The impending retirement of US Federal Reserve Chairman Alan Greenspan has produced worldwide paeans of praise for the great man, balanced by some reservations about the legacy he leaves of a property price bubble. There is also a strong feeling that, having warned of the dangers of "irrational exuberance" way back in 1996, he subsequently became a cheerleader for the dot.com boom.
But one of the big blots on Greenspan's copy book is surely the blessing he gave to the huge package of tax cuts unveiled by the Bush administration during the first term. Given the almost divine status Greenspan had already by the turn of the century, this very right-wing Republican must have known full well what he was doing.
Not to put too fine a point upon it, the chairman of the Federal Reserve, a man revered to an extent that mere mortals of politicians could never aspire, was prepared to sanction an economically irresponsible and socially divisive program of tax cuts aimed unashamedly at the rich.
The main purpose of these tax cuts was to reward the supporters of the Bush-Cheney-Rumsfeld axis, and make the very rich even richer. It was done in full knowledge that, if it came to the crunch -- and budget deficit duly got completely out of hand -- the Republican response would be, not to repeal the tax cuts, but to demand reductions in government spending directed principally at the poor and the middle class.
Almost unbelievably -- I say almost, because few rationalizations are beyond the chutzpah of right-wing evangelicals in the US -- the tired old 1980s supply-side explanation was dragged out of the archives. Such tax cuts were justified because they encouraged enterprise, boosted productivity and had a "trickle down" effect on the less fortunate citizens beneath. And, despite all the evidence to the contrary, they were even justified given their "alleged" miraculous impact on the economy's paying for themselves.
Similar arguments were adduced in the UK in 1988 when the then UK chancellor of the exchequer Nigel Lawson introduced a tax reduction package. But in both the US and the UK, the budgetary arithmetic showed that the cuts never paid for themselves in new revenue. They were a cost to the budget, and that was that.
Yet if the Conservative Party in the UK today have their way, we shall go down that route yet again. Notwithstanding the growing concern in Britain about the rising budget deficit and the threat to the success of the Chancellor of the Exchequer Gordon Brown's famous "golden rule" (ie, balancing the current budget over the course of an economic cycle), and despite the obvious view from all opinion polls that the voters are still dissatisfied with the state of the public sector, here are the rival claimants for the leadership of the UK Conservative Party, David Davies and David Cameron, going on about the need for tax cuts.
There is something seriously inconsistent about an opposition that complains about "black holes" in the public finances but still promises tax cuts, but it is probably not an inconsistency that their Republican friends in America would worry about.
There is a deeper concern here though. Until the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991, the "capitalist" world always felt some sense of constraint, or even decency, about the degree to which it was prepared to push the boundaries of its own avarice.
Such constraints have all but disappeared, and the results can be seen in the pervading "culture" and the ethos of the media. Few people worry these days about the "redistribution of wealth and income." British Prime Minister Tony Blair seemed surprised that BBC TV interviewer Jeremy Paxman even raised the subject a few years ago.
Blair, a soi-disant Labor prime minister, has no problems with the filthy rich. The general public itself goes along with all this. They may want to win the lottery or succeed on programs such as Who Wants to be a Millionaire?, but they bear an increasingly unequal and squalid society with a patient shrug.
Or am I missing something?
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