c. Instead of trying to salvage a mountain of mortgage-backed toxic assets, the government should allow for a market cleansing of such worthless assets by purchasing the threatened mortgages at the current, depreciated or market values, not at the inflated face values. Not only will this method rescue the vulnerable homeowners, it will also cost taxpayers much less money.
d. In return for the huge sums of taxpayers’ money given away, nationalize (purchase) Citigroup and other insolvent banks on the basis of the real, depreciated market price of their assets and, then, use the thus nationalized banks to issue loans at reasonable rates, and thereby unfreeze the credit markets.
e. Nationalize the Federal Reserve Bank (just as central banks are publicly-owned in most countries of the world), institute a high and strict reserve requirement for private bank lending, thereby limiting the money-creation power of commercial banks. Money creation must be a government prerogative, not private banks’.
3. Demand the following regarding fiscal policy and/or taxation system:
a. re-introduce the more progressive pre-Bush and pre-Reagan taxation system, or tax schedules.
b. Tax capital gains at the same rate as wages and profits, not at half the rate. Also, require payment of these taxes at the time of sale of assets, not deferred indefinitely if the gains are simply reinvested in yet more assets.
c. Close offshore tax havens.
d. Re-introduce the estate tax.
e. Stop multiple depreciations of buildings for purposes of fraudulent tax write-offs; that is, a building should be depreciated only once, not multiple times.
f. Place a cap on the amount of property tax that is excluded from taxable income.
g. On the spending side of fiscal policy, demand “peace dividends” by demanding an end to the wars in Iraq and Afghanistan, by downsizing the military empire, by closing down the nearly 800 hundred U.S. military bases abroad, and by re-allocating a significant portion of military spending to non-military public spending.
4. Regarding the implementation of the projected “job creation” stimulus package, which is currently being crafted by the Congress and the Obama economic team, demand the following: no outsourcing of the financing of the public works projects, that is, direct government financing, not through the banks; rigorous reviews, public oversight, and competitive bidding of public works projects, not crony contracting or outsourcing of the kind that has marked the “rebuilding” of Iraq, or New Orleans.
As noted earlier, none of this is really radical or transformative, requiring systemic or structural changes. It is simply reversing some of the excessive supply-side or neoliberal giveaways to big business and the wealthy. Or, as Michael Hudson of the University of Missouri, puts it, “It is a small step back toward the Progressive Era a century ago—the era that set America on the path of prosperity that made the 20th century the American century” [7].
Nonetheless the Bush/Obama economic policy makers, in concert with most members of the Congress, may balk at most of the reforms suggested here; they will certainly do so as long as the American people have not started speaking out and asking some hard questions. For now the people seem to be in shock and disbelief of the magnitude of the crisis and, perhaps more importantly, of the treacherous government collaboration with Wall Street sharks in looting their treasury and mortgaging their future.
But as the crisis drags along, the economic hardship becomes more agonizing, and the extent of the theft surrounding the Wall Street bailout scam becomes public, the people are bound to speak out. Only then, that is, only when pressure from below threatens the established order, will radical reforms in a progressive direction stand a chance.
Ismael Hossein-zadeh, author of the recently published The Political Economy of U.S. Militarism (Palgrave-Macmillan 2007), teaches economics at Drake University, Des Moines, Iowa.
