As is well known, the United States the United States is the largest debtor nation in the world. Currently this debt is more than $9.3 trillion and rising at an average of $1.3 billion per day. This means that the share for each and every citizen – man, woman and child – is $30,789. But even this astounding number is misleading. If one were to insert Social Security and Medicare into the equation, which the above does not, the actual amount is closer to $60 trillion.

Modern conservative tax policies pushed by Democrat and Republican alike have reversed the more redistributive programs of the recent past and no doubt contributed to the debt crisis. They have also widened the ever-growing income gap between Americans. In a recent interview, economist and historian Michael Hudson points to some of the consequences of today’s policies:

Our tax laws have shaped the marketplace to favor the debt-financed buying and selling of real estate, stocks and bonds rather than new direct investment. Advocates of this financialization of saving and investment depict it as a viable mode of wealth creation, but the effect is simply to de-industrialize the United States. And this is the tragedy of our economy today.

In his analysis, the problem is not simply an issue of whether we should tax income in a far more progressive manner (as in the 1960s rate of %93 for those making more than $200,000), but that the question of what to tax “should take precedence over how highly to tax the scant income that wealthy people are obliged to declare.”

Classical economists focused first and foremost on WHAT should be taxed. From the Physiocrats through Adam Smith and John Stuart Mill to socialists such as Ferdinand Lasalle and America’s Progressive Era reformers, they concluded that the main source of taxation should be unearned income, defined as land rent, monopoly rent, other forms of economic rent (income extracted without playing a necessary role in production) and capital gains on these rent-yielding assets, mainly land sites.

Using loopholes, manipulation and special tax privileges, mulitnational corporations and monopolies rarely even report taxable income under the current institutional structures. Shifting the focus to what, rather than simply how much to tax, is an essential step towards reversing the trend of debt-induced financial polarization according to Hudson’s analysis.

America’s growing debt reduces the amount of money that is spent on production and consumption and increases the transfer of wealth from the bottom to the top of the economic pyramid, with the main beneficiaries being the financial sector. Non-productive debt formation and financing has become the primary means of wealth creation in the US and has furthered the decline in the dollar’s value. The situation today is that we are “entering a Two Economy society.”

The dichotomy is not merely between an elite and the masses, or between the vested interests and the downtrodden, the cultured and the great unwashed. It is something much more specific. These two nations, two cities, actually are two economies – Economy #1 (production and consumption) vs. financial and property-based Economy #2 which controls the economic surplus in the form of savings and investment. And the different characteristics of these two economies go far beyond the merely economic dimension.

Indeed. But as Hudson points out, there is little by way of movement building in place to reverse, or even challenge such a trend. Lobbyists from Wall Street pack the coffers of Republicans and Democracts alike by pushing a propaganda campaign of University of Chicago economics ideology down the throat of the American public. Orwellian free markets reign and any government intervention or regulation is evil incarnate. But people are feeling the squeeze regardless. Nearly %80 of the the American public [pdf] feel the country is on the wrong track, with six in ten citing the economy as the primary reason. And unsurprisingly most of the population is becoming extremely uncertain about the future.

One would guess that in such a situation – where a large portion of the population not only thinks the economic trends of the country are heading in the wrong direction, but also places the presidential incumbent’s approval rating at an all-time low – would lead the current nominees (particularly Democrat Barack Obama) to move away from the neo-conservative economic ideologies that are largely to blame for these results. But rather than a move to the Left we get the inevitable, and unquestionedly assumed prudential move to the center (which is of course code for moving to the right).

Immediately upon becoming the presumptive Democratic nominee, Obama bagan lurching to the right in a whole host of policy areas, not least of which the economy. This triangulating move is at the heart of Ralph Nader’s recent criticisms of the Obama campaign where he said:

There’s only one thing different about Barack Obama when it comes to being a Democratic presidential candidate. He’s half African-American…. Whether that will make any difference, I don’t know. I haven’t heard him have a strong crackdown on economic exploitation in the ghettos. Payday loans, predatory lending, asbestos, lead. What’s keeping him from doing that? Is it because he wants to talk white? He doesn’t want to appear like Jesse Jackson? We’ll see all that play out in the next few months and if he gets elected afterwards.

In expanding on his statement Nader continues:

He wants to appeal to white guilt. You appeal to white guilt not by coming on as black is beautiful, black is powerful. Basically he’s coming on as someone who is not going to threaten the white power structure, whether it’s corporate or whether it’s simply oligarchic. And they love it. Whites just eat it up.

The key here is his reference to the “white power structure,” which I think is ultimately the reason Obama has reversed course. He wants Wall Street’s approval. But whether this is merely a nessessary and strategic move taken to win the White House, as many liberals contend, or an accurate reflection of the policies we are likely to see if he wins in November has yet to be seen. One thing is certain though. National politicians are loathe to take on the power structure as it exists today, regardless of whether the public is ripe for just such a move.