Deficit reduction is not austerity; it kills capitalism

by Jehu

According to the chart below, each attempt to reduce the federal deficit in the last 30 years or so appears to undermine capital itself:

CFssDqUWgAA8CKj.jpg large

The correlation suggests that if the Left is committed to a society beyond capitalism, ending all fascist state deficits can be a path to realizing this end. The correlation is explained by the fact that capital at this point is producing more surplus value than can be reinvested profitably in productive employment. The absence of sufficient outlets for newly formed capital is not simply a problem for capitalists like the owners of the largest American corporations who must sit on the uninvested profits: unless the fascist state deficits constantly increase, overproduction of surplus value eventually forces a general devaluation of capital as the mode of production for profit grinds to a halt.

Nothing I have presented here should be a surprise since it is the conclusion of both labor theory and Keynesian theory together. For instance, according to the bourgeois simpleton economist, Hyman Minsky, aggregate profits of capital must equal aggregate investment of capital plus the deficit spending of the fascist state:

“In spite of the greater complexity of financial relations, the key determinant of system behavior remains the level of profits. The financial instability hypothesis incorporates the Kalecki (1965)-Levy  (1983) view of profits, in which the structure of aggregate demand determines profits. In the skeletal model, with highly simplified consumption behavior by receivers of profit incomes and wages, in each period aggregate profits equal aggregate investment. In a more complex (though still highly abstract) structure, aggregate profits equal aggregate investment plus the government deficit. Expectations of profits depend upon investment in the future, and realized profits are determined by investment: thus, whether or not liabilities are validated depends upon investment. Investment takes place now because businessmen and their bankers expect investment to take place in the future.”

Peter Jones, a Marxist writer, has come to a similar conclusion regarding how fascist state deficit spending increases the wealth of the capitalists:

“Consider the following possibility. Suppose the government decides to fund a corporate tax cut by increasing the deficit, and leaves government spending unchanged. Suppose corporate tax revenue  falls  by  $C as  a  result,  and  government  borrowing  increases  by  the  same  amount. Assume banks (domestic or foreign) fund this deficit by purchasing $C of extra Treasury bonds. Now  suppose,  as  a  simplification,  that corporations’ investment decisions  are unaffected  by the  combination  of  the  tax  cut  and  increase  in  government  borrowing. This  implies  that  the extra $C  in  after  tax  profit  that  they make  as  a  result  of  the  tax  cut will  be  pent  entirely on paying dividends. Also suppose that this increase in dividend payments makes no difference to total consumption, and so total bank deposits increase by $C. In that case, banks will have an extra $C in funds available: i.e., just enough to cover the value of the Treasury bonds.

So  under  these  simplified  assumptions,  a  corporate  tax  cut  funded  by  increased  borrowing brings about an equivalent increase in dividend payments, which in turn ‘creates’ the loanable funds  required  to  finance  the  increased  deficit.  Both  the  income  and  wealth  of  shareholders increases  by  the  size  of  the  corporate  tax  cut, the after-tax profit  share of  income  increases, but shareholders’ consumption, and everyone else’s, remains unchanged. Most  importantly, the after-tax profit rate increases (though before-tax it is constant).

Thus, both labor theory of value and Keynesian theory suggest capitalism cannot survive without the deficit spending of the fascist state, although each school employs this conclusion for their own ends.

You have to understand what a complete scam the federal deficit is: First, the rich are given a tax cut by fascist state politicians; then, the tax cuts is borrowed back by the fascist state; Finally, the fascist state issues a bond that entitles the rich to claim a portion of future fascist state tax revenues. And then, to top it all off, MMT comes along and dresses this scam up as “the cumulative financial assets” of the private sector.

Leftists who get nervous when people talk about deficit reduction, you are playing the part of the fool in the scam. The scam could not continue if the Left did not fight alongside the fascists against every attempt to end deficit spending. On the one hand, Leftists make it possible for the fascists to claim deficit spending helps everyone. On the other hand, you whine about growing inequality over the last thirty years even as you ignore the fact that the fascist state literally pays the rich to NOT pay taxes. I don’t expect this to change, since it flows from your idea that fascist state spending is somehow more “progressive” than that of private capital investment.

The reality is that both investment and the accumulation of fascist state debt is the accumulation of wealth in the hands of the very people you think you are fighting against. Fascist state debt in all of its forms is itself the measure of the rising inequality in society.

At some point, the radical Left is going to have to get serious about deficit spending and have a debate over what its aims really are. It doesn’t matter whether they decide to fix capitalism or kill it, but they can’t do one while pretending to stand for the other. The real problem, however, is that the radical Left is not really committed to ending capitalism and only pays lip service to that aim. Its real practical aim is to fix capitalism, somehow.

The radical Left is going to have to take a leap into the unknown and trust its theory, even if it appears the consequences are unpleasant. The theory says fascist state deficits must go, but your fears tell you when deficits spending goes, so do jobs and wages. Like any well trained slave, you think it is impossible to survive without jobs and wages, i.e., without wage slavery. You are wrong. Your theory says you are wrong. You can trust your theory or you can trust decades of capitalistic indoctrination.