Sunday Morning Links

This and that for your Sunday reading.

- Edward Robinson laments the willingness of European centre-left parties to abandon any attempt to argue against austerity even when the evidence shows that's the right position to take:

Centre-left parties in Europe appear to have completely lost the argument for pragmatic fiscal policy, much in the way that US Democrats seemed to lose their own case precisely at the moment when stimulus was working. Consider again how little financial commitment it would have taken to have shored-up confidence in Greek sovereign debt via Eurobonds. Greek debt in 2010 represented only 3.6% of Eurozone GDP. François Hollande’s government was supposed to be making the case for Eurobonds.

What is worse, the centre-left now appears to have let the very explanation of (or blame for) the crisis slip away from them into the hands of neoliberals. Instead of constantly reminding voters and markets that sovereign debt-to-GDP ratios were falling in the Eurozone (and the UK) before the crisis, they have given up. Voters seem to have forgotten that the massive public debts accrued since 2008 had been private debts before then.

From this analysis flows austerity’s legitimacy. To social democrats, it seems profoundly misguided to be prescribing supply-side medicine to a problem which was fundamentally caused by a huge uptick in private-sector debt, necessitated by steadily falling effective demand for 30 years. Of course, there is always inefficiency or corruption, but these were not the primary causes of the crisis. Nonetheless, centre-left parties are assenting.
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While elections are on the table we must campaign hard, both within our respective national parties and within the broader argument at European level. But if that cannot shift the balance, then genuine social democrats will soon need to decide whether or not to stand by the fading hope of a return to economic pragmatism in the Eurozone or whether to throw their lot in with those calling for the tried and tested routes out of chronic indebtedness.

Choose the former and we risk being permanently subsumed into European austerity elites, choose the latter and we find ourselves, against the European project, with some unattractive intellectual companions and just as much uncertainty. It is a real dilemma.

But surely the status quo of never-ending internal devaluation is politically unacceptable, damaging to the ideal of a united Europe and harmful to democracy and economic development.

- Meanwhile, Matthew O'Brien writes that plenty of U.S. families with relatively high gross incomes are nonetheless living paycheque to paycheque - meaning that precarious financial situations aren't limited to the lower end of the income scale. And while workers across the board are struggling to get by, Paul Krugman highlights how the right is pushing for ever more giveaways to people who live off of wealth rather than labour:

In my last post I tried to document the extent to which modern Republican rhetoric has already adopted the values of “patrimonial capitalism”, even though America’s top one percent still owes its high incomes largely to compensation rather than wealth. On reflection, I thought I should also document the extent to which the GOP has put its money — or, actually, taxpayers’ money — where its mouth is, with concrete policies that favor wealth over work.

Consider, as Exhibit A, the Bush tax cuts. Bush did cut the top tax rate on earned income from 39.6 to 35 percent, a 12 percent reduction. But he cut the rate on capital gains from 21 to 15, a 28 percent reduction; he cut the rate on dividends from 39.6 (because dividends were previously taxed as ordinary income) to 15, a reduction of more than 60 percent. And he put the estate tax on a path toward zero — a 100 percent reduction.

The estate tax made a partial comeback thanks to the awkward fact that a Democrat was in the White House, and there have been some tax hikes on capital income. The point, however, was that Bush tried to give people living off wealth, inherited wealth in particular, much bigger tax cuts than he gave high earners.

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Even now, 6 of the 10 wealthiest Americans are heirs rather than self-made entrepreneurs — the Koch brothers plus a bunch of Waltons. There’s every reason to believe that the role of inheritance will only grow over time.

And if it does, half our political system will be cheering it on and offering the ever-more-empowered heirs as much assistance as possible.

- And Alison highlights how the Kochs in particular have used their money to warp Canadian politics in favour of their own interests.

- Mariana Mazzucato reminds us that public policy can set a necessary foundation for innovation, while pointing out that the Cons have preferred to hand free money to entrenched corporate interests and resource extractors rather than encouraging the development of new ideas.

- Finally, Don Lenihan offers a useful set of criteria for open government - while highlighting how far we are from the ideal.