Austerity Comes To Italy-- Blaming Democracy For The Excesses Of The Predatory Banksters?

Corrupt behind what Americans conceive of in our politicians-- and disgraced for having been caught on tape referring to the country whose government he heads as "shitty"-- career criminal/right-wing Prime Minister Silvio Berlusconi knows he's committing political suicide by shoving a brutal austerity package down his people's throats. His right wing coalition has a firm grip on the Senate and they just passed the toxic package 165-141. It will be tougher in the lower house.

The measures will to generate more than 50 billion euros ($66.2bn) in cost savings through a mix of new taxes, pension changes and cuts to public spending. The plan aims to balance the budget in 2013 and help the government bring down Italy's enormous debt, which amounts to 120 per cent of its gross domestic product, the second-highest ratio in the euro zone after heavily indebted Greece.

Despite the Senate's backing, political opposition to the package remains high. To ensure the measures passed the Senate, Mr Berlusconi imposed a confidence vote-- a parliamentary manoeuvre that tied the survival of his government to the measures' passage.

Over the past two months, Mr Berlusconi has faced a tough balancing act, weighing the political interests of his coalition partners against the demands for growth-boosting measures from the European Central Bank, which has begun buying Italian bonds to lower the country's borrowing costs.

The ECB has warned that its patronage is only temporary and has called on Italy to introduce tough reforms that will address the country's high youth employment and lack of productivity.
"We have to face two major problems: our debt and our lack of growth," said Enrico Letta, a leader of the opposition Democratic Party.

The current package doesn't address those obstacles in any concrete way.

The measures include an increase in the value-added tax to 21 per cent from 20 per cent, the introduction of a 3 per cent "solidarity tax" on people who earn more than 300,000 euros ($396,940) a year, and an increase in the retirement age for women working in the private sector to 65 from 60 as of 2014.

Thousands of workers went on strike earlier this week, responding to a call by a major union that has pledged to oppose the plan regardless of whether it passes Parliament.

Some politicians and economists have said a technocratic government would be better suited to adopt the unpopular measures required to shock Italy's moribund economy back to life.

As Time points out there's a sense of unfairness that has "infuriated a public already fed up with the disproportionate compensation enjoyed by its ruling elite." And with disdain for Berlusconi growing-- as well as for the pampered political class ("The Caste"), what's this "technocratic government" thing being pushed. A government of banksters? Modern day fascists and plutocrats? Democracy is getting slapped around in Europe (as bad as it is in Michigan) by those who know what's better-- even if "those who know better" are the ones who have led the way into insolvency.

Opinion polls put Berlusconi's approval ratings in the low 20 percent range, European partners have heaped scorn on his center-right government's handling of the crisis and the ECB has said it will not keep supporting Italy indefinitely.

The premier should be down and out but the center-left opposition has struggled to establish itself as a cohesive political force and make capital from either the government's floundering record or Berlusconi's multiple personal scandals.

As Wednesday night's comfortable victory in a Senate confidence vote on the austerity measures underlined, the government has the numbers to survive, at least for the moment.

"It's a very serious situation," said Renato Mannheimer, one of Italy's leading pollsters, whose regular survey in the Corriere della Sera newspaper this week showed 8 out of 10 Italians opposed to the government and a similar number critical of the center-left opposition.

"There's one scandalous episode after another, there's the economic crisis, we're being observed very critically by the world at large and there's generalized distrust of the political class," he said.

"But as long as Berlusconi can hold his majority together in parliament, the situation remains, unless there is some outside shock from the bond markets or something similar," he said.

That does not mean the increasingly tense coalition between the People of Freedom (PDL), a party built entirely around Berlusconi, and the pro-devolution Northern League will get much done. Few believe it will survive until elections scheduled in 2013.

Berlusconi is no longer the undisputed master of Italian politics and business and newspapers speculate daily about the prospect of his replacement by a technical government of experts or a temporary cross-party administration that could push through tough reform.

His coalition's chaotic handling of the austerity plan has caused deep alarm among the tightly interwoven business and political establishment whose support has traditionally been needed for Italian governments of all colors to survive.

"We talked a lot about a government of technocrats or a 'wide-majority government'," said one senior banker who attended last weekend's Ambrosetti forum, the annual gathering of Italy's business elite at Cernobbio on the shores of Lake Como.

"We need a government that is able to react quickly but...a government which has the support of parliament can't be replaced," he said.

The wrangling over austerity measures to bring Italy's creaking public finances under control has nonetheless shown how deeply divided the coalition has become and how far Berlusconi's own power to enforce agreement in cabinet has weakened.

Business leaders at Cernobbio watched in shock as an urgent call for action by ECB President Jean-Claude Trichet was answered by Tremonti with nothing other than vague assurances and sweeping reflections on history and philosophy.

