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The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hudson

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  • The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hudson

    The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems

    by Michael Hudson

    It looks like bookstores are about to be swamped this summer and fall by a forest of advice for which publishers gave respectable advances a year ago as the economy was going off the rails. Seeking to minimize the risk of cognitive dissonance, the marketing strategy seems to be to offer advice by well-placed or celebrity insiders on how to recover the kind of free lunch that American pension plans – and popular hopes for easy wealth – have long assumed to be part of the natural law of economic growth, if only it can be better managed. The fantasy that people want to buy is that the happy 1981-2007 era of debt-leveraged price gains for real estate, stocks and bonds can be brought back. But the Bubble Economy was so debt-leveraged that it cannot reasonably be restored. This means that publishers have achieved the marketer’s dream of planned obsolescence: Readers a year or so from now will have to buy a new slew of books as they feel hungry again from the lack of intellectual protein.

    For the time being we are being fed Wall Street defenses of the Bush-Obama (Paulson-Geithner) attempt to re-inflate the bubble by a bailout giveaway that has tripled America’s national debt in the hope of getting bank credit (that is, more debt) growing again. The problem is that debt leveraging is what caused our economic collapse. A third of U.S. real estate is now estimated to be in negative equity, with foreclosure rates still rising. So publishers have only a short time frame to sell the current spate of books before people wake up to the fact that attempts to renew the Bubble Economy will make the financial overhead heavier.

    In the face of this stultifying financial trend, the book-buying public is being fed appetizers pretending that economic recovery simply requires more “incentives” (a euphemism for special tax breaks for the rich) to encourage more “saving,” as if savings automatically finance new capital investment and hiring rather than what really happens: Money is being lent out to create yet more debt owed by the bottom 90 percent to the economy’s top 10 percent. Publishers evidently believe that the way to attract readers – and certainly to get reviews in the major media – is to propose easy solutions. The theme of most of this year’s bubble books therefore is how we could have avoided the bubble “if only…” If only there had been better regulation, for instance.

    But to what aim? After blaming Alan Greenspan for playing the role of “useful idiot” by promoting deregulation and blocking prosecution of financial fraud, most writers trot out the approved panaceas: federal regulation of derivatives (or even banning them altogether), a Tobin tax on securities transactions, closure of offshore banking centers and ending their tax-avoidance stratagems. But no one is going so far as to suggest going to the root of the financial problem by removing the general tax deductibility of interest that has subsidized debt leveraging, taxing “capital” gains at the same rate as wages and profits, or closing the notorious tax loopholes for the finance, insurance and real estate (FIRE) sectors.

    Right-wing publishers are re-warming the usual panaceas such as giving more tax incentives to “savers” (another euphemism for more giveaways to high finance) and a re-balanced federal budget to avoid “crowding out” private finance. Wall Street’s dream is to privatize Social Security to create yet a new bubble to feed off of. (Fortunately, such proposals failed during the Republican-controlled Bush administration as a result of a reality check in the form of taxpayer outrage after the dot.com bubble burst in 2000.)

    What is not heard is a call to finance Social Security and Medicare out of the general budget instead of keeping their funding as a special regressive tax on labor and its employers, available for plunder by Congress to finance tax cuts for the upper wealth brackets. Yet how can America achieve industrial competitiveness in global markets with this pre-saving retirement tax and privatized health insurance, debt-leveraged housing costs and related personal and corporate debt overhead? The rest of the world provides much lower-cost housing, health care and related costs of employee budgets – or simply keeps labor near subsistence levels. This is a major problem with today’s dreams of a renewed Bubble Economy: They leave out the international dimension.

    The latest panacea being offered is to rebuild America’s depleted infrastructure. Alas, Wall Street plans to do this Tony Blair-style, by public-private partnerships that incorporate enormous flows of interest payments into the price structure while providing underwriting and management fees to Wall Street. Falling employment and property prices have squeezed public finances so that new infrastructure investment will take the form of installing privatized tollbooths over the economy’s most critical access points such as roads and other hitherto public transportation, communications and clean water.

    Surprisingly, one does not hear even an echo of calls to restore state and local property taxes to their Progressive Era levels so as to collect the “free lunch” of land rent and use its gains over time as the main fiscal base. This would hold down land prices (and hence, mortgage debt) by preventing rising location values from being capitalized and paid out as interest to the banks. It would have the additional advantage of shifting the fiscal burden off income and sales (a policy that raises the price of labor, goods and services). Instead, most reforms today call for further cutting property taxes to promote more “wealth creation” in the form of higher debt-leveraged property price inflation. The idea is to leave more rental income to be capitalized into yet larger mortgages and paid out as interest to the financial sector. Instead of housing prices falling and income and sales taxes being reduced, rising site values merely will be paid to the banks, not to the local tax authorities. The latter are forced to shift the fiscal burden onto consumers and business.

