After I read Aaron’s post A Tale of Two Economies, I read a some other others things that I thought resonated with it.
The gap between the top 0.01% and everyone else hasn't
been this bad since the Roaring Twenties
The graphic is a little difficult to read, but the top chart shows average income of the top 1% as a multiple of average income of the bottom 90%, starting in 1912. The bottom chart shows the top marginal federal rate tax rate on income at the same times.
Wealth, as opposed to income, tells the same story.
That’s right: the bottom half of the people in the U.S. own 2.5% of the wealth; the top ten percent owns over 70% of it. (corrected per proofreader Aaron)
I commend the rest of the graphs to you; they show income stagnation for just about everyone except the rich, the wealth and income disparities compared to other OECD countries, the income disparities by state (Minnesota currently does better than most, but it still isn’t anything to brag about), etc.
The second thing that caught my eye was Paul Krugman’s column on the return of voodoo economics, and the fact that Congressional Republicans who have been howling so loudly about the federal deficit and, on the other hand, want to make the deficit-busting Bush tax cuts permanent:
For a while, leading Republicans posed as stern foes of federal red ink. Two weeks ago, in the official G.O.P. response to President Obama’s weekly radio address, Senator Saxby Chambliss devoted his entire time to the evils of government debt, “one of the most dangerous threats confronting America today.” He went on, “At some point we have to say ‘enough is enough.’ ”
But this past Monday Jon Kyl of Arizona, the second-ranking Republican in the Senate, was asked the obvious question: if deficits are so worrisome, what about the budgetary cost of extending the Bush tax cuts for the wealthy, which the Obama administration wants to let expire but Republicans want to make permanent? What should replace $650 billion or more in lost revenue over the next decade?
His answer was breathtaking: “You do need to offset the cost of increased spending. And that’s what Republicans object to. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.” So $30 billion in aid to the unemployed is unaffordable, but 20 times that much in tax cuts for the rich doesn’t count. [italics are mine]
The next day, Mitch McConnell, the Senate minority leader, confirmed that Mr. Kyl was giving the official party line: “There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”
Of course, as Krugman observes, this is horse puckey:
Ronald Reagan said that his tax cuts would reduce deficits, then presided over a near-tripling of federal debt. When Bill Clinton raised taxes on top incomes, conservatives predicted economic disaster; what actually followed was an economic boom and a remarkable swing from budget deficit to surplus. Then the Bush tax cuts came along, helping turn that surplus into a persistent deficit, even before the crash.
The third thing that caught my attention was a story in the New York Times that even the rich, alas, are cutting back:
The economic recovery has been helped in large part by the spending of the most affluent. Now, even the rich appear to be tightening their belts.
Late last year, the highest-income households started spending more confidently, while other consumers held back. But their confidence has since ebbed, according to retail sales reports and some economic analysis.
“One of the reasons that the recovery has lost momentum is that high-end consumers have become more jittery and more cautious,” said Mark Zandi, chief economist for Moody’s Analytics.
Why, if the only people who have any money won’t spend it, the economy will surely tank! The only rational thing to do is give the rich additional tax cuts as a balm for spending some of their money in this trickle-down economy!
Or — mon Dieu — we could put some money into the hands of the other 90%, because they would surely spend it. Consider things like an extension of unemployment benefits, jobs programs, additional economic stimulus, foreclosure assistance, and public works.
The fourth thing that caught my attention was a nameless, fungible commentator on NBC News (okay, you caught me watching television news) telling Brian Williams not to worry, that the top 500 businesses were sitting on the on $180 trillion cash, (the same mountain of money that Aaron mentions in his post), and they’d undoubtedly start spending it soon and hiring people.
Why would they do that? If nobody has any money to buy anything from these businesses except the rich, and they aren’t buying, who’s left?
So here’s the point: businesses don’t create jobs. Demand creates jobs. Demand comes from people with some money and the confidence to spend it.
You can write that down. In fact, you should.
This is where The Republicans, Stonewall and the Emmerbots, Tom Emmer’s witch doctor economist, and Tom Horner, too, have it so thoroughly and tragically backwards and upside down. It doesn’t do a restaurant any good to shave a couple of bucks off the server’s pay if there aren’t customers who will come in to buy the food.
There may be another post on two on this topic in coming days.