Current mood:

slightly Marxist

Lifted and edited from one of my own comments on a previous post...
We have had a system in place over the last three decades where the lending class -- the top 0.1% of the wealth distribution -- made sure that everybody else was underpaid (by crushing any factor that would force them to provide raises in keeping with productivity growth, or even inflation most of the time), but then given credit to allow them to consume at the same standard they'd grown accustomed to during the rise of the middle class in the '50s and '60s. This structure ensured that over time, more and more people -- initially in the lower classes, but eventually in the shrinking middle class as well -- sank into what is effectively debt peonage: their future productivity became explicitly forfeit to the lenders, foreclosing any further efforts to extract concessions via unionization or other such tactics.

The system finally collapsed because the lenders got a little too greedy. I am not eager to bail them out by promising them even more of the future productivity of workers, in the form of today's government dollars to cover immediate losses, and tomorrow's government dollars to pay off the debt that financed today's government dollars.

Note that I'm perfectly happy to pay rich folks back on government debt if they're financing actual Keynesian spending today, which would help get the economy growing again. In that scenario, growth causes the debt to shrink over time relative to the economy as a whole -- the rising tide actually lifts all boats.

But I find it absolutely ridiculous that we are allowing the ultrarich to lend money -- at interest -- in order to finance paying off themselves, to make up for stupid risks they should have known better than to take. This basically has them taking money out of one pocket, handing it to the government, then grabbing it back and stuffing it in a different pocket, and charging our posterity for the privilege of having momentarily held the money.

Anyone who complains about efforts to use progressive taxation to redistribute wealth has missed the fact that the current distribution only exists because of a fundamentally unsustainable system of policies that was intentionally designed to concentrate wealth, and which has collapsed because such concentration leads to an insufficiency of demand relative to potential output. The poor can't afford to consume, and there aren't enough rich to pick up the slack.