    The problem is that this new wave of reformist books advocates merely marginal changes to deep structural problems. There are the usual pro forma calls to re-industrialize America, but not to address the financial debt dynamic that has undercut industrial capitalism in this country and abroad. How will these timid “reforms” look in retrospect a decade from now? The Bush-Obama bailout pretends that banks “too-big-to-fail” only face a liquidity problem, not a bad debt problem in the face of the economy’s widening inability to pay. The reason why past bubbles cannot be recovered is that they have reached their debt limit, not only domestically, but also the international political limit of global Dollar Hegemony.

    What needs to be written about is what the marginalists leave out of account and what academic jargon calls “exogenous” considerations, which turn out to be what economics really is all about: the debt overhead; financial fraud and crime in general (one of the economy’s highest-paying sectors); military spending (a key to the U.S. balance-of-payments deficit and hence to the buildup of central bank dollar reserves throughout the world); the proliferation of unearned income and insider political dealing. These are the core phenomena that “free market” idea strippers have relegated to the “institutionalist” basement of the academic economics curriculum.

    For example, the press keeps on parroting the Washington line that Asians “save” too much, causing them to lend their money to America. But the “Asians” saving these dollars are the central banks. Individuals and companies save in yuan and yen, not dollars. It is not these domestic savings that China and Japan have placed in U.S. Treasury securities to the tune of $3 trillion. It is America’s own spending – the trillions of dollars its payments deficit is pumping abroad, in excess of foreign demand for U.S. exports and purchases of U.S. companies, stocks and real estate. This payments deficit is not the result of U.S. consumers maxing out on their credit cards. What is being downplayed is the military spending that has underlain the U.S. balance-of-payments deficit ever since the Korean War. It is a trend that cannot continue much longer, now that foreign countries are starting to push back.

    Inasmuch as China’s central bank is now the largest holder of U.S. Government and other dollar securities, it has become the main subsidizer of the U.S. payments deficit – and also the domestic U.S. federal budget deficit. Half of the federal budget’s discretionary spending is military in character. This places China in the uncomfortable position of being the largest financier of U.S. military adventurism, including U.S. attempts to encircle China and Russia militarily to block their development as rivals over the past fifty years. That is not what China intended, but it is the effect of global dollar hegemony.

    Another trend that cannot continue is “the miracle of compound interest.” It is called a “miracle” because it seems too good to be true, and it is – it cannot really go on for long. Heavily leveraged debts go bad in the end, because they accrue interest charges faster than the economy’s ability to pay. Basing national policy on dreams of paying the interest by borrowing money against steadily inflated asset prices has been a nightmare for homebuyers and consumers, as well as for companies targeted by financial raiders who use debt leverage to strip assets for themselves. This policy is now being applied to public infrastructure into the hands of absentee owners, who will build interest charges into the new service prices they charge, and be allowed to treat these charges as a tax-deductible expense. Banking lobbyists have shaped the tax system in a way that steers new absentee investment into debt rather than equity financing.

    The irresponsible cheerleaders applauding a bubble economy as “wealth creation” (to use one of Alan Greenspan’s favorite phrases) would like us, their audience, to believe that they knew that there was a problem all along, but simply could not restrain the economy’s “irrational exuberance” and “animal spirits.” The idea is to blame the victims – homeowners forced into debt to afford access to housing, pension-fund savers forced to consign their wage set-asides to money managers for the large Wall Street firms, and companies seeking to stave off corporate raiders by taking “poison pills” in the form of debts large enough to block their being taken over. One looks in vain for an honest acknowledgment of how the financial sector turned into a Mafia-style gang more akin to post-Soviet kleptocrat insiders than to Schumpeterian innovators.

    The cursorily reformist gaggle of post-bubble tomes assumes that we have reached “the end of history” as far as big problems are concerned. What is missing is a critique of the big picture – how Wall Street has financialized the public domain to inaugurate a neo-feudal tollbooth economy while privatizing the government itself, headed by the Treasury and Federal Reserve. Left untouched is the story how industrial capitalism has succumbed to an insatiable and unsustainable finance capitalism, whose newest “final stage” seems to be a zero-sum game of casino capitalism based on derivative swaps and kindred hedge fund gambling innovations.

