Cutting At Both Ends: How Austerity Creates Slavery

When matters of prosperity, and indeed the economic factors which sustain it, are to be discussed, you must start with government. We might argue about how much of a role government should be play in economics, but the fact remains that a government’s income and spending affect all aspects of an economy. Simply because both private enterprise and all participating members of a society are bound by the laws of their respective governing body, we must begin with that mutual entity to which all facets of civilization are connected.

Ever since the recession brought on by the fall of giant financial institutions in 2008, United States politics have been in gridlock over how to revive the American economy. As a result, naturally, the issue of government spending and massive public deficits has become a rising star and serious “hot button” topic of debate. As is classic American fashion, the stakes have been severely raised as of late, reaching the point of crisis in the wake of vanishing middle-class jobs and wages.

If you’re unfamiliar with American culture, the general rule of thumb is:

“Don’t do anything until it’s ALMOST too late. Then, go in guns-a-blazing and blame the whole thing on someone else when it’s all over.” 

There is no cultural precedent in American history which exemplifies any genuine effort for prevention. We must wait until the absolute moment of doom before anything of value can be accomplished. Just watch our soccer team; you can learn a lot about a culture by watching how their soccer team plays. The USA soccer team will get destroyed in the first half of a game—just so they can make a comeback in the second half. They can never just dominate from the start. They have to be the underdog that pulls themselves out of a crisis situation. This is the American way: Disaster before action.

In another American tradition—politics—there is a pervasive tendency to prolong and exacerbate the serious problems of our nation due to the exchange of dogma for logic. It’s become more effective to merely BELIEVE in things like “tax cuts for the wealthiest Americans will create jobs”, rather than having to actually prove that they make any sense. It’s a dangerous game. Asserting that the ideals and beliefs of a minority of people should serve as sound policy is not only devastating to our national well-being, it’s downright insane. On the topic of the continued economic malaise in the U.S., the rhetoric is particularly disturbing and twisted.

The discussion regarding America’s lack of economic growth, high unemployment rate, and quickly dissolving middle-class, has been intensely framed as a problem with government spending. Conservative deficit hawks on the right promulgate that high public deficits reduce confidence in markets and that generous entitlement programs along with superfluous social spending are contributing to that plot line. The other half of right-wing rhetoric is an emphasis on tax cuts for wealthy citizens and tax incentives for American businesses. Overall, the idea here is that cutting taxes AND government spending is going to (somehow) generate prosperity. We need only to observe post WWI Germany to understand the dangers of extreme austerity measures.

In order to understand why this matters, and why these ideas are so hopelessly insane, we have to touch upon very basic economics. No technical stuff—super easy. I promise.

TWO BIG SPENDERS: PUBLIC AND PRIVATE

An economy that is growing and expanding is one in which money and the transfer of wealth happens quickly and smoothly. This means that wealth flows from private enterprise to employees pockets (wages and health care coverage subsidies) back to private enterprise (buying goods and services), then over to the public sector in the form of taxes which support everyone (including bank bailouts, apparently). None of this happens in any particular order; the important thing to understand is that wealth MUST change hands for an economy to thrive and for people to acquire wealth. I use the term wealth here because its transfer does not necessarily imply value in the form of money. Wealth of convenience, time, education, safety, and health may cost money to one or more parties, but the advantages such an investment affords the beneficiary cannot truly be measured in dollar amounts. For example: When employees have access to good health coverage, adequate sick-time, and good public schools, though private enterprise and government are spending to provide those things, the overall value of well-educated children and healthy employees is exponentially greater than the monetary value and contributes to the net potential of human capital to generate future wealth. So, in this way you can see how ALL parties benefit when wealth—beyond money—is distributed adequately.

The other part to understanding the transfer of wealth is knowing exactly WHO or WHAT is doing the spending. Spending is important not only as a measure of liability (money going out) but also as a measure of assets (money coming in). You can’t spend money you don’t have (or at least not for too long—see “2008 economic crisis”). One of the most elusive and misunderstood concepts in economics is the relationship between spending, saving, and economic growth. For both economic growth and saving (meaning the conservation of wealth and lack of new debt) to occur, someone has to spend. You know the old saying “It takes money to make money”. The adequate transfer of wealth requires that it leaves one party and joins another. Acknowledging the crucial role of spending in a healthy economy helps to underline its absolutely necessity. If spending stops, the economy stops—because, as noted above, the flow of wealth is what keeps an economy going.

Okay, so spending makes the economy go ’round. Great. But, who exactly is doing the spending? Spending can easily be broken down into two large entities from which wealth flows: the private sector and the public sector.

