PERI entitled Creating Decent Jobs in the United States (.PDF), in which she concludes that "collective bargaining presents a powerful way to turn the tide on the declining workers’ pay and benefits we have seen for decades", finds that "a union worker has a 20 percent greater chance of having a decent job than a similar non-union worker", and shows that "that there is no strong evidence that higher unionization rates lead to higher unemployment rates".

Her dissertation: Mandated wage floors and the wage structure: Analyzing the ripple effects of minimum and prevailing wage laws (.PDF), is a study of the overall impact of mandated wage floors on wages.

Last December 31 we heard Jeannette Wicks-Lim explain how currently most minimum wage earners in the U.S. can no longer the afford the basic necessities of life, and outline her proposal to combine minimum wage and earned income tax credit policies to guarantee a decent living wage for all.

Wicks-Lim's proposal was ignored by the Obama Administration.

In another interview released this past Monday by The Real News Network, Michael Hudson again talks with Paul Jay about the state and direction of the US economy and the governments plans and actions, now warning that:

...what's happening in Greece is a dress rehearsal for what's going on in the United States. Already, a few weeks ago in Athens, the protestors had signs up referring to Wisconsin and the problems here. What's happening in Greece in the last week is exactly what's happened in Minnesota with the close-down of government. And the demands of privatization--Greece sell off its roads, its land, its port authority, its water and sewer--is just what Illinois's been doing, what Chicago's been doing, what Minnesota's been told to do, and what American cities are trying to do. So you have an identical strategy being used between Greece and the United States. Greece is the first domino since Iceland. And the financial interests that are looking at this post-2008 debt crisis as a grab bag think 'now is the chance for us to make our move'. Now we can take all this debt that we've built up and we can get out of the financial system, we can turn it into direct ownership of property. We can own the Greek islands, we can own the Greek public domain, just like we can own what Minnesota, Chicago, Wisconsin, and California own. And all of a sudden you have a huge virtual foreclosure process.
[snip]
You can look at what's happening in Greece when it says cut back your pensions, cut back your Social Security, cut back your medical care. This is exactly what we're going to see done in the next two weeks by the Obama administration here.

Hudson will in all likelihood be ignored again.