    What have been lost are the Progressive Era’s two great reforms. First, minimizing the economy’s free lunch of unearned income (e.g., monopolistic privilege and privatization of the public domain in contrast to one’s own labor and enterprise) by taxing absentee property rent and asset-price (“capital”) gains, keeping natural monopolies in the public domain, and anti-trust regulation. The aim of progressive economic justice was to prevent exploitation – e.g., charging more than the technologically necessary costs of production and reasonable profits warranted. This aim had a fortuitous byproduct that made the Progressive Era reforms seem likely to conquer the world in a Darwinian evolutionary manner: Minimization of the free lunch enabled economies such as the United States to out-compete others that didn’t enact progressive fiscal and financial policy.

    A second Progressive Era aim was to steer the financial sector so as to fund capital formation. Industrial credit was best achieved in Germany and Central Europe in the decades prior to World War I. But the Allied victory led to the dominance of Anglo-American banking practice based on loans against property or income streams already in place. Today’s bank credit has become decoupled from capital formation, taking the form mainly of mortgage credit (80%), and loans secured by corporate stock (for mergers, acquisitions and corporate raids) as well as for speculation. The effect is to spur asset-price inflation on credit, in ways that benefit the few at the expense of the economy at large.

    The problem of debt-leveraged asset-price inflation is clearest in the post-Soviet “Baltic syndrome,” to which Britain’s economy is now succumbing. Debts are run up in foreign currency (real estate mortgages in the Baltics, tax-avoidance funds and flight capital in Britain), without exports having any prospect of covering their carrying charges as far as the eye can see. The result is a debt trap – chronic austerity for the domestic market, causing lower capital investment and living standards without hope of recovery.

    These problems illustrate the extent to which the world economy as a whole has pursued the wrong course since World War I. This long detour has been facilitated by the failure of socialism to provide a viable alternative. Although Russia’s bureaucratic Stalinism got rid of the post-feudal free lunch of land rent, monopoly rent, interest and financial or property-price gains, its bureaucratic overhead overpowered the economy in the end. Russia fell. The question is whether the Anglo-American brand of finance capitalism will follow suit from its own internal contradictions.

    The flaws in the U.S. economy are tragic because they are so intractable, embedded as they are in the very core of post-feudal Western economies. This is what Greek tragedy is about: a tragic flaw that dooms the hero from the outset. The main flaw embedded in our own economy is rising debt in excess of the ability to pay is part of a larger flaw: the financial free lunch that property and financial claims extract in excess of a corresponding cost as measured in labor effort or an equitably shared tax burden (the classical theory of economic rent). Like land seizure and insider privatization deals, such wealth increasingly can be inherited, stolen or obtained by political corruption. Wealth and revenue extracted via today’s finance capitalism avoids taxation, thereby receiving an actual fiscal subsidy as compared to tangible industrial investment and operating profit. Yet academics and the popular media treat these core flaws as “exogenous,” that is, outside the realm of economics analysis.

    Unfortunately for us – and for reformers trying to rescue our post-bubble economy – the history of economic thought has been suppressed to give an impression that today’s stripped-down, largely trivialized junk economics is the apex of Western social history. One would not realize from the present discussion that for the past few centuries a different canon of logic existed. Classical economists distinguished between earned income (wages and profits) and unearned income (land rent, monopoly rent and interest). The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains. But even the Progressive Era did not go much beyond seeking to purify industrial capitalism from the carry-overs of feudalism: land rent and monopoly rent stemming from military conquest, and financial exploitation by banks and (in America) Wall Street as the “mother of trusts.”

    What makes today’s bubble different from previous ones is that instead of being organized by governments as a stratagem to dispose of their public debt by creating or privatizing monopolies to sell off for payment in government bonds, the United States and other nations today are going deeply into debt simply to pay bankers for bad loans. The economy is being sacrificed to reward finance, instead of finance subordinating and channeling finance to promote economic growth and lower the economy-wide cost structure to remain viable. Interest-bearing debt is weighing down the economy and causing debt deflation by diverting saving into debt payments instead of capital investment. Under this condition “saving” is not the solution to today’s economic shrinkage; it is part of the problem. In contrast to the personal hoarding of Keynes’s day, the problem is the financial sector’s extractive power as creditor instead of clear the slate by wiping out the economy’s bad-debt overhang in the historically normal way, by a wave of bankruptcy.