PRIVATE SECTOR SPENDING

Spending from the private sector comes in the form of wages, health insurance, and citizens buying goods and services. Yet it’s important to note that such spending by private corporations has one ultimate goal: increasing profits. To be sure, an intense interest in profits is NOT a bad thing. It does not make a corporation EVIL that they seek to make a profit. What is necessary to understand is that the societal benefits of good pay and health benefits to private sector employees are a pleasant SIDEEFFECT of staying competitive in the job market, but that such effects are NOT the GOAL of the private sector. As long as costs are down and profits are up, the private sector is not fundamentally interested in whether or not your child’s school has an adequate budget this year—that’s the pubic sector’s job.

PUBLIC SECTOR SPENDING

Spending from the public sector comes in the form of government programs, funded by tax dollars, meant to protect and support its citizens. Governments invest in things like police, fire and emergency services, as well as education, health care, and social spending in an effort to preserve and grow human capital. Though, unlike the private sector, public sector spending is obligated to support the needs of the people it serves. In stark contrast to the spending goals of private entities, the government’s ultimate goal is the welfare and prosperity of ALL its citizens. This is an important distinction as it illustrates   the fact that private enterprise does not HAVE to do anything to help the people if it doesn’t WANT to (though we hope government oversight mandates they keep SOME obligation to society, such as paying taxes and obeying laws). Government is different; it does not have the luxury of not caring and it must answer to the needs of its citizens.

If you take nothing at all from this section, let it be the understanding that while the private sector is invariably linked to the economic health of the over all public, it does not FEEL nor ACT with direct obligation to the citizens of this nation on a daily basis. Government cannot free itself of its obligation to the people, and so neither can government spending.

WHEN SPENDING STOPS, CRISIS STARTS

So what happens when either the private or public sectors STOP spending? What happens when the private sector cuts back on wages, health care, sick time, and pensions—like it has been over the course of 30 years? Because private enterprise, the government, and the people can never accumulate wealth without one of those groups spending, when one STOPS spending, someone HAS to pick up the slack. When private sector wages and benefits stagnate or stop (layoffs) at the same time that the cost of living increases, inevitably what happens is government spending will increase to pick up the deficiency in the form of food stamps, housing assistance, job training programs, and additional health care funding. Essentially, because the flow of wealth from the private sector stops flowing to the people, wealth must flow to them from the public sector to keep the economy going.

You might be wondering why the government must spend more and not the people in the from of higher prices; the answer is that they already do—thats one of the reasons the middle-class is disappearing. The problem is that the average American does not get paid enough to accommodate for such increases in the cost of living. So, if the private sector won’t pick up the slack in the form of wages and benefits, and the people don’t have money to spend, public spending must increase in the form of entitlement programs. (I say “won’t” as a reflection of private sector choice because the suggestion that they “can’t” afford to increase wages is silly at best when you consider that American corporate profits have reached RECORD highs after the recession and beyond).

Bill Maher put private and public spending in perspective during his speech about raising the minimum wage:

“Do you want small government with less handouts or do you want a low minimum wage? Because you cannot have both..”

Keeping in mind that the private sector’s concerns are profits—NOT the welfare of the population at large—it becomes easy to understand why the public sector is FORCED to provide for the people. The only problem with increasing public spending on welfare programs is that the tax revenue necessary to do so doesn’t exist, therefore creating these “deficits” we hear so much about in the news. The government is “broke” because it doesn’t take in enough tax revenue, not because its spending is “out of control”. This severe lack of tax revenue is the result of two systemic issues:

A.) Billion-Dollar corporations paying $0 taxes. 

B.) Decreasing wages and employment for a majority of Americans means less payroll taxes

CUTTING FROM BOTH ENDS: TAXES AND WELFARE PROGRAMS

Herein lies the serious predicament in which we all find ourselves:

1.) The private sector refuses to pay livable wages and benefits to its employees, which forces the government to pick up the slack in the form of entitlement programs.


2.) Entitlement programs are funded by tax revenues of which the most profitable companies pay none.


3.) The government has to cut entitlement programs and social welfare spending because of lacking tax revenue.

Over the course of the last 30-years, the political right’s deficit hawks have not only suggested that spending programs which help the poor be cut, but also, that valuable trillion-dollar tax revenue from corporations also be cut. This is all happening at the same time the private sector REFUSES to spend. Take a second to wrap your mind around this:

We know that if the private sector stops spending the public sector, in the form of government assistance programs, will HAVE to spend. Yet corporations also lobby the government for lower corporate taxes, tax incentives, and tax haven loop-holes which essentially ad up to trillions in lost government revenue. No wonder the government is “broke”. But the real danger is to the welfare of the people.

