The FIRE Next Time: End-Game for the Elite’s One-Way Class War

Michael Hudson has consistently been one of the best guides through the labyrinth of lies that surround the monumental act of elite thievery known as the “economic crisis.” Patiently and perceptively, he applies his economic expertise to the realities behind the blather, laying out – in grim, heart-sinking detail – how our great and good are using the crisis they created to move in remorselessly for the final kill on any dreams of a decent life for the rabble – that is, the 99 percent of us who fall outside the golden circle of the rentier class.

So when Hudson speaks, we should pay serious heed. And his latest piece in CounterPunch is heedful – and heart-sinking – indeed. We are, he says, entering the end-game of a decades-long process of wealth transference in which the entire burden of sustaining society – a degraded, hollowed-out, inhumane society – and a bloated, belligerent militarist oligarchy falls entirely on working people and the poor, while the elite reap all the profit.

Hudson sees yet another manufactured crisis hitting the battered system next spring: the “debt” crisis, when Republican legislators and Blue Dog Democrats refuse to raise the federal debt ceiling, “forcing” a most willing (yea, eager) Barack Obama to effect an “historic compromise” to “save” the government from closure and collapse: a flat tax.

You should read Hudson’s entire analysis, which is set up carefully with very pertinent historical background, but here are some disturbing excerpts:

The danger the United States faces today is that the government debt crisis scheduled to hit Congress next spring (when Republicans are threatening to vote against raising the federal debt limit as the government deficit soars) will provide an opportunity for the wealthy to give a coup de grace on what is left of progressive taxation in this country. A flat tax on wage income and consumer sales would “free” the rentiers from taxes on their property. …

The flat tax actually would tax wage earners much more steeply than the wealthy, whose income it would largely exempt! … The tax does not fall on “empty” pricing in excess of value – what the classical economists termed “economic rent,” that element of price (and income) that has no counterpart in actual cost of production (ultimately reducible to labor) but is a pure free lunch: land rent, monopoly rent, interest and other financial fees, and insurance premiums. This economic rent is the major return to wealth. It is grounded in the finance, insurance and real estate (FIRE) sector.

The effect of untaxing the FIRE sector is twofold. First, it increases the power of wealth, privilege, monopoly rights and property over living labor – including the power of hereditary wealth over the living. Second, it helps “post-industrialize” the economy, creating a “service” economy. A service economy is mainly a FIRE-sector economy.

And now for the end-game, the kabuki theater in which the FIRE-breathing – or rather, FIRE-bought -- politicians of both parties finally give the One Percenters what they’ve always wanted: everything.

The wealthy want just what bankers want: the entire economic surplus (followed by a foreclosure on property). They want all the disposable income over and above basic subsistence – and then, when this shrinks the economy, they want the government to sell off the public domain in “privatization” giveaways, and they want people to turn over their houses and any other property they have to the creditors. “Your money or your life” is not only what bank robbers demand. It is what banks themselves demand, and the wealthy 10 per cent of the population that owns most of the bank stock.

And of course, the wealthy classes want to free themselves from the share of taxes that they have not already shed. The flat-tax ploy is their godsend.

Here’s how I think the plan is intended to work. Given the fact that voters have already rejected the flat tax in principle, it can only be introduced by fiatunder crisis conditions. Alan Simpson, President Obama’s designated co-chairman of the “Deficit Reduction Commission” (the euphemistic title given to what is in reality a “Shift Taxes Off Wealth Onto Labor” commission) already has suggested that Republicans close down the government by refusing to increase the federal debt limit this spring. This would create a fiscal crisis and threat of government shutdown. It would be a fiscal 9/11, for the Republicans to trot out their “rescue plan” for the emergency breakdown of government.

The result would cap the tax shift off finance and wealth onto wage earners. Supported by Blue Dog Democrats, President Obama would shed crocodile tears and sign off on the most right-wing, oligarchic, anti-labor, anti-black and anti-minority, anti-industrial tax that anyone has yet been able to think up. The notorious Flat Tax would fall only on wage income (paid by employees and employers alike) and on consumer goods (the value-added tax, VAT), while exempting returns that accrue to the wealthy in the form of interest and dividend income, rent and capital gains.

Barack Obama is already one of the most right-wing presidents we’ve ever had, building upon and expanding virtually every pernicious policy of his oligarchic predecessor. But as Hudson warns us, we ain’t seen nothin’ yet.

The Downward Road is Crowded

A few quick takes, whilst we seek to repair the damage from the latest attack on the main site.

Money for Old Rope
This is what $70 billion a year in whiz-bang, top-shelf "intelligence" buys you: Taliban Leader in Secret Talks Was an Impostor.

The United States of Insouciance
Since his return from a self-imposed hiatus, Paul Craig Roberts has been a man on fire, penning a series of riveting, ravaging articles that speak hard truth to the imperial state -- and to a society seemingly content to countenance, if not cheer, that state's worst malefactions. Roberts has done it again with his latest piece: "Insouciant Americans." Get thee hence, and read.

Mission Accomplished
It's hard to understand why all our serious commentators are writing that Barack Obama's presidency is in trouble, and offering sage advice, from right, left, and center, on what he needs to do to "get back on track." The truth, of course, is that Barack Obama's presidency is a smashing success -- indeed, a record-breaking success -- and that he is accomplishing exactly what he was put into office to do, as the New York Times reports today: Corporate Profits Were the Highest on Record Last Quarter.

Chronicles of Corruption
My old Moscow Times comrade Matt Taibbi adds another chapter to his on-going -- and jaw-dropping -- series of stories on the deliberate evisceration of ordinary Americans by their monied and minatory betters. Taibbi has few equals when it comes to explaining the true depth and extent of American corruption -- and almost no equal when it comes to actually reporting on it from the front lines. He is creating a record of the reality of our times that future historians (yes, yes, if there are any) will find invaluable.

The Dissident Path
Chris Hedges is another incendiary voice, burning through the threadbare curtain of liberal piety and exceptionalist myth to expose the corroded heart of a nation sliding into barbarity. His latest piece at Truthdig is an excellent example, so we'll finish here with a few choice quotes:

There is no hope left for achieving significant reform or restoring our democracy through established mechanisms of power. The electoral process has been hijacked by corporations. The judiciary has been corrupted and bought. The press shuts out the most important voices in the country and feeds us the banal and the absurd. Universities prostitute themselves for corporate dollars. Labor unions are marginal and ineffectual forces. The economy is in the hands of corporate swindlers and speculators. And the public, enchanted by electronic hallucinations, remains passive and supine. We have no tools left within the power structure in our fight to halt unchecked corporate pillage.

The liberal class, which Barack Obama represents, was never endowed with much vision or courage, but it did occasionally respond when pressured by popular democratic movements. This was how we got the New Deal, civil rights legislation and the array of consumer legislation pushed through by Ralph Nader and his allies in the Democratic Party. The complete surrendering of power, however, to corporate interests means that those of us who seek nonviolent yet profound change have no one within the power elite we can trust for support. The corporate coup has ossified the structures of power. It has obliterated all checks on corporate malfeasance. It has left us stripped of the tools of mass organization that once nudged the system forward toward justice. ....

Our worst premonitions are becoming reality. Our intuition has proved correct. We are reaching the breaking point. An explosion, unless we halt the increased pressure, seems inevitable. And what is left for those of us who cannot embrace the contaminants of violence? If the system shuts us out how can we influence it through nonviolent mechanisms of popular protest? How can we restore a civil society? How can we battle back against those who will mobilize hatred to cement into place an American fascism?

I do not know if we can win this battle. I suspect we cannot. But I do know that if we stop resisting, if we stop rebelling, something fundamental will die within us. As the corporate vise tightens, as the vast corporate system begins to break down with fossil fuel decline, extreme climate change and the expansion of global poverty, even mundane and ordinary acts to assert our common humanity and justice will be condemned as subversive.

It is time to think of resistance in a new way, something that is no longer carried out to reform a system but as an end in itself. African-Americans understood this during the long night of slavery. German opposition leaders understood it under the Nazis. Dissidents in the former Soviet Union knew this during the nightmare of communism. Resistance in these closed systems was local and often solitary. It was done with the understanding that evil must always be defied. The tiny acts of rebellion—day after day, month after month, year after year and decade after decade—exposed to everyone who witnessed them the heartlessness, cruelty and inhumanity of the oppressor. They were acts of truth and beauty. We must take to the street. We must jam as many wrenches into the corporate system as we can. We must not make it easy for them. But we also must no longer live in self-delusion. This is a battle that will outlive us. And if we fight, even with this tragic vision, we will lead lives worth living and keep alive another way of being.