    Today, the financial sector is translating its affluence (at taxpayer expense), into the political power to pry yet more public infrastructure away from state and local communities and from the public domain at the national level, Thatcher- and Blair-style as it is sold off to absentee buyers-on-credit to pay off public debt (while cutting taxes on wealth yet further). No one remembers the cry for what Keynes called “euthanasia of the rentier.” We have entered the most oppressive rentier epoch since feudal European times. Instead of providing basic infrastructure services at cost or subsidized rates to lower the national cost structure and thus make it more affordable – and internationally competitive – the economy is being turned into a collection of tollbooths. How strange that this year’s transitory wave of post-bubble books fails to place the financialization of the U.S. and global economies in this long-term context.

    (Art credit: Peter Tyla)

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    Last edited by FRED; 05-19-09, 07:53 PM.
    Ed.

  • #2
    Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

    Hudson is an economic god.

    It's time to Eat the Rich, before they turn us into slaves . . . . :eek:
    raja
    Boycott Big Banks • Vote Out Incumbents

    Comment


    • #3
      Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

      This piece is going to be my condensed bible for a while I think. Good on ya Michael.

      Comment


      • #4
        Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

        After reading this great commentary, I cannot help to think: What if Dr. Hudson has an iTulip account? :eek:

        From now on, I shall think at least trice before I write!

        Comment


        • #5
          Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

          Hussman did a good job of describing what is happening in the global economy and why. Unfortunately, I don't see any way out of this mess. I've read hundreds of different times over the past two years on many websites including this one, Mish, Denninger, RGE, CR, et al.....the same thing. Transparency, let the insolvent banks fail, clean up the debt, haircuts to the bondholders.....etc etc...blah blah blah........yada yada yada......
          we need to understand one thing........The USA is controlled and run by the banking system. Why in the hell would they do ANYTHING that cuts into their profits? Answer......They won't. GS, JPM, and MS pretty much are propping the stock market up right now so the banks can sell equity to rebuild capital ....all with the US governments blessing! It's complete fraud on a grand scale out in the open and NOTHING will ever be done about it. Why?????.......because...........you guessed it!........The banksters run the country.
          God Help us all!
          RanMan :cool:

          Comment


          • #6
            Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

            "These problems illustrate the extent to which the world economy as a whole has pursued the wrong course since World War I."

            The Federal Reserve was established in 1913 in part to draw the US into WWI. 1913 was a watershed year no doubt.

            "The flaws in the U.S. economy are tragic because they are so intractable, embedded as they are in the very core of post-feudal Western economies."

            Bingo. Only a revolution will the overthrow western Ponzi 'growth at all costs' model in favor of a sustainability model. Peak oil will help.

            Comment


            • #7
              Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

              Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.

              -- Property taxes. This guy loves property taxes. Unfortunately, property taxes directly undermine one of the bedrock principles of a free society-- Private Property. (the others being Life and Liberty). When the state taxes your property, they OWN your property. This assertion can be easily tested by simply not paying your property tax, and seeing what happens next. That's why the founding fathers made direct taxes unconstitutional. People forget they did this for a very, very good reason.

              -- Misguided sense of globalism. "The rest of the world provides much lower-cost housing, health care and related costs of employee budgets" Really? Maybe. What the rest of the world DEFINITELY provides is LOWER-QUALITY housing and health care. You get what you pay for. Don't believe me? Then why do US hospitals just over the border from Canada do such a tremendous business with Canadians?

              -- Reverence for anti-trust legislation. Another progressive "reform" that is simply a crude attempt to treat a symptom, and not the disease. What is the disease? The stultifying "dead hand" of the modern corporation. Corporations (or more accurately, agents of Corporations) have hijacked our legal system over the last 150 years, such that today artificial corporate persons are treated in preference to natural human persons. Combine this legal preference with corporations' unnatural advantages over natural human persons (i.e. perpetual existence) and its "game over". The sad fact is, Corporations raped the world so badly in the 17th and 18th centuries (viz, British East India Company, etc.) in such a morally outrageous way that English law deliberately and aggressively hamstrung the corporate legal form in the late 18th century... only, people have short memories it seems, and corporations got their mojo back by the time the War Between the States rolled around. Read "Gangs of America" by Ted Nace; in fact, put down whatever you are reading and pick up that book immediately. If not sooner.

              --Apologist for Communism. "Although Russia’s bureaucratic Stalinism got rid of the post-feudal free lunch of land rent, monopoly rent, interest and financial or property-price gains, its bureaucratic overhead overpowered the economy in the end. Russia fell." Good grief. Communism is nihilistic and the economic embodiment of pure evil. Hudson references his own ridiculous notions about land rent and property tax as something Stalin got right; that should be a gigantic klaxon horn showing him how completely wrong he is about that.