Cutting from both ends—government income and government spending—will inevitably stop the flow of wealth from the public sector to the majority of Americans. At the same time middle-class and working poor citizens are not receiving adequate wealth exchange from the private sector, the private sector is also effectively stopping the government from transferring wealth as well, through tax dodging. So, if an adequate transfer of wealth does not come from the private sector or the public sector, how can the average American ever accumulate wealth? Well, that’s simple: They can’t.

THE GOAL IS SLAVERY

If you haven’t notice, government operations in the U.S. have become increasingly privatized. From prisons to schools to homeland security, and soon the postal service, nearly every job or program offered by the government is being outsourced to the private sector. As mentioned previously in this article, it’s crucial to remain cognizant of private enterprise goals: profits. It is only in this realization that the true nature of private sector “efficiency”—in this case, the efficiency of cutting costs to increase revenue—can be understood for all its implications.

Tax evasion and tax cuts for wealthy corporations of this country are a principal architectural design for the privatization of government. For a government that must spend with obligation to the public, spending without adequate tax revenue creates a uniquely desperate situation for which privatization, in comparison, becomes appealing. In terms of government spending—particularly government spending without adequate tax revenue—its much cheaper to hire a private company to handle a service or personnel, rather than take on the expensive task of providing livable wages, health care, and pensions.

You might be telling yourself that the United States is a fierce democracy comprised of dedicated, intelligent, and patriotic citizens who would never accept the privatization of the people’s government. And I would tell you to ask yourself how much of the public system, which helps transfer wealth and power to the people, has been severely defunded or privatized to some extent? Particularly this is true of education—the last great medium of climbing the socioeconomic ladder. And this is not only true of higher education, but K-12 education as well. A population robbed of good education is a population that has finished asking questions, stays silent, and is doomed to submit to ANYTHING simply because they are being denied so much.

Without adequate tax revenue to fund public spending that afford educational and power advantages to the greater 99%, what we get is a population dumbed down and robbed of the means to oppose. Starved of income, the public state begins to take on the rhetoric and tactics of corporate ideology: cut budgets to create “efficiency”. In this way, public opinion is forced to accept privatization in the face of its alternative which destroys education and public obligation altogether.

Therefore, the fastest avenue to the privatization of any public service or entity is simply defunding it. The evolution from public to private operation is simple: defund a government program so that it doesn’t function well, bring attention to its malfunction and cost to gather support for its ending, then, cut the budget again until the program is simply discontinued and later bid upon by private contractors. The greatest intellectual of our time, Noam Chomsky, elucidates this transition best: 

“If you want to privatize something and destroy it, the standard method is first defund it so it doesn’t work and then people get upset about it, and they accept privatization.”

But there’s an even darker side to the privatization of the public sector:

Soon there won’t BE a public sector. 

This final point is extremely important, so in order to make certain that its impact is maximized, there will be some overlapping points that have already been reviewed. The reviewing of these points is essential to comprehending the “big picture” as the final result is a result of their cumulative effect. The conclusion is liable to blow your damn mind.

Remember the earlier revelations of this article which highlighted two sources of spending in a society: public and private. Also recall that wealth MUST move and flow in order for an economy to expand and prosper, and that such flows from private and public spending allow the people to prosper as a result. And finally, realize that the people depend on either private or public spending to accumulate wealth (in order for wealth to be transferred, spending must occur).

As it stands now, the private sector has severely cut off its spending in the form of cutbacks on wages, health care, pensions,  job training, and other investments that aid the people in acquiring wealth: monetary wealth, educational wealth, the wealth of health etc. So, as a result the public sector has been forced to pick up the slack through welfare programs like food stamps and housing assistance. However, the loss of trillions of dollars in corporate tax cuts and tax havens has precipitated dramatic public spending cuts on such welfare programs, while at the same time other public programs are becoming privatized. The end result is a sprint toward the complete transfer of public spending to the private sector. And, as we’ve seen, unlike public sector spending which is obligated to the great good of all citizens, private sector spending has no such allegiance.

Effectively what this means is that the private sector could eventually control ALL transfer of wealth, unchallenged by the offset of public spending. This is extremely dangerous as we’ve seen the private sector’s propensity for cutting spending in the name of “efficiency” that transfers all costs to the consumer. If you think the government doesn’t care about the people now, you might as well hang yourself when the United States becomes a private corporation. Imagine the outcome of a society in which independent private sector spending, headed by an elite board of minority owners, decides whether or not you should have money to live over their bottom line.

The goal of privatization is control over wealth, to make sure an elite minority have it all and the majority have nothing.

Ask yourself, truly: 

What is the purpose of denying people the ability to accumulate wealth? The answer is slavery. Slaves don’t accumulate wealth. Slaves have no power.

Welcome to the new America.

Matthew Rosario

American / Writer / Musician