"It seemed like he couldn't promise anything on behalf of the whole government. He seemed not to have the power to do so," said the banker, who was present at the closed-door session.

Although parallels are not exact, there is increasing talk of the dark days of "Tangentopoli," the "Bribesville" scandals of the early 1990s when Italy's political order was driven out in a wave of popular fury at its corruption and inefficiency.

"We have that climate a little bit and I think at a certain point, if they ask for more sacrifices, things could blow up," said Turin University political scientist Luca Ricolfi.

Austerity: Class War Against Working People, An International Plague

Unless you think you'll be winning a lot of lotteries in the future, you're never going to be as rich as Warren Buffett. A significant number of Americans-- rational people in other countries don't think this way-- hold out hope that they will be the exception and that they want to be certain that tax rates on billionaires are low... just in case. Meanwhile, they could be making $40-50,000 a year and paying a higher effective tax rate than the billionaires they're protecting by voting for the billionaire protection racket known as the Republican Party. In yesterday's New York Times Buffett himself begged Americans-- and their representatives in Congress-- to stop coddling the super-rich. (You can watch Buffett discussing his editorial with Charlie Rose Monday night.)

Our leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.



While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.



These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.



Last year my federal tax bill-- the income tax I paid, as well as payroll taxes paid by me and on my behalf-- was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income-- and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.



If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine-- most likely by a lot.



...Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.



I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone-- not even when capital gains rates were 39.9 percent in 1976-77-- shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.



Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion-- a staggering $227.4 million on average-- but the rate paid had fallen to 21.5 percent.



The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)



I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.



Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.



Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.



But for those making more than $1 million-- there were 236,883 such households in 2009-- I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more-- there were 8,274 in 2009-- I would suggest an additional increase in rate.



My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

We've been watching with alarm what the Austerity approach has done to social cohesion in Greece and England. I expect it will be even worse in France and Italy, which the international banksters are forcing in that direction. Italy's largest labor union threatened a general strike yesterday, after Berlusconi hastily pushed through an Austerity plan demanded by World Plutocracy.

Critics say the package-- a mix of spending cuts, job cuts and tax increases, including a "solidarity tax" for high-earners-- will strangle Italy’s stagnant economy, which is now expected to grow by only about one per cent this year.



Other critics, including nine members of Berlusconi’s own coalition, say it unfairly targets the middle class and fails to tackle Italy’s massive tax evasion problem.



Susanna Camusso, leader of the CGIL labour union, criticized measures aimed at liberalizing Italy’s labour market and targeting its pension system, saying a strike is the only way to "change the inequity of this package." She told the La Repubblica newspaper that union officials will meet Aug. 23 to set a strike date and invited other unions to join.

I don't trust Labor's Ed Miliband to get it any more right in England than Obama has here in the U.S., but yesterday Miliband launched a flashy (for him) attack on Cameron's reactionary approach to the riots, calling it "shallow and simplistic." Take that, fascist dog!

Reiterating his call for a national inquiry into the causes of the violence, he said the country had a "deep need" to explain and understand what had happened, but that Cameron had responded with "gimmickry."



The Labour leader said nothing could excuse or justify the actions of the rioters and looters but that, unless the causes were understood properly, the violence could be repeated.



...Miliband said writing the riots off as "pure criminality" or simply blaming parents would not get to the root of the problem. In a direct attack on Cameron, he characterised the government's response as "kneejerk gimmicks," citing talk of water cannon, "supercops" and the "harassment" of gangs.



"A prime minister who used to say 'hug a hoodie' now says the answer is to reform our health and safety laws," he said.



"A crisis like this tells us something about our political leaders. Day by day, the prime minister has revealed himself to be reaching for shallow and superficial answers."



Miliband said individuals were responsible for their actions, questioning why some parents were failing to teach their children right from wrong, but added that everyone had a responsibility for the society we live in.



He also questioned whether an economy that dictates that some parents have to work up to 70-hour weeks, meaning they are largely absent from their children's lives, might have a role in family breakdown.



But he added: "Children's ideas of right and wrong don't just come from their parents. And we can't honestly say the greed, selfishness and gross irresponsibility that shocked us all so deeply is confined to the looters, or even to their parents.



"It's not the first time we've seen this kind of me first, take what you can culture. The bankers who took millions while destroying people's savings-- greedy, selfish and immoral. The MPs who fiddled their expenses-- greedy, selfish and immoral. The people who hacked phones to get stories to make money for themselves-- greedy, selfish and immoral.



"People who talk about the sick behaviour of those without power should talk equally about the sick behaviour of those with power.



"Let's not pretend that the crisis of values in our society is confined to a minority only at the bottom when we see the morality of millions of hardworking, decent people under siege from the top as well."



He said the last Labour government, as well as the coalition, had failed to address the issues of inequality in society, arguing that there is a culture of aspiration for success that is out of the reach of people at the bottom, creating frustration.