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What Trickle-Down Economics Has Done to the US: The Rich Get All the Money
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Adapted from the as-yet-unpublished book by the author, Do What Works and Call It Capitalism.
That Improving Economy Is Further Away Than It Appears
Leisure and hospitality – the fastest growing major blue-skill industry – is the worst sector. The average leisure and hospitality worker makes just $18,900 a year (gross, before taxes). This is not even enough to keep a family of three above the poverty level ($19,790 in 2014). Similarly, retail, the largest blue-skill sector, is second-worst in terms of pay, with average annual earnings of $27,700. – Mike Cassidy, Where Are the Jobs? 2015 (1)
By most media accounts, the US economy at the beginning of 2015 is recovering nicely from the Great Recession. GDP is growing at a historically healthy rate, above 2 percent per year. Unemployment is about the historic average, at 5.7 percent. The stock market is near record highs. And more jobs are being created than at any time in more than 10 years. But this is all a great deception. The expansion is benefiting a tiny minority of the population only – the very rich. No one else has any money, and without significant changes in government policies, no one except the wealthy is likely to have any in the future.
This is the fact that eluded the Democrats in the 2014 election. When Democrats boast of how well President Obama has done with the economy despite Republican opposition to everything he does, they are missing the point. This economic resurgence has not reached most Americans.
Ronald Reagan brought supply-side economics to the federal government, the belief that suppliers of goods drive the economy, not the consumers. The supply-siders believe that lower taxes stimulate production and improve the economy. They also favor deregulation of industry. The theory, which acquired the nickname “trickle-down economics,” was that economic growth would benefit everyone. That has not happened. The entire supply-side economic theory has proven to be totally wrong as the data in this article shows.
When George H.W. Bush ran against Reagan for the Republican nomination in 1980, he called Reagan’s supply-side economics, “voodoo economics,” and he was right. It has no basis in reality, but it has bewitched the Republican Party and they still cling to it. And most current government financial policies still are consistent with it. Bill Clinton did not change things. Barack Obama has not changed things. The Reagan economic program still is with us, and still is doing great damage to the US economy and most Americans.
At the beginning of 2015, more than six years since the crisis of 2008, most Americans were either in a worse financial condition than they were before 2008, or had experienced very little improvement in their economic condition. Most Americans have no financial reserves and live paycheck to paycheck.
Source: http://truthisscary.com/2015/03/what-trickle-down-economics-has-done-to-the-us-the-rich-get-all-the-money/
Whaaaa , Thats how it works in America comrade , Should i play the violin for you comrade?
The writer’s premise is flawed. He makes the improper assumption (purposely) that we operate in a capitalistic free market based system. This couldn’t be further from the truth. The rich are richer because of the fascist based cronyist system. And it is system based, not “party based” in the sense it was designed this way.
In free-market capitalism, capital generates income for the owners of the capital which in turn is used to create additional capital. This is very good. Sometimes, it can be actually too good. As capital continues to accumulate, its owners find it more and more difficult to deploy it efficiently. The business sector generally must interact with the household sector by selling goods and services or lending to them. When capital accumulates too rapidly, the productive capacity of the business sector can outpace the ability of the household sector to absorb the increasing production.
The capitalists, or if you prefer, job creators use their increasing wealth and income to reinvest, thus increasing the productive capacity of the business they own. They also lend their accumulated wealth to other business as well as other entities after they have exhausted opportunities within business they own. As they seek to deploy ever more capital, excess factories, housing and shopping centers are built and more and more dubious loans are made. This is overinvestment. As one banker described the events leading up to 2008 – First the banks lent all they could to those who could pay them back and then they started to lend to those could not pay them back. As cash poured into banks in ever increasing amounts, caution was thrown to the wind. For a while consumers can use credit to buy more goods and services than their incomes can sustain. Ultimately, the overinvestment results in a financial crisis that causes unemployment, reductions in factory utilization and bankruptcies all of which reduce the value of investments.
If the economy was suffering from accumulated chronic underinvestment, shifting income from the non-rich to the rich would make sense. Underinvestment would mean there was a shortage of shopping centers, hotels, housing and factories were operating at 100% of capacity but still not able to produce as many cars and other goods as people needed. It might not seem fair, but the quickest way to build up capital is to take income away from the middle class who have a high propensity to consume and give to the rich who have a propensity to save (and invest). Except for periods in the 1950s and 1960s and possibly the 1990’s when tax rates on the rich just happened to be high enough to prevent overinvestment, the economy has generally suffered from periodic overinvestment cycles.
It is not just a coincidence that tax cuts for the rich have preceded both the 1929 and 2007 depressions. The Revenue acts of 1926 and 1928 worked exactly as the Republican Congresses that pushed them through promised. The dramatic reductions in taxes on the upper income brackets and estates of the wealthy did indeed result in increases in savings and investment. However, overinvestment (by 1929 there were over 600 automobile manufacturing companies in the USA) caused the depression that made the rich, and most everyone else, ultimately much poorer.
Since 1969 there has been a tremendous shift in the tax burdens away from the rich on onto the middle class. Corporate income tax receipts, whose incidence falls entirely on the owners of corporations, were 4% of GDP then and are now less than 1%. During that same period, payroll tax rates as percent of GDP have increased dramatically. The overinvestment problem caused by the reduction in taxes on the wealthy is exacerbated by the increased tax burden on the middle class. While overinvestment creates more factories, housing and shopping centers; higher payroll taxes reduces the purchasing power of middle-class consumers. …”
http://seekingalpha.com/article/1543642
“without significant changes in government policies, no one except the wealthy is likely to have any in the future.”
This looks to be the point of your article. The rich are getting richer bec. the Fed gov and big business are in bed together. What we need is a separation of business and gov just like a separation of church and state.
Pure capitalism doesn’t work.
Pure communism doesn’t work.
A blend of each works …..okay……..if closely monitored and power hungry politicians aren’t allowed to take hold.
Extremism is the enemy of our system……because it was set up to play the middle. A little capitalism, a little communism.
Sorry folks. Truth hurts.
The writer “Dan Riker is a progressive writer and novelist who now lives in Portland, Oregon”.
A clueless left wing shill that has the economic sense of a pig.
I am sure all you animal farmers out there get the point.
Praise God!
Long Live the Republic!
Yeah, our last Republican president sure had a lot of “economic sense” didn’t he????
Just in case your memory isn’t very good, it was Bush, a Republican, that gave us the largest economic collapse since the depression. As a matter of fact, ALL of the economic downturns we’ve had in this country since the depression have happened under REPUBLICAN administrations.
Republicans are perfectly okay with “socialism”, just as long as the handouts are flowing in the right direction, up-words, to corporations and billionaires.
http://rt.com/usa/sadoff-inequality-rich-poor-685/