              --Holy crap. Do I smell "Labor Theory of Value" here? Maybe a little Class Warfare, too? "The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains." Hmmmmmmmmmmmmmmm.

              Hudson defines some of the problems correctly, but the solutions? I don't like where any of his ideas are going with respect to the solutions. Not one bit.

              Comment


              • #8
                Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                these corporate problems you are talking about they are the result of concentration of power and writing the rules to suit yourself. Regulation is needed to prevent concentration of power, ie Hudson pointing out how unfair concentration of power has been achieved in the past through accumulation of property and achieving monopoly rents and there is a need to regulate against this. Coz once the power is there the power to create new rules like perpetual person companies is there. Pesonally I think you've bought into all this liberty stuff as its used as the excuse for the concentration of power. Ask 50,000 people what liberty means and you're likely to get 50,000 different answers, ask a wall street banker and he's likely to say property rights.

                Comment


                • #9
                  Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                  maybe I should clarify, that there needs to be some regulation on property rights, other wise they can be abused. Try to maximise the benefits minimise the negatives kind of thing

                  Comment


                  • #10
                    Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                    good points made
                    #1 agree with proptery tax. my tax this year $8000 bucks on a 2000 sq ft house. I fear being layed off and having to come up with 8000 a year. I can take a year or two but may force me to move.

                    #2 each country is made up of different cultures, have a different history etc. yes we have some common goals, but not all cultures want and value the same things. I am an happy to be an american, to have religious freedom, upward social mobility, rights to travel, freedom for women. I dont want to be a Saudi, Taliban etc.

                    #3 its all about money. Our political system is awash in it. Unless you have access to money you really have limited justice.

                    #4 Stalin killed how many? Evil bastard

                    #5 Que??

                    Comment


                    • #11
                      Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                      Originally posted by BuckarooBanzai View Post
                      -- Property taxes. This guy loves property taxes. Unfortunately, property taxes directly undermine one of the bedrock principles of a free society-- Private Property. (the others being Life and Liberty). When the state taxes your property, they OWN your property. This assertion can be easily tested by simply not paying your property tax, and seeing what happens next. That's why the founding fathers made direct taxes unconstitutional. People forget they did this for a very, very good reason.
                      I strongly agree with this objection...

                      Originally posted by marvenger View Post
                      maybe I should clarify, that there needs to be some regulation on property rights, other wise they can be abused. Try to maximise the benefits minimise the negatives kind of thing
                      ... but perhaps Hudson phrased the issue too broadly. I gather from some of his other writings that he objects to the concentration of capital in the hands of the wealthy, and the extraction of passive economic rent from laborers by capitalists. Perhaps he'd be agreeable to a "progressive" system of property taxation with a very high rate for investment properties but a very low or non-existent rate for primary residences...

                      Originally posted by charliebrown View Post
                      #1 agree with proptery tax. my tax this year $8000 bucks on a 2000 sq ft house. I fear being layed off and having to come up with 8000 a year. I can take a year or two but may force me to move.
                      ... because the most offensive thing about property taxes is that you can never be secure in "ownership" of your home if it can be taxed out from under you.

                      ====

                      I don't share Hudson's ideological tilt or even agree with him as to what constitutes justice, but in the main, I think his analysis is valuable.

                      Comment


                      • #12
                        Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                        Originally posted by FRED View Post
                        What is not heard is a call to finance Social Security and Medicare out of the general budget instead of keeping their funding as a special regressive tax on labor and its employers, available for plunder by Congress to finance tax cuts for the upper wealth brackets.
                        Well, thanks to the trust funds, an increasing portion of these programs will be financed out of the general budget! Hooray!

                        Originally posted by FRED View Post
                        What is being downplayed is the military spending that has underlain the U.S. balance-of-payments deficit ever since the Korean War. It is a trend that cannot continue much longer, now that foreign countries are starting to push back.

