It is becoming obvious that the American middle class (topic dujour among presidential candidates these days) has been enslaved by an ideology that only benefits the wealthiest among US. It is an ideology of austerity that has prevailed in the U.S. at least since the 1980s, and Paul Krugman says is putting Europe into its Second Great Depression.
It is really an economic ideology of the 18th century first formulated by Adam Smith—of fewer government services and lower taxes that has made corporations all powerful with the greatest profits in their history, left American workers with little or no control over their livelihoods, and resulted in the greatest income inequality since the 1920s.
Such an insidious ideology has kept the poorest states poorer, caused declining investment in education (our seed corn for future entrepreneurs), is quickly degrading our public infrastructure, and even the ability to protect ourselves. President Obama’s State of the Economy report and latest speeches have made it obvious. The greatest income inequality since the 1920s is here to stay, unless there are major changes in economic policies.
That is why most Americans (at least the 90 percent) have become harried, 24/7 workers with little vacation time, poor health care options (in spite of Obamacare), too expensive educational opportunities, too few well-paying jobs, and little protection from the globalization that stronger labor laws would bring.
Those policies have been called supply-side economics, under the theory that giving more tax breaks to the wealthiest by reducing capital gains and maximum tax rates, while shrinking government investment and oversight, would induce the wealthiest to put their money into productive investments, thus creating more jobs.
But that never happened. When President Reagan cut the maximum income tax rate from 70 percent that prevailed in the 1970s to 50 percent, it and 2 recessions created the largest budget deficit of that era, which is why he instituted 11 tax hikes to bring the budget back into a semblance of balance. This was all catalogued by his budget director, David Stockmen in The Triumph of Politics.
Then we have GW Bush’s further tax cuts on both maximum income tax rates to 35 percent and capital gains to their lowest in modern history that so depleted tax revenues it created the largest budget deficits in history, and ultimately the Great Recession.
It’s no use sugar coating the truth any longer. Since the end of the Great Recession, the top 1 percent of income earners have garnered 96 percent of total income since 2009, after a brief dip. And Americans still have the greatest income inequality of the developed western world.
Why could such inequality be here to stay? In part because so much wealth has flowed to so few, and it is easy to buy influence in this country. The most obvious receivers of such largesse are the conservative members of Congress, mostly Republicans, who continue to block the economic reforms that would better the lives of those that live on Main Street.
Nobelist Paul Krugman said as much in his latest NYTimes Oped: “So what does it say about the current state of the G.O.P. that discussion of economic policy is now monopolized by people who have been wrong about everything, have learned nothing from the experience, and can’t even get their numbers straight?… Clearly, failure has only made them stronger, and now they are political kingmakers. Be very, very afraid.”
The White House just released their Council of Economic Advisors 2015 Report, chaired by Jason Furman. It said, “The second important factor influencing the dynamics of middle-class incomes is inequality. This, too, is a global issue. In the US, the top 1 percent has garnered a larger share of income than in any other G-7 country in each year since 1987 for which data are available, as shown in the above graph.”
It should be clear what must be done to remove the obstacles that hold back most Americans from a better life. Let us start by jettisoning the 18th century myth which enslaves all economic classes, a myth that only holds us back in the 21st century. Indiscriminately lowering taxes while minimizing government services and oversight hasn’t improved the lives of anyone except the wealthiest among us.
Harlan Green © 2015
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen