Where Is Huey Long When You Need Him?

Marshall Auerbach at Naked Capitalism:

Leaving aside the economic and political costs of the policies undertaken by President Obama, there is a much more profoundly corrosive social effect at work here. There is a pervasive sense that people who have played according to the rules are being persistently jobbed by this Administration – this has begun to perpetuate a feeling of “they’ve got theirs and now I want mine.” It’s hard to quantify the impact of this growing mentality, but it is the kind of phenomenon often manifests itself via widespread tax evasion and a corresponding loss of political legitimacy on the part of a government in other countries.

The primary reason the public accepts what we call “fiat money” is because it has tax liabilities to the government. If the tax system were removed, the government would eventually find that its fiat money would lose its ability to purchase goods and services on the market. In the words of the economist Abba Lerner:

The modern state can make anything it chooses generally acceptable as money…It is true that a simple declaration that such and such is money will not do, even if backed by the most convincing constitutional evidence of the state’s absolute sovereignty. But if the state is willing to accept the proposed money in payment of taxes and other obligations to itself the trick is done.

If that trend persists, then we do end up being like Greece. Not because of growing national insolvency, but more because our citizenry begins to view the government as a piggy bank to be exploited, rather than an instrument which mobilizes national resources for broader public purpose. Absent this political authority, everything begins to break down.

For all of his renewed vigor on the campaign trail, Mr. Obama fundamentally fails to understand this phenomenon, which is why his exhortations of the kind that he uttered last weekend to the Congressional Black Caucus no longer resonate with the broader public. His “change” message is no longer a symbol of hope, but has become a source of bitter irony and cynicism. As a result, this President risks turning off an entire generation of new voters who were once genuinely excited by the man’s promise.

Frank Rich recently suggested that “it’s time for this big dog to bite back” and urged Obama to “call out the powerful interests…whether on Wall Street or in Big Oil or any other sector where special interests are aligned against reform in the public interest.” All well and good. But consider the fact that these “powerful interests” were some of the President’s biggest campaign donors. Which leaves a more troubling question: what if this particular “Big Dog” is actually nothing more than a lap dog – guarding the very special interests that he purports to oppose?