                        Inasmuch as China’s central bank is now the largest holder of U.S. Government and other dollar securities, it has become the main subsidizer of the U.S. payments deficit – and also the domestic U.S. federal budget deficit. Half of the federal budget’s discretionary spending is military in character.
                        I don't think this is a balanced perspective. Those who favor spending on butter over guns tend to win the argument about the budget by making some expenditures a matter of standing law (mandatory) while leaving the rest subject to annual appropriation (discretionary). By making social spending mandatory, those who think expansive social programs are a proper core function of government -- but military hegemony is not -- control the terms of the debate. This is the kind of obfuscation-by-classification game that I would think Hudson would normally decry if employed by his ideological opponents. At the end of the day, there is no manditory and discretionary spending any more than there are entitlement trust funds. There are only inputs and outputs; revenue and expenditures; surplus and deficit. There is only government spending. Period. "Surplus" FICA isn't being plundered by Congress to fund tax cuts for the wealthy; it's just being plundered to fund the entirety of current expenditures. The US balance of payments deficit isn't the result of military spending, it is the result of spending. It's especially unfortunate that Hudson references the impact of military spending since the Korean War, given how much military expenditures have fallen as a percentage of federal outlays since then.

                        What we spend on, how much we spend, and how much we tax are very proper subjects for debate -- maybe we should spend less on the military and tax more progressively. But it isn't honest for Hudson to assume that mandatory entitlement spending is justified, and therefore any accumulation of debt can be blamed on adjustment of the tax code or discretionary spending. For that matter, laws can be changed. Are not the tax rates a matter of law? Why is "mandatory" spending sacrosanct but tax policy falls into the same category as "discretionary" spending. It's all discretionary.

                        The main problem I have with Hudson is that he presents extremely insightful analysis buried inside a very subjective and ideological framework. I wish he'd play it a bit more straight. The heart of the matter is that we spend on guns and we spend on butter and we don't tax enough to cover what we spend, so we borrow.

                        Originally posted by FRED View Post
                        What have been lost are the Progressive Era’s two great reforms. First, minimizing the economy’s free lunch of unearned income (e.g., monopolistic privilege and privatization of the public domain in contrast to one’s own labor and enterprise) by taxing absentee property rent and asset-price (“capital”) gains, keeping natural monopolies in the public domain, and anti-trust regulation. The aim of progressive economic justice was to prevent exploitation – e.g., charging more than the technologically necessary costs of production and reasonable profits warranted.
                        Anyone know how Hudson feels about intellectual property? Like, after I invent something, am I allowed to get rich off of passive income generated by licensing the use of my idea? Does he collect royalties for his books? Do intellectual property rights constitute "monopolistic privilege"?
                        Last edited by ASH; 05-20-09, 01:52 AM. Reason: civility

                        Comment


                        • #13
                          Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                          Originally posted by ASH View Post
                          ... but perhaps Hudson phrased the issue too broadly. I gather from some of his other writings that he objects to the concentration of capital in the hands of the wealthy, and the extraction of passive economic rent from laborers by capitalists. Perhaps he'd be agreeable to a "progressive" system of property taxation with a very high rate for investment properties but a very low or non-existent rate for primary residences...

                          I agree, property up to a certian size should have minimal tax if its owner occupied.

                          Comment


                          • #14
                            Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                            Originally posted by BuckarooBanzai View Post
                            Woof. Hudson gets some things right but he's a progressive idealogue, which makes him wrong at least 5 different ways in this essay.

                            . . .

                            Hudson defines some of the problems correctly, but the solutions? I don't like where any of his ideas are going with respect to the solutions. Not one bit.
                            Buckaroo, thanks for that great post. I had the exact same reactions to Hudson's article. Yet another thinly-veiled socialist.

                            Comment


                            • #15
                              Re: The Latest in Junk Economics: Marginalist Panaceas to Today’s Structural Problems -- Michael Hud

                              Originally posted by ASH View Post
                              The main problem I have with Hudson is that he presents extremely insightful analysis buried inside a very subjective and ideological framework. I wish he'd play it a bit more straight. The heart of the matter is that we spend on guns and we spend on butter and we don't tax enough to cover what we spend, so we borrow.
                              Yes he's ideologically opposed to free lunches and proud of it.


                              Originally posted by ASH View Post
                              Anyone know how Hudson feels about intellectual property? Like, after I invent something, am I allowed to get rich off of passive income generated by licensing the use of my idea? Does he collect royalties for his books? Do intellectual property rights constitute "monopolistic privilege"?
                              intellectual property rights are particularly abused in my mind. seems like its usually a 30k year salaried scientist doing the inventing and corporations taking the profits and often the 30k scientists is subsidied by tax payer in the military industrial complex too. what a rort! and they get developing countries to agree to 20 year patents in WTO negotions where astronomical profits are made, while millions die who can't afford patented technology. System is chronically rigged, and hudson does well in describing the obvious as this job is made hard by ingrained neoliberal